<PAGE>
Rule 424(b)(5)
Registration No. 33-62313
333-03831
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 18, 1995)
$250,000,000
[LOGO]CABLEVISION
CABLEVISION SYSTEMS CORPORATION
10 1/2% SENIOR SUBORDINATED DEBENTURES DUE 2016
----------------
Interest on the 10 1/2% Senior Subordinated Debentures due 2016 (the
"Debentures") of Cablevision Systems Corporation (the "Company") is payable
semi-annually on May 15 and November 15 of each year, commencing November 15,
1996. The Debentures are redeemable at the option of the Company, in whole or
in part, on or after May 15, 2006 at the redemption prices set forth herein.
The Debentures represent senior subordinated unsecured obligations of the
Company and will rank pari passu in right of payment with all other senior
subordinated unsecured indebtedness of the Company. The Debentures are
subordinated to all existing and future Senior Indebtedness (as defined
herein) of the Company. The amount of Senior Indebtedness outstanding at March
31, 1996, adjusted to give effect to the transactions described under
"Capitalization" and the application of the estimated net proceeds from the
sale of the Debentures offered hereby and the Company's $150,000,000 of 9 7/8%
Senior Subordinated Notes due 2006 (the "Notes") offered concurrently
herewith, would have been approximately $569.4 million. The consummation of
the Other Offering (as defined herein) is not a condition to the consummation
of this Offering, nor is the consummation of this Offering a condition to the
consummation of the Other Offering.
INVESTMENT IN THE DEBENTURES INVOLVES SIGNIFICANT RISKS, DISCUSSED UNDER
"RISK FACTORS" BEGINNING ON PAGE S-10 OF THIS PROSPECTUS SUPPLEMENT, 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(1)(3)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Debenture.......................... 100% 2.625% 97.375%
--------------------------------------------------------------------------------
Total.................................. $250,000,000 $6,562,500 $243,437,500
</TABLE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from May 21, 1996.
(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 payable by the Company estimated at $250,000.
----------------
The Debentures are offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them, 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 the
Debentures will be available for delivery in New York, New York on or about
May 21, 1996 in book-entry form through the facilities of The Depository Trust
Company.
----------------
BEAR, STEARNS & CO. INC. MERRILL LYNCH & CO.
Joint Book-Running Managers
MORGAN STANLEY & CO.
INCORPORATED
----------------
The date of this Prospectus Supplement is May 16, 1996.
<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,
1995 (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 Report on Form 10-Q for the fiscal quarter ended March 31,
1996 (the "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 DEBENTURES
OFFERED HEREBY OR THE NOTES OFFERED CONCURRENTLY HEREWITH AT LEVELS ABOVE
THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. 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. An investment in the securities offered hereby involves
significant risks. See "Risk Factors" in this Prospectus Supplement.
THE COMPANY
The Company is one of the largest operators of cable television systems in
the United States, with approximately 2,752,000 subscribers in 19 states as of
March 31, 1996, 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
2,085,000 subscribers as of March 31, 1996 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
667,000 subscribers as of March 31, 1996 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 ($37.28 for March 1996) and a high
ratio of premium service units to basic subscribers (1.8:1 for March 1996). 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.
On May 10, 1996, the Company entered into an agreement with Warburg, Pincus
Investors, L.P. ("Warburg") to acquire (the "Pending Warburg Transactions")
from Warburg the interests in A-R Cable Services, Inc. ("A-R Cable"), A-R Cable
Partners, Cablevision of Newark and Cablevision of Framingham Holdings, Inc.
("CFHI") that the Company does not already own. See "Recent Developments--
Pending Warburg Transactions".
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, Bravo, MuchMusic and the Independent Film Channel), Rainbow
News 12 (regional news services serving suburban areas surrounding New York
City) and the sports services of Prime SportsChannel Networks (Prime Network
and NewSport). Rainbow Programming also owns an interest in Madison Square
Garden, L.P.
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 Rainbow News 12 programming services, as well
as on behalf of unaffiliated cable television systems.
S-3
<PAGE>
THE OFFERING
Securities Offered.......... $250,000,000 principal amount of 10 1/2% Senior
Subordinated Debentures due 2016 (the
"Debentures") offered by the Company (the
"Offering").
Maturity Date............... May 15, 2016.
Interest Payment Dates...... May 15 and November 15, commencing November 15,
1996.
Optional Redemption......... On and after May 15, 2006, the Debentures are
redeemable, at the option of the Company, in
whole or in part, at the redemption prices set
forth herein, plus accrued and unpaid interest
thereon to the redemption date. See "Description
of the Debentures".
Subordination............... Subordinated to all existing and future Senior
Indebtedness (as defined) of the Company. The
Debentures will rank pari passu with the
Company's $275,000,000 of 10 3/4% Senior
Subordinated Debentures due 2004, the Company's
$200,000,000 of 9 7/8% Senior Subordinated
Debentures due 2013, the Company's $150,000,000
of 9 7/8% Senior Subordinated Debentures due
2023 and the Company's $300,000,000 of 9 1/4%
Senior Subordinated Notes due 2005
(collectively, the "Existing Debentures") and
the Company's $150,000,000 of 9 7/8% Senior
Subordinated Notes due 2006 (the "Notes")
offered concurrently herewith. The amount of
Senior Indebtedness outstanding at March 31,
1996, adjusted to give pro forma effect to the
transactions described under "Capitalization"
and the application of the estimated net
proceeds to the Company from the offering of the
Debentures and the Notes offered concurrently
herewith, would have been approximately $569.4
million. At March 31, 1996, the Company had
outstanding, adjusted to give pro forma effect
to the transactions described under
"Capitalization", $1,663 million of senior
subordinated indebtedness and obligations
(including $339.7 million of indebtedness of
subsidiaries guaranteed by the Company) that
would have ranked pari passu with the
Debentures. Also, at March 31, 1996,
consolidated subsidiaries of the Company had
outstanding, adjusted to give pro forma effect
to the transactions described under
"Capitalization", approximately $1,346 million
of indebtedness (not including $339.7 million of
indebtedness of subsidiaries guaranteed by the
Company, described above) which, insofar as the
assets of those subsidiaries are concerned,
would have been effectively senior to the
Debentures.
Certain Restrictions........ The Indenture for the Debentures, among other
things, contains restrictions (with certain
exceptions) on the ability of the Company and
its Restricted Subsidiaries (as defined) to
incur additional indebtedness, make certain
dividend payments or payments to redeem or
retire capital stock, invest in Unrestricted
Subsidiaries (as defined) or affiliates, engage
in certain
S-4
<PAGE>
transactions with affiliates and merge or
consolidate with or transfer all or
substantially all of their assets to another
entity. The Indenture also prohibits the Company
from issuing any indebtedness that is senior in
right of payment to the Debentures and expressly
subordinate in right of payment to any other
indebtedness of the Company.
Absence of Public Market.... There is no public market for the Debentures. The
Company does not intend to apply for listing of
the Debentures on any securities exchange or for
quotation through the National Association of
Securities Dealers Automated Quotation System.
Although Bear, Stearns & Co. Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and
Morgan Stanley & Co. Incorporated have informed
the Company that they currently intend to make a
market in the Debentures, they are not obligated
to do so, and any such market making may be
discontinued at any time without notice.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the
Debentures.
Concurrent Offering; Use of
Proceeds....................
Concurrently with the offering of the Debentures,
the Company is offering $150,000,000 aggregate
principal amount of the Notes (the "Other
Offering"). The net proceeds to be received by
the Company from the Offering and the Other
Offering (estimated to be $388.6 million in the
aggregate) will initially be applied to repay
borrowings under the Company's principal bank
credit agreement (the "Credit Agreement"). The
Company expects to reborrow amounts repaid under
the Credit Agreement in the future in connection
with the Pending Warburg Transactions and for
general corporate purposes. The Company expects
to raise additional funds in the future. See
"Use of Proceeds". The consummation of the Other
Offering is not a condition to the consummation
of this Offering, nor is the consummation of
this Offering a condition to the consummation of
the Other Offering.
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, 1995,
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 March
31, 1996 and 1995 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 three-month period ended March 31,
1996 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, 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- ---------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA(1):
Revenues................ $ 304,165 $ 245,401 $1,078,060 $ 837,169 $ 666,724 $ 572,487 $ 603,272
Operating expenses:
Technical............... 128,690 93,225 412,479 302,885 241,877 204,449 213,059
Selling, general and
administrative......... 72,888 55,817 266,209 195,942 172,687 120,356 121,527
Restructuring charge.... -- -- -- 4,306 (2) -- -- --
Depreciation and
amortization........... 84,694 82,654 319,929 271,343 194,904 168,538 215,326
--------- --------- ---------- --------- --------- --------- ---------
Operating profit........ 17,893 13,705 79,443 62,693 57,256 79,144 53,360
Other income (expense):
Interest expense, net... (67,895) (75,328) (311,887) (261,781) (230,327) (193,379) (257,189)
Provision for
preferential payment to
related party.......... (1,400) (1,400) (5,600) (5,600) (5,600) (2,662) --
Provision for loss on
Olympics venture....... -- -- -- -- -- (50,000)(3) --
Loss on sale of
preferred stock........ -- -- -- -- -- (20,000)(4) --
Write off of deferred
financing costs........ -- (2,888)(5) (5,517)(5) (9,884)(5) (1,044)(5) (12,284)(5) --
Loss on redemption of
debentures............. -- -- -- (7,088)(5) -- -- --
Share of affiliates' net
losses................. (20,968) (29,105) (93,024) (82,864) (61,017) (47,278) (23,780)
Gain (loss) on sale of
programming and
affiliate interests,
net.................... -- -- 35,989 -- (330) 7,053 15,505
Minority interest....... (2,355) (2,110) (8,637) (3,429) 3,000 -- --
Gain on sale of
marketable securities,
net.................... -- -- -- -- -- 733 5,806
Settlement of litigation
and related matters.... -- -- -- -- -- (5,655) (9,677)
Miscellaneous, net...... (1,577) (1,376) (8,225) (7,198) (8,720) (6,175) (11,224)
--------- --------- ---------- --------- --------- --------- ---------
Net loss................ (76,302) (98,502) (317,458) (315,151) (246,782) (250,503) (227,199)
Dividend requirements
applicable to preferred
stock.................. (24,378) (2,471) (20,249) (6,385) (885) (885) (4,464)
--------- --------- ---------- --------- --------- --------- ---------
Net loss applicable to
common shareholders.... $(100,680) $(100,973) $ (337,707) $(321,536) $(247,667) $(251,388) $(231,663)
========= ========= ========== ========= ========= ========= =========
Net loss per common
share.................. $ (4.06) $ (4.27) $ (14.17) $ (13.72) $ (10.83) $ (11.17) $ (10.32)
========= ========= ========== ========= ========= ========= =========
Average number of common
shares outstanding (in
thousands)............. 24,810 23,669 23,826 23,444 22,859 22,512 22,446
========= ========= ========== ========= ========= ========= =========
Book value per common
share.................. $ (81.17) $ (81.16) $ (76.61) $ (76.93) $ (64.61) $ (55.28) $ (41.49)
========= ========= ========== ========= ========= ========= =========
Deficiency of earnings
available to cover
fixed charges.......... $ (76,283) $ (98,484) $ (317,384) $(315,003) $(246,644) $(250,429) $(227,124)
========= ========= ========== ========= ========= ========= =========
Deficiency of earnings
available to cover
fixed charges and
preferred stock
dividends.............. $(100,661) $(100,955) $ (337,633) $(321,388) $(247,529) $(251,314) $(231,588)
========= ========= ========== ========= ========= ========= =========
</TABLE>
(footnotes on following page)
S-6
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
MARCH 31, --------------------------------------------------------------
1996 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA(1):
Total assets........... $ 2,593,106 $ 2,502,305 $ 2,176,413 $ 1,327,418 $ 1,251,157 $1,475,672
Total debt............. 2,696,580 3,157,107 3,169,236 2,235,499 2,004,452 2,211,056
Redeemable preferred
stock(4).............. 924,574 257,751 -- -- -- 32,094(4)
Stockholders'
deficiency............ (2,014,893) (1,891,676) (1,818,535) (1,503,244) (1,250,248) (932,428)
STATISTICAL DATA(1):
Homes passed(6)........ 3,339,000 3,328,000 2,899,000 2,240,000 2,019,000 2,005,000
Basic service
subscribers........... 2,085,000 2,061,000 1,768,000 1,379,000 1,262,000 1,372,000
Basic penetration(7)... 62.4% 61.9% 61.0% 61.6% 62.5% 68.4%
Number of premium
television units...... 3,841,000 3,990,000 3,208,000 3,003,000 2,802,000 2,326,000
Average number of
premium units per
basic subscriber...... 1.8 1.9 1.8 2.2 2.2 1.7
Average monthly revenue
per basic
subscriber(8)......... $ 37.28 $ 37.07 $ 36.33 $ 36.59 $ 37.64 $ 34.43
</TABLE>
--------
(1) The consolidated statement of operations, balance sheet and statistical
data reflect (i) the deconsolidation of 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 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 reorganization of V Cable, Inc. ("V Cable"),
the Company redeemed A-R Cable's redeemable preferred stock, incurring a
loss of $20 million.
