<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-35263
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 1, 1997)
$300,000,000
[LOGO]
CABLEVISION SYSTEMS CORPORATION
7 7/8% SENIOR DEBENTURES DUE 2018
------------------
Interest on the Debentures is payable semi-annually on February 15 and
August 15 of each year, commencing August 15, 1998. The Debentures will mature
on February 15, 2018.
The Debentures are senior unsecured obligations of Cablevision Systems
Corporation ("Cablevision") and will rank PARI PASSU in right of payment with
all existing and future unsubordinated indebtedness of Cablevision, including
Cablevision's 7 7/8% Senior Notes due 2007 (the "7 7/8% Senior Notes") and its
8 1/8% Senior Debentures due 2009. All secured indebtedness of Cablevision will
have a prior claim with respect to the assets securing such indebtedness. The
liabilities, including trade payables, of Cablevision's subsidiaries will have a
prior claim with respect to the assets of those subsidiaries. In that regard,
certain of the subsidiaries in Cablevision's Restricted Group (as defined
herein) have guaranteed the indebtedness of Cablevision under the Company's
Credit Agreement (as defined herein), but these subsidiaries will not be
guarantors of the Debentures. As of September 30, 1997, after giving effect to
the sale of the 7 7/8% Senior Notes and the Debentures offered hereby and the
application of the estimated net proceeds therefrom, (i) Cablevision would have
had approximately $2,354 million of debt outstanding (other than certain
guarantees of subsidiary debt discussed herein), virtually all of which would
have been unsecured, (ii) Restricted Group subsidiaries of Cablevision would
have had approximately $774 million of third-party debt (including guarantees of
borrowings under the Credit Agreement of $105 million), and (iii) Unrestricted
Group (as defined herein) subsidiaries would have had approximately $2,102
million of debt. See "Risk Factors--Ranking of Debentures", "Recent
Developments" and "Capitalization" for additional information concerning
indebtedness of Cablevision and its subsidiaries and changes to the amount of
such indebtedness since September 30, 1997.
INVESTMENT IN THE DEBENTURES INVOLVES SIGNIFICANT RISKS, DISCUSSED UNDER
"RISK FACTORS" BEGINNING ON PAGE S-11 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 UNDERWRITING PROCEEDS
TO PUBLIC(1) DISCOUNT(2) TO COMPANY(1)(3)
<S> <C> <C> <C>
Per Debenture................................. 98.857% 1.625% 97.232%
Total......................................... $296,571,000 $4,875,000 $291,696,000
</TABLE>
(1) Plus accrued interest, if any, from February 6, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, and has agreed to reimburse the Underwriters for certain of their
expenses in connection with this offering. See "Underwriting".
(3) Before deducting expenses payable by the Company estimated at $500,000.
------------------------------
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
February 6, 1998 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 DEAN WITTER SALOMON SMITH BARNEY
---------------
The date of this Prospectus Supplement is February 3, 1998.
<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, 1996
as amended by the Company's Form 10-K/A for the fiscal year ended December 31,
1996 (collectively, 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, the Form 10-Qs (as defined in the accompanying Prospectus) and the Form
10-Q for the fiscal quarter ended September 30, 1997. See "Incorporation of
Certain Documents by Reference" in the accompanying Prospectus.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES. SUCH
TRANSACTIONS MAY INCLUDE OVER-ALLOTMENT, STABILIZING, THE PURCHASE OF DEBENTURES
TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
S-2
<PAGE>
SUMMARY
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR
INCORPORATED BY REFERENCE HEREIN. 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 2,899,000 subscribers in 19 states as of
September 30, 1997, based on the number of basic subscribers in systems which
are currently majority-owned by the Company. 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 and in Madison Square Garden, L.P. ("MSG"), a sports
entertainment company.
CABLE TELEVISION
The cable television systems that are currently majority-owned by the
Company (the "Company's cable television systems") served approximately
2,899,000 subscribers in 19 states as of September 30, 1997. The Company's cable
television systems have generally been characterized by relatively high revenues
per subscriber ($38.36 for September 1997) and a high ratio of premium service
units to basic subscribers (1.5:1 for September 1997). 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 Company's restricted group of
subsidiaries (the "Restricted Group") served approximately 1,946,000 subscribers
as of September 30, 1997, primarily in and around metropolitan New York City
(including in the boroughs of Brooklyn and The Bronx, on Long Island, in
Fairfield County, Connecticut, in New Jersey and in Westchester County, New
York) and in and around Boston, Massachusetts. The revenue per subscriber and
ratio of premium service units to basic subscribers for cable television systems
in the Restricted Group for September 1997 were $41.69 and 1.6:1, respectively.
The cable television operations currently in the Company's unrestricted
group of subsidiaries ("Unrestricted Cable") served approximately 953,000
subscribers as of September 30, 1997 in Ohio and 15 other states. The revenue
per subscriber and ratio of premium service units to basic subscribers for
Unrestricted Cable for September 1997 were $31.58 and 1.2:1, respectively.
PROGRAMMING AND ENTERTAINMENT SERVICES
The Company conducts its programming and entertainment activities through
Rainbow Media Holdings, Inc. ("Rainbow Media"), its 75% owned subsidiary and a
member of the Unrestricted Group (as defined herein), and through subsidiaries
of Rainbow Media in partnership with certain unaffiliated entities, including
Fox Sports Net, LLC ("Fox Sports") and Liberty Media Corporation. The remaining
25% interest in Rainbow Media is owned by NBC Cable Holding, Inc., a subsidiary
of National Broadcasting Company, Inc. ("NBC"). Rainbow Media's businesses
include a 60% interest in Regional Programming Partners (which includes its
interest in MSG and six regional sports networks), five national entertainment
networks (American Movie Classics ("AMC"), Bravo, MuchMusic, Romance Classics
and the Independent Film Channel ("IFC")), Rainbow News 12 (regional news
networks serving suburban areas surrounding New York City) and a 50% interest in
National Sports Partners (which includes Fox Sports Net). MSG is a sports
entertainment company that owns and operates the Madison Square Garden arena and
the adjoining Theater at MSG, the New York Knickerbockers professional
basketball team, the New York Rangers professional hockey team, the Madison
Square Garden Network and SportsChannel
S-3
<PAGE>
Associates ("SportsChannel New York"). MSG and Regional Programming Partners'
regional sports networks provide regional sports programming to the New York,
New England, Chicago, Cincinnati, Cleveland, San Francisco and Florida areas.
AMC is a national entertainment network featuring classic, unedited and
non-colorized films from the 1930s through the 1970s. Bravo is a national
entertainment network offering international films and performing arts programs,
including jazz, dance, classical music, opera and theatrical programs. Romance
Classics is a national entertainment network featuring classic, unedited and
non-colorized films with romantic themes from the 1930s through the 1970s.
MuchMusic is a music network featuring a diverse mix of new and established
musical artists. IFC is a national entertainment network that airs independent
films made outside the traditional Hollywood system. National Sports Partners is
a national sports network featuring Fox Sports Net, which provides national
sports programming to the regional sports networks owned by Regional Programming
Partners and certain other regional sports networks owned by Fox/Liberty
Networks, LLC. See "Business--Programming Operations--General" in the Form 10-K.
ADVERTISING SERVICES
Rainbow Advertising Sales Corporation ("Rainbow Advertising") sells
advertising time to national, regional and local advertisers on behalf of the
Company's cable television systems and the Rainbow News 12 programming network,
as well as on behalf of unaffiliated cable television systems. Rainbow Media
also owns a 50% general partnership interest in National Advertising Partners,
which sells advertising for National Sports Partners, certain of the regional
sports networks owned by Regional Programming Partners and certain other
regional sports networks owned by Fox/Liberty Networks, LLC.
RECENT DEVELOPMENTS
See "Recent Developments" for a description of certain transactions
involving the Company, including the Pending TCI NY/NJ Transactions (as defined
herein), the Proposed TCI CT Transactions (as defined herein), certain pending
and completed cable television systems sales, the Warburg Transactions (as
defined herein), an agreement to acquire certain assets from The Wiz, Inc. and
certain of its subsidiaries and affiliates, an agreement with At Home
Corporation, the CNYC Letter (as defined herein), the acquisition of Radio City
Productions LLC, the Fox/Liberty Transactions (as defined herein), the MSG
Redemption (as defined herein), the NBC Transaction (as defined herein) and the
Rainbow Media financing.
S-4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.................. $300,000,000 principal amount of 7 7/8% Senior
Debentures due 2018 (the "Debentures") offered by the
Company (the "Offering").
Maturity Date....................... February 15, 2018.
Interest Payment Dates.............. February 15 and August 15, commencing August 15,
1998.
Optional Redemption................. The Debentures are not subject to redemption at the
option of the Company prior to maturity.
Ranking............................. The Debentures are senior unsecured obligations of
Cablevision and will rank PARI PASSU in right of
payment with all existing and future unsubordinated
indebtedness of Cablevision, including Cablevision's
7 7/8% Senior Notes and its 8 1/8% Senior Debentures
due 2009. All secured indebtedness of Cablevision
will have a prior claim with respect to the assets
securing such indebtedness. The liabilities,
including trade payables, of Cablevision's
subsidiaries will have a prior claim with respect to
the assets of those subsidiaries. In that regard,
certain of the subsidiaries in the Company's
Restricted Group have guaranteed the indebtedness of
Cablevision under the Company's principal bank credit
agreement (the "Credit Agreement"), but these
subsidiaries will not be guarantors of the
Debentures. As of September 30, 1997, after giving
effect to the sale of the 7 7/8% Senior Notes and the
Debentures offered hereby and the application of the
estimated net proceeds therefrom, (i) Cablevision
would have had $105 million outstanding under the
Credit Agreement, $1,195 million of senior unsecured
indebtedness, $1,048 million of subordinated and
senior subordinated indebtedness and obligations and
$6 million of capitalized leases (other than certain
guarantees of subsidiary debt discussed below); (ii)
subsidiaries in the Restricted Group would have had
$665 million of indebtedness and $4 million of
capitalized leases, in addition to the guarantees of
Cablevision's borrowings under the Credit Agreement
of $105 million; and (iii) subsidiaries in the
Unrestricted Group would have had $2,102 million of
indebtedness and capitalized leases. All of the
indebtedness of subsidiaries in the Restricted Group
has been guaranteed by Cablevision ($151 million on a
senior subordinated basis and the balance on a senior
basis) and $1,282 million of the indebtedness of
subsidiaries in the Unrestricted Group has been
guaranteed by Cablevision on a limited recourse basis
with the guarantee limited to the stock of the
relevant subsidiary, which stock has been pledged to
the lender to secure the guarantee. See "Risk
Factors--Ranking of Debentures", "Recent
Developments" and "Capitalization" for additional
information concerning indebtedness of
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
Cablevision and its subsidiaries and changes to the
amount of such indebtedness since September 30, 1997.
