<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
-------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________to___________
Commission File Number: 1-9046
-------
Cablevision Systems Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2776686
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Media Crossways, Woodbury, New York 11797
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 364-8450
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of common stock outstanding as of November 7, 1997:
Class A Common Stock--13,929,503
Class B Common Stock--11,109,709
<PAGE>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------------- -----------------------
1997 1996 1997 1996
------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues..................................................... $1,314,995 $ 955,618 $ 517,930 $ 331,122
------------ ----------- ---------- -----------
Operating expenses:
Technical................................................... 568,259 392,076 227,829 134,496
Selling, general and administrative......................... 347,405 226,940 132,786 80,501
Depreciation and amortization............................... 363,023 262,741 140,442 87,573
------------ ----------- ---------- -----------
1,278,687 881,757 501,057 302,570
------------ ----------- ---------- -----------
Operating profit.......................................... 36,308 73,861 16,873 28,552
------------ ----------- ---------- -----------
Other income (expense):
Interest expense............................................ (261,533) (196,750) (107,748) (64,651)
Interest income............................................. 2,635 2,678 1,807 438
Share of affiliates' net losses............................. (32,243) (59,403) (762) (19,342)
Write off of deferred interest and financing costs.......... (13,710) (34,341) (13,710) (10,329)
Gain on redemption of subsidiary preferred stock............ 181,738 -- 181,738 --
Provision for preferential payment to related party......... (4,200) (4,200) (1,400) (1,400)
Minority interest........................................... 14,145 (7,385) 10,317 (2,575)
Miscellaneous............................................... (7,059) (7,444) (3,068) (3,201)
------------ ----------- ---------- -----------
(120,227) (306,845) 67,174 (101,060)
------------ ----------- ---------- -----------
Net income (loss)............................................ (83,919) (232,984) 84,047 (72,508)
Dividend requirements applicable to preferred stocks......... (110,324) (92,596) (37,593) (34,423)
------------ ----------- ---------- -----------
Net income (loss) applicable to common shareholders.......... $ (194,243) $(325,580) $ 46,454 $(106,931)
------------ ----------- ---------- -----------
------------ ----------- ---------- -----------
Net income (loss) per common share........................... $ (7.81) $ (13.12) $ 1.87 $ (4.31)
------------ ----------- ---------- -----------
------------ ----------- ---------- -----------
Average number of common shares outstanding (in thousands)... 24,858 24,823 24,892 24,828
------------ ----------- ---------- -----------
------------ ----------- ---------- -----------
</TABLE>
See accompanying notes to
consolidated financial statements.
2
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................... $ 32,135 $ 11,612
Accounts receivable trade (less allowance for doubtful
accounts of $29,830 and $12,955)........................... 181,994 105,406
Notes and other receivables (including affiliate amount of
$10,235 in 1997)........................................... 85,080 19,368
Prepaid expenses and other assets............................ 64,424 23,053
Property, plant and equipment, net........................... 1,720,053 1,390,971
Investments in affiliates.................................... 60,424 311,865
Advances to affiliates....................................... 4,923 7,855
Feature film inventory....................................... 149,630 134,258
Net assets held for sale..................................... 264,344 --
Franchises, net of accumulated amortization of
$453,157 and $389,791...................................... 366,588 379,466
Affiliation agreements, net of accumulated amortization of
$125,483 and $44,385....................................... 234,289 162,388
Excess costs over fair value of net assets acquired and other
intangible assets, net of accumulated amortization of
$677,953 and $549,256...................................... 1,615,156 436,606
Deferred financing, acquisition and other costs, net of
accumulated amortization of $38,168 and $29,755............ 93,723 51,877
-------------- --------------
$4,872,763 $3,034,725
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to
consolidated financial statements.
3
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
September 30, December 31,
1997 1996
------------- ------------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Accounts payable.......................... $227,578 $186,409
Accrued liabilities:
Interest................................ 69,178 45,774
Payroll and related benefits............ 85,467 63,987
Franchise fees.......................... 26,518 26,453
Other................................... 283,660 104,172
Accounts payable to affiliates............ 915 14,012
Feature film and contract rights
payable................................. 283,318 115,437
Deferred revenue.......................... 114,770 --
Bank debt................................. 2,875,891 1,670,245
Senior debt............................... 397,617 --
Senior debentures......................... 398,518 --
Subordinated debentures................... 1,048,207 1,323,105
Subordinated notes payable................ 151,000 141,268
Obligation to related party............... 191,328 192,819
Capital lease obligations and other debt.. 48,951 7,264
Minority interest......................... 124,737 --
----------- ----------
Total liabilities..................... 6,327,653 3,890,945
----------- ----------
Deficit investment in affiliates.......... 18,225 512,800
----------- ----------
Series H Redeemable Exchangeable
Preferred Stock......................... 315,772 289,506
----------- ----------
Series M Redeemable Exchangeable
Preferred Stock......................... 777,149 715,759
----------- ----------
Commitments and contingencies
Stockholders' deficiency:
8% Series C Cumulative Preferred
Stock, $.01 par value, 112,500 shares
authorized, 110,622 shares issued
($100 per share liquidation
preference)........................... 1 1
8% Series D Cumulative Preferred
Stock, $.01 par value, 112,500 shares
authorized, none issued ($100 per
share liquidation preference)......... --
8-1/2% Series I Cumulative Convertible
Exchangeable Preferred Stock, $.01 par
value, 1,380,000 shares authorized and
issued ($250 per share liquidation
preference).......................... 14 14
Class A Common Stock, $.01 par value,
50,000,000 shares authorized,
13,823,172 and 13,583,676 shares
issued................................ 138 136
Class B Common Stock, $.01 par value,
20,000,000 shares authorized,
11,109,709 and 11,254,709 shares
issued................................ 111 113
Paid-in capital......................... 167,251 164,538
Accumulated deficit..................... (2,733,551) (2,539,087)
----------- ----------
Total stockholders' deficiency.......... (2,566,036) (2,374,285)
----------- ----------
$4,872,763 $3,034,725
----------- ----------
----------- ----------
See accompanying notes to
consolidated financial statements.