(5) In connection with the 1992 reorganization of V Cable, the Company wrote
off approximately $7.5 million of deferred financing costs related to the
debt of V Cable. 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
(the portions relating to Cablevision of NYC and Cablevision of New Jersey
amounting to $3.2 million were written off in 1995) 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 Associates and Rainbow News 12,
resulting in an approximately $2.3 million write-off of deferred financing
costs.
(6) 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.
(7) Basic penetration represents basic service subscribers at the end of the
period as a percentage of homes passed at the end of the period.
(8) 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
Restricted Group (as defined under "The Company") and Unrestricted Cable on the
date or for the period indicated, as the Restricted Group and Unrestricted
Cable were constituted on March 31, 1996, and for the periods ended and as of
March 31, 1996 and December 31, 1995, respectively, adjusted to give pro forma
effect to the transactions described under "Condensed Pro Forma Consolidated
Financial Information", and assuming that U.S. Cable Television Group, L.P. ,
A-R Cable, A-R Cable Partners and CFHI become part of Unrestricted Cable and
Cablevision of Newark becomes part of the Restricted Group. The data should be
read in conjunction with the Company's Consolidated Financial Statements and
"Management's Discussion and Analysis".
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------------------------- -----------------------------------------------------
FINANCIAL DATA 1996 1995 1995 1994 1993
-------------- ------------------------- ---------- ------------------------ ---------- ----------
PRO FORMA ACTUAL PRO FORMA ACTUAL
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESTRICTED GROUP:
STATEMENT OF OPERATIONS
DATA:
Revenues............... $ 207,634 $ 194,181 $ 157,737 $ 793,112 $ 679,025 $ 584,567 $ 495,354
Operating profit before
depreciation and
amortization(1)....... 83,593 76,233 69,041 330,381 285,323 249,316 215,563
Depreciation and
amortization.......... 54,549 49,672 41,631 212,800 168,067 154,187 111,366
Operating profit....... 29,044 26,561 27,410 117,581 117,256 95,129 104,197
Total interest
expense............... 51,771(2) 38,092(2) 41,254(2) 179,991(2) 170,863(2) 153,923(2) 137,960
BALANCE SHEET DATA:
Total assets........... $2,242,067 $2,021,231 $1,207,405 $1,582,936 $1,415,777 $1,119,882 $ 838,746
Senior debt............ 569,387 601,029 1,108,950 472,229 567,249 969,895 488,128
Subordinated debt...... 1,474,012(2) 1,064,895(2) 764,820(2) 1,473,993(2) 1,064,876(2) 764,802(2) 822,781
Obligation to related
party................. 188,713 188,713 188,845 192,945 192,945 193,079 91,619
Total debt............. 2,232,112(2) 1,854,637(2) 2,062,615(2) 2,139,167(2) 1,825,070(2) 1,927,776(2) 1,402,528
FINANCIAL RATIOS AND
OTHER DATA:
Operating profit before
depreciation and
amortization to
revenues.............. 40.3% 39.3% 43.8% 41.7% 42.0% 42.6% 43.5%
Total debt to operating
profit before
depreciation and
amortization.......... 6.7x(3) 6.1x(3) 7.5x(3) 6.5x 6.4x 7.7x 6.5x
Operating profit before
depreciation and
amortization to total
interest expense...... 1.6x 2.0x 1.7x 1.8x 1.7x 1.6x 1.6x
Capital expenditures... $ 53,674 $ 53,597 $ 44,053 $ 247,369 $ 234,516 $ 251,078 $ 193,048
UNRESTRICTED CABLE:
STATEMENT OF OPERATIONS
DATA:
Revenues............... $ 104,879 $ 57,657 $ 53,624 $ 407,887 $ 226,130 $ 169,826 $ 137,853
Operating profit before
depreciation and
amortization(1)....... 40,198 25,764 25,401 167,002 107,093 84,932 65,789
Depreciation and
amortization.......... 44,567 26,714 35,273 187,096 124,488 105,938 80,287
Operating profit
(loss)................ (4,369) (950) (9,872) (20,094) (17,395) (21,006) (14,498)
Total interest
expense............... 25,900 26,269 30,844 107,545 123,741 103,803 94,452
BALANCE SHEET DATA:
Total assets........... $1,217,339 $ 778,090 $ 788,346 $1,056,916 $ 716,399 $ 823,363 $ 536,629
Total debt............. 1,111,970 608,160 1,101,919 1,091,813 1,094,003 1,092,440 832,964
FINANCIAL RATIOS AND
OTHER DATA:
Operating profit before
depreciation and
amortization to
revenues.............. 38.3% 44.7% 47.4% 40.9% 47.4% 50.0% 47.7%
Total debt to operating
profit before
depreciation and
amortization.......... 6.9x(4) 5.9x(4) 10.8x(3) 6.5x 10.2x 9.9x(4) 12.7x
Operating profit before
depreciation and
amortization to total
interest expense...... 1.6x 1.0x 0.8x 1.6x 0.9x 0.8x 0.7x
Capital expenditures... $ 32,854 $ 21,646 $ 7,279 $ 90,753 $ 43,707 $ 24,195 $ 20,304
</TABLE>
(footnotes on following page)
S-8
<PAGE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1996 AS OF DECEMBER 31,
---------------------- ----------------------------------
STATISTICAL DATA PRO FORMA ACTUAL 1995 1994 1993
---------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
RESTRICTED GROUP:
Homes passed(5)........ 2,665,000 2,559,000 2,549,000 2,138,000 1,731,000
Basic service subscrib-
ers at end of period.. 1,657,000 1,534,000 1,512,000 1,243,000 1,029,000
Basic penetration(6)... 62.2% 59.9% 59.3% 58.1% 59.4%
Number of premium tele-
vision units.......... 3,397,000 3,269,000 3,375,000 2,699,000 2,557,000
Average number of pre-
mium units per basic
subscriber............ 2.1 2.1 2.2 2.2 2.5
Average revenue per ba-
sic subscriber(7)..... $ 38.52 $ 38.92 $ 38.82 $ 38.29 $ 38.65
UNRESTRICTED CABLE:
Homes passed(5)........ 1,665,000 780,000 779,000 760,000 509,000
Basic service subscrib-
ers at end of period.. 1,095,000 551,000 549,000 525,000 350,000
Basic penetration(6)... 65.8% 70.6% 70.5% 69.1% 68.7%
Number of premium tele-
vision units.......... 1,201,000 572,000 615,000 508,000 446,000
Average number of pre-
mium units per basic
subscriber............ 1.1 1.0 1.1 1.0 1.3
Average revenue per ba-
sic subscriber(7)..... $ 30.58 $ 32.74 $ 32.45 $ 31.72 $ 30.56
</TABLE>
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 Cablevision MFR, Inc. seller note in the amount of approximately
$141.3 million that is, together with related interest expense, guaranteed
by the Restricted Group and, for pro forma amounts, also includes CFHI
seller note in the amount of approximately $9.7 million.
(3) Operating profit before depreciation and amortization is annualized for
purposes of preparing interim financial ratios that include balance sheet
items.
(4) Cablevision MFR, Inc. was acquired in August 1994, and operating profit
before depreciation and amortization for 1994 for the period the Company
owned Cablevision MFR, Inc. is annualized for purposes of preparing
financial ratios.
(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.
S-9
<PAGE>
RISK FACTORS
Purchase of the securities offered hereby involves various risks, including
the following principal factors, which, together with the other matters set
forth herein or incorporated by reference herein, should be carefully
considered by prospective investors. The Risk Factors set forth below
supersede the section captioned "Risk Factors" in the accompanying Prospectus.
Substantial Indebtedness and High Degree of Leverage. The Company has
incurred substantial indebtedness, primarily to finance acquisitions and
expansion of its operations and, to a lesser extent, for investments in and
advances to affiliates. The Company's consolidated debt plus the 11 3/4%
Series G Redeemable Exchangeable Preferred Stock (the "Series G Preferred
Stock") and 11 1/8% Series L Redeemable Exchangeable Preferred Stock (the
"Series L Preferred Stock") aggregated approximately $3.6 billion at March 31,
1996 ($4.5 billion on a pro forma basis after giving effect to the
transactions described under "Capitalization") with varying maturities to
2023, including an aggregate of approximately $539.5 million ($1,149.8 million
on a pro forma basis after giving effect to the transactions described under
"Capitalization") maturing on or prior to December 31, 2000. See Note 4 of
Notes to the Consolidated Financial Statements.
Net Losses and Stockholders' Deficiency. The Company reported net losses for
the three months ended March 31, 1996 and 1995 of $76.3 million and $98.5
million, respectively, and for the years ended December 31, 1995, 1994 and
1993 of $317.5 million, $315.2 million and $246.8 million, respectively. At
March 31, 1996, the Company had a stockholders' deficiency of $2.0 billion.
The net losses primarily reflect high levels of interest expense and
depreciation and amortization charges relating to the depreciation of assets
obtained through, and debt incurred to finance, acquisitions. Interest expense
and depreciation and amortization charges remained at a high level throughout
1993, 1994, 1995 and the first quarter of 1996 and will continue at high
levels throughout the remainder of 1996 and future years as a result of
previously completed, pending and future acquisitions, expected capital
expenditures and additional investments in the Company's programming
operations. The Company expects to continue incurring substantial losses for
at least the next several years. See "Management's Discussion and Analysis--
Liquidity and Capital Resources".