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 in the accompanying
Prospectus) to incur additional indebtedness, make
certain dividend payments or payments to redeem or
retire capital stock, invest in Unrestricted
Subsidiaries or Affiliates (each, as defined in the
accompanying Prospectus), engage in certain
transactions with Affiliates, incur liens and merge
or consolidate with or transfer all or substantially
all of their assets to another entity.
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, Morgan Stanley & Co. Incorporated and
Salomon Brothers Inc (collectively, 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, Inc.'s Automated Quotation
System.
Use of Proceeds..................... The net proceeds to be received by the Company from
the Offering are estimated to be $291.2 million and
will be applied to repay borrowings under the Credit
Agreement. The Company expects to reborrow the amount
repaid under the Credit Agreement in the future for
general corporate purposes. The Company also expects
to raise additional funds in the future. See "Use of
Proceeds" herein.
</TABLE>
S-6
<PAGE>
SELECTED FINANCIAL DATA
The historical consolidated statement of operations data (except for book
value per common share and deficiency of earnings available to cover fixed
charges) and consolidated balance sheet data for each year ended and as of
December 31 in each year in the five-year period ended December 31, 1996,
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 certified public accountants. The historical consolidated
statement of operations data and balance sheet data for the periods ended and as
of September 30, 1997 and 1996 included in the following selected financial data
have been derived from financial statements of the Company that have not been
audited, but that, in the opinion of the management of the Company, reflect all
adjustments necessary for the fair presentation of such data for the interim
periods. The results of operations for the nine-month period ended September 30,
1997 are not necessarily indicative of the results of operations for the full
year, although the Company expects that it incurred a substantial loss for the
year ended December 31, 1997, excluding the gain associated with the redemption
of the Series A preferred stock of A-R Cable Services, Inc. ("A-R Cable") and
the gain associated with the consummation of the Fox/Liberty Transactions.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA(1):
Revenues................................. $1,314,995 $ 955,618 $1,315,142 $1,078,060 $ 837,169 $ 666,724 $ 572,487
Operating expenses:
Technical.............................. 568,259 392,076 538,272 412,479 302,885 241,877 204,449
Selling, general and administrative.... 347,405 226,940 313,476 266,209 195,942 172,687 120,356
Restructuring charge................... -- -- -- -- 4,306(2) -- --
Depreciation and amortization.......... 363,023 262,741 388,982 319,929 271,343 194,904 168,538
--------- --------- --------- --------- --------- --------- ---------
Operating profit......................... 36,308 73,861 74,412 79,443 62,693 57,256 79,144
Other income (expense):
Interest expense, net.................. (258,898) (194,072) (265,015) (311,887) (261,781) (230,327) (193,379)
Provision for preferential payment to
related party........................ (4,200) (4,200) (5,600) (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 interest and
financing costs(5)................... (13,710) (34,341) (37,784) (5,517) (9,884) (1,044) (12,284)
Gain on redemption of subsidiary
preferred stock...................... 181,738(6) -- -- -- -- -- --
Loss on redemption of debentures....... -- -- -- -- (7,088 (5) -- --
Share of affiliates' net losses........ (32,243) (59,403) (82,028) (93,024) (82,864) (61,017) (47,278)
Gain (loss) on sale of programming and
affiliate interests, net............. -- -- -- 35,989 -- (330) 7,053
Minority interest...................... 14,145 (7,385) (9,417) (8,637) (3,429) 3,000 --
Gain on sale of marketable securities,
net.................................. -- -- -- -- -- -- 733
Settlement of litigation and related
matters.............................. -- -- -- -- -- -- (5,655)
Miscellaneous, net..................... (7,059) (7,444) (6,647) (8,225) (7,198) (8,720) (6,175)
--------- --------- --------- --------- --------- --------- ---------
Net loss................................. (83,919) (232,984) (332,079) (317,458) (315,151) (246,782) (250,503)
Dividend requirements applicable to
preferred stock........................ (110,324) (92,596) (127,780) (20,249) (6,385) (885) (885)
--------- --------- --------- --------- --------- --------- ---------
Net loss applicable to common
stockholders........................... $(194,243) $(325,580) $(459,859) $(337,707) $(321,536) $(247,667) $(251,388)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net loss per common share................ $ (7.81) $ (13.12) $ (18.52) $ (14.17) $ (13.72) $ (10.83) $ (11.17)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Average number of common shares
outstanding (in thousands)............. 24,858 24,823 24,827 23,826 23,444 22,859 22,512
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Book value per common share.............. $ (102.92) $ (90.19) $ (95.59) $ (76.61) $ (76.93) $ (64.61) $ (55.28)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Deficiency of earnings available to cover
fixed charges.......................... $ (83,919) $(232,984) $(332,079) $(317,458) $(315,151) $(246,782) $(250,503)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
S-7
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT
AVERAGE MONTHLY REVENUE DATA)
CONSOLIDATED BALANCE SHEET DATA(1):
Total assets................................. $ 4,872,763 $3,034,725 $2,502,305 $2,176,413 $1,327,418 $1,251,157
Total debt................................... 5,111,512 3,334,701 3,157,107 3,169,236 2,235,499 2,004,452
Redeemable preferred stock................... 1,092,921 1,005,265 257,751 -- -- --
Stockholders' deficiency..................... (2,566,036) (2,374,285) (1,891,676) (1,818,535) (1,503,244) (1,250,248)
STATISTICAL DATA(1):
Homes passed(7).............................. 4,484,000 3,858,000 3,328,000 2,899,000 2,240,000 2,019,000
Basic service subscribers.................... 2,899,000 2,445,000 2,061,000 1,768,000 1,379,000 1,262,000
Basic penetration(8)......................... 64.6% 63.4% 61.9% 61.0% 61.6% 62.5%
Number of premium television units........... 4,204,000 3,862,000 3,990,000 3,208,000 3,003,000 2,802,000
Average number of premium units per basic
subscriber................................. 1.5 1.6 1.9 1.8 2.2 2.2
Average monthly revenue per basic
subscriber(9).............................. $ 38.36 $ 36.71 $ 37.07 $ 36.33 $ 36.59 $ 37.64
</TABLE>
- ------------------------
(1) The consolidated statement of operations, balance sheet and statistical data
reflect (i) the acquisition of Cablevision of New York City ("Cablevision of
NYC"), effective as of July 10, 1992, and (ii) various acquisitions of cable
television systems and other businesses during the periods presented. See
"Business--Cable Television Operations" in the Form 10-K. 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.
(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 million loss in connection with
Rainbow Media'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 the redeemable preferred stock of A-R Cable, 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, and 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 charges of
approximately $2.0 million in redemption fees, $4.5 million in deferred
financing costs and $0.6 million in unamortized discount were recorded in
connection with the redemption of the reset debentures. In January 1995,
Rainbow Media amended its credit agreement to refinance its existing
borrowings and to provide funds for the acquisition of the third-party
interests in SportsChannel New York and Rainbow News 12, resulting in an
approximately $2.3 million write-off of deferred financing costs. In April
1996, the Company wrote off approximately $24.0 million of deferred interest
and financing costs in connection with the refinancing of all indebtedness
of V Cable and VC Holding, Inc. and the formation of Cablevision of Ohio. In
September 1996, the Company wrote off approximately $10.3 million of
deferred financing costs in connection with the refinancing of the Credit
Agreement, and in the fourth quarter of 1996, an additional $3.1 million of
deferred financing costs relating to the Company's MFR subsidiary were
written off in connection with a reorganization and refinancing of
Cablevision MFR, Inc. In July 1997, the Company paid a premium of
approximately $8.4 million to redeem its 10 3/4% Senior Subordinated
Debentures due 2004 and wrote off deferred financing costs of approximately
$5.3 million in connection therewith.
(6) In July 1997, the Company redeemed the Series A preferred stock of A-R Cable
and recognized a gain principally representing the reversal of accrued
preferred dividends in excess of amounts paid.
(7) Homes passed is based upon homes passed by cable actually marketed and does
not include multiple dwelling units passed by the cable plant that are not
connected to it.
(8) Basic penetration represents basic service subscribers at the end of the
period as a percentage of homes passed at the end of the period.
(9) Based on recurring service revenues, excluding installation charges and
certain other revenues such as advertising, pay-per-view and home shopping
revenues, for the month of September or December, as the case may be,
divided by the average number of basic subscribers for that month.