4
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................................. $(83,919) $(232,984)
-------- ---------
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization...................................................... 363,023 262,741
Share of affiliates' net losses.................................................... 32,243 59,403
Minority interest.................................................................. (14,145) 7,385
Amortization of deferred financing................................................. 5,565 5,359
Amortization of deferred interest.................................................. -- 4,684
Amortization of debenture discount................................................. 112 78
Accretion of interest on debt...................................................... -- 6,828
Write off of deferred interest and financing costs................................. 13,710 34,341
Loss on sale of equipment.......................................................... 4,034 3,165
Gain on redemption of subsidiary preferred stock................................... (181,738) --
Changes in assets and liabilities net of effects
of acquisitions:
Accounts receivable trade.......................................................... (10,771) 6,109
Notes receivable, affiliates....................................................... (10,235) --
Notes and other receivables........................................................ (43,965) (882)
Prepaid expenses and other assets.................................................. (10,982) (7,898)
Advances to affiliates............................................................. 14,372 (3,064)
Feature film inventory............................................................. 22,677 16,067
Accounts payable................................................................... 22,643 1,867
Accrued interest................................................................... 17,364 22,852
Accrued payroll and related benefits............................................... 16,694 9,707
Accrued franchise fees............................................................. (274) (2,422)
Accrued liabilities, other......................................................... 32,800 (10,663)
Accounts payable to affiliates..................................................... (19,552) 2,869
Feature film rights payable........................................................ (9,660) (16,464)
Deferred revenue................................................................... 79,025 --
-------- ---------
Total adjustments............................................................. 322,940 402,062
-------- ---------
Net cash provided by operating activities.............................................. $239,021 $169,078
-------- ---------
</TABLE>
See accompanying notes
to consolidated financial statements.
5
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
(continued)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from investing activities:
Capital expenditures............................................................ $(316,217) $(294,183)
Proceeds from sale of plant and equipment....................................... 1,959 525
Additions to intangible assets.................................................. (922) (1,681)
Increase in investments in affiliates, net...................................... (174,817) (85,948)
Payments for acquisitions, net of cash acquired................................. (533,853) (107,062)
---------- ----------
Net cash used in investing activities......................................... (1,023,850) (488,349)
---------- ----------
Cash flows from financing activities:
Proceeds from bank debt......................................................... 2,271,614 1,186,328
Repayment of bank debt.......................................................... (1,397,543) (924,987)
Proceeds from senior debt....................................................... 19,000 12,500
Repayment of senior debt........................................................ (19,750) (918,131)
Preferred stock dividends....................................................... (22,889) (22,905)
Net proceeds from issuance of redeemable exchangeable preferred stock........... -- 624,021
Proceeds from issuance of senior subordinated debt............................... 398,508 399,385
Redemption of senior subordinated debt........................................... (283,445) --
Redemption of subsidiary preferred stock......................................... (112,306) --
Issuance of common stock......................................................... 2,718 3,212
Decrease in obligation to related party.......................................... (1,491) (1,495)
Payments of capital lease obligations and other debt............................. (5,302) (2,462)
Additions to deferred financing and other costs.................................. (43,762) (25,348)
---------- ----------
Net cash provided by financing activities........................................ 805,352 330,118
---------- ----------
Net increase in cash and cash equivalents......................................... 20,523 10,847
Cash and cash equivalents at beginning of year.................................... 11,612 15,332
----------- -----------
Cash and cash equivalents at end of period........................................ $ 32,135 $ 26,179
----------- -----------
----------- -----------
</TABLE>
See accompanying notes
to consolidated financial statements.
6
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Cablevision
Systems Corporation and its majority owned subsidiaries (the "Company") have
been prepared in accordance with the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Note 2. Responsibility for Interim Financial Statements
The financial statements as of and for the three and nine months ended
September 30, 1997 and 1996 presented in this Form 10-Q are unaudited;
however, in the opinion of management, such statements include all
adjustments, consisting solely of normal recurring adjustments, necessary for
a fair presentation of the results for the periods presented.
The interim financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
The results of operations for the interim periods are not necessarily
indicative of the results that might be expected for future interim periods
or for the full year ending December 31, 1997.
Note 3. Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income (loss)
after deduction of preferred stock dividends by the weighted average number
of common shares outstanding. Common stock equivalents were not included in
the computation as their effect would be antidilutive or insignificant. In
February 1997, the Financial Accounting Standards Board issued its Statement
No. 128, "Earnings per Share." Among other provisions, SFAS No. 128
simplifies the standards for computing earnings per share. The Company does
not expect the adoption of SFAS No. 128 to have a material impact on its
per share determinations.
Note 4. Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers short-term investments with a maturity at date of purchase of three
months or less to be cash equivalents.
7
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
The Company paid cash interest expense of approximately $232,451 and $162,676
for the nine months ended September 30, 1997 and 1996, respectively. The
Company's noncash financing activities for the nine months ended September
30, 1997 and 1996 included capital lease obligations of $24,820 and $2,403,
respectively, incurred when the Company entered into leases for new equipment
and preferred stock dividend requirements of $87,656 and $69,912,
respectively.
Note 5. Acquisitions
On April 1, 1997, Rainbow Media Holdings, Inc. ("Rainbow Media") consummated
a transaction in which Rainbow Programming Holdings, Inc. merged with and
into Rainbow Media, a newly formed subsidiary of the Company. In addition,
NBC received a 25% equity interest (which interest may be increased up to 27%
under certain circumstances) in non-voting Class C common stock of Rainbow
Media. The Company owns the remaining 75% equity interest in Rainbow Media.
The partnership interests in certain of Rainbow Media's programming services
formerly owned by NBC are now owned by subsidiaries of Rainbow Media. As a
result of the exchange of 25% of the Company's interest in Rainbow Media for
NBC's interests in certain entities, the Company recorded goodwill of $54,108
which will be amortized over a 10 year period.