Need for Additional Financing. 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. 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".
Future Capital Expenditures and Commitments. The Company's cable television
systems have commitments for capital expenditures, including major system
upgrades, which will involve substantial expenditures over the next several
years. In addition, the Company, through Rainbow Programming (as defined under
"The Company"), has entered into numerous contracts relating to cable
television programming, including rights agreements with professional and
other sports teams. These contracts typically require substantial payments
over extended periods of time. See Note 11 of Notes to Consolidated Financial
Statements for a discussion of commitments.
Rainbow Programming has the right to acquire interests in Madison Square
Garden, L.P. ("MSG Holdings") from ITT Corporation ("ITT") sufficient to
equalize the interests of ITT and Rainbow Programming in MSG Holdings by
making certain scheduled payments totalling $250 million (plus interest on any
unpaid portion thereof) on specified dates commencing October 1996 and up to
and including March 17, 1997. See "The Company--Programming Services". The
Company and Rainbow Programming may fund the interest payments on the unpaid
portion of the $250 million amount required to equalize the interests of ITT
and Rainbow Programming in MSG Holdings from available cash balances or
amounts borrowed under the Credit Agreement.
S-10
<PAGE>
Accordingly, the Company funded a $29 million interest payment on March 11,
1996 and the $2.2 million and $1.8 million monthly interest payments on April
15, 1996 and May 15, 1996, respectively, from funds available under the Credit
Agreement. The Company has not yet identified specific funding sources for the
up to $250 million that could be required in connection with the ITT/MSG
Holdings transactions or for the monthly interest payments. The Company also
has a commitment to fund annual payments to Charles F. Dolan related to
Cablevision of New York City ("Cablevision of NYC"). See "Business--
Consolidated Cable Affiliates--Cablevision of New York City" and "Business--
Programming Operations" in the Form 10-K and "Management's Discussion and
Analysis--Liquidity and Capital Resources".
Intangible Assets. The Company had total assets at March 31, 1996 of
approximately $2.6 billion, of which approximately $1.0 billion were
intangible assets, principally franchises, affiliation agreements, excess cost
over fair value of net assets acquired, deferred financing, acquisition and
other costs and deferred interest expense. It is possible that no cash would
be recoverable from the voluntary or involuntary sale of these intangible
assets.
Losses on Investments in and Advances to Certain Affiliates. The Company has
made investments in and advances to certain affiliates in which Charles F.
Dolan has substantial ownership interests. At March 31, 1996, advances (less
applicable reserves) to one such affiliate, Atlantic Cable Television
Publishing Corporation ("Atlantic Publishing"), aggregated approximately $16.7
million. Because Mr. Dolan has a substantial interest in Atlantic Publishing,
an inherent conflict of interest exists with respect to such advances. There
can be no assurances that such advances and any amounts accrued with respect
thereto will be fully recovered or that conflicts of interest will not arise
with respect to the recovery of such amounts.
Atlantic Publishing holds a minority equity interest and a debt interest in
a company that publishes cable television guides which are offered to the
Company's subscribers and to other unaffiliated cable television operators.
Through March 31, 1996, the Company had advanced an aggregate of $16.7 million
to Atlantic Publishing, of which approximately $0.5 million was repaid during
1993, approximately $0.6 million was repaid during 1994 and approximately $1.0
million was repaid during 1995. The Company has written off all advances to
Atlantic Publishing other than approximately $3.1 million. Atlantic Publishing
is owned by a trust for certain Dolan family members; however, the Company has
the option to purchase Atlantic Publishing for an amount equal to the owner's
net investment therein plus interest. The current owner has only a nominal
investment in Atlantic Publishing. See "Business--Other Affiliates--Atlantic
Publishing" in the Form 10-K.
On December 15, 1995, the Company consummated the acquisition of Cablevision
of Boston Limited Partnership ("Cablevision of Boston"). In connection with
the acquisition, all the subordinated advances that the Company had made to
Cablevision of Boston became intercompany indebtedness. As part of the
acquisition of Cablevision of Boston, the Company entered into an agreement
with Mr. Dolan with respect to Mr. Dolan's 0.5% general partnership interest
in Cablevision of Brookline Limited Partnership ("Cablevision of Brookline"),
a partnership affiliated with Cablevision of Boston. The Company acquired the
remaining 99.5% of the partnership interests in Cablevision of Brookline in
the acquisition of Cablevision of Boston. Under the agreement, the Company has
a right of first refusal to acquire Mr. Dolan's 0.5% general partnership
interest and a right to acquire such interest on the earlier to occur of Mr.
Dolan's death or January 1, 2002 at the greater of $10,000 or the book value
of such interest at such date. Mr. Dolan's estate has the right to put the
interest to the Company at the same price. Additionally, in the event of a
change of control of the Company or Cablevision of Brookline, Mr. Dolan will
have the right to put his 0.5% general partnership interest in Cablevision of
Brookline to the Company at the greater of (i) prices declining from $3.9
million for the twelve months ended December 15, 1996 to $10,000 for the
twelve months ended December 15, 2002 and (ii) the book value of such interest
on the date of transfer.
See "Business--Consolidated Cable Affiliates--Cablevision of New York City"
in the Form 10-K for a discussion of the Company's acquisition of
substantially all of Charles F. Dolan's interest in Cablevision of NYC, which
was consummated as described therein in July 1992.
S-11
<PAGE>
Voting Control by Majority Stockholders; Disparate Voting Rights. As of
March 31, 1996, Charles F. Dolan beneficially owned and possessed sole voting
power with respect to 259,306 shares or 1.8% of the Company's outstanding
Class A common stock (the "Class A Common Stock") and 2,346,281 shares or
20.3% of the Company's outstanding Class B common stock (the "Class B Common
Stock" and, collectively with the Class A Common Stock, the "Common Stock").
In addition, as of March 31, 1996, an aggregate of 4,000,000 shares or 34.6%
of the outstanding Class B Common Stock were held by two Grantor Retained
Annuity Trusts (the "GRA Trusts") established by Mr. Dolan for estate planning
purposes. Mr. Dolan may be deemed to have beneficial ownership of the shares
of Class B Common Stock held by the GRA Trusts due to his right to reacquire
the Class B Common Stock held by the GRA Trusts by substituting other property
of equivalent value, but, until such event, each of the GRA Trusts, through
their co-trustees (who are family members of Mr. Dolan) has the power to vote
and dispose of the shares of Class B Common Stock held by the GRA Trusts. As a
result of his beneficial ownership of the shares held by the GRA Trusts, as of
March 31, 1996, Mr. Dolan beneficially owned 259,306 shares or 1.8% of the
Company's outstanding Class A Common Stock and 6,346,281 shares or 54.8% of
the Company's outstanding Class B Common Stock. On a combined basis, these
shares represented 25.5% of the total number of shares of both classes of
Common Stock and 49.0% of the total voting power of the classes. Other trusts
established by Mr. Dolan for the benefit of certain Dolan family members, and
as to which Mr. Dolan disclaims beneficial ownership, owned, as of March 31,
1996, an additional 500,000 shares of Class A Common Stock or 3.5% of the
Class A Common Stock and 5,225,928 shares of the Class B Common Stock, or
45.2% of the Class B Common Stock and 40.6% of the total voting power of all
classes of the Common Stock. As a result of this stock ownership, Dolan family
members have the power to elect all the directors subject to election by
holders of the Class B Common Stock, which directors constitute 75% of the
entire Board of Directors of the Company. Moreover, because holders of Class B
Common Stock are entitled to ten votes per share while holders of Class A
Common Stock are entitled to one vote per share, Dolan family members may
control stockholder decisions on matters in which holders of Class A and Class
B Common Stock vote together as a class. These matters include the amendment
of certain provisions of the Company's certificate of incorporation (the
"Certificate of Incorporation") and the approval of fundamental corporate
transactions, including mergers. In addition, because the affirmative vote or
consent of the holders of at least 66 2/3% of the outstanding shares of the
Class B Common Stock, voting separately as a class, is required to approve (i)
the authorization or issuance of any additional shares of Class B Common Stock
and (ii) any amendment, alteration or repeal of any of the provisions of the
Certificate of Incorporation which adversely affects the powers, preferences
or rights of the Class B Common Stock, Dolan family members also have the
power to prevent such issuance or amendment. The voting rights of the Class B
Common Stock beneficially owned by Mr. Dolan will not be modified as a result
of any transfer of legal or beneficial ownership thereof.
Restrictive Covenants. The Company's principal bank credit agreement (the
"Credit Agreement") and certain of the Company's other debt instruments
contain various financial and operating covenants which, among other things,
require the maintenance of certain financial ratios and restrict the Company's
ability to borrow funds from other sources and to utilize funds for various
purposes, including investments in certain subsidiaries. Violation of the
covenants in the Credit Agreement or in the indentures governing the Company's
publicly-issued debentures and notes could result in a default under the
Credit Agreement which would permit the bank lenders thereunder to restrict
the Company's ability to borrow undrawn funds under the Credit Agreement and
to accelerate the maturity of borrowings thereunder. See "Management's
Discussion and Analysis--Liquidity and Capital Resources".
Risks Related to Regulation. The Company's cable television operations may
be adversely affected by government regulation, the impact of competitive
forces and technological changes. In 1992, Congress enacted the 1992 Cable
Act, which represented a significant change in the regulatory framework under
which cable television systems operate. In April 1993 and February 1994, the
Federal Communications Commission ("FCC") ordered reductions in cable
television rates. In June 1995, a Federal appeals court upheld the material
aspects of the FCC's rate regulation scheme. Congress has enacted legislation
(the "Telecommunications Act of 1996") that relaxes the regulation of cable
television rates. The FCC is formulating rules to implement the
Telecommunications Act of 1996. These rules will determine the effect of the
legislation on the Company. See
S-12
<PAGE>
"Business--Cable Television Operations--Competition" and "Business--Cable
Television Operations--Regulation" in the Form 10-K.
Risk of Competition. Cable operators compete with a variety of distribution
systems, including broadcast television stations, multichannel multipoint
distribution services ("MMDS"), satellite master antenna systems ("SMATV"),
direct broadcast satellite systems ("DBS"), and private home dish earth
stations. For example, CAI Wireless Systems, Inc., an MMDS operator, has
received investments from Bell Atlantic Corporation and NYNEX Corporation and
owns operating systems or spectrum rights in a significant portion of the
Company's systems areas. In addition, four DBS systems are now operational in
the United States and recently AT&T Corp. announced an investment in Hughes
Electronics Corp.'s DirecTv system. The 1992 Cable Act prohibits a cable
programmer that is owned by or affiliated with a cable operator (such as
Rainbow Programming) from unreasonably discriminating among or between cable
operators and other multichannel video distribution systems with respect to
the price, terms and conditions of sale or distribution of the programmer's
service and from unreasonably refusing to sell service to any multichannel
video programming distributor. Cable systems also compete with the entities
that make videotaped movies and programs available for home rental. The 1992
Cable Act regulates the ownership by cable operators of MMDS and SMATV. Under
the Telecommunications Act of 1996, the cross-ownership provisions do not
apply to any cable operator in a franchise area in which a cable operator
faces competition from video programming distributors meeting certain
statutory requirements. In July 1992, the FCC voted to authorize additional
competition to cable television by video programmers using broadband common
carrier facilities constructed by telephone companies. The FCC allowed
telephone companies to take ownership interests of up to 5% in such
programmers. The FCC also reaffirmed an earlier administrative holding, upheld
on appeal by a Federal appeals court, that programmers using such a telephone
company-provided "video dialtone" system would not need to obtain a state or
municipal franchise. Several telephone companies have sought approval from the
FCC to build such "video dialtone" systems. Such a system has been proposed in
several communities in which the Company currently holds a cable franchise and
several of such systems have been approved by the FCC. The Telecommunications
Act of 1996 repeals the "video dialtone" rules, but gives telephone companies
(and cable companies, to the extent permitted by the FCC) the option of
providing video programming to subscribers through "open video systems" that
closely resemble video dialtone systems and that would not require a local
cable franchise. Additional competition to cable systems is possible if the
FCC authorizes the licensing of local multipoint distribution services
("LMDS"). The FCC has proposed to license this type of service to providers.