S-8
<PAGE>
SUPPLEMENTAL FINANCIAL AND OPERATING DATA
The following tables set forth information concerning the Company's
Restricted Group and Unrestricted Cable on the dates and for the periods
indicated. Data for the 1997, 1996 and 1995 periods reflect the Restricted Group
and Unrestricted Cable as they were constituted on September 30, 1997. Pro forma
data for the periods ended and as of September 30, 1997 and December 31, 1996
have been adjusted to give pro forma effect to this Offering and the offering of
the 7 7/8% Senior Notes and to the transactions described under "Condensed Pro
Forma Consolidated Financial Information" in the Company's Form 8-K filed on
August 30, 1997 and assumes that A-R Cable, A-R Cable Partners and Cablevision
of Framingham Holdings, Inc. ("CFHI") became part of Unrestricted Cable as of
the beginning of the respective periods. The data should be read in conjunction
with the Company's Consolidated Financial Statements and Management's Discussion
and Analysis.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------------------------------- -------------------------------------------------------
1997 1996 1996 1995 1994
----------------------------- ----------- ------------------------- ----------- -------------
PRO PRO
FINANCIAL DATA FORMA(1) ACTUAL FORMA(1) ACTUAL
- ------------------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESTRICTED GROUP:
STATEMENT OF
OPERATIONS DATA:
Revenues....... $ 789,874 $ 789,874 $ 687,960 $ 955,996 $ 938,252 $ 787,955 $ 584,567
Operating
profit before
depreciation
and
amortization(2)... 322,220 322,220 289,282 398,728 392,240 344,062 249,316
Depreciation
and
amortization... 227,868 227,868 197,351 292,695 283,404 248,944 154,187
Operating
profit....... 94,352 94,352 91,931 106,033 108,836 95,118 95,129
Total interest
expense(3)... 185,456 177,972 158,056 229,721 213,723 235,479 153,923
BALANCE SHEET
DATA:
Total assets... $2,083,775 $2,070,400 $2,279,474 $2,291,621 $2,278,246 $1,875,970 $ 1,119,882
Bank and senior
debt......... 1,632,115 1,618,740 726,296 1,151,929 984,554 1,133,231 969,895
Subordinated
debt(3)...... 1,199,207 1,199,207 1,464,339 1,474,105 1,464,373 1,064,876 764,802
Obligation to
related
party........ 191,328 191,328 191,450 192,819 192,819 192,945 193,079
Total
debt(3)...... 3,022,650 3,009,275 2,382,085 2,818,853 2,641,746 2,391,052 1,927,776
FINANCIAL RATIOS
AND OTHER DATA:
Operating
profit before
depreciation
and
amortization
to
revenues..... 40.8% 40.8% 42.1% 41.7% 41.8% 43.7% 42.6%
Total debt to
operating
profit before
depreciation
and
amortization... 7.0x(4) 7.0x(4) 6.2x(4) 7.1x 6.7x 6.9x 7.7x
Operating
profit before
depreciation
and
amortization
to total
interest
expense...... 1.7x 1.8x 1.8x 1.7x 1.8x 1.5x 1.6x
Capital
expenditures... $ 235,194 $ 235,194 $ 229,519 $ 341,974 $ 338,468 $ 251,210 $ 251,078
UNRESTRICTED CABLE:
STATEMENT OF
OPERATIONS DATA:
Revenues....... $ 277,840 $ 206,334 $ 104,999 $ 352,995 $ 158,382 $ 117,200 $ 169,826
Operating
profit before
depreciation
and
amortization(2).... 105,454 76,156 39,773 135,360 59,420 48,354 84,932
Depreciation
and
amortization... 101,158 77,898 35,051 141,121 61,837 43,611 105,938
Operating
profit
(loss)....... 4,296 (1,742) 4,722 (5,761) (2,417) 4,743 (21,006)
Total interest
expense...... 61,074 40,195 21,732 86,257 31,737 59,125 103,803
BALANCE SHEET
DATA:
Total assets... $ 782,628 $ 782,628 $ 927,997 $ 908,881 $ 617,848 $ 256,206 $ 823,363
Total debt..... 906,407 906,407 510,943 932,048 471,881 528,021 1,092,440
FINANCIAL RATIOS
AND OTHER DATA:
Operating
profit before
depreciation
and
amortization
to
revenues..... 38.0% 36.9% 37.9% 38.3% 37.5% 41.3% 50.0%
Total debt to
operating
profit before
depreciation
and
amortization... 6.4x(4) 8.9x(4) 9.6x(4) 6.9x 7.9x 10.9x 9.9x(5)
Operating
profit before
depreciation
and
amortization
to total
interest
expense...... 1.7x 1.9x 1.8x 1.6x 1.9x 0.8x 0.8x
Capital
expenditures... $ 56,189 $ 48,310 $ 57,645 $ 113,433 $ 84,855 $ 27,013 $ 24,195
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
S-9
<PAGE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
----------------------------------- ------------------------
1997 1996 1996
------------------------ --------- ------------------------
STATISTICAL DATA PRO FORMA (1) ACTUAL PRO FORMA (1) ACTUAL
------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
RESTRICTED GROUP:
Homes passed(6).................................... 3,058,000 3,058,000 2,708,000 2,982,000 2,982,000
Basic service subscribers.......................... 1,946,000 1,946,000 1,699,000 1,888,000 1,888,000
Basic penetration(7)............................... 63.6% 63.6% 62.7% 63.3% 63.3%
Number of premium television units................. 3,098,000 3,098,000 2,947,000 3,125,000 3,125,000
Average number of premium units per basic
subscriber....................................... 1.6 1.6 1.7 1.7 1.7
Average revenue per basic subscriber(8)............ $41.69 $41.69 $38.9 $38.84 $38.84
UNRESTRICTED CABLE:
Homes passed(6).................................... 1,426,000 1,426,000 1,139,000 1,415,000 876,000
Basic service subscribers.......................... 953,000 953,000 737,000 938,000 557,000
Basic penetration(7)............................... 66.9% 66.9% 64.7% 66.3% 63.6%
Number of premium television units................. 1,106,000 1,106,000 865,000 1,079,000 737,000
Average number of premium units per basic
subscriber....................................... 1.2 1.2 1.2 1.2 1.3
Average revenue per basic subscriber(8)............ $31.58 $31.58 $31.23 $29.68 $29.54
</TABLE>
- ------------------------
(1) The information presented does not give pro forma effect to the Pending TCI
NY/NJ Transactions (as described in "Recent Developments--Pending TCI NY/NJ
Transactions") or for the sale of certain cable television systems (as
described in "Recent Developments--Pending and Completed Cable Television
Systems Sales").
(2) 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.
(3) Includes Cablevision MFR, Inc. seller note in the amount of $141.3 million
that is, together with related interest expense, guaranteed by the
Restricted Group and also includes CFHI seller note in the amount of $9.7
million.
(4) Operating profit before depreciation and amortization is annualized for
purposes of preparing interim financial ratios that include balance sheet
items.
(5) 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.
(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 in the period presented, divided by the average
number of basic subscribers for that month.
S-10
<PAGE>
RISK FACTORS
PURCHASE OF THE DEBENTURES 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 and issued substantial amounts of mandatorily
redeemable preferred stock, primarily to finance acquisitions and expansion of
its operations, to refinance outstanding indebtedness and, to a lesser extent,
for investments in and advances to affiliates. The Company's consolidated debt
plus the Company's 11 3/4% Series H Redeemable Exchangeable Preferred Stock and
11 1/8% Series M Redeemable Exchangeable Preferred Stock aggregated
approximately $6.2 billion at September 30, 1997. See Note 4 of Notes to the
Consolidated Financial Statements. As a result of the Company's high level of
indebtedness and the significant amount of redeemable preferred stock, the
Company has significant cash requirements to service indebtedness and to pay
dividends and redemption amounts on redeemable preferred stock, increasing the
Company's vulnerability to adverse developments in its business and adverse
economic and industry conditions. Based on currently outstanding obligations,
the Company's quarterly cash obligations for the first, second, third and fourth
quarters of 1998 are currently expected to be (i) for debt service,
approximately $30.5 million, $61.5 million, $30.5 million and $61.5 million,
respectively, and (ii) for dividends on the Company's 8 1/2% Series I Cumulative
Convertible Exchangeable Preferred Stock ("Series I Preferred Stock"),
approximately $7.3 million per quarter. The Company also has outstanding cash
redemption obligations for 1998 (i) if the Company elects to pay in cash, of
approximately $151 million in respect of the repayment of the Senior
Subordinated Notes due 1998/2003 of Cablevision MFR, Inc. when due in the third
quarter of 1998 and (ii) if the Pending TCI NY/NJ Transactions are consummated,
of approximately $190 million in respect of the Cablevision of NYC Payment (as
defined in the accompanying Prospectus) to Charles F. Dolan.
NET LOSSES AND STOCKHOLDERS' DEFICIENCY. The Company reported net losses
applicable to common stockholders for the nine months ended September 30, 1997
and 1996 of $194.2 million and $325.6 million, respectively, and for the years
ended December 31, 1996, 1995 and 1994 of $459.9 million, $337.7 million and
$321.5 million, respectively. At September 30, 1997, the Company had a
stockholders' deficiency of $2.6 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 1994, 1995, 1996 and 1997 and will continue
at high levels throughout 1998 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".
POSSIBLE NONCOMPLETION OF CERTAIN TRANSACTIONS. There can be no assurances
that the Company's pending transactions, including those that have not yet
closed described in "Recent Developments", will be consummated in a timely
manner, or at all. The Company does not believe that the failure to consummate
such pending transactions would be reasonably likely to have a material adverse
effect on the Company as a whole. Furthermore, there can be no assurances that
the refinancing of the Assumed Debt (as defined under "Recent
Developments--Pending TCI NY/NJ Transactions") assumed in the Pending TCI NY/NJ
Transactions (the "Refinancing") will be consummated in a timely manner or at
all or on what terms the Refinancing may be consummated. With respect to the
refinancing of the Assumed Debt in the Refinancing, the aggregate amount of
Assumed Debt that will be assumed by CSC Parent in the Pending TCI NY/ NJ
Transactions is expected to be approximately $669 million. All of the Assumed
Debt will, in accordance with the Contribution and Merger Agreement, be payable
upon consummation of the Pending TCI NY/NJ
S-11
<PAGE>
Transactions. The refinancing of the Assumed Debt is included as part of the
Refinancing. The Company is in discussions with commercial lenders with respect
to a separate credit facility (the "New Credit Facility") in the aggregate
amount of $800 million to provide funds for the refinancing of the Assumed Debt
in the Refinancing, for additional working capital needs for the Contributed
Businesses and for other corporate purposes. The Company currently expects that
the New Credit Facility will be in place at or prior to the consummation of the
Pending TCI NY/NJ Transactions. However, there can be no assurances that the New
Credit Facility will be obtained or upon what terms the New Credit Facility will
be obtained. If the New Credit Facility is not obtained, the Company would need
additional capital in order to refinance the $669 million in Assumed Debt upon
consummation of the Pending TCI NY/NJ Transactions and for any additional
working capital needs for the Contributed Businesses. That additional funding
could be obtained by amending the Company's existing facility to increase
borrowings available to refinance the Assumed Debt and by issuing debt in the
public markets. However, there can be no assurances that any such amendments
would be obtained or any such issuance could be effected or upon what terms such
amendment could be obtained or such issuance could be effected. If the New
Credit Facility is not obtained and additional capital was not available for the
Company to assume and pay the Assumed Debt, the Company would not be able to
comply with the terms of the Contribution and Merger Agreement and could be held
to be in breach thereof. If such breach were to give rise to a judgment that the
Company was unable to satisfy, then such breach could cause a material adverse
effect on the Company and a default under the Company's debt, including the
Debentures offered hereby, and in such circumstances could cause defaults under
other outstanding obligations of the Company.
POSSIBLE SEPARATION OF RAINBOW MEDIA FROM THE COMPANY. If the Pending TCI
NY/NJ Transactions (as defined herein) are consummated, Cablevision, the issuer
of the Debentures, will be a wholly-owned subsidiary of CSC Parent Corporation
("CSC Parent"), the businesses of Tele-Communications, Inc. ("TCI") contributed
in such transactions will be held as separate direct subsidiaries of CSC Parent
and Rainbow Media will continue to be a 75%-owned subsidiary of Cablevision
(with NBC owning the remaining 25% interest). The Amended and Restated
Contribution and Merger Agreement with a subsidiary of TCI permits the Company
under certain circumstances to restructure these holdings so that Rainbow Media
becomes a separate subsidiary of CSC Parent (and would no longer be a subsidiary
of Cablevision) and the Contributed Businesses (as defined herein) become
subsidiaries of Cablevision. Following such transactions, the cash flow of
Rainbow Media would not, and the residual equity value of Rainbow Media would no
longer, support the ability to pay interest and principal on the Debentures and
other debt.