On April 16, 1997, the Company and certain of its affiliates and ITT
Corporation ("ITT") and certain of its affiliates, entered into definitive
agreements ("MSG Agreement") relating to the acquisition by subsidiaries of
Cablevision of ITT's 50 percent interest in Madison Square Garden L.P.
("MSG"). The transaction closed on June 17, 1997 when MSG borrowed $799,000
under its credit facility which was used to redeem a portion of ITT's
interest in MSG for $500,000 and to repay its existing indebtedness. Rainbow
Media contributed its SportsChannel Associates programming company to MSG,
which, together with the redemption, increased the Company's interest in MSG
to 89.8% and reduced ITT's interest to 10.2%. The remaining 10.2% interest is
subject to certain puts and calls as specified in the MSG agreement. The
acquisition was accounted for using the purchase method of accounting. The
assets and liabilities and results of operations of MSG have been
consolidated with those of the Company as of June 17, 1997. Previously the
Company's investment in MSG was accounted for using the equity method of
accounting. The excess of the purchase price over the net book value of
assets acquired of approximately $299,298 will be allocated to the specific
assets acquired when independent appraisals are obtained and will be
amortized accordingly.
In June 1997, the Company acquired from Warburg Pincus Investors, L.P.
("Warburg") the interests that the Company did not already own in A-R Cable
Partners ("Nashoba") and Cablevision of Framingham ("Framingham") for a
purchase price of approximately $33,348 and
8
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
$7,865, respectively. The acquisitions of Nashoba and Framingham were
accounted for as purchases with the operations of these companies being
consolidated with those of the Company as of the acquisition dates. The
excess of the purchase price over the net book value of assets acquired
approximates $22,815 and $11,743 for the acquisition of Nashoba and
Framingham, respectively, and is being amortized over 10 years.
On July 2, 1997 the Company redeemed from Warburg the Series A preferred
stock of A-R Cable Services, Inc. (A-R Cable) for an aggregate amount of
approximately $112,301. The assets and liabilities of A-R Cable have been
consolidated with those of the Company as of July 2, 1997. Previously, the
Company's investment in A-R Cable was accounted for using the equity method
of accounting. In connection with this transaction, the Company recognized a
gain of $181,738 principally representing the reversal of accrued preferred
dividends in excess of amounts paid.
Pro Forma Results of Operations
The following unaudited pro forma condensed results of operations are
presented for the nine months ended September 30, 1997 and 1996 as if the
acquisitions of MSG, Nashoba and Framingham, the NBC transaction and the A-R
Cable consolidation had occurred on January 1, 1997 and 1996, respectively.
Nine Months Ended September 30,
-------------------------------
1997 1996
------------ ------------
Net revenues............................. $1,614,743 $1,418,204
------------ ------------
------------ ------------
Net loss................................. $ (377,847) $ (361,392)
------------ ------------
------------ ------------
Net loss per common share ............... $ (15.20) $ (14.56)
------------ ------------
------------ ------------
The pro forma information presented above gives effect to certain
adjustments, including the amortization of acquired intangible assets and
increased interest expense on acquisition debt. The pro forma information has
been prepared for comparative purposes only and does not purport to indicate
the results of operations which would actually have occurred had the
transactions been made at the beginning of the periods indicated, or which
may occur in the future. These amounts do not reflect the gain recognized on
the redemption of A-R Cable's Series A preferred stock.
9
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
Note 6. Net Assets Held for Sale
In February 1997, the Company announced that it was pursuing a plan to
dispose of certain nonstrategic cable television systems representing an
aggregate of up to 478,000 basic subscribers. As described below, the Company
has entered into definitive agreements covering the sale of cable television
systems representing approximately 380,000 basic subscribers.
On May 8, 1997, A-R Cable Services-ME, Inc. (A-R Maine), a subsidiary of A-R
Cable, entered into an agreement to sell the cable television systems in
Maine owned by A-R Maine for approximately $78,000 in cash. This transaction
was consummated on October 31, 1997. In addition, on August 13, 1997, A-R
Cable entered into an agreement to sell cable television systems in Rockford,
Illinois for approximately $97,000 in cash.
On August 13, 1997, Cablevision of the Midwest, Inc., a subsidiary of the
Company, entered into an agreement to sell cable television systems in Allen
and Gibsonberg Township, Ohio for approximately $10,700 in cash.
On August 19, 1997, Rainbow Media entered into an agreement for the sale of
its subsidiary, CV Radio Associates, L.P., for $8,400.
On August 29, 1997, the Company entered into an agreement to sell the cable
television properties of U.S. Cable Television Group, L.P. ("U.S. Cable"), a
subsidiary of the Company, for $315,000.
The pending transactions are subject to the receipt of regulatory and other
customary approvals. The pending transactions are currently expected to be
consummated in the fourth quarter of 1997 and/or the first quarter of 1998.
The Company expects to record gains upon the consummation of the
transactions. There can be no assurance that the pending transactions will be
consummated in a timely fashion, or at all.
For financial reporting purposes, the assets and liabilities attributable to
the above transactions have been classified in the consolidated balance sheet
as net assets held for sale and consist of the following at September 30,
1997.
Property, plant and equipment, net................. $124,819
Intangible assets, net............................. 164,788
Other assets....................................... 4,726
--------
Total assets....................................... 294,333
Total liabilities.................................. 29,989
--------
Net assets......................................... $264,344
--------
--------
10
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
The accompanying consolidated statement of operations for the nine months
ended September 30, 1997 includes net revenues aggregating approximately
$100,000 and net losses aggregating approximately $14,500 relating to net
assets held for sale. Assets to be disposed of are not being depreciated or
amortized while they are held for sale.
Note 7. Debt
On July 25, 1997, the Company paid $283,445 plus accrued interest of $9,361
to redeem its $275,000 10 3/4% Senior Subordinated Debentures due 2004. The
payment included a redemption premium of $8,445. In addition, the Company
wrote-off deferred financing costs of approximately $5,265 related to the
debentures.