Competition from Telephone Companies. The 1984 Cable Act barred co-ownership
of telephone companies and cable television systems operating in the same
service areas. Numerous Federal district courts held this prohibition to be
unconstitutional. Several of these decisions have been upheld on appeal. The
Telecommunications Act of 1996 repeals this restriction and permits a
telephone company to provide video programming directly to subscribers in its
telephone service territory, subject to certain regulatory requirements, but
generally prohibits a telephone company from acquiring an in-region cable
operator, except in certain small markets under certain circumstances.
Telephone companies (Ameritech Corp. in Ohio and Southern New England
Telephone Co. in Connecticut) have obtained or applied for local franchises to
construct and operate cable television systems in several communities in which
the Company currently holds cable franchises. Neither the 1984 Cable Act nor
the 1992 Cable Act bars a telephone company from acquiring cable systems
outside its telephone service area, and several Regional Bell operating
companies have purchased or made investments in the cable systems. See
"Business--Cable Television Operations--Regulation" in the Form 10-K.
Risk of Non-Exclusive Franchises and Franchise Renewals. The Company's cable
television systems are operated primarily under nonexclusive franchise
agreements with local government franchising authorities, in some cases with
the approval of state cable television authorities. The Company's business is
dependent on its ability to obtain and renew its franchises. Although the
Company has never lost a franchise as a result of a failure to obtain a
renewal, its franchises are subject to non-renewal or termination under
certain circumstances. In certain cases, franchises have not been renewed at
expiration and the Company operates under temporary licenses while negotiating
renewal terms with the franchising authorities. See "Business--Cable
Television Operations--Franchises" in the Form 10-K.
S-13
<PAGE>
Absence of Public Market. The Debentures are a new security for which there
currently is no market. Although Bear, Stearns & Co. Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated (the
"Underwriters") have informed the Company that they currently intend to make a
market in the Debentures, they are not obligated to do so and any such market
making may be discontinued at any time without notice. Accordingly, there can
be no assurance as to the development or liquidity of any market for the
Debentures. The Company does not intend to apply for listing of the Debentures
on any securities exchange or for quotation through the National Association
of Securities Dealers Automated Quotation System.
S-14
<PAGE>
THE COMPANY
The Company is one of the largest operators of cable television systems in
the United States, with approximately 2,752,000 subscribers in 19 states as of
March 31, 1996 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"), including Cablevision of NYC and, as
of December 15, 1995, a subsidiary holding the cable television assets
previously a part of Cablevision of Boston, and an unrestricted group of
subsidiaries. The unrestricted group of subsidiaries consists primarily of
Cablevision of Ohio (as defined under "Recent Developments-- V Cable
Transactions"), Cablevision MFR, Inc. ("Cablevision MFR" and, collectively
with Cablevision of Ohio, "Unrestricted Cable") and Rainbow Programming
Holdings, Inc. (including Rainbow Advertising Sales Corporation ("Rainbow
Advertising"), American Movie Classics Company ("AMCC") and SportsChannel
Associates ("SportsChannel New York"), collectively, "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 Holdings,
Inc. ("CFHI"), A-R Cable Partners and Cablevision of Newark. The Company's
unrestricted subsidiaries and investments are collectively referred to herein
as the "Unrestricted Group". See "Recent Developments" for a discussion of
certain transactions involving members of the Unrestricted Group, including
Cablevision of Ohio, A-R Cable, CFHI, A-R Cable Partners and Cablevision of
Newark. The Restricted Group and each member of the Unrestricted Group that
operates cable television systems are individually and separately financed.
The indebtedness of Cablevision of Ohio 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. Rainbow Programming's future cash
requirements may be financed with separate external debt financing, which, as
to the assets of Rainbow Programming, would be structurally senior to any of
the Company's indebtedness. 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 three major metropolitan areas, New York City, Boston and
Cleveland, with a view to being a significant cable provider in each of these
markets; to maximize its revenue per subscriber by 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 startup of such adjunct
businesses as information services, interactive services (including Internet
access), near video on demand, video on demand, residential telephony and
commercial telephony. To successfully roll out these adjunct new businesses
significantly beyond the initial development phases, the Company will require
additional capital from the sale of equity in the capital markets or to a
strategic investor.
S-15
<PAGE>
CABLE TELEVISION
The cable television systems that are majority owned and managed by the
Company (the "Company's cable television systems") served approximately
2,085,000 subscribers as of March 31, 1996 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
667,000 subscribers as of March 31, 1996 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 ($37.28 for March 1996) and ratios of
premium service units to basic subscribers (1.8:1 for March 1996). 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 served approximately
1,534,000 subscribers as of March 31, 1996, primarily on Long Island, New
York, in Connecticut (principally Fairfield County), in northern New Jersey,
in Westchester County, New York, in and around Boston, Massachusetts and in
Cleveland, Ohio. See "Recent Developments--V Cable Transactions" for a
discussion of the transactions pursuant to which the Company's cable
television systems in Cleveland, Ohio were contributed to Cablevision of Ohio
(a part of Unrestricted Cable) on April 17, 1996. The revenue per subscriber
and ratio of premium service units to basic subscribers for cable television
systems in the Restricted Group for March 1996 were $38.92 and 2.1:1,
respectively.
The cable television operations in Unrestricted Cable served approximately
551,000 subscribers as of March 31, 1996 and are conducted through the
Company's unrestricted subsidiaries, Cablevision of Ohio and Cablevision MFR.
The Unrestricted Group also conducts its cable television operations through
its unrestricted investments, consisting of A-R Cable, U.S. Cable, CFHI, A-R
Cable Partners and Cablevision of Newark. The revenue per subscriber and ratio
of premium service units to basic subscribers for the Company's unrestricted
subsidiaries for March 1996 were $32.74 and 1.0:1, respectively. See "Recent
Developments--Pending Warburg Transactions" for a discussion of the Company's
agreement to acquire the remaining interests in A-R Cable, A-R Cable Partners,
Cablevision of Newark and CFHI (collectively, the "Warburg Companies") and
"Recent Developments--V Cable Transactions" for a discussion of the
transactions pursuant to which U.S. Cable will become part of Unrestricted
Cable.
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.
See "Recent Developments--V Cable Transactions" in this Prospectus
Supplement and "Business--Recent Developments--V Cable Transactions" in the
Form 10-K for a description of the reorganization and recapitalization of V
Cable. This transaction resulted in the inclusion within the Restricted Group
of V Cable's Long Island cable television systems (which served approximately
161,000 subscribers as of March 31, 1996) and the transfer of the North Coast
Cable cable television systems (which served approximately 87,000 subscribers
as of March 31, 1996) from the Restricted Group to Unrestricted Cable and will
result in the acquisition of the 80% of U.S. Cable (which served approximately
245,000 subscribers as of March 31, 1996) not owned by the Company. U.S. Cable
will be part of Unrestricted Cable.
S-16
<PAGE>
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. and Liberty Media
Corporation. Rainbow Programming's businesses include eight regional
SportsChannel services, four national entertainment services (American Movie
Classics ("AMC"), Bravo, MuchMusic ("MM") and the Independent Film Channel
("IFC")), Rainbow News 12 (regional news services serving suburban areas
surrounding New York City) and the sports services of Prime SportsChannel
Networks (Prime Network and NewSport). Rainbow Programming also owns an
interest in MSG Holdings (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. AMC 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 March 1995, MSG Holdings, a partnership among subsidiaries of Rainbow
Programming and subsidiaries of ITT, acquired the business and assets of
Madison Square Garden ("MSG") in a transaction in which MSG merged with and
into MSG Holdings. MSG Holdings owns the Madison Square Garden Arena and the
adjoining Paramount Theater, the New York Rangers professional hockey team,
the New York Knickerbockers professional basketball team and the Madison
Square Garden Network, a sports programming network with over five million
subscribers. The purchase price paid by MSG Holdings for MSG was $1,009.1
million.
MSG Holdings funded the purchase price of the acquisition through (i)
borrowings of $289.1 million under a $450 million credit agreement among MSG
Holdings, various lending institutions and Chemical Bank, as administrative
agent, (ii) an equity contribution from Rainbow Programming of $110 million,
and (iii) an equity contribution from ITT of $610 million. ITT, Rainbow
Programming and the Company are parties to an agreement made as of August 15,
1994 (as amended, the "Bid Agreement") that, as amended, provides Rainbow
Programming the right to acquire interests in MSG Holdings from ITT sufficient
to equalize the interests of ITT and Rainbow Programming in MSG Holdings by
making certain scheduled payments totalling $250 million (plus interest on any
unpaid portion thereof) on specified dates commencing October 1996 and up to
and including March 17, 1997. Rainbow Programming may acquire all or part of
such interests in MSG Holdings through (i) the payment of cash to ITT, (ii)
the delivery to ITT, at the option of the Company, of common or preferred
stock of the Company (together with the commitment of a nationally recognized
underwriter to promptly purchase such common or preferred stock for cash), or
a combination of cash and common or preferred stock (with such a commitment),
or (iii) the delivery to ITT, at the option of ITT, subject to certain
conditions and in lieu of payment of a limited amount of the required cash or
common or preferred stock for the purchase of a portion of such interests, of
certain designated programming interests of Rainbow Programming. If any
scheduled payment is not made on the applicable due date, then Rainbow
Programming will forfeit (a) its right to equalize the interests in MSG
Holdings and (b) certain minority rights. The Company and Rainbow Programming
may fund the interest payments on the unpaid portion of the $250 million
amount required to equalize the interests of ITT and Rainbow Programming in
MSG Holdings from available cash balances, from borrowings by Rainbow
Programming or from funds available under the Company's Credit Agreement.
Accordingly, the Company funded a $29 million interest payment on March 11,
1996 and the $2.2 million and $1.8 million monthly interest payments on April
15, 1996 and May 15, 1996, respectively, from funds available under the Credit
Agreement. If certain conditions are met and Rainbow Programming has forfeited
its right to equalize the interests in MSG Holdings, then Rainbow Programming
will also have the right to require ITT to purchase all of Rainbow
Programming's interest in MSG Holdings for an amount equal to (i) the price
paid by Rainbow Programming for such interest plus (ii) all interest paid by
Rainbow Programming on the unpaid portion of the $250 million of scheduled
payments (as described above).