NEED FOR ADDITIONAL FINANCING. The Company's businesses require substantial
investment on a continuing basis to finance capital expenditures and related
expenses for, among other things, upgrade of cable plant, the offering of new
services and further participation in existing services, the funding of costs of
cable programming services and other businesses prior to their becoming
cash-flow positive, and the servicing, repayment or refinancing of its
indebtedness and mandatorily redeemable preferred stock. The Company will
require significant additional financing, through debt and/or equity issuances,
to meet its capital expenditure plans and to pay the principal of and interest
on its debt and to pay dividends and make redemption payments on its preferred
stock. The Company also 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
rollout of these businesses, as to which the Company has made no definitive
decision, the Company may require significant additional capital. Depending on
the scope of the Company's participation in personal communications services
("PCS") and direct broadcasting satellite ("DBS") ventures, as to which the
Company has made no definitive decision, significant additional capital may also
be required for these businesses. The Company is not currently able to estimate
the amounts of such capital expenditures, which would depend highly upon, among
other factors, the timing and scope thereof. In addition, the Company may
require additional capital if (i) it elects to pay cash to acquire ITT
Corporation's remaining interest in MSG following an exercise by ITT Corporation
of its put rights at approximately $188 million in cash or by the Company of its
call rights with
S-12
<PAGE>
respect to such interests (see "Recent Developments--Rainbow Media--Madison
Square Garden"), (ii) it elects to make the Cablevision of NYC Payment of
approximately $190 million in cash to Charles F. Dolan due under the Cablevision
of NYC Agreement (as defined in the accompanying Prospectus) (see "Recent
Developments--CNYC Letter"), (iii) it elects to pay cash of up to $151 million
in order to repay the Senior Subordinated Notes due 1998/2003 of Cablevision
MFR, Inc. when due in August 1998 (see Note 3 to "Summary--Supplemental
Financial and Operating Data"), (iv) the New Credit Facility is not obtained in
order to pay the approximately $669 million in Assumed Debt that will be payable
upon consummation of the Pending TCI NY/NJ Transactions, or (v) the Wiz
transaction described under "Recent Developments--Agreement to Acquire Certain
Assets from The Wiz, Inc. and its Subsidiaries and Affiliates" is consummated.
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 intends to make
substantial capital expenditures, including major system upgrades, with respect
to its cable television systems over the next several years. In addition, the
Company, through Rainbow Media and its subsidiaries, 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 the
Consolidated Financial Statements for a discussion of commitments.
The Company has a commitment to fund annual payments to Charles F. Dolan
related to Cablevision of New York City, L.P. ("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". See "Recent Developments--CNYC
Letter" for a discussion of certain recent modifications to the Cablevision of
NYC Agreement.
For further commitments, see "--Need for Additional Financing".
INTANGIBLE ASSETS. The Company had total assets at September 30, 1997 of
$4.9 billion, of which $2.3 billion were intangible assets, consisting of
franchises, affiliation agreements, excess cost over fair value of net assets
acquired and deferred financing, acquisition and other costs. It is possible
that no cash would be recoverable from the voluntary or involuntary sale of
these intangible assets.
VOTING CONTROL BY MAJORITY STOCKHOLDERS; DISPARATE VOTING RIGHTS. As of
September 30, 1997, Charles F. Dolan beneficially owned and possessed sole
voting power with respect to 7,805 shares or 0.1% of the Company's outstanding
Class A common stock (the "Class A Common Stock") and 4,859,281 shares or 43.7%
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 September 30, 1997, an aggregate of 1,240,000 shares or 11.2% of
the outstanding Class B Common Stock were held by a grantor retained annuity
trust (the "GRA Trust") 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 Trust due to his right to reacquire the Class B
Common Stock held by the GRA Trust by substituting other property of equivalent
value, but, until such event, the GRA Trust, through its co-trustees (who are
Mr. Dolan and his spouse), has the power to vote and dispose of the shares of
Class B Common Stock held by it. As a result of his direct holdings and his
beneficial ownership of the shares held by the GRA Trust, as of September 30,
1997, Mr. Dolan beneficially owned 7,805 shares or 0.1% of the Company's
outstanding Class A Common Stock and 6,099,281 shares or 54.9% of the Company's
outstanding Class B Common Stock. On a combined basis, these shares represented
24.5% of the total number of shares of both classes of Common Stock and 48.8% of
the total voting power of the Common Stock. 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 September 30, 1997, an additional
39,000 shares of Class A Common Stock or 0.3% of the Class A Common Stock and
5,016,928 shares of the
S-13
<PAGE>
Class B Common Stock or 45.1% of the Class B Common Stock and 40.1% 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 the Dolan family members will not
be modified as a result of any transfer of legal or beneficial ownership
thereof. If the Pending TCI NY/NJ Transactions are consummated, the Common Stock
of the Dolan family members will be converted into shares of common stock of CSC
Parent and the Dolan family members will continue to maintain the voting rights
set forth above, including the voting rights resulting from the ownership of a
majority of the total voting power of CSC Parent's outstanding common stock,
subject to reduction for the shares of CSC Parent's Class A common stock to be
issued by CSC Parent to TCI and to TCI's right to designate two Class B
directors of CSC Parent under the Stockholders Agreement (as defined under
"Recent Developments--Pending TCI NY/NJ Transactions"). Subsequent to the
consummation of the Pending TCI NY/NJ Transactions, the Class B stockholders of
CSC Parent, which include the Dolan family members, will be party to the
Stockholders Agreement with TCI, which agreement provides for certain rights of
and limitations on the Class B stockholders, TCI and CSC Parent with respect to
the CSC Parent common stock and CSC Parent. See "Recent Developments--Pending
TCI NY/NJ Transactions".
RESTRICTIVE COVENANTS. 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. The
Company currently expects that the New Credit Facility, if obtained, would have
covenants of the same type contained in the Credit Agreement. If the New Credit
Facility is not obtained, the Company may be required to agree to additional
and/or more restrictive covenants under the Credit Agreement if the Company were
to seek an amendment of the Credit Agreement in order to obtain additional funds
to refinance the Assumed Debt upon consummation of the Pending TCI NY/NJ
Transactions. 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 (i) to restrict the Company's ability to borrow undrawn funds
under the Credit Agreement and (ii) 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 1993 and 1994, the Federal Communications
Commission ("FCC") ordered reductions in cable television rates. In 1995, a
Federal appeals court upheld the material aspects of the FCC's rate regulation
scheme. Congress subsequently enacted legislation (the "Telecommunications Act
of 1996") that relaxes the regulation of cable television rates; however, the
most significant rate regulation relaxation affecting the Company will not occur
until after March 31, 1999. Recently, certain members of Congress have proposed
that the relaxation of rate regulation after March 31, 1999
S-14
<PAGE>
should be reevaluated in light of market conditions. The Company cannot predict
whether any legislation related thereto will be considered by Congress and what
form any legislation, if enacted into law, would take. See "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, DBS, multichannel multipoint
distribution services ("MMDS"), satellite master antenna systems ("SMATV") and
private home dish earth stations. For example, four DBS systems are now
operational in the United States, some with investment by companies with
substantial resources such as Hughes Electronics Corp. Certain members of
Congress have called for changes in the federal copyright laws to permit DBS
systems to retransmit local broadcast signals to DBS customers. If enacted, such
amendments could enhance the competitive position of DBS systems.
The 1992 Cable Act prohibits a cable programmer that is owned by or
affiliated with a cable operator (such as Rainbow Media) 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 satellite-delivered services and from
unreasonably refusing to sell any such service to any multichannel video
programming distributor. In several instances, Rainbow Media has been ordered by
the FCC to provide satellite-delivered programming to multi-channel video
programmers after such multi-channel video programmers have filed complaints
pursuant to these program-access rules. The FCC has recently sought comment on
whether it can and should extend these program-access rules to cover some
terrestrial-delivered programming by programmers such as Rainbow Media. In
addition, proposals have been made to Congress in support of such extensions.
The Company cannot predict whether such an extension will be adopted by the FCC
or considered by Congress and, if so, what effect it might have on the Company's
operations. 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. The Telecommunications Act of 1996 gives telephone companies and
other video providers the option of providing video programming to subscribers
through "open video systems" ("OVS"), a wired video delivery system similar to a
cable television system that would not require a local cable franchise. Several
OVS operators have sought to enter New York City, Boston and Westchester County,
New York. Additional video competition to cable systems is possible from new
wireless local multipoint distribution services ("LMDS") authorized by the FCC,
for which spectrum will be auctioned by the FCC in early 1998.
COMPETITION FROM TELEPHONE COMPANIES. The 1984 Cable Act barred
co-ownership of telephone companies and cable television systems operating in
the same service areas. 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, and in
certain locations have commenced offering service. Neither the 1984 Cable Act
nor the 1992 Cable Act bars a telephone company from acquiring cable systems
outside its telephone service area. Several Regional Bell operating companies
have purchased or made investments in such 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 non-exclusive franchise
agreements with local government franchising
S-15
<PAGE>
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
either temporary operating agreements or without a license while negotiating
renewal terms with the franchising authorities. See "Business--Cable Television
Operations-- Franchises" in the Form 10-K.
RANKING OF DEBENTURES. The Debentures are senior unsecured obligations of
Cablevision and will rank PARI PASSU in right of payment with all existing and
future unsubordinated indebtedness of Cablevision, including Cablevision's
7 7/8% Senior Notes and 8 1/8% Senior Debentures due 2009. All secured
indebtedness of Cablevision will have a prior claim with respect to the assets
securing such indebtedness. The liabilities, including trade payables, of
Cablevision's subsidiaries will have a prior claim with respect to the assets of
those subsidiaries. In that regard, certain of the subsidiaries in the Company's
Restricted Group have guaranteed the indebtedness of Cablevision under the
Credit Agreement, but these subsidiaries will not be guarantors of the
Debentures. As of September 30, 1997, after giving effect to the sale of the
7 7/8% Senior Notes and the Debentures offered hereby and the application of the
estimated net proceeds therefrom, (i) Cablevision would have had $105 million
outstanding under the Credit Agreement, $1,195 million of senior unsecured
indebtedness, $1,048 million of subordinated and senior subordinated
indebtedness and obligations and $6 million of capitalized leases (other than
certain guarantees of subsidiary debt discussed below); (ii) subsidiaries in the
Restricted Group would have had $665 million of indebtedness and $4 million of
capitalized leases, in addition to the guarantees of Cablevision's borrowings
under the Credit Agreement of $105 million; and (iii) subsidiaries in the
Unrestricted Group would have had $2,102 million of indebtedness and capitalized
leases. All of the indebtedness of subsidiaries in the Restricted Group has been
guaranteed by Cablevision ($151 million on a senior subordinated basis and the
balance on a senior basis) and $1,282 million of the indebtedness of
subsidiaries in the Unrestricted Group has been guaranteed by Cablevision on a
limited recourse basis with the guarantee limited to the stock of the relevant
subsidiary, which stock has been pledged to the lender to secure the guarantee.
See "Recent Developments" and "Capitalization" for additional information
concerning indebtedness of Cablevision and its subsidiaries and changes to the
amounts of such indebtedness since September 30, 1997.
ABSENCE OF PUBLIC MARKET. The Debentures are a new security for which there
currently is no market. Although 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, Inc.'s Automated
Quotation System ("NASDAQ").