In August 1997, the Company issued $400,000 principal amount of 8 1/8% Senior
Debentures due 2009. The Senior Debentures were issued at a discount of
$1,492. The proceeds of the offering were used to reduce borrowings under the
Company's Senior Term Loan. The Senior Debentures can not be redeemed by the
Company prior to maturity.
Note 8. Recent Developments
On June 6, 1997, the Company entered into an agreement with TCI
Communications, Inc., a subsidiary of Tele-Communications, Inc. ("TCI
Transaction") whereby the Company will issue 12,235,543 shares of Class A
common stock, subject to adjustment in certain events, in exchange for cable
television systems located in New Jersey, Long Island and New York's Rockland
and Westchester counties serving approximately 820,000 subscribers at
September 30, 1997 and having stipulated outstanding indebtedness of $669,000
at closing. The closing is conditioned, among other things, upon expiration
or termination of the waiting period under the Hart-Scott-Rodino ("HSR")
Antitrust Improvements Act of 1976, receipt of approvals from federal, state
and local governmental agencies and others, and approval of the Company's
shareholders. On August 1, 1997, the United States Federal Trade Commission
issued a second request with respect to the HSR Act filing, seeking
additional information with respect to the pending transaction.
On June 22, 1997, Rainbow Media Sports Holdings, Inc. ("Rainbow Sports"), a
wholly-owned subsidiary of Rainbow Media entered into an agreement with Fox
Sports Net, LLC ("Fox Sports"), a subsidiary of Fox/Liberty Networks, LLC, to
organize three partnerships, Regional Programming Partners, National Sports
Partners and National Advertising Partners (the "Fox Liberty Transaction").
Upon the formation of Regional Programming Partners, Rainbow Media will
contribute its partnership interests in its regional sports channels and MSG
in exchange for a 60% interest in Regional Programming Partners ("RPP"). The
Company will be the managing partner of RPP.
11
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
Fox Sports will contribute $850,000 in cash to Regional Programming Partners
in exchange for a 40% interest in Regional Programming Partners. Upon the
formation of National Sports Partners and National Advertising Partners, the
Company and Fox Sports will each contribute certain assets to the
partnerships for a 50% partnership interest. Fox Sports will be the managing
partner of these partnerships. Consummation of the transaction is subject to
regulatory approvals and third party consents. The Company expects to record
a gain upon consummation of this transaction.
On October 2, 1997, the Company entered into an agreement with At Home
Corporation ("@Home") and certain of its shareholders, pursuant to which the
Company agreed to enter into agreements for the distribution of the @Home
service over the Company's cable television syatems on the same terms and
conditions as @Home's founding partners, Telecommunications, Inc., Comcast
Corporation and Cox Communications. The Company received a warrant to
purchase 7,875,784 shares of @Home's Series A common stock at an exercise
price of $.50 per share, and, in addition, a warrant to purchase up to
3,071,152 shares of @Home's Series A common stock at $.50 per share under
certain conditions (the "Contingent Warrant"). The Contingent Warrant is not
immediately exercisable and will become exercisable as and to the extent
certain cable systems, including the TCI contributed systems, are transferred
from TCI and its controlled affiliates to the Company or its controlled
affiliates. @Home Network distributes high-speed interactive services to
residences and businesses using its own network architecture and a variety of
transport options, including the cable industry's hybrid-fiber coaxial
infrastructure.
12
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
The following table sets forth on an unaudited historical basis certain items
related to operations as a percentage of net revenues for the periods
indicated.
STATEMENT OF OPERATIONS DATA
- ----------------------------
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------------------------------
1997 1996
--------------------------- -------------------------- (Increase)
% of % of Decrease
Amount Revenues Amount Revenues in Net Loss
------------ ------------- ----------- ------------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Revenues............................................ $1,314,995 100% $ 955,618 100% $ 359,377
Operating expenses:
Technical......................................... 568,259 43 392,076 41 (176,183)
Selling, general & administrative................. 347,405 26 226,940 24 (120,465)
Depreciation and amortization..................... 363,023 28 262,741 27 (100,282)
------------ ----------- -----------
Operating profit.................................... 36,308 3 73,861 8 (37,553)
Other expense:
Interest expense, net............................. (258,898) (20) (194,072) (20) (64,826)
Share of affiliates' net loss..................... (32,243) (2) (59,403) (6) 27,160
Write-off of deferred interest and
financing costs................................. (13,710) (1) (34,341) (4) (20,631)
Gain on redemption of subsidiary preferred stock.. 181,738 14 -- -- 181,738
Provision for preferential payment torelated
party........................................... (4,200) -- (4,200) -- --
Minority interest................................. 14,145 1 (7,385) (1) 21,530
Miscellaneous, net................................ (7,059) -- (7,444) (1) 385
------------ ----------- -----------
Net loss............................................ (83,919) (6) (232,984) (24) 149,065
Dividend requirements applicable to preferred
stocks............................................ (110,324) (8) (92,596) (10) (17,728)
------------ ----------- -----------
Net loss applicable to common shareholders.......... $ (194,243) (15)% $(325,580) (34)% $ 131,337
------------ ----------- -----------
------------ ----------- -----------
OTHER OPERATING DATA:
- ---------------------
Operating profit before depreciation and
amortization (1).................................. $ 399,331 $ 336,602
Net cash provided by operating activities (2)....... 239,021 169,078
Net cash used in investing activities (2)........... 1,023,850 488,349
Net cash provided by financing activities (2)....... 805,352 330,118
</TABLE>
- ------------------------
(1) Operating profit before depreciation and amortization is presented here to
provide additional information about the Company's ability to meet future
debt service, capital expenditures and working capital requirements.
Operating profit before depreciation and amortization should be considered
in addition to and not as a substitute for net income and cash flows as
indicators of financial performance and liquidity as reported in accordance
with generally accepted accounting principles.
(2) See Item 1.--"Consolidated Statements of Cash Flows".