S-17
<PAGE>
MSG Holdings is being managed on a 50-50 basis by Rainbow Programming and
ITT. If, as discussed above, Rainbow Programming does not equalize the
interests in MSG Holdings, its management role will be effectively eliminated.
Rainbow Programming also has the right to voluntarily relinquish any power to
direct the management and policies of MSG Holdings. In connection with
obtaining the consent of the National Hockey League (the "NHL") and the
National Basketball Association (the "NBA") to the indirect transfers of the
New York Rangers and the New York Knickerbockers, respectively, resulting from
the merger, the Company and Rainbow Programming entered into agreements with
the NHL and the NBA agreeing, among other matters, to conduct themselves in
accordance with the relevant rules of each league.
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
PENDING WARBURG TRANSACTIONS
On May 10, 1996, the Company entered into an agreement (the "Warburg
Agreement") with Warburg, Pincus Investors, L.P. ("Warburg") to acquire from
Warburg the interests that the Company does not already own in A-R Cable, A-R
Cable Partners, Cablevision of Newark and CFHI (collectively, the "Warburg
Companies") for an aggregate purchase price of $183 million (the "Pending
Warburg Transactions"). See "Business--Other Cable Affiliates" in the Form 10-
K for a description of these affiliates. The transaction is subject to the
receipt of necessary regulatory approvals.
Under the Warburg Agreement, interests in each Warburg Company will be
purchased by the Company separately as the regulatory approvals related to the
purchase of such Warburg Company are received. With respect to any interest in
a Warburg Company that is not acquired by October 10, 1996, the allocated
purchase price for each such interest will be increased from and after October
10, 1996 by an interest factor of 8% per annum, compounded quarterly, until
the earlier of such date as the Company acquires the interests in such Warburg
Company or February 10, 1997. If any such purchases occur prior to October 10,
1996, the purchase price for the relevant interests will be reduced by the
same interest factor. If by February 10, 1997, all conditions to the Company's
purchase of Warburg's interest in any one of the Warburg Companies (other than
the receipt of regulatory approvals and third party consents) have been
satisfied but the acquisition of such interests has not occurred, the Company
will make a loan to Warburg in respect of each such Warburg Company, secured
by a pledge of such interests, in the amount of the allocated purchase price
therefor, plus the accrued interest resulting from the interest factor
adjustment discussed above. If the Company does not make the required loan,
Warburg will have the right to commence a sale process with respect to such
Warburg Company and will have a preferential right to receive its purchase
price from the proceeds of any such sale.
The Pending Warburg Transactions will result in the Company increasing the
number of subscribers in cable television systems that are majority owned and
managed by the Company by approximately 422,000 subscribers to approximately
2,507,000 subscribers (as of March 31, 1996) and decreasing the number of
subscribers in cable television systems in which the Company has non-majority
investments by the same amount to approximately 245,000 subscribers (as of
March 31, 1996). See "Condensed Pro Forma Consolidated Financial Information".
The funds to purchase Warburg's interests are expected to be provided by bank
borrowings by the Company. See "Use of Proceeds".
The Company intends to designate Cablevision of Newark (which served
approximately 48,000 subscribers as of March 31, 1996) as a member of the
Restricted Group and intends to make A-R Cable, A-R Cable Partners and CFHI a
part of Unrestricted Cable.
V CABLE TRANSACTIONS
GECC Agreement. On February 2, 1996, the Company entered into an agreement,
as amended (the "GECC Agreement"), with General Electric Capital Corporation
("GECC"), pursuant to which the Company
S-18
<PAGE>
effected a reorganization and recapitalization relating to V Cable. As of
March 31, 1996, V Cable served approximately 379,000 subscribers, principally
in the suburbs of Cleveland, Ohio and on Long Island. As part of this
reorganization and recapitalization, (i) on March 18, 1996, the Company repaid
$500 million of V Cable debt and $70 million of U.S. Cable debt, together with
accrued interest, from the proceeds of the Company's issuance in February 1996
of $650 million aggregate liquidation preference of the Series L Preferred
Stock; and (ii) on April 17, 1996, three subsidiaries in the Company's
Unrestricted Group, Telerama, Inc., Cablevision of the Midwest, Inc. and
Cablevision of Cleveland, L.P. (collectively, "Cablevision of Ohio"), borrowed
approximately $288.6 million under a new $500 million Cablevision of Ohio
credit facility and used such amounts to (a) repay approximately $209.0
million due under the credit facilities of V Cable and VC Holding, Inc. ("VC
Holding"), (b) repay approximately $75.0 million under the Company's Credit
Agreement in exchange for the Company's contribution of its North Coast Cable
cable television system (which served approximately 87,000 subscribers in the
Cleveland metropolitan area as of March 31, 1996) to Cablevision of Ohio (a
newly organized Unrestricted Subsidiary), and (c) repay approximately $4.6
million of fees and expenses in connection with the transactions. Also, on
April 17, 1996, the Company repaid approximately $215.0 million of remaining
indebtedness under V Cable's credit agreement (representing indebtedness
associated with V Cable's Long Island systems) with borrowings under the
Credit Agreement and designated the Long Island systems (which served
approximately 161,000 subscribers as of March 31, 1996) previously within V
Cable as part of the Restricted Group. As a result of these transactions, the
V Cable and VC Holding credit agreements were repaid in full and terminated.
In connection with the GECC Agreement, the 80% interest in U.S. Cable (which
served approximately 245,000 subscribers as of March 31, 1996), including U.S.
Cable's 19% interest in VC Holding not owned by V Cable, will be acquired for
approximately $4 million and V Cable will repay approximately $152 million to
GECC, which will be raised through a separate bank facility (U.S. Cable will
be part of Unrestricted Cable).
New Cablevision of Ohio Credit Facility. As part of the V Cable
reorganization and recapitalization, the Company combined its North Coast
Cable cable television system and the Ohio cable television systems of V Cable
into Cablevision of Ohio, which is a wholly-owned subsidiary of the Company
and a member of the Unrestricted Group. A group of banks has provided the $500
million Cablevision of Ohio credit facility, consisting of a $425 million
nine-year reducing revolving credit facility and a $75 million 9 1/2 year term
loan. As discussed above, in connection with the consummation of the
reorganization and recapitalization of V Cable, Cablevision of Ohio drew
approximately $288.6 million under its credit facility to repay outstanding V
Cable debt to GECC and to repay Restricted Group debt assumed by Cablevision
of Ohio in connection with the contribution of North Coast Cable.
U.S. Cable Acquisition. On March 18, 1996, the Company contributed $70
million of proceeds of the Series L Preferred Stock offering mentioned above
to U.S. Cable. U.S. Cable applied the $70 million to the prepayment to GECC of
a portion of the indebtedness under its credit facility. The GECC Agreement
contemplates that following the receipt of any required franchise and
regulatory approvals, U.S. Cable will (i) redeem the 80% of U.S. Cable's
partnership interests not owned by V Cable for approximately $4 million and
(ii) refinance the remaining $152 million of U.S. Cable indebtedness payable
to GECC. The funds to redeem the partnership interest and to repay
indebtedness owed to GECC will be provided by a drawdown under a $175 million
credit facility to be arranged with a new group of banks. As part of the
acquisition of the 80% interest in U.S. Cable that V Cable does not already
own, the Company will acquire the 19% interest in VC Holding currently held by
U.S. Cable.
There can be no assurance that the acquisition of the U.S. Cable partnership
interests will be consummated or will be consummated in the form presently
contemplated.
S-19
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering are
estimated to be $243.2 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 in connection with the Pending Warburg Transactions and for general
corporate purposes. The Company also 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 7.9%, and mature in installments over the 1996-2003
time period. See "Management's Discussion and Analysis--Liquidity and Capital
Resources".
Concurrently with the Offering, the Company is offering (the "Other
Offering") its $150,000,000 of 9 7/8% Senior Subordinated Notes due 2006 (the
"Notes"). The Company expects to use the net proceeds from the Other Offering
(estimated to be $145.4 million) to repay borrowings under the Credit
Agreement. The Company expects to reborrow the amount repaid under the Credit
Agreement in the future in connection with the Pending Warburg Transactions
and for general corporate purposes. The consummation of the Other Offering is
not a condition to the consummation of this Offering, nor is the consummation
of this Offering a condition to the consummation of the Other Offering.
S-20
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company and its consolidated subsidiaries at March 31, 1996 and as adjusted to
reflect the pro forma consolidated capitalization of the Company and its
consolidated subsidiaries at March 31, 1996, adjusted to give effect to (i)
the transactions described under "Recent Developments--V Cable Transactions"
(the "V Cable Transactions"), (ii) the Pending Warburg Transactions, (iii) the
cancellation of treasury shares and (iv) the issuance of $250,000,000 of the
Debentures offered hereby and $150,000,000 of the Notes being offered by the
Company concurrently, and the application of the estimated net proceeds to the
Company from such offerings. See "Recent Developments", "Use of Proceeds" and
"Condensed Pro Forma Consolidated Financial Information".
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
------------------------
HISTORICAL PRO FORMA
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT:
Restricted Group:
Bank indebtedness(1)............................. $ 591,743 $ 560,101
10 3/4% Senior Subordinated Debentures due 2004.. 275,000 275,000
9 1/4% Senior Subordinated Notes due 2005........ 300,000 300,000
9 7/8% Senior Subordinated Notes due 2006 offered
concurrently herewith........................... -- 149,385
9 7/8% Senior Subordinated Debentures due 2013... 198,946 198,946
10 1/2% Senior Subordinated Debentures due 2016
offered hereby.................................. -- 250,000
9 7/8% Senior Subordinated Debentures due 2023... 149,681 149,681
Subordinated notes(2)............................ 141,268 151,000
Obligation to related party(3)................... 188,713 188,713
Capitalized lease obligations.................... 9,286 9,286
----------- -----------
Total.......................................... 1,854,637 2,232,112
----------- -----------
V Cable:
Senior debt...................................... 414,660 --
----------- -----------
Cablevision of Ohio:
Bank debt........................................ -- 288,600
----------- -----------
MFR:
Senior bank debt................................. 193,500 193,500
----------- -----------
Other Unrestricted Subsidiaries:
Bank debt........................................ 233,783 450,453
Senior indebtedness.............................. -- 413,200
----------- -----------
Total.......................................... 233,783 863,653
----------- -----------
Total long-term debt......................... 2,696,580 3,577,865
----------- -----------
Series G Redeemable Exchangeable Preferred Stock..... 265,336 265,336
----------- -----------
Series L Redeemable Exchangeable Preferred Stock..... 659,238 659,238
----------- -----------
STOCKHOLDERS' DEFICIENCY:
Series C/D Cumulative Preferred Stock:
Authorized--225,000 shares
Outstanding--110,622 shares...................... 1 1
Series I Cumulative Convertible Exchangeable Pre-
ferred Stock...................................... 14 14
Class A Common Stock:
Authorized--50,000,000 shares
Outstanding--14,341,169 shares historical and
13,249,616
pro forma....................................... 143 132
Class B Common Stock:
Authorized--20,000,000 shares
Outstanding--11,572,709 shares................... 116 116
Paid-in-capital.................................... 225,354 272,712
Accumulated deficit................................ (2,180,129) (2,206,005)
----------- -----------
(1,954,501) (1,933,030)
Treasury stock (1,091,553 shares historical and 0
shares pro forma)................................. (60,392) --
----------- -----------
Total stockholders' deficiency................. (2,014,893) (1,933,030)
----------- -----------
Total capitalization......................... $ 1,606,261 $ 2,569,409
=========== ===========
</TABLE>
S-21
<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. These amounts do not include approximately $17.2
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's credit agreement.