S-16
<PAGE>
THE COMPANY
The Company is one of the largest operators of cable television systems in
the United States, with approximately 2,899,000 subscribers in 19 states as of
September 30, 1997, based on the number of basic subscribers in systems that are
currently majority owned by the Company. 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 and in MSG, a sports entertainment company.
For financing purposes, the Company is structured as a Restricted Group and
an Unrestricted Group. The Restricted Group includes (i) all of the Company's
cable operations in and around metropolitan New York City, including Long
Island, and most of its subsidiaries in and around Boston, Massachusetts and
(ii) the commercial telephony operations of the Company's subsidiary,
Cablevision Lightpath, Inc., on Long Island, New York. The Unrestricted Group
principally includes the Company's cable television operations in the Cleveland,
Ohio area and in certain parts of Massachusetts, the cable television systems of
U.S. Cable Television Group, L.P. ("U.S. Cable") and certain other cable
television systems. Other Unrestricted Group subsidiaries include Rainbow Media
(which conducts the Company's programming and entertainment activities and
includes AMC, Bravo, a 60% general partnership interest in Regional Programming
Partners, a 50% general partnership interest in National Sports Partners, a 50%
general partnership interest in National Advertising Partners, an interest in a
DBS business and certain other subsidiaries), Rainbow Advertising (which sells
advertising time on behalf of the Company's cable television systems, certain of
Rainbow Media's programming networks and some unaffiliated cable television
systems), CSC Technology, Inc. (the Company's subsidiary engaged in research and
development of new technology) and the Company's interest in a PCS business. The
Restricted Group and certain members of the Unrestricted Group are individually
and separately financed. The indebtedness of each entity in the Unrestricted
Group is non-recourse to Cablevision, except that, in certain cases, such
indebtedness has been guaranteed by Cablevision with recourse on such guarantee
limited to the capital stock of such entities owned by Cablevision. Rainbow
Media'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 and Entertainment Services", through separate external debt
financing of Rainbow Media, AMC and MSG, which are, as to the assets of Rainbow
Media and such subsidiaries, structurally senior to the Debentures and
Cablevision's other 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. See "Recent
Developments" for a discussion of certain transactions involving the Restricted
Group and members of the Unrestricted Group.
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 and entertainment 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 to 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
S-17
<PAGE>
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. See "Risk Factors--Need for Additional Financing".
CABLE TELEVISION
The Company's cable television systems served approximately 2,899,000
subscribers as of September 30, 1997 in New York, Massachusetts, Ohio,
Connecticut, New Jersey, Alabama, Arkansas, Florida, Illinois, Kansas, Kentucky,
Maine, Michigan, Mississippi, Missouri, North Carolina, Oklahoma, Pennsylvania
and Tennessee. The Company's cable television systems have generally been
characterized by relatively high revenues per subscriber ($38.36 for September
1997) and a high ratio of premium service units to basic subscribers (1.5:1 for
September 1997). 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
1,946,000 subscribers as of September 30, 1997, primarily in and around
metropolitan New York City (including in the boroughs of Brooklyn and The Bronx,
on Long Island, in Fairfield County, Connecticut, in New Jersey and in
Westchester County, New York) and in and around Boston, Massachusetts. The
revenue per subscriber and ratio of premium service units to basic subscribers
for cable television systems in the Restricted Group for September 1997 were
$41.69 and 1.6:1, respectively.
The cable television operations currently in Unrestricted Cable served
approximately 953,000 subscribers as of September 30, 1997 in Ohio and 15 other
states. The revenue per subscriber and ratio of premium service units to basic
subscribers for Unrestricted Cable for September 1997 were $31.58 and 1.2:1,
respectively.
As of September 30, 1997, giving effect to the Pending TCI NY/NJ
Transactions and the announced sales of the Company's cable television systems
described under "Recent Developments--Pending and Completed Cable Television
Systems Sales", CSC Parent would have served approximately 3,318,000
subscribers.
PROGRAMMING AND ENTERTAINMENT SERVICES
The Company conducts its programming and entertainment activities through
Rainbow Media, its 75% owned subsidiary and a member of the Unrestricted Group,
and through subsidiaries of Rainbow Media in partnership with certain
unaffiliated entities, including Fox Sports and Liberty Media Corporation. The
remaining 25% interest in Rainbow Media is owned by a subsidiary of NBC. Rainbow
Media's businesses include a 60% interest in Regional Programming Partners
(which includes its interest in MSG and six regional sports networks), five
national entertainment networks (AMC, Bravo, MuchMusic, Romance Classics and
IFC), Rainbow News 12 (regional news networks serving suburban areas surrounding
New York City) and a 50% interest in National Sports Partners (which includes
Fox Sports Net). MSG is a sports entertainment company that owns and operates
the Madison Square Garden arena and the adjoining Theater at MSG, the New York
Knickerbockers professional basketball team, the New York Rangers professional
hockey team, the Madison Square Garden Network and SportsChannel New York. MSG
and Regional Programming Partners' regional sports networks provide regional
sports programming to the New York, New England, Chicago, Cincinnati, Cleveland,
San Francisco and Florida areas. AMC is a national entertainment network
featuring classic, unedited and non-colorized films from the 1930s through the
1970s. Bravo is a national entertainment network offering international films
and performing arts programs, including jazz, dance, classical music, opera and
theatrical programs. Romance Classics is a national entertainment network
featuring classic, unedited and non-colorized films with romantic themes
S-18
<PAGE>
from the 1930s through the 1970s. MuchMusic is a music network featuring a
diverse mix of new and established musical artists. IFC is a national
entertainment network that airs independent films made outside the traditional
Hollywood system. National Sports Partners is a national sports network
featuring Fox Sports Net, which provides national sports programming to the
regional sports networks owned by Regional Programming Partners and certain
other regional sports networks owned by Fox/Liberty Networks, LLC. See
"Business--Programming Operations--General" in the Form 10-K. See "Recent
Developments--Rainbow Media" for a discussion of several recent transactions
relating to Rainbow Media.
ADVERTISING SERVICES
Rainbow Advertising sells advertising time to national, regional and local
advertisers on behalf of the Company's cable television systems and the Rainbow
News 12 programming network, as well as on behalf of unaffiliated cable
television systems. Rainbow Media also owns a 50% general partnership interest
in National Advertising Partners, which sells advertising for National Sports
Partners, certain of the regional sports networks owned by Regional Programming
Partners and certain other regional sports networks owned by Fox/Liberty
Networks, LLC.
RECENT DEVELOPMENTS
PENDING TCI NY/NJ TRANSACTIONS
On November 21, 1997, the Company entered into the Amended and Restated
Contribution and Merger Agreement (the "Contribution and Merger Agreement") with
a subsidiary of TCI. The Contribution and Merger Agreement amended and restated
the agreement originally reached on June 6, 1997. Pursuant to the Contribution
and Merger Agreement, TCI will contribute to CSC Parent or its designees certain
cable television systems located in New Jersey, on Long Island and in New York's
Rockland and Westchester Counties (the "Contributed Businesses") and CSC Parent
or its designees will assume $669 million in outstanding indebtedness for
borrowed money (the "Assumed Debt") of the Contributed Businesses and will also
assume (or cause its designees to assume) certain other obligations associated
with the assets of the Contributed Businesses (the "Pending TCI NY/NJ
Transactions"). In consideration for the contribution, CSC Parent will assume
the Assumed Debt and certain other liabilities and will issue to TCI an
aggregate of 12,235,543 shares of CSC Parent Class A common stock, subject to
adjustment in certain events. As more fully described below, CSC Parent will
become the parent holding company of the Company following the transactions.
The Contribution and Merger Agreement provides for the merger of a
wholly-owned subsidiary of CSC Parent with and into the Company, with the
Company as the surviving corporation, and the conversion in the merger of
outstanding shares of the Company's common stock into like shares of common
stock of CSC Parent and for the simultaneous contribution by or on behalf of TCI
of the Contributed Businesses in exchange for 12,235,543 shares of Class A
common stock of CSC Parent, subject to adjustment in certain events. Following
the closing of the transactions contemplated by the Contribution and Merger
Agreement, CSC Parent will be renamed Cablevision Systems Corporation.
The Company will remain the obligor for its existing debt and preferred
stock obligations, including the Debentures offered hereby, although by their
terms, the Company's Series I Preferred Stock will become convertible into Class
A common stock of CSC Parent. The Contributed Businesses initially will be
contributed to and held by subsidiaries of CSC Parent and will not be
contributed to or held by subsidiaries of the Company unless CSC Parent decides
to combine the cable operations of the Company and the Contributed Businesses,
as permitted under the Contribution and Merger Agreement. See "Risk Factors--
Possible Separation of Rainbow Media from the Company".
Based upon information delivered to the Company by TCI, the cable television
systems of the Contributed Businesses served approximately 824,000 subscribers
as of June 30, 1997, and generated, for the year ended December 31, 1996 and the
six months ended June 30, 1997, combined operating profit
S-19
<PAGE>
before depreciation and amortization of $174.6 million and $97.2 million,
respectively, and combined net income of $47.2 million and $22.6 million,
respectively.
In connection with securing certain regulatory approvals for the Pending TCI
NY/NJ Transactions, the Company has agreed to divest certain cable television
system assets of the Contributed Businesses that are located in Paramus and
Hillsdale, New Jersey. Based on information delivered to the Company by TCI, the
system assets to be divested served approximately 5,200 subscribers as of
September 30, 1997.
As a result of the Pending TCI NY/NJ Transactions, existing Company common
stockholders will become common stockholders of CSC Parent, which will be a new
publicly traded company that will own the Company and, separately, the
Contributed Businesses. The Contribution and Merger Agreement permits CSC Parent
to combine the cable operations of Cablevision and the Contributed Businesses
after the first anniversary of the closing of the Pending TCI NY/NJ
Transactions, or prior thereto if the Company receives a favorable tax ruling.
Following such a combination, CSC Parent would be permitted to establish Rainbow
Media as a separate subsidiary of CSC Parent. No decision has been made as to
whether such a combination of the Contributed Businesses and Cablevision's cable
television systems and the Rainbow Media separation would be effected without
such a favorable ruling, and there can be no assurances that such a ruling will
be obtained. If the Company effects these transactions, Rainbow Media and its
subsidiaries would be subsidiaries of CSC Parent and would no longer be
subsidiaries of Cablevision, the issuer of the Debentures. Combination of the
Contributed Businesses and Cablevision's cable television systems and any full
or partial separation of Rainbow Media from the Company is also dependent upon
compliance with the Company's debt covenants and upon the receipt of regulatory
and other approvals. Following such transactions, the cash flow of Rainbow Media
would not, and the residual equity value of Rainbow Media would no longer,
support the ability to pay interest and principal on the Debentures and other
debt. See "Risk Factors--Possible Separation of Rainbow Media from the Company".