13
<PAGE>
CABLEVISION SYSTEMS CORPORATION
STATEMENT OF OPERATIONS DATA
- ----------------------------
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------------------------------------
1997 1996
------------------------------ --------------------------- (Increase)
% of % of Decrease
Amount Revenues Amount Revenues in Net Loss
-------------- ------------- ---------- ------------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Revenues.......................................... $ 517,930 100% $ 331,122 100% $186,808
Operating expenses:
Technical....................................... 227,829 44 134,496 41 (93,333)
Selling, general & administrative............... 132,786 26 80,501 24 (52,285)
Depreciation and amortization................... 140,442 27 87,573 26 (52,869)
-------------- ---------- ----------
Operating profit.................................. 16,873 3 28,552 9 (11,679)
Other expense:
Interest expense, net........................... (105,941) (20) (64,213) (19) (41,728)
Share of affiliates' net loss................... (762) -- (19,342) (6) 18,580
Write-off of deferred interest andfinancing
costs......................................... (13,710) (3) (10,329) (3) (3,381)
Gain on redemption of subsidiary preferred
stock......................................... 181,738 35 -- -- 181,738
Provision for preferential payment torelated
party......................................... (1,400) -- (1,400) -- --
Minority interest............................... 10,317 2 (2,575) (1) 12,892
Miscellaneous, net.............................. (3,068) (1) (3,201) (1) 133
-------------- ---------- ----------
Net income (loss)................................. 84,047 16 (72,508) (22) 156,555
Dividend requirements applicable to preferred
stocks.......................................... (37,593) (7) (34,423) (10) (3,170)
-------------- ---------- ----------
Net income (loss) applicable to common
shareholders.................................... $ 46,454 9% $(106,931) (32)% $153,385
-------------- ---------- ----------
-------------- ---------- ----------
OTHER OPERATING DATA:
- ---------------------
Operating profit before depreciationand
amortization (1)................................ $ 157,315 $ 116,125
Net cash provided by operating
activities...................................... 121,137 82,623
Net cash used in investing activities............. 136,282 192,504
Net cash provided by financing activities......... 12,820 118,924
</TABLE>
- ------------------------
(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.
14
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Acquisitions. In August and September 1996, the Company acquired all of the
interests in U.S. Cable and Cablevision of Newark, respectively, that it did
not already own. These acquisitions along with the transactions completed in
1997 discussed in Note 5 will be referred to as the "Acquisitions" in the
following discussion.
Revenues for the three and nine months ended September 30, 1997 increased
$186.8 million (56%) and $359.4 million (38%), respectively, over the
corresponding 1996 periods. Approximately $154.7 million (47%) and $251.1
million (26%) of the increase was attributable to the Acquisitions for the
three and nine months ended September 30, 1997, respectively, with increases
of approximately $14.7 million (4%) and $45.5 million (5%) resulting from
higher revenue per subscriber and approximately $10.1 million (3%) and $37.2
million (4%) due to increases in other revenue sources such as Rainbow
Media's programming services, advertising on the Company's cable television
systems and revenue derived from a developing commercial telephony business.
The remaining increases of approximately $7.3 million (2%) and $25.6 million
(3%) were attributable to internal growth of over 65,700 and 76,500 in the
average number of subscribers.
Technical expenses increased $93.3 million (69%) and $176.2 million (45%) for
the three and nine months ended September 30, 1997 compared to the same 1996
periods. Approximately $84.0 million (62%) and $125.4 million (32%) of the
increase for the three and nine months ended September 30, 1997,
respectively, was a direct result of the Acquisitions. The remaining 7% and
13% of the increases were attributable to increases in those costs directly
associated with the internal growth in the average number of subscribers and
revenues mentioned above. As a percentage of revenues, technical expenses
increased 3% and 2%, respectively, for the three and nine months ended
September 30, 1997 over the same periods in 1996.
Selling, general and administrative expenses increased $52.3 million (65%)
and $120.5 million (53%), respectively, for the three and nine months ended
September 30, 1997 when compared to the same 1996 periods. Approximately
$31.5 million (39%) and $64.1 million (28%) of the increase was related to
the Acquisitions. Approximately 16% and 17% of the increase, respectively,
was due to non-cash adjustments related to an incentive stock plan. The
remaining 10% and 8% of the increase resulted from higher administrative,
sales and marketing, and customer service costs. As a percentage of revenues,
selling, general and administrative expenses increased 2% in each of the
three and nine months ended September 30, 1997 compared to the same 1996
periods; excluding the effects of the incentive stock plan, as a percentage
of revenues such costs decreased 1% for the three months ended September 30,
1997 and remained constant for the nine months ended September 30, 1997, as
compared to the same periods in 1996.
Operating profit before depreciation and amortization increased $41.2 million
(35%) and $62.7 million (19%) for the three and nine months ended September
30, 1997 over the same periods in 1996. Approximately $39.1 million and $61.6
million, respectively, of the increase is due to the Acquisitions and $14.6
million and $38.7 million, respectively, resulted from the combined effect of
the revenue and expense increases discussed above. These increases were
15
<PAGE>
CABLEVISION SYSTEMS CORPORATION
offset by a decrease in operating profit before depreciation and amortization
of $12.5 million and $37.6 million, respectively, due to the adjustments made
in respect of the incentive stock plan. On a pro forma basis, giving effect
to the Acquisitions as if they had occurred on January 1, 1996 and the
exclusion of incentive stock plan adjustments, operating profit before
depreciation and amortization would have increased 16.0% and 15.5%,
respectively, for the three and nine months ended September 30, 1997 over the
same periods in the prior year.
Operating profit before depreciation and amortization is presented here to
provide additional information about the Company's ability to meet future
debt service, capital expenditures and working capital requirements.
Operating profit before depreciation and amortization should be considered in
addition to and not as a substitute for net income and cash flows as
indicators of financial performance and liquidity as reported in accordance
with generally accepted accounting principles.
Depreciation and amortization expense increased $52.9 million (60%) and
$100.3 million (38%) for the three and nine months ended September 30, 1997
over the same periods in 1996. Approximately 43% and 27% of the respective
increases were attributable to the Acquisitions. The remaining 17% and 11% of
the increases resulted primarily from depreciation on new plant assets,
offset by a decrease in depreciation and amortization for certain assets held
for sale.