(2) Represents Cablevision MFR, Inc. seller notes in the amount of $141.3
million for Monmouth Cable and Riverview Cable and $9.7 million for
Framingham Cable (after giving effect to the Pending Warburg
Transactions). These amounts are guaranteed by the Restricted Group.
(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. The Company'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) Represents the cancellation of 1,091,553 shares of treasury stock of which
1,041,553 shares were issued to a wholly-owned subsidiary of the Company
in connection with the Company's acquisition of Cablevision of Boston.
S-22
<PAGE>
CONDENSED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following condensed pro forma consolidated balance sheet as of March 31,
1996 presents the Company's financial position as adjusted to give effect to
(i) the acquisition of the 80% partnership interest in U.S. Cable not owned by
V Cable and the refinancing of U.S. Cable and V Cable indebtedness, (ii) the
cancellation of 1,091,553 shares of treasury stock, of which 1,041,553 shares
were issued to a wholly owned subsidiary of the Company in connection with the
Company's acquisition of Cablevision of Boston (the "Cancellation of Treasury
Shares"), and (iii) the Pending Warburg Transactions, the offering of the
Debentures and the Notes and the application of the net proceeds from such
offerings, in each case as if they had occurred as of that date. The following
condensed pro forma consolidated statement of operations for the year ended
December 31, 1995 presents the Company's consolidated results of operations as
adjusted to give effect to (i) the Company's acquisition of Cablevision of
Boston on December 15, 1995 (the "Cablevision of Boston Acquisition"), (ii)
the redemption by the Company of its Series E Preferred Stock on November 2,
1995, the issuance in September 1995 of the Company's Series G Preferred
Stock, the issuance in November 1995 of $300,000,000 of the Company's 9 1/4%
Senior Subordinated Notes due 2005 and the issuance in November 1995 of
$345,000,000 of the Company's 8 1/2% Series I Cumulative Convertible
Exchangeable Preferred Stock ("Series I Preferred Stock") and the application
of the net proceeds to the Company from such offerings to repay bank
indebtedness (the "1995 Refinancings"), (iii) the V Cable Transactions and the
offering of the Company's Series L Preferred Stock (the "Series L Preferred
Stock Offering") and the application of the net proceeds therefrom, and (iv)
the Pending Warburg Transactions and the offering of the Debentures and the
Notes and the application of the proceeds from such offerings, in each case as
if they had occurred at the beginning of the period presented. The following
condensed pro forma consolidated statement of operations for the three months
ended March 31, 1996 presents the Company's consolidated results of operations
as adjusted to give effect to (i) the V Cable Transactions and the Series L
Preferred Stock Offering and the application of the net proceeds therefrom and
(ii) the Pending Warburg Transactions and the offering of the Debentures and
the Notes and the application of the proceeds from such offerings, in each
case as if they had occurred at the beginning of the period 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 has been prepared for comparative purposes only and 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-23
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS*
---------------------------------------------------
PENDING WARBURG
TRANSACTIONS
CANCELLATION OF AND OFFERING OF
V CABLE TREASURY THE NOTES
HISTORICAL TRANSACTIONS SHARES AND THE DEBENTURES PRO FORMA
----------- ------------ --------------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equiva-
lents.................. $ 28,017 $ 3 (1) $ $ 5,783 (5) $ 33,803
Accounts receivable
trade, net............. 84,842 904 (1) 2,974 (5) 88,720
Notes and other receiv-
ables.................. 17,461 372 (1) 1,581 (5) 19,414
Prepaid expenses and
other assets........... 25,075 726 (1) 1,315 (5) 27,116
Property, plant and
equipment, net......... 1,056,999 101,396 (1) 144,287 (5) 1,302,682
Investments in and ad-
vances to affiliates... 251,783 (70,000)(1) (11,282)(8) 170,501
Feature film inventory.. 138,019 138,019
Intangible assets, net.. 918,984 144,473 (3) 250,538 (6) 1,313,995
Deferred financing
costs, interest expense
and other costs, net... 71,926 4,600 (2) 1,602 (5) 63,065
(25,876)(2) 10,813 (7)
----------- --------- -------- --------- -----------
$ 2,593,106 $ 156,598 $ 407,611 $ 3,157,315
=========== ========= ======== ========= ===========
LIABILITIES AND STOCKHOLDERS' DEFI-
CIENCY
Accounts payable........ $ 153,763 $ 11,035 (1) $ $ 22,951 (5) $ 187,749
Accrued liabilities..... 217,250 10,064 (1) 23,176 (5) 250,490
Accounts payable to af-
filiates............... 17,964 855 (1) 6,486 (5) 19,648
(5,657)(8)
Feature film rights pay-
able................... 127,499 127,499
Bank debt............... 1,019,026 130,660 (2) 104,020 (5) 1,492,654
288,600 (2) (205,572)(7)
155,920 (2)
Senior debt............. 414,660 (414,660)(2) 413,200 (5) 413,200
Subordinated deben-
tures.................. 923,627 399,385 (7) 1,323,012
Subordinated notes pay-
able................... 141,268 9,732 (5) 151,000
Obligation to relation
party.................. 188,713 188,713
Capital lease obliga-
tions and other debt... 9,286 9,286
----------- --------- -------- --------- -----------
3,213,056 182,474 767,721 4,163,251
----------- --------- -------- --------- -----------
Deficit investment in
affiliates............. 470,369 (467,849)(8) 2,520
----------- --------- -------- --------- -----------
Series G Preferred
Stock.................. 265,336 265,336
----------- --------- -------- --------- -----------
Series L Preferred
Stock.................. 659,238 659,238
----------- --------- -------- --------- -----------
Stockholders' deficien-
cy:
Preferred stock........ 15 15
Common stock........... 259 (11)(4) 248
Paid-in capital........ 225,354 (60,381)(4) 107,739 (8) 272,712
Accumulated deficit.... (2,180,129) (25,876)(2) (2,206,005)
----------- --------- -------- --------- -----------
(1,954,501) (25,876) (60,392) 107,739 (1,933,030)
Less, treasury stock, at
cost (1,091,553
shares)................ (60,392) 60,392 (4) --
----------- --------- -------- --------- -----------
(2,014,893) (25,876) -- 107,739 (1,933,030)
----------- --------- -------- --------- -----------
$ 2,593,106 $ 156,598 $ -- $ 407,611 $ 3,157,315
=========== ========= ======== ========= ===========
</TABLE>
--------
*See Note A of Notes to Condensed Pro Forma Consolidated Financial Statements.
S-24
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS*
------------------------------------------------------------
PENDING
V CABLE WARBURG
TRANSACTIONS TRANSACTIONS
AND SERIES L AND OFFERING
CABLEVISION PREFERRED OF THE NOTES
OF BOSTON 1995 STOCK AND THE
HISTORICAL ACQUISITION REFINANCINGS OFFERING DEBENTURES PRO FORMA
---------- ----------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $1,078,060 $ 59,818 (9) $ $ 76,568 (15) $159,458 (19) $1,373,904
---------- -------- -------- -------- -------- ----------
Operating expenses:
Technical.............. 412,479 27,315 (9) 34,895 (15) 61,501 (19) 536,190
Selling, general and
administrative........ 266,209 18,759 (9) 19,875 (15) 36,345 (19) 333,375
(2,100)(10) (5,713)(20)
Depreciation and amor-
tization.............. 319,929 8,189 (9) 36,329 (15) 81,696 (19) 427,270
10,730 (10) 1,216 (18) (30,819)(21)
---------- -------- -------- -------- -------- ----------
998,617 62,893 92,315 143,010 1,296,835
---------- -------- -------- -------- -------- ----------
Operating profit
(loss)................ 79,443 (3,075) (15,747) 16,448 77,069
Other income (expense):
Interest expense....... (313,850) (9,863)(9) (2,399)(12) (26,157)(15) (52,621)(19) (306,782)
3,104 (11) 40,771 (13) 84,003 (16) 1,412 (20)
(6,805)(14) (24,377)(22)
Interest income........ 1,963 211 (9) 70 (15) 170 (19) 2,414
Share of affiliates'
net loss.............. (93,024) 2,840 (15) 80,254 (23) (9,930)
Write-off of deferred
financing costs....... (5,517) (5,517)
Gain on sale of
programming and
affiliate interests... 35,989 35,989
Provision for preferen-
tial payment to re-
lated party........... (5,600) (5,600)
Minority interest...... (8,637) (8,637)
Miscellaneous, net..... (8,225) (231)(9) (241)(15) 5,556 (19) (3,141)
---------- -------- -------- -------- -------- ----------
Net income (loss)....... (317,458) (9,854) 31,567 44,768 26,842 (224,135)
Dividend requirements
applicable to preferred
stock.................. (20,249) (47,869)(13) (75,386)(17) (34,029)(19) (136,291)
7,213 (14) 34,029 (23)
---------- -------- -------- -------- -------- ----------
Net income (loss)
applicable to common
shareholders........... $ (337,707) $ (9,854) $ (9,089) $(30,618) $ 26,842 $ (360,426)
========== ======== ======== ======== ======== ==========
Net loss per common
share.................. $ (14.17) $ (14.72)
========== ==========
Average number of common
shares outstanding (in
thousands)............. 23,826 656 (9) 24,482
========== ======== ==========
</TABLE>
--------
*See Note B of Notes to Condensed Pro Forma Consolidated Financial Statements.
S-25
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS*
----------------------------
PENDING
V CABLE WARBURG
TRANSACTIONS TRANSACTIONS
AND SERIES L AND OFFERING
PREFERRED OF THE NOTES
STOCK AND THE
HISTORICAL OFFERING DEBENTURES PRO FORMA
---------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Revenues................ $ 304,165 $19,690(24) $ 40,985(28) $ 364,840
--------- ------- -------- ---------
Operating expenses:
Technical............. 128,690 9,456(24) 16,484(28) 154,630
Selling, general and
administrative....... 72,888 4,589(24) 9,784(28) 85,829
(1,432)(29)
Depreciation and amor-
tization............. 84,694 8,537(24) 12,737(28) 107,424
1,205(27) 251(30)
--------- ------- -------- ---------
286,272 23,787 37,824 347,883
--------- ------- -------- ---------
Operating profit
(loss)................. 17,893 (4,097) 3,161 16,957
Other income (expense):
Interest expense...... (69,697) (6,357)(24) (12,679)(28) (83,007)
11,473(25) 507(29)
(6,254)(31)
Interest income....... 1,802 14(24) 57(28) 1,873
Share of affiliates'
net loss............. (20,968) 17,902(32) (3,066)
Write-off of deferred
financing costs......