The closing of the Pending TCI NY/NJ Transactions is conditioned, among
other things, upon the approval of the Company's stockholders and the receipt of
various approvals, including the transfer of control of certain FCC licenses
used in the operation of the Contributed Businesses. There can be no assurance
that the various approvals will be obtained in a timely manner or at all or that
governmental agencies or others may not take legal action to prevent the
consummation of the Pending TCI NY/NJ Transactions. The Company's stockholders
having a majority of the Company's voting power have agreed with TCI in a voting
agreement (the "Voting Agreement") that they will vote to approve the adoption
of the Contribution and Merger Agreement and the issuance of CSC Parent shares
to TCI and against any matter that would compete with or interfere with such
adoption and issuance.
The Contribution and Merger Agreement provides that at the closing, CSC
Parent, TCI and certain holders of CSC Parent's Class B common stock (the "Class
B Stockholders") will enter into a Stockholders Agreement (the "Stockholders
Agreement") providing, among other things, for: (i) limits on TCI's ability to
buy more than an additional 10% of the CSC Parent Class A common stock beyond
that issued to TCI in the Pending TCI NY/NJ Transactions, (ii) limitations on
TCI's ability to transfer CSC Parent Class A common stock to any person who
after such transfer would beneficially own 10% or more of the outstanding CSC
Parent Class A common stock or 5% or more of all the outstanding CSC Parent
common stock, except for transfers of all of TCI's CSC Parent Class A common
stock to a single purchaser who agrees to become a party to the Stockholders
Agreement, transfers to certain TCI subsidiaries and transfers in connection
with a bona fide pledge to secure a borrowing, (iii) consultation rights among
CSC Parent, TCI and the Class B Stockholders regarding sales of CSC Parent as a
whole or significant CSC Parent assets, sales of CSC Parent Class A common stock
owned by TCI and sales of CSC Parent Class B common stock owned by the Class B
Stockholders, (iv) certain tag-along and drag-along rights between TCI and the
Class B stockholders, (v) preemptive rights for TCI on new issuances of CSC
Parent common stock so that TCI may maintain ownership of 33% of the outstanding
CSC Parent common stock, with certain limited exceptions, (vi) TCI's right to
designate two Class B directors, (vii) the right of TCI director
S-20
<PAGE>
designees to membership on a CSC Parent Board committee to approve certain
transactions with Class B stockholders and their family members that will give
such designees a veto over such transactions, (viii) TCI's agreement to vote in
proportion with the public CSC Parent Class A stockholders for the election of
the 25% of CSC Parent directors which the CSC Parent Class A common stock is
entitled to elect, (ix) CSC Parent's agreement not to effect acquisition
transactions that would cause the debt to cash flow ratio of CSC Parent
(calculated as described in the Stockholders Agreement) to exceed a specified
ratio (initially 8.0 to 1, and declining to 7.5 to 1 after December 31, 1999),
and (x) registration rights under the Securities Act for shares of CSC Parent
Class A common stock owned by TCI.
The Pending TCI NY/NJ Transactions are expected to be consummated on
February 27, 1998. Because, among other things, the Pending TCI NY/NJ
Transactions are subject to receipt of approvals that are outside the control of
the Company and TCI, there can be no assurance that the Pending TCI NY/NJ
Transactions will be consummated in a timely fashion, or at all.
The following charts summarize the corporate organizational structure of the
Company prior to and immediately following the Pending TCI NY/NJ Transactions
and after giving effect to certain transactions contemplated to occur after
completion of the Pending TCI NY/NJ Transactions. No decision has been made as
to whether a combination of the Contributed Businesses and Cablevision's cable
television systems and the Rainbow Media separation would be effected without a
favorable tax ruling.
[Chart depicting Company Structure Prior to Completion of Pending TCI NY/NJ
Transactions and Other Contemplated Related Transactions]
S-21
<PAGE>
[Chart depicting Cablevision Structure Immediately Following Completion of
Pending TCI NY/NJ Transactions and Prior to Other Contemplated Related
Transactions]
[Chart depicting Cablevision Structure Following Completion of Pending TCI NY/NJ
Transactions and Other Contemplated Related Transactions]
S-22
<PAGE>
PROPOSED TCI CT TRANSACTIONS
On January 27, 1998, the Company, CSC Parent and a subsidiary of TCI entered
into a non-binding letter of intent for the Company to acquire TCI's cable
television systems (the "TCI Connecticut Systems") in and around Hartford,
Vernon, Branford and Lakeville, Connecticut on the terms described below (the
"Proposed TCI CT Transactions"). In consideration for the TCI Connecticut
Systems, which have been valued by the parties at $380 million, in the Proposed
TCI CT Transactions CSC Parent will (i) transfer to TCI its cable television
systems serving Kalamazoo, Michigan (which served approximately 48,000
subscribers as of December 31, 1997 and which have been valued by the parties at
$75 million), (ii) transfer to TCI other cable television systems to be
identified by TCI and purchased with approximately $25 million of funds provided
by CSC Parent, (iii) issue shares of CSC Parent's Class A common stock (based on
a $115.60 per share valuation), and (iv) assume certain indebtedness relating to
the TCI Connecticut Systems, which is anticipated to total approximately $110
million.
The TCI Connecticut Systems initially will be contributed to and held by
subsidiaries of CSC Parent and will not be contributed to or held by
subsidiaries of the Company unless CSC Parent decides to combine the cable
operations of the Company and the TCI Connecticut Systems.
Based upon information provided to the Company by TCI, the TCI Connecticut
Systems served approximately 249,000 subscribers as of September 30, 1997.
The closing of the Proposed TCI CT Transactions will be conditioned, among
other things, upon the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and other regulatory and other customary approvals. The Proposed TCI CT
Transactions are currently expected to be consummated during 1998. There can be
no assurance that the HSR Act waiting period will expire or be terminated in a
timely fashion or that other approvals will be obtained in a timely manner or at
all or that governmental agencies or others will not take legal action to
prevent the consummation of the Proposed TCI CT Transactions. Accordingly, there
can be no assurance that the Proposed TCI CT Transactions will be consummated in
a timely fashion, or at all.
PENDING AND COMPLETED CABLE TELEVISION SYSTEMS SALES
On February 19, 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 completed the sale of cable television systems in Alabama, Florida,
Illinois, Kentucky, Maine, Missouri, North Carolina, Ohio and neighboring
states, representing approximately 381,900 subscribers for an aggregate purchase
price of $496.7 million. The Company has also entered into definitive agreements
covering the sale of individual cable television systems in Wellsville/ Penn
Yan, New York; Windsor, New York; and New Milford, Pennsylvania, representing
approximately 16,200 subscribers for an aggregate consideration of $16.3
million. The Company is actively pursuing the sale of other nonstrategic
systems. There can be no assurance that the Company will enter into agreements
covering other asset sales or that any pending asset sale transactions will be
consummated.
On January 23, 1998, the Company completed the sale of substantially all of
the assets of U.S. Cable, including cable television systems in Alabama,
Florida, Kentucky, Missouri, North Carolina and neighboring states (which served
approximately 256,000 subscribers as of September 30, 1997) to Mediacom LLC for
$311 million in cash.
On January 22, 1998, the Company consummated the sale of the cable
television systems in Rockford, Illinois owned by A-R Cable (which served
approximately 66,000 subscribers as of September 30, 1997) to Insight
Communications Company, Inc. for $97 million in cash.
On December 23, 1997, the Company completed the sale of the cable television
system in Allen and Gibsonberg Township, Ohio owned by Cablevision of the
Midwest, Inc. (which served approximately 6,900 subscribers as of September 30,
1997) to TWFanch-one Co. for $10.7 million in cash.
S-23
<PAGE>
On October 31, 1997, the Company completed the sale of cable television
systems owned by A-R Cable in Maine (which served approximately 53,000
subscribers as of September 30, 1997) to Frontiervision Operating Partners, L.P.
for $78 million in cash.
On January 15, 1998, A-R Cable entered into an agreement with Adelphia
Communications Corporation ("Adelphia") to sell to Adelphia the cable television
systems in Wellsville/Penn Yan, New York owned by A-R Cable (which served
approximately 12,100 subscribers as of September 30, 1997) for approximately
$11.5 million in cash. The transaction is subject to the receipt of regulatory
and other customary approvals. The transaction is currently expected to be
consummated in the first half of 1998. There can be no assurance that the
transaction will be consummated in a timely fashion, or at all.
On January 15, 1998, A-R Cable entered into an agreement with Adams CATV,
Inc. ("Adams") to sell to Adams the cable television systems in Windsor, New
York and New Milford, Pennsylvania owned by A-R Cable (which served
approximately 4,100 subscribers as of September 30, 1997) for approximately $4.8
million in cash. The transaction is subject to the receipt of regulatory and
other customary approvals. The transaction is currently expected to be
consummated in the first half of 1998. There can be no assurance that the
transaction will be consummated in a timely fashion, or at all.
AGREEMENT TO ACQUIRE CERTAIN ASSETS
FROM THE WIZ, INC. AND ITS SUBSIDIARIES AND AFFILIATES
As of January 29, 1998, Cablevision Electronics Investments, Inc.
("Cablevision Electronics"), a wholly-owned subsidiary of the Company, entered
into an agreement (the "Purchase Agreement") with The Wiz, Inc. and certain of
its subsidiaries and affiliates (collectively, the "Wiz") pursuant to which
Cablevision Electronics will acquire substantially all of the assets associated
with approximately 40 Nobody Beats The Wiz consumer electronics store locations.
The Wiz filed for bankruptcy protection on December 16, 1997. Prior to the
bankruptcy filing, the Wiz operated approximately 53 retail locations.
The purchase price to be paid by Cablevision Electronics will be equal to
the sum of (i) 80% of total qualifying inventory and 10% of nonqualifying
inventory and (ii) $10.0 million which is expected to be used for the payment of
certain administrative expenses (a portion of which will be assumed and paid by
Cablevision Electronics (thereby reducing the $10.0 million payment by a
corresponding amount)). Based on current estimates, the purchase price to be
paid by Cablevision Electronics is currently expected to approximate $95
million.
Cablevision Electronics has the right to make up to $3.0 million of secured
loans to the Wiz prior to closing for the purpose of purchasing new inventory
(the "Inventory Loans"). Any such advances shall be matched by another secured
lender to the Wiz on the basis of approximately $700,000 for each $300,000
advanced by Cablevision Electronics.
The Purchase Agreement provides for certain secured loans from Cablevision
Electronics to the Wiz (the proceeds of which will be used by the Wiz to meet
operating costs pending closing). To date, the Company has made $7 million of
such secured loans. Additional secured loans in specified amounts are required
over the period from February 4, 1998 through the closing date. Cablevision
Electronics can elect at any time not to make further secured loans but if it
does so, the Wiz will have the right to terminate the Purchase Agreement.