Net interest expense increased $41.7 million (65%) and $64.8 million (33%),
respectively, for the three and nine months ended September 30, 1997 over the
comparable 1996 periods. Approximately 59% and 31% of the increase is
attributable to the Acquisitions. The remaining increase of 6% and 2%,
respectively, is due to higher bank borrowings partly offset by lower
interest rates.
Share of affiliates' net losses decreased to $.8 million and $32.2 million,
respectively, for the three and nine months ended September 30, 1997 from
$19.3 million and $59.4 million for the same 1996 periods. Such amounts
consist primarily of the Company's share in the net losses of certain cable
affiliates which, for the three and nine months ended September 30, 1997
amounted to $-0- (reflecting the consolidation of A-R Cable, Nashoba and
Framingham) and $37.8, respectively, and $16.5 million and $50.6 million,
respectively, for the same periods in the prior year; and in the net gains/
losses of certain programming businesses, in which the Company has varying
ownership interests, which amounted to losses of $.8 million and gains of
$5.6 million for the three and nine months ended September 30, 1997 and net
losses of $2.8 million and $8.8 million, respectively, for the same periods
in the prior year.
Provision for preferential payment to related party consists of the expensing
of the proportionate amount due with respect to an annual payment ($5.6
million) made in connection with the acquisition of Cablevision of New York
City ("CNYC") in 1992.
Minority interest for the three and nine months ended September 30, 1997
represents NBC's 25% share of the net loss of Rainbow Media, ITT's share of
the net loss of MSG since the date of acquisition and SportsChannel
Associates and Liberty's share of net income of Prism. For the
16
<PAGE>
CABLEVISION SYSTEMS CORPORATION
same periods in the prior year, the minority interest represented NBC's 25%
share of the net income of American Movie Classics Company.
Gain on redemption of subsidiary preferred stock for the three and nine
months ended September 30, 1997 represents the gain recognized upon the
redemption of A-R Cable's Series A preferred stock of $181,738 (see Note 5 of
Notes to Consolidated Financial Statements).
17
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Liquidity and Capital Resources
For financing purposes, the Company is structured as the Restricted
Group, consisting of Cablevision Systems Corporation and certain of its
subsidiaries and an Unrestricted Group of certain subsidiaries. The
Unrestricted Group of subsidiaries consists primarily of Cablevision of Ohio,
U.S. Cable, Rainbow Media, A-R Cable and CSC Technology, Inc.
The Restricted Group has executed limited recourse guarantees with
respect to A-R Cable, as described below, and has guaranteed the MFR Inc.
notes and the Cablevision of Framingham Holdings, Inc. note that had been
issued in connection with the acquisition of interests in those companies.
Otherwise, the Restricted Group does not guarantee the indebtedness of any
unrestricted subsidiary nor does any unrestricted subsidiary guarantee the
indebtedness of the Restricted Group.
The following table presents selected unaudited historical results of
operations and other financial and statistical information related to the
captioned groups or entities as of and for the nine months ended September
30, 1997. Unrestricted Cable consists of Cablevision of Ohio, U.S. Cable, A-R
Cable, A-R Cable Partners and Cablevision of Framingham. "Other Unrestricted
Subsidiaries" includes Rainbow Media, CSC Technology, Inc. and other
companies engaged in certain development activities.
<TABLE>
<CAPTION>
Other
Restricted Unrestricted Unrestricted Total
Group Cable Subsidiaries Company
------------ ----------- ------------ ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Revenues....................................... $ 789,874 $206,334 $ 318,787 $1,314,995
Operating expenses:
Technical.................................... 321,217 86,772 160,270 568,259
Selling, general and administrative.......... 146,437 43,406 157,562 347,405
Depreciation and amortization................ 227,868 77,898 57,257 363,023
------------ ---------- ------------ ------------
Operating profit (loss)........................ $ 94,352 $ (1,742) $ (56,302) $ 36,308
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
Currently payable interest expense............. $ 175,062 $ 39,032 $ 41,761 $ 255,855
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
Total interest expense......................... $ 177,972 $ 40,195 $ 43,366 $ 261,533
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
Bank and other senior debt..................... $1,220,222 $906,407 $1,195,830 $3,322,459
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
Senior debentures.............................. $ 398,518 $ -- $ -- $ 398,518
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
Subordinated debt.............................. $1,199,207 $ -- $ -- $1,199,207
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
Obligation to related party.................... $ 191,328 $ -- $ -- $ 191,328
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
Deficit investment in affiliate................ $ -- $ -- $ 18,225 $ 18,225
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
Redeemable Exchangeable Preferred Stock........ $1,092,921 $ -- $ -- $1,092,921
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
Capital expenditures........................... $ 235,194 $ 48,310 $ 32,713 $ 316,217
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
Ending Cable subscribers....................... 1,945,642 953,613 -- 2,899,255
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
</TABLE>
18
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Restricted Group
On August 26, 1997, the Company issued $400 million principal amount of 8
1/8% non callable Senior Debentures due 2009. The Debentures are senior
unsecured obligations of the Company and rank senior to each series of the
Company's senior subordinated debentures. The net proceeds of approximately
$392 million were used to reduce bank borrowings.
On September 9, 1997, the Company's Shelf Registration with the SEC for
$1 billion of debt securities became effective. The debt securities may be
either senior debt securities or subordinated debt securities.
On November 3, 1997, the Restricted Group had total usage under its $1.7
billion Credit Agreement (including the credit facility for MFR, Inc.,
collectively the "Credit Agreement") of approximately $1.2 billion and
letters of credit of $17 million issued on behalf of the Company.
Unrestricted and undrawn funds available to the Restricted Group under the
Credit Agreement amounted to approximately $478 million at November 3, 1997.
The Credit Agreement contains certain financial covenants that may limit
the Restricted Group's ability to utilize all of the undrawn funds available
thereunder, including covenants requiring the Restricted Group to maintain
certain financial ratios and restricting the permitted uses of borrowed funds.