Provision for prefer-
ential payment to re-
lated party.......... (1,400) (1,400)
Minority interest..... (2,355) (2,355)
Miscellaneous, net.... (1,577) (43)(24) (87)(28) (1,707)
--------- ------- -------- ---------
Net income (loss)....... (76,302) 990 2,607 (72,705)
Dividend requirements
applicable to preferred
stock.................. (24,378) (8,838)(26) (9,388)(28) (33,216)
9,388(32)
--------- ------- -------- ---------
Net income (loss) appli-
cable to common
shareholders........... $(100,680) $(7,848) $ 2,607 $(105,921)
========= ======= ======== =========
Net loss per common
share.................. $ (4.06) $ (4.27)
========= =========
Average number of common
shares outstanding (in
thousands)............. 24,810 24,810
========= =========
</TABLE>
--------
* See Note C of Notes to Condensed Pro Forma Consolidated Financial Statements.
S-26
<PAGE>
NOTE A--NOTES TO CONDENSED PRO FORMA BALANCE SHEET AS OF MARCH 31, 1996
V CABLE TRANSACTIONS
(1) As a result of the proposed acquisition of the 80% of partnership
interests in U.S. Cable not already owned by V Cable, 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 (1) reflect
the consolidation of such amounts as of the balance sheet date.
(2) In connection with the V Cable Transactions, the Company will (a) repay
existing V Cable indebtedness totalling $414,660,000 with the proceeds of
$130,660,000 under the Company's Credit Agreement and $288,600,000 under
the new Cablevision of Ohio credit facility and (b) repay additional
existing U.S. Cable debt totalling $151,920,000 and redeem outstanding
U.S. Cable preferred stock amounting to $4,000,000. Funds will be provided
from a new U.S. Cable credit facility. Deferred interest expense and
financing costs of $25,876,000 were written off in connection with the V
Cable Transactions. The Company will incur financing costs of $4,600,000
in connection with the new Cablevision of Ohio credit facility.
(3) Represents the excess ($144,473,000) of the purchase price of U.S. Cable
over the value of the net liabilities assumed.
CANCELLATION OF TREASURY SHARES
(4) Represents the cancellation of 1,091,553 shares of treasury stock of which
1,041,553 shares were issued to a wholly-owned subsidiary of the Company
in connection with the Company's acquisition of Cablevision of Boston.
PENDING WARBURG TRANSACTIONS AND THE OFFERINGS OF THE NOTES AND THE DEBENTURES
(5) As a result of the Pending Warburg Transactions, the assets and
liabilities of the Warburg Companies will be combined with the Company's
consolidated balance sheet amounts. The adjustments referenced by this
Note (5) reflect the consolidation of such amounts as of the balance sheet
date.
(6) Represents the excess ($250,538,000) of the purchase price of the
interests in the Warburg Companies not owned by the Company over the value
of the net liabilities assumed.
(7) Represents the issuance of the Debentures and the Notes, the repayment of
bank debt, the application of $183,000,000 of the proceeds to satisfy the
purchase price under the Warburg Agreement and the application of the
balance of the proceeds to pay financing costs. See "Recent Developments--
Pending Warburg Transactions".
(8) Represents the elimination of the Company's investment in the Warburg
Companies, the reclassification of intercompany amounts and the excess of
the value at March 31, 1996 ($214,439,000) of the Series A preferred stock
over the purchase price attributable to such preferred stock
($106,700,000).
NOTE B--NOTES TO CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED
DECEMBER 31, 1995
CABLEVISION OF BOSTON ACQUISITION
(9) As a result of the acquisition of Cablevision of Boston on December 15,
1995 (and related issuance of approximately 688,000 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 (9) reflect the
consolidation of such amounts for the period January 1, 1995 through
December 14, 1995.
S-27
<PAGE>
(10) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired of $10,976,000 for the
period, offset by the elimination of pre-acquisition amortization of
intangibles of $246,000 and the elimination from selling, general and
administrative expenses of management fees payable of $2,100,000
resulting from the Cablevision of Boston Acquisition.
(11) Represents interest expense of $6,425,000 attributable to $76,583,000 of
bank debt (8.8% interest rate) reduced by pre-acquisition interest
expense of $9,529,000 incurred by Cablevision of Boston on its bank debt
and debt owed to Charles F. Dolan and the Company.
1995 REFINANCINGS
(12) Represents additional interest expense and amortization of deferred
financing costs in connection with the issuance of the Company's 9 1/4%
Senior Subordinated Notes due 2005 offset by a reduction of interest
expense resulting from the repayment of bank debt bearing interest at
8.8%.
(13) Represents a reduction in interest expense resulting from the repayment
of bank debt at a rate of 8.8% with the proceeds of the Series G
Preferred Stock and the Series I Preferred Stock and reflects the
dividends payable on the Series G Preferred Stock and the Series I
Preferred Stock.
(14) Represents an increase in interest expense related to additional bank
borrowings at 8.8% used to redeem the Series E Preferred Stock and the
elimination of dividends payable on the Series E Preferred Stock.
V CABLE TRANSACTIONS AND THE SERIES L PREFERRED STOCK OFFERING
(15) As a result of the proposed acquisition of the 80% of partnership
interests in U.S. Cable not already owned by V Cable, 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 (15)
reflect the consolidation of such amounts for the year ended December 31,
1995 and the elimination of the Company's share of losses in U.S. Cable
previously recorded on the equity basis.
(16) Represents the reduction in interest expense resulting from (i) the
repayment of $898,803,000 of V Cable debt and $214,000,000 of U.S. Cable
debt and (ii) the elimination of amortization of deferred interest and
financing costs related to the repayment of debt, offset by the increase
in interest expense and amortization of deferred financing costs related
to additional bank borrowings of $491,803,000.
(17) Represents the dividends payable on the Series L Preferred Stock.
(18) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired of $144,473,000, offset by
the elimination of pre-acquisition amortization of intangibles.
PENDING WARBURG TRANSACTIONS AND THE OFFERINGS OF THE NOTES AND THE DEBENTURES
(19) As a result of the Pending Warburg Transactions, the results of
operations of the Warburg Companies will be combined with the Company's
consolidated results of operations. The adjustments referenced by this
Note (19) reflect the consolidations of such amounts for the year ended
December 31, 1995.
(20) Represents the elimination of management fees and accrued interest
thereon earned by the Company and recorded on the books of the Warburg
Companies. These management fees and related interest had not been paid
and the Company had not reflected any accrual for such amounts in its
financial statements.
(21) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired offset by the elimination
of pre-acquisition amortization of intangibles.
(22) Represents estimated interest expense on $400,000,000 of debt incurred by
the Company in this Offering and the Other Offering, partially offset by
the decrease in interest expense resulting from the repayment of bank
debt with the portion of the proceeds of this Offering and the Other
Offering not being applied to the Pending Warburg Transactions
($183,000,000) and expenses/note discount ($11,428,000) of this Offering
and the Other Offering, and the amortization of deferred financing costs
and note discount incurred in connection with this Offering and the Other
Offering ($726,000). See "Recent Developments--Pending Warburg
Transactions".
S-28
<PAGE>
(23) Represents the elimination of the net losses of the Warburg Companies
previously recorded by the Company using the equity method of accounting
and the elimination of the preferred stock dividends previously recorded
by A-R Cable.
NOTE C--NOTES TO CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE THREE MONTHS ENDED MARCH 31, 1996
V CABLE TRANSACTIONS AND THE SERIES L PREFERRED STOCK OFFERING
(24) As a result of the proposed acquisition of the 80% of partnership
interests in U.S. Cable not already owned by V Cable, 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 (24)
reflect the consolidation of such amounts for the fiscal quarter ended
March 31, 1996 and the elimination of the Company's share of losses in
U.S. Cable previously recorded on the equity basis.
(25) Represents the reduction in interest expense resulting from (i) the
repayment of $414,660,000 of V Cable debt and $151,920,000 of U.S. Cable
debt and (ii) the elimination of amortization of deferred interest and
financing costs related to the repayment of debt, offset by the increase
in interest expense and amortization of deferred financing costs related
to additional bank borrowings of $520,180,000.
(26) Represents dividends payable on the Series L Preferred Stock for the
period prior to its issuance in February 1996.
(27) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired of $144,473,000 offset by
the elimination of pre-acquisition amortization of intangibles.
PENDING WARBURG TRANSACTIONS AND THE OFFERINGS OF THE NOTES AND THE DEBENTURES
(28) As a result of the Pending Warburg Transactions, the results of
operations of the Warburg Companies will be combined with the Company's
consolidated results of operations. The adjustments referenced by this
Note (28) reflect the consolidations of such amounts for the fiscal
quarter ended March 31, 1996.
(29) Represents the elimination of management fees and accrued interest
thereon earned by the Company and recorded on the books of the Warburg
Companies. The Company had previously reserved all of such management
fees and accrued interest. These management fees and related interest had
not been paid and the Company had not reflected any accrual for such
amounts in its financial statements.
(30) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired offset by the elimination
of pre-acquisition amortization of intangibles.
(31) Represents estimated interest expense on $400,000,000 of the debt
incurred by the Company in this Offering and the Other Offering,
partially offset by the decrease in interest expense resulting from the
repayment of bank debt with the portion of the proceeds of this Offering
and the Other Offering not being applied to the Pending Warburg
Transactions ($183,000,000) and expenses/note discount ($11,428,000) of
this Offering and the Other Offering, and the amortization of deferred
financing costs and note discount incurred in connection with this
Offering and the Other Offering ($182,000). See "Recent Developments--
Pending Warburg Transactions".
(32) Represents the elimination of the net losses of the Warburg Companies
previously recorded by the Company using the equity method of accounting
and the elimination of preferred stock dividends previously recorded by
A-R Cable.
S-29
<PAGE>
DESCRIPTION OF THE DEBENTURES
The following description of the particular terms of the 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 Debentures will be issued under an Indenture dated as of November 1,
1995 (the "Indenture"), between the Company and The Bank of New York, as
trustee (the "Trustee"). The Indenture is subject to and is governed by the
Trust Indenture Act of 1939, as amended. The following summaries of certain
provisions of the Indenture do not purport to be complete, and where reference
is made to particular provisions of the Indenture, such provisions, including
the definitions of certain terms, are incorporated by reference as a part of
such summaries or terms, which are qualified in their entirety by such
reference. The definitions of certain capitalized terms used in the Indenture
and in the following summary are set forth below under "Description of Debt
Securities--Certain Definitions" in the accompanying Prospectus.
GENERAL
The Debentures are limited to $250,000,000 aggregate principal amount and
will be issued in fully registered form, without coupons, in denominations of
$1,000 and integral multiples thereof. The Debentures will mature on May 15,
2016.
The Debentures will bear interest from May 21, 1996 at a rate of 10 1/2% per
annum, payable semi-annually on May 15 and November 15 of each year,
commencing November 15, 1996. Interest on the Debentures will be computed on
the basis of a 360-day year of twelve 30-day months and is payable to the
person in whose name each Debenture was registered at the close of business on
the preceding May 1 and November 1, respectively, subject to certain
exceptions. The Debentures will be unsecured obligations of the Company. The
Debentures will be subordinated to all existing and future Senior Indebtedness
of the Company.
Principal of and premium, if any, and interest on the Debentures will be
payable, and the 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, to the extent paid in cash, may be made at the option of the
Company by check mailed to the person entitled thereto as shown on the
Register of the Debentures. No service charge will be made for any
registration of transfer or exchange of Debentures, except for any tax or
other governmental charge that may be imposed in connection therewith.