Cablevision Electronics has the right to terminate its obligations under the
Purchase Agreement at any time. If it terminates between February 10, 1998 and
February 17, 1998, its secured loans (other than the inventory loans) will be
forgiven in certain circumstances. If the transactions contemplated by the
Purchase Agreement are consummated, the secured loans will only be repaid to the
extent that the purchase price payable in respect of the purchased inventory
exceeds the amounts payable to certain secured creditors.
Cablevision Electronics is, and following the acquisition will be, an
unrestricted subsidiary under the Company's debt instruments. The Company has
not guaranteed any of Cablevision Electronics's obligations under the Purchase
Agreement. The Company expects that the acquired business will incur substantial
operating losses for the first six months of 1998.
S-24
<PAGE>
WARBURG TRANSACTIONS
On May 10, 1996, the Company entered into an agreement with Warburg Pincus
Investors, L.P. ("Warburg") to acquire from Warburg (the "Warburg Transactions")
the interests that the Company did not already own in A-R Cable, A-R Cable
Partners, Cablevision of Newark and CFHI. See "Business-- Other Cable
Affiliates" in the Form 10-K for a description of these affiliates.
On September 27, 1996, the Company acquired from Warburg the equity
interests that Warburg owned in Cablevision of Newark for $37 million in cash
and subsequently designated Cablevision of Newark (which served approximately
48,000 subscribers as of September 30, 1997) as a member of the Restricted
Group.
On June 11, 1997, the Company acquired from Warburg the equity interests
that Warburg owned in A-R Cable Partners and CFHI for $41 million in cash and on
July 2, 1997, the Company acquired from Warburg the equity interests that
Warburg owned in A-R Cable for $112 million in cash (collectively, the "1997
Warburg Transactions"). The Company has designated each of A-R Cable, A-R Cable
Partners and CFHI (the "Warburg Companies") (which collectively served
approximately 387,000 subscribers as of September 30, 1997) as a member of
Unrestricted Cable.
@HOME
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 systems on the same terms and
conditions as @Home's founding partners, TCI, Comcast Corporation and Cox
Communications, Inc. 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
Contributed Business, are transferred from TCI and its controlled affiliates to
the Company or its controlled affiliates. The @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. The Company's investment in @Home will be
held in a subsidiary that has been designated as a Member of the Unrestricted
Group.
CNYC LETTER
On November 25, 1997, Charles F. Dolan and the Company entered into a letter
agreement ("CNYC Letter") pursuant to which they agreed (i) to defer the
commencement of the period during which Mr. Dolan could, pursuant to the CNYC
Agreement, require the Company to purchase his remaining partnership interests
in Cablevision of NYC, from December 1, 1997 to the date of the consummation of
the Pending TCI NY/NJ Transactions and (ii) to provide for cash payment for such
partnership interests of approximately $190 million. On January 26, 1998, Mr.
Dolan notified the Company of his election to require the Company to purchase
his remaining partnership interests in Cablevision of NYC upon consummation of
the Pending TCI NY/NJ Transactions. If the Pending TCI NY/NJ Transactions are
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.
RAINBOW MEDIA
RADIO CITY PRODUCTIONS. On December 5, 1997, MSG purchased all of the
membership interests in Radio City Productions LLC, the production company that
operates Radio City Music Hall in New York City and produces The Radio City
Christmas Spectacular and shows featuring the Radio City Rockettes,
S-25
<PAGE>
from Radio City Productions, Inc. and Rockefeller Group Inc. for approximately
$70 million in cash. Simultaneously, MSG entered into a 25-year lease for Radio
City Music Hall. Radio City Productions LLC has announced plans to invest in
excess of $25 million for the refurbishment and technological modernization of
Radio City Music Hall.
FOX/LIBERTY TRANSACTIONS. On December 18, 1997, Rainbow Media Sports
Holdings, Inc. ("Rainbow Sports"), a wholly-owned subsidiary of Rainbow Media,
consummated the transactions contemplated by an agreement (the "Formation
Agreement") with Fox Sports, a subsidiary of Fox/Liberty Networks, LLC, and
organized three partnerships: Regional Programming Partners (a partnership that
owns the interests in regional sports programming businesses previously owned by
Rainbow Media), National Sports Partners (a partnership that owns and operates a
national sports programming network) and National Advertising Partners (a
partnership that manages and sells national advertising for certain of the
regional sports networks owned by Regional Programming Partners and certain
regional sports networks owned by Fox/ Liberty Networks, LLC) (the "Fox/Liberty
Transactions").
In connection with the formation of Regional Programming Partners, Rainbow
Media contributed to Regional Programming Partners in consideration for the
issuance of a 60% general partnership interest in Regional Programming Partners:
(i) its 50% general partnership interest in SportsChannel Chicago Associates;
(ii) its 50% general partnership interest in SportsChannel Pacific Associates;
(iii) all of the partnership interests in SportsChannel New England Limited
Partnership; (iv) all of the partnership interests in SportsChannel Ohio
Associates; (v) all of the partnership interests in SportsChannel Cincinnati
Associates; (vi) all of the outstanding stock of the general partner in MSG and
an 89.4% limited partnership interest in MSG; (vii) its 30% general partnership
interest in SportsChannel Florida Associates; and (viii) all of the limited
liability company interests in Metro Channel LLC. A subsidiary of Rainbow Media
is the managing general partner of Regional Programming Partners.
In consideration of an issuance of a 40% general partnership interest in
Regional Programming Partners, at the closing, Fox Sports contributed $850
million in cash to Regional Programming Partners. Regional Programming Partners
used approximately $450 million of such proceeds to make an investment in MSG,
which in turn used such amount to repay a portion of the MSG Credit Facility (as
defined herein).
In connection with the formation of National Sports Partners, (i) Rainbow
Media contributed in consideration for the issuance of a 50% general partnership
interest in National Sports Partners (a) all of the limited liability company
interests in American Sports Classics LLC, (b) a 50% general partnership
interest in Prime SportsChannel Networks Associates and (c) all of the capital
stock of SportsChannel Ventures, Inc. and (ii) Fox Sports contributed in
consideration for the issuance of a 50% general partnership interest in National
Sports Partners (a) certain assets, including the assets pertaining to or used
in the business of Fox Sports, (b) a 50% general partnership interest in Prime
SportsChannel Networks Associates, and (c) all of the capital stock of Fox Watch
Productions Inc. A subsidiary of Fox Sports is the managing general partner of
National Sports Partners.
In connection with the formation of National Advertising Partners, (i)
Rainbow Media contributed in consideration for the issuance of a 50% general
partnership interest in National Advertising Partners certain assets relating to
the national advertising of the regional sports programming services in which
Rainbow Media has an interest and (ii) Fox Sports contributed in consideration
for the issuance of a 50% general partnership interest in National Advertising
Partners certain assets relating to the national advertising of the regional
sports programming services in which Fox Sports has an interest. A subsidiary of
Fox Sports is the managing general partner of National Advertising Partners.
MADISON SQUARE GARDEN. On June 17, 1997, the Company and ITT Corporation
("ITT") and certain of their affiliates completed the redemption by MSG of a
portion of ITT's 50% interest in MSG (the "MSG Redemption"). As a result of the
MSG Redemption, the contemporaneous contribution by Rainbow Media of
SportsChannel New York to MSG (described below), and the investment in MSG by
Regional Programming Partners (described above), Rainbow Media's interest in MSG
(which was contributed to Regional Programming Partners in the Fox/Liberty
Transactions) increased from 50% to 92.2%.
S-26
<PAGE>
ITT received $500 million from MSG and, after giving effect to the transactions
described in the previous sentence, owns a 7.8% equity interest in MSG. MSG
financed the redemption with borrowings under an $850 million senior secured
credit facility (the "MSG Credit Facility"). On June 17, 1997, a portion of the
MSG Credit Facility also was drawn to refinance existing MSG indebtedness.
Undrawn portions of the MSG Credit Facility are available to finance MSG's
working capital requirements and general corporate needs. ITT has the right to
require the Company to repurchase one-half of its remaining equity interest in
MSG on June 17, 1998 (the "Initial Put Right") for $94 million and its remaining
equity interest in MSG on June 17, 1999 for $94 million. If ITT does not
exercise its Initial Put Right, the purchase price for its entire remaining
equity interest in MSG on June 17, 1999 will be $188 million. The Company has
the right to satisfy any or all of its put obligations by having MSG redeem the
equity interests being put by ITT in cash. The Company also can satisfy its put
obligation in cash or, subject to certain conditions, the Company's Class A
Common Stock. ITT's put rights with respect to its remaining equity interest in
MSG will be accelerated if there occurs a bankruptcy event relating to the
Company or MSG, a dissolution of MSG or an acceleration of or failure to pay at
maturity any indebtedness of the Company or MSG in an aggregate amount equal to
or greater than $20 million. The Company has the right on June 17, 2000 to
purchase for cash ITT's remaining equity interest in MSG if ITT chooses not to
exercise either of its put options. The purchase price for ITT's remaining
equity interest in MSG so repurchased by the Company will be the greater of the
fair market value of ITT's remaining equity interest in MSG and the amount ITT
would have received if it had exercised its right to put such interests to the
Company. If the Company's right to purchase ITT's remaining equity interests in
MSG on June 17, 2000 expires unexercised, Regional Programming Partners'
interest in MSG will decline to 90.4% and ITT's interest will increase to 9.6%.
The Company will also have the right to repurchase, or at the Company's election
to cause MSG to redeem, all of ITT's remaining equity interest in MSG at any
time following a Change in Control (as defined) of ITT, at the same purchase
price that would apply if ITT put its remaining equity interest in MSG to the
Company. In connection with the Fox/Liberty Transactions, Regional Programming
Partners and the Company agreed that Regional Programming Partners would
purchase from the Company any equity interest that the Company purchased from
ITT for the same price paid by the Company.
ISSUANCE OF 25% EQUITY INTEREST TO NBC. On April 1, 1997, Rainbow Media
consummated a transaction (the "NBC Transaction") in which Rainbow Programming
Holdings, Inc. merged with and into Rainbow Media, a newly formed subsidiary of
the Company. In addition, a subsidiary of 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 in exchange for NBC's contribution
of its partnership interests in certain of Rainbow Media's programming networks
(including six regional SportsChannel services, AMC and Bravo). The Company owns
the remaining 75% equity interest in Rainbow Media. The partnership interests
formerly owned by NBC are now owned by subsidiaries of Rainbow Media. If Rainbow
Media has not issued publicly traded securities on or prior to September 30,
1999, NBC will have the right to "put" its non-voting Class C common stock to
Rainbow Media for redeemable preferred stock of Rainbow Media.