As of September 30, 1997, the Company had entered into interest exchange
(swap and interest rate cap) agreements with several of its banks on a
notional amount of $225 million, on which the Company pays a fixed rate of
interest and receives a variable rate of interest for specified periods, with
an average maturity of one year. The average effective annual interest rate
on all Restricted Group bank debt outstanding as of September 30, 1997 was
approximately 7.1%.
The Company believes that, for the Restricted Group, internally generated
funds together with funds available under its existing Credit Agreement will
be sufficient to meet its debt service and preferred stock dividend
requirements and to fund its planned capital expenditures through 1998.
The Company intends to incur additional costs to facilitate the startup
of such adjunct businesses as high speed data service, digital video service
and residential telephony. Depending upon the timing and scope of the roll
out of these businesses beyond 1998, the Company may require additional
capital. Depending on the scope of the Company's participation in the PCS and
DBS ventures beyond 1998, additional capital may also be required. The
acquisition of ITT's remaining interest in MSG following an exercise by ITT
of its put rights may be made, at the Company's election, in either cash or
shares of the Company's Class A common stock.
Charles F. Dolan ("Dolan") and the Company have agreed ("CNYC Letter") (i) to
defer the commencement of the period during which Dolan could elect, pursuant
to the Company's pre-existing obligations under the Purchase and
Reorganization Agreement, dated as of December 20, 1991 between Dolan and
Cablevision (the "CNYC Agreement"), to require the Company to purchase his
remaining partnership interests in Cablevision of New York City, L.P.
("Cablevision of NYC"), from December 1, 1997 to the date of the consummation
of the TCI Transaction and (ii) to provide for cash payment for such partnership
interests of approximately $190 million. If the TCI Transaction is not
consummated on or prior to July 1, 1998, the CNYC Letter will terminate and
the CNYC Agreement will remain in full force and effect in accordance with
its terms, except that the First Put Period (as defined therein) will
commence on July 1, 1998 and end on October 31, 1998. In the event Dolan
exercises his put, the Company's obligation may be paid in cash or, at the
Company's option, shares of Class A common stock. No decision has been made
as to the form of payment in such circumstance.
19
<PAGE>
CABLEVISION SYSTEMS CORPORATION
On August 8, 1998, the Company has the obligation to redeem in cash, or in
shares of the Company's Class A common stock, the Cablevision MFR, Inc.
promissory notes in the amount of $141.3 million for Monmouth Cable and
Riverview Cable and $9.7 million for CFHI. The Company has made no decision
on how the obligation in respect of the promissory notes is to be paid.
Unrestricted Cable
Cablevision of Ohio
The Company's subsidiaries Telerama, Inc., Cablevision of the Midwest,
Inc., and Cablevision of Cleveland, L.P., (collectively "Cablevision of
Ohio") are party to a credit facility with a group of banks led by
NationsBank of Texas, N.A., as agent (the "Cablevision of Ohio Credit
Facility") which consists of a nine year $425 million reducing revolving
credit facility which matures on June 30, 2005 and a nine and one half year
$75 million term loan facility which matures on December 31, 2005. The
reducing revolving facility has scheduled facility reductions beginning in
1999. The term loan facility requires repayments of $375,000 per year from
1997 through 2003 with the balance to be repaid in the final two years. As of
November 3, 1997, Cablevision of Ohio had outstanding borrowings under its
reducing revolving facility of $228 million, and $1 million of outstanding
letters of credit leaving unrestricted and undrawn funds available amounting
to $196 million. The Restricted Group made a $10 million equity contribution
to Cablevision of Ohio in February, 1997 and an additional $6 million in
March, 1997, the proceeds of which were used to pay down debt under the
reducing revolving credit facility. The funds available under the reducing
revolving credit facility will be used to rebuild the Cablevision of Ohio
plant and for general corporate purposes. The Cablevision of Ohio Credit
Facility contains certain financial covenants that may limit its ability to
utilize all of the undrawn funds available thereunder, including covenants
requiring Cablevision of Ohio to maintain certain financial ratios.
The Company believes that for Cablevision of Ohio, internally generated
funds together with funds available under its existing credit agreement and
capital contributions from the Restricted Group, will be sufficient to meet
its debt service requirements including amortization requirements under its
credit agreement and to fund its capital expenditures through 1998.
20
<PAGE>
CABLEVISION SYSTEMS CORPORATION
U.S. Cable
The U.S. Cable credit facility is led by The Bank of New York and Bank of
Montreal, as co-agents, and consists of a three year $175 million revolving
credit facility maturing on August 13, 1999. The revolving facility is
payable in full upon maturity. The funds available under the credit facility
will be used to finance working capital and general corporate purposes.
As of November 3, 1997, U.S. Cable had $153 million of outstanding
borrowings under its revolving credit facility leaving unrestricted and
undrawn funds available amounting to $22 million. The U.S. Cable facility
contains certain financial covenants that may limit its ability to utilize
all of the undrawn funds available thereunder, including covenants requiring
U.S. Cable to maintain certain financial ratios.
The Company believes that for U.S. Cable, internally generated funds
together with funds available under its existing credit agreement will be
sufficient to meet its debt service requirements and to fund its capital
expenditures through 1998. The Company expects to complete the sale of U.S.
Cable in the first quarter of 1998, although there can be no assurance.
A-R Cable Group
On October 31, 1997, A-R Cable consummated the sale of its Bangor and
Lewiston, Maine cable systems, to FrontierVision for $78.2 million. $69.6
million of the proceeds were used to paydown A-R Cable's term debt balance.
On November 3, 1997, A-R Cable had outstanding borrowings of $328 million
leaving unrestricted and undrawn funds amounting to $7 million. A-R Cable's
credit facility matures on December 30, 1997.
A-R Cable is currently in negotiations with GECC for a new one year
facility maturing December 31, 1998. In conjunction with this new facility,
it is A-R Cable's intent to transfer the A-R Massachusetts assets to the
Restricted Group and paydown approximately $177 million of A-R's debt related
to those systems. There can be no assurances that a new credit facility can
be implemented.