The Indenture does not contain any provisions that limit the ability of the
Company to incur indebtedness or that afford Holders of the Debentures
protection in the event of a highly leveraged or similar transaction involving
the Company, other than as described under "Description of Debt Securities--
Certain Covenants of the Company--Limitation on Indebtedness" in the
accompanying Prospectus.
SINKING FUND
The Debentures will not be entitled to the benefits of a sinking fund.
OPTIONAL REDEMPTION
The Debentures will be subject to redemption at any time on or after May 15,
2006, 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 May 15 of the years indicated:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2006..................................................... 105.250%
2007..................................................... 103.938
2008..................................................... 102.625
2009..................................................... 101.313
</TABLE>
S-30
<PAGE>
and thereafter at 100% of the aggregate principal amount, 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 Debentures are to be redeemed,
the Trustee shall select the 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 Debentures other than through the issuance of subordinated
indebtedness, preferred stock or common stock.
SUBORDINATION
The indebtedness represented by the 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 Debentures or before any
acquisition of 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 Debentures (other than payments made
in Junior Securities) or to acquire any of the Debentures or on account of the
redemption provisions of the Debentures (except mandatory redemption payments
made, in accordance with the terms of the Debentures, in 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 Indenture provides 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 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 Debentures (or
the Company's 10 3/4% Senior Subordinated Debentures due 2004, the Company's 9
7/8% Senior Subordinated Debentures due 2013, the Company's 9 7/8% Senior
Subordinated Debentures due 2023, the Company's 9 1/4% Senior Subordinated
Notes due 2005 (collectively, the "Existing Debentures") and the Notes) may
recover more, ratably, than the Holders of the Debentures.
A Holder of Debentures by his acceptance of 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 necessary or appropriate to effectuate
the subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purpose.
S-31
<PAGE>
The amount of Senior Indebtedness outstanding at March 31, 1996, adjusted to
give pro forma effect to the transactions described under "Capitalization" and
the application of the net proceeds to the Company from this Offering and the
Other Offering, would have been approximately $569.4 million.
CERTAIN COVENANTS OF THE COMPANY
Limitation on Indebtedness. The Indenture provides that the Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly
incur, create, issue, assume, guarantee or otherwise become liable for,
contingently or otherwise, or become responsible for the payment of,
contingently or otherwise, any Indebtedness (other than Indebtedness between
or among any of the Company and Restricted Subsidiaries) unless, after giving
effect thereto, the Cash Flow Ratio shall be less than or equal to 9 to 1. At
March 31, 1996, such Cash Flow Ratio was approximately 5.7 to 1.
Limitation on Senior Subordinated Indebtedness. The Indenture provides that
the Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become liable for, contingently or otherwise, or become responsible for the
payment of, contingently or otherwise, any Indebtedness which is both (i)
senior in right of payment to the Debentures and (ii) expressly subordinate in
right of payment to any other Indebtedness of the Company. For purposes of
this covenant, Indebtedness is deemed to be senior in right of payment of the
Debentures if it is not subordinate in right of payment to Senior Indebtedness
at least to the same extent as the Debentures are subordinate to Senior
Indebtedness.
Limitation on Restricted Payments. The Indenture provides that, so long as
any of the Debentures remain outstanding, the Company will not, and will not
permit any Restricted Subsidiary to, make any Restricted Payment if (a) at the
time of such proposed Restricted Payment, a Default or Event of Default shall
have occurred and be continuing or shall occur as a consequence of such
Restricted Payment or (b) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments that shall have been made on
or after July 1, 1988 would exceed the sum of:
(i) $25,000,000, plus
(ii) an amount equal to the difference between (A) the Cumulative Cash
Flow Credit and (B) 1.2 multiplied by Cumulative Interest Expense.
Notwithstanding the foregoing, so long as no Default or Event of Default
shall have occurred and be continuing, the Company may make any Permitted
Restricted Payment; provided, however, that such Permitted Restricted Payment
shall thereafter be counted as a Restricted Payment solely for purposes of
calculating whether any future Restricted Payments are permitted under clause
(b) of the preceding sentence.
For purposes of the "Limitation on Restricted Payments" covenant, the amount
of any Restricted Payment or Permitted Restricted Payment, if other than cash,
shall be based upon fair market value as determined by the Board of Directors
of the Company, whose good faith determination shall be conclusive.
The foregoing provisions do not prevent: (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at such date of
declaration such payment complied with the above provisions; (ii) the
retirement or redemption of any shares of the Company's capital stock or
warrants, rights or options to acquire capital stock of the Company, in
exchange for, or out of the proceeds of a substantially concurrent sale of,
other shares of the Company's capital stock or warrants, rights or options to
acquire capital stock of the Company (other than Disqualified Stock); and
(iii) the redemption of or payments of cash dividends on the Company's 8%
Series C Cumulative Preferred Stock (the "Series C Preferred Stock")
outstanding on January 1, 1995, which redemptions or dividends are provided
for by the terms of the Series C Preferred Stock in effect on such date (or
redemption of or payment of cash dividends on any security of the Company
issued in exchange for or upon the conversion of such Series C Preferred
Stock; provided that the aggregate amount payable pursuant to the terms of
such security is no greater than the aggregate amount payable pursuant to the
terms of the Series C Preferred
S-32
<PAGE>
Stock). For purposes of determining the aggregate permissible amount of
Restricted Payments in accordance with clause (b) of the first paragraph of
this covenant, all amounts expended pursuant to clauses (i) and (iii) of this
paragraph shall be included and all amounts expended or received pursuant to
clause (ii) of this paragraph shall be excluded; provided, however, that
amounts paid pursuant to clause (i) of this paragraph shall be included only
to the extent that such amounts were not previously included in calculating
Restricted Payments.
For the purposes of the foregoing provisions, the net proceeds from the
issuance of shares of capital stock of the Company upon conversion of
Indebtedness shall be deemed to be an amount equal to (i) the accreted value
of such Indebtedness on the date of such conversion and (ii) the additional
consideration, if any, received by the Company upon such conversion thereof,
less any cash payment on account of fractional shares (such consideration, if
in property other than cash, to be determined by the Board of Directors of the
Company whose good faith determination shall be conclusive). If the Company
makes a Restricted Payment which, at the time of the making of such Restricted
Payment would in the good faith determination of the Company be permitted
under the requirements of this covenant, such Restricted Payment shall be
deemed to have been made in compliance with this covenant notwithstanding any
subsequent adjustments made in good faith to the Company's financial
statements affecting Cumulative Cash Flow Credit or Cumulative Interest
Expense for any period.
As of March 31, 1996, the Company would have been permitted to make
Restricted Payments of $613.1 million.
Limitation on Investments in Unrestricted Subsidiaries and Affiliates. The
Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly (i) make any Investment or
(ii) allow any Restricted Subsidiary to become an Unrestricted Subsidiary (a
"redesignation of a Restricted Subsidiary"), in each case unless (a) no
Default or Event of Default shall have occurred and be continuing or shall
occur as a consequence of such Investment or such redesignation of a
Restricted Subsidiary, and (b) after giving effect thereto, the Cash Flow
Ratio shall be less than or equal to 9 to 1.
The foregoing provisions of this covenant shall not prohibit (i) any renewal
or reclassification of any Investment existing on the date hereof or (ii)
trade credit extended on usual and customary terms in the ordinary course of
business.
Transactions with Affiliates. The Indenture provides that the Company shall
not, and shall not permit any of its subsidiaries to, sell, lease, transfer or
otherwise dispose of any of its properties or assets to or purchase any
property or assets from, or enter into any contract, agreement, understanding,
loan, advance or guarantee with, or for the benefit of, an Affiliate of the
Company that is not a subsidiary of the Company, having a value, or for
consideration having a value, in excess of $10,000,000 individually or in the
aggregate unless the Board of Directors of the Company shall make a good faith
determination that the terms of such transaction are, taken as a whole, no
less favorable to the Company or such subsidiary, as the case may be, than
those which might be available in a comparable transaction with an unrelated
Person. For purposes of clarification, this provision shall not apply to
Restricted Payments or Permitted Restricted Payments permitted under "--
Limitation on Restricted Payments".
REGARDING THE TRUSTEE
The Bank of New York ("BONY") is the Trustee under the Indenture, which
relates to the Debentures and the Notes, and is the trustee under the
indentures relating to the Company's Existing Debentures. BONY is a party to
certain credit agreements with the Company and its subsidiaries, including the
Credit Agreement, borrowings under which constitute Senior Indebtedness under
the Indenture. BONY may also maintain other banking arrangements with the
Company in the ordinary course of business.
S-33
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase 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 principal amount of
the Debentures set forth opposite its name below. The Underwriters have agreed
to purchase all the Debentures if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Bear, Stearns & Co. Inc..................................... $ 83,333,334
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................... 83,333,334
Morgan Stanley & Co. Incorporated........................... 83,333,332
------------
Total.................................................. $250,000,000
============
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Debentures directly to the public at the public offering price set
forth on the cover page of this Prospectus Supplement, and to certain dealers
at such price less a concession not in excess of .25% of the principal amount
of the Debentures. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of .125% of the principal amount of the Debentures to
certain other dealers. After the initial public offering, the public offering
price, concession and reallowance may be changed by the Underwriters.
There is no public market for the Debentures. The Company does not intend to
list the Debentures on any securities exchange or to arrange for their
quotation on NASDAQ. The Company has been advised by the Underwriters that
they presently intend to make a market in the Debentures after the
consummation of the Offering, although they are under no obligation to do so.
No assurance can be given, however, as to the liquidity of the trading market
for the Debentures or that an active public market for the Debentures will
develop. If an active public market does not develop, the market prices and
liquidity of the Debentures may be adversely affected.
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 the Company's Series L
Preferred Stock in February 1996 and were underwriters of the Company's 9 1/4%
Senior Subordinated Notes due 2005 and the Company's Series I Preferred Stock
represented by Depositary Shares in November 1995.
In connection with this Offering, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
VALIDITY OF DEBENTURES
The validity of the Debentures 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-34
<PAGE>
EXPERTS
The consolidated financial statements and schedule of the Company and its
subsidiaries as of December 31, 1995 and 1994 and for each of the years in the
three-year period ended December 31, 1995 that are incorporated in this
Prospectus Supplement by reference have been incorporated herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of A-R Cable Services, Inc. and its
subsidiaries as of December 31, 1995 and 1994 and for each of the years in the
three-year period ended December 31, 1995 that are incorporated in this
Prospectus Supplement by reference have been incorporated herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
S-35
<PAGE>
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NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL 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 PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN A CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE 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 ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................... S-3
Risk Factors............................................................... S-10
The Company................................................................ S-15
Recent Developments........................................................ S-18
Use of Proceeds............................................................ S-20
Capitalization............................................................. S-21
Condensed Pro Forma Consolidated Financial Information..................... S-23
Description of the Debentures.............................................. S-30
Underwriting............................................................... S-34
Validity of Debentures..................................................... S-34
Experts.................................................................... S-35
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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$250,000,000
[LOGO]CABLEVISION
CABLEVISION SYSTEMS
CORPORATION
10 1/2% SENIOR SUBORDINATED
DEBENTURES DUE 2016
----------------
PROSPECTUS SUPPLEMENT
----------------
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
May 16, 1996
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