As of November 3, 1997, Nashoba and Framingham had outstanding borrowings
aggregating $50 million with unrestricted and undrawn funds aggregating $21
million. The Company believes that for Nashoba and Framingham, internally
generated funds together with funds available under their respective credit
agreements will be sufficient to meet their respective debt service and
capital expenditure requirements through 1998.
21
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Unrestricted--Other
Rainbow Media
Rainbow Media has executed a new $300 million, three year credit facility
with Canadian Imperial Bank of Commerce and Toronto-Dominion (Texas), Inc. as
co-agents, and a group of banks. On April 2, 1997 approximately $172 million
was drawn to refinance, in part, the previous $202 million credit facility.
The balance of the funds utilized to fully repay the $202 million facility
and to repay $169 million to the Restricted Group came from a $205 million
distribution by American Movie Classics Company (AMCC). This distribution was
provided by funds made available under a new AMCC $250 million, seven year
revolving credit and term loan facility maturing in 2004 that closed
concurrently with the Rainbow Media credit facility.
The Rainbow Media three year revolving credit facility matures on
March 31, 2000 and is payable in full on such date. The funds available under
the credit facility will be used to finance working capital requirements and
for general corporate purposes.
As of November 3, 1997, Rainbow Media had outstanding borrowings of $170
million and $4 million in outstanding letters of credit, leaving unrestricted
and undrawn funds available amounting to $126 million. As of November 3,
1997, AMCC had outstanding borrowings of $202 million leaving unrestricted
funds available of $44 million.
Rainbow Media's credit facility contains certain financial covenants that
limit its ability to utilize all of the undrawn funds available thereunder,
including covenants requiring Rainbow Media to maintain certain financial
ratios.
The Company believes that for Rainbow Media, internally generated funds
together with funds available under its credit agreement will be sufficient
to meet its debt service requirements and to fund its capital expenditures
through 1998.
Madison Square Garden
On June 6, 1997 Madison Square Garden L.P. ("MSG") entered into an $850
million credit agreement (the "MSG Credit Facility") with a group of banks
led by Chase Manhattan Bank, as agent. The MSG Credit Facility expires on
December 31, 2004. The Term Loan is due in 26 quarterly installments
commencing September 30, 1998, of which $40 million is payable by
December 31, 1998. On July 11, 1997 a new unrestricted subsidiary of MSG, Garden
Programming, LLC, made a $40 million 14 year loan to a non-related entity.
The proceeds for such loan came from a $20 million drawdown by MSG under the
MSG Credit Facility, which was then loaned to Garden Programming LLC, and a
$20 million five year term loan entered into directly by Garden Programming
LLC with a group of banks.
22
<PAGE>
CABLEVISION SYSTEMS CORPORATION
As of November 3, 1997, outstanding debt under the MSG Credit Facility
consisted of a $650 million term loan and a revolving credit loan of $99
million. In addition, MSG had outstanding letters of credit of $4.7 million
as of November 3, 1997, resulting in unrestricted and undrawn funds available
amounting to $96 million. As of November 3, 1997, outstanding debt under the
Garden Programming, LLC term loan was $20 million. The funds available will
be used for general corporate purposes. The MSG Credit Facility contains
certain financial covenants that may limit its ability to utilize all of the
undrawn funds available thereunder, including covenants requiring MSG to
maintain certain financial ratios. The Company believes that for MSG,
internally generated funds together with funds available under its existing
credit agreement will be sufficient to meet its debt service requirements
under its credit agreement and to fund capital expenditures through 1998.
In connection with the Fox Liberty Transaction discussed in Note 8 to
the Consolidated Financial Statements, the Company intends to repay a portion
of the MSG Credit Facility. MSG has received approval from its banks to amend
the MSG Credit Facility whereby the existing term loan will be repaid and a
new, seven-year revolving credit facility of no less than $450 million will
be put in place.
23
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Part II. Other Information
Item 1. Legal Proceedings
The Company is party to various lawsuits, some involving
substantial amounts. Management does not believe that such lawsuits
will have a material adverse impact on the financial position of the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The index to exhibits is on page 26.
(b) The Company filed a Current Report on Form 8-K with the
Commission on August 29, 1997.
24
<PAGE>
CABLEVISION SYSTEMS CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CABLEVISION SYSTEMS CORPORATION
Registrant
Date: November 14, 1997 By: /s/ William J. Bell
------------------------------------------
William J. Bell, as Vice Chairman,
Director and Principal Financial
Officer of Cablevision Systems
Corporation
Date: November 14, 1997 By: /s/ Andrew B. Rosengard
------------------------------------------
Andrew B. Rosengard, as Executive Vice
President, Financial Planning and
Controller and Chief Accounting
Officer of Cablevision Systems
Corporation
25
<PAGE>
CABLEVISION SYSTEMS CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
---------- -------------- ----
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 32,135
<SECURITIES> 0
<RECEIVABLES> 211,824
<ALLOWANCES> (29,830)
<INVENTORY> 149,630
<CURRENT-ASSETS> 0
<PP&E> 3,078,540
<DEPRECIATION> (1,358,487)
<TOTAL-ASSETS> 4,872,763
<CURRENT-LIABILITIES> 0
<BONDS> 5,111,512
1,092,921
15
<COMMON> 249
<OTHER-SE> (2,566,300)
<TOTAL-LIABILITY-AND-EQUITY> 4,872,763
<SALES> 0
<TOTAL-REVENUES> 1,333,250
<CGS> 0
<TOTAL-COSTS> 568,259
<OTHER-EXPENSES> 363,023
<LOSS-PROVISION> (18,255)
<INTEREST-EXPENSE> (261,533)
<INCOME-PRETAX> (83,919)
<INCOME-TAX> 0
<INCOME-CONTINUING> (83,919)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83,919)
<EPS-PRIMARY> (7.81)
<EPS-DILUTED> 0<F1>
<FN>
<F1>Not presented as the resultant computation would be a decrease in net loss per
share and therefore not meaningful.
</FN>
</TABLE>