RAINBOW MEDIA FINANCING. On April 1, 1997, Rainbow Media executed a $300
million, three-year revolving credit facility. On April 2, 1997, approximately
$172 million was drawn to refinance, in part, Rainbow Media's previous $202
million credit facility. The balance of the funds utilized to fully repay the
$202 million facility and to repay $169 million that had been borrowed from the
Restricted Group to purchase interests in MSG 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 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
remaining funds available under the Rainbow Media credit facility will be
available to finance Rainbow Media's working capital requirements and for
general corporate purposes.
S-27
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering are
estimated to be $291.2 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
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 7.4%, and mature in installments over the 1998-2003
time periods. See "Management's Discussion and Analysis--Liquidity and Capital
Resources".
S-28
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company and its consolidated subsidiaries at September 30, 1997 and as adjusted
to reflect the issuance of $500,000,000 of the 7 7/8% Senior Notes and
$300,000,000 of the Debentures offered hereby and the application of the
estimated net proceeds to the Company therefrom. See "Recent Developments", "Use
of Proceeds" and "Unaudited Condensed Pro Forma Consolidated Financial
Information".
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
--------------------------
<S> <C> <C>
HISTORICAL PRO FORMA
------------ ------------
<CAPTION>
LONG-TERM DEBT(1): (DOLLARS IN THOUSANDS)
<S> <C> <C>
Restricted Group:
Bank indebtedness(2).......................................................... $ 887,907 $ 105,236
Cablevision MFR, Inc. bank indebtedness....................................... 322,283 322,283
7 7/8% Senior Notes due 2007.................................................. -- 499,475
8 1/8% Senior Debentures due 2009............................................. 398,518 398,518
7 7/8% Senior Debentures due 2018 offered hereby.............................. -- 296,571
9 1/4% Senior Subordinated Notes due 2005..................................... 300,000 300,000
9 7/8% Senior Subordinated Notes due 2006..................................... 149,468 149,468
9 7/8% Senior Subordinated Debentures due 2013................................ 199,040 199,040
10 1/2% Senior Subordinated Debentures due 2016............................... 250,000 250,000
9 7/8% Senior Subordinated Debentures due 2023................................ 149,699 149,699
Subordinated notes(3)......................................................... 151,000 151,000
Obligation to related party(4)................................................ 191,328 191,328
Capitalized lease obligations................................................. 10,032 10,032
------------ ------------
Total Restricted Group.................................................. 3,009,275 3,022,650
------------ ------------
Unrestricted Cable:
Cablevision of Ohio bank indebtedness(5)...................................... 302,492 302,492
U.S. Cable bank indebtedness(5)............................................... 154,886 154,886
A-R Cable Partners and CFHI bank indebtedness(5).............................. 51,229 51,229
A-R Cable senior debt(5)...................................................... 397,617 397,617
Capitalized lease obligations................................................. 183 183
------------ ------------
Total Unrestricted Cable................................................ 906,407 906,407
------------ ------------
Other Unrestricted Subsidiaries:
AMC bank indebtedness(5)...................................................... 206,367 206,367
MSG bank indebtedness(1)...................................................... 781,000 781,000
Rainbow Media bank indebtedness(5)............................................ 169,727 169,727
Capitalized lease obligations and other....................................... 38,736 38,736
------------ ------------
Total Other Unrestricted Subsidiaries................................... 1,195,830 1,195,830
------------ ------------
Total long-term debt.............................................. 5,111,512 5,124,887
------------ ------------
Series H Redeemable Exchangeable Preferred Stock(6)................................... 315,772 315,772
------------ ------------
Series M Redeemable Exchangeable Preferred Stock(6)................................... 777,149 777,149
------------ ------------
STOCKHOLDERS' DEFICIENCY(1):
Series C/D Cumulative Preferred Stock:
Authorized--225,000 shares
Outstanding--110,622 shares................................................... 1 1
Series I Cumulative Convertible Exchangeable Preferred Stock(6)................... 14 14
Class A Common Stock:
Authorized--50,000,000 shares
Outstanding--13,823,172 shares................................................ 138 138
Class B Common Stock:
Authorized--20,000,000 shares
Outstanding--11,109,709 shares................................................ 111 111
Paid-in-capital................................................................... 167,251 167,251
Accumulated deficit............................................................... (2,733,551) (2,733,551)
------------ ------------
Total stockholders' deficiency................................................ (2,566,036) (2,566,036)
------------ ------------
Total capitalization...................................................... $ 3,638,397 $ 3,651,772
------------ ------------
------------ ------------
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
S-29
<PAGE>
FOOTNOTES:
(1) As described under "Recent Developments", in connection with the Pending TCI
NY/NJ Transactions, TCI would contribute to CSC Parent the Contributed
Businesses in exchange for 12,235,543 shares of CSC Parent's Class A common
stock and CSC Parent assuming $669 million in outstanding indebtedness and
certain other obligations associated with the assets of the Contributed
Businesses, in connection with the Proposed TCI CT Transactions, TCI would
contribute to CSC Parent the TCI Connecticut Systems in exchange for the
Company's Kalamazoo, Michigan system, certain other designated cable
television systems, shares of CSC Parent's Class A common stock and CSC
Parent assuming indebtedness associated with the TCI Connecticut Systems and
in connection with the Fox/ Liberty Transactions, Regional Programming
Partners received $850 million as a cash contribution from Fox Sports.
Regional Programming Partners used $450 million of the Fox Sports' cash
contribution to make an investment in MSG, which in turn used such amount to
repay a portion of the MSG Credit Facility. None of these transactions is
reflected in the "Capitalization" table, nor is the effect of the pending
transactions discussed under "Recent Developments--Pending and Completed
Cable Television Systems Sales".
(2) See "Management's Discussion and Analysis--Liquidity and Capital Resources"
and the Consolidated Financial Statements for a description of bank
indebtedness. These amounts do not include approximately $17.0 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. Certain of Cablevision's subsidiaries in the
Restricted Group have guaranteed Cablevision's borrowings under the Credit
Agreement.
(3) Represents Cablevision MFR, Inc. seller notes in the amount of $141.3
million for Monmouth Cable and Riverview Cable and $9.7 million for CFHI.
These amounts are effectively guaranteed on a senior subordinated basis by
Cablevision.
(4) 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 Cablevision. See generally "Description of Debt
Securities--Certain Definitions--Indebtedness" in the accompanying
Prospectus and "Recent Developments--CNYC Letter" herein for a discussion of
the circumstances under which the Company may discharge this obligation in
stock, rather than for cash.
(5) This indebtedness has been guaranteed by Cablevision with recourse under
such guarantees limited to Cablevision's equity ownership in the related
borrower. Subsequent to September 30, 1997, the Cablevision of Ohio bank
indebtedness, the U.S. Cable bank indebtedness, the A-R Cable Partners and
CFHI bank indebtedness and all but approximately $19 million of the A-R
Cable senior debt has been repaid out of the proceeds from the transactions
described under "Recent Developments" and borrowings under the Credit
Agreement.
(6) At Cablevision's election, this series of Preferred Stock may be exchanged
for senior subordinated debentures in a principal amount corresponding to
the liquidation value of the Preferred Stock.
S-30
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited condensed pro forma consolidated balance sheet as of
September 30, 1997 presents the Company's financial position as adjusted to give
effect to the sale on December 5, 1997 of $500,000,000 of Cablevision's 7 7/8%
Senior Notes due 2007 and the sale of the Debentures offered hereby (the
"Offerings") as if they had occurred as of that date. The following unaudited
condensed pro forma consolidated statement of operations for the year ended
December 31, 1996 presents the Company's consolidated results of operations as
adjusted to give effect to (i) the NBC Transaction, (ii) the MSG Redemption,
(iii) the 1997 Warburg Transactions, (iv) the 1996 acquisitions of U.S. Cable
and Cablevision of Newark (the "U.S. Cable and Newark Acquisitions"), and (v)
the Offerings and the application of the proceeds from the Offerings, in each
case as if they had occurred at the beginning of the period presented. The
following unaudited condensed pro forma consolidated statement of operations for
the nine months ended September 30, 1997 presents the Company's consolidated
results of operations as adjusted to give effect to (i) the NBC Transaction,
(ii) the MSG Redemption, (iii) the 1997 Warburg Transactions and (iv) the
Offerings and the application of the proceeds from the 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.
The condensed pro forma consolidated financial statements do not give effect
to the Pending TCI NY/ NJ Transactions, the Proposed TCI CT Transactions, the
acquisition of certain assets from the Wiz and its subsidiaries, the Fox/Liberty
Transactions, the acquisition of the membership interests in Radio City
Productions, LLC or the pending or completed cable television systems sales,
each of which is described under "Recent Developments".
S-31
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE
HISTORICAL OFFERINGS* PRO FORMA
------------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.......................................... $ 32,135 $ 32,135
Accounts receivable--trade, net.................................... 181,994 181,994
Notes and other receivables........................................ 85,080 85,080
Prepaid expenses and other assets.................................. 64,424 64,424
Property, plant and equipment, net................................. 1,720,053 1,720,053
Investments in affiliates.......................................... 60,424 60,424
Advances to affiliates............................................. 4,923 4,923
Feature film inventory............................................. 149,630 149,630
Net assets held for sale........................................... 264,344 264,344
Intangible assets, net............................................. 2,216,033 2,216,033
Deferred financing, acquisition
and other costs, net............................................. 93,723 $ 13,375(1) 107,098
------------- ----------- -------------
$ 4,872,763 $ 13,375 $ 4,886,138
------------- ----------- -------------
------------- ----------- -------------
LIABILITIES & STOCKHOLDERS' DEFICIENCY
Accounts payable................................................... $ 227,578 $ 227,578
Accrued liabilities................................................ 464,823 464,823
Accounts payable to affiliates..................................... 915 915
Deferred revenue................................................... 114,770 114,770
Feature film and contract rights payable........................... 283,318 283,318
Bank debt.......................................................... 2,875,891 $ (782,671 (1) 2,093,220
Senior debt........................................................ 397,617 397,617
Senior notes and debentures........................................ 398,518 499,475(1) 897,993
Senior debentures offered hereby................................... -- 296,571(1) 296,571
Subordinated debentures............................................ 1,048,207 1,048,207
Subordinated notes payable......................................... 151,000 151,000
Obligation to related party........................................ 191,328 191,328
Capital lease obligations and other debt........................... 48,951 48,951
Minority interest.................................................. 124,737 124,737
------------- ----------- -------------
6,327,653 13,375 6,341,028
------------- ----------- -------------
Deficit investment in affiliates................................... 18,225 18,225
------------- -------------
Redeemable preferred stock......................................... 1,092,921 1,092,921
------------- -------------
Stockholders' deficiency:
Preferred stock.................................................. 15 15
Common stock..................................................... 249 249
Paid-in capital.................................................. 167,251 167,251
Accumulated deficit.............................................. (2,733,551) (2,733,551)
------------- ----------- -------------
(2,566,036) -- (2,566,036)
------------- ----------- -------------
$ 4,872,763 $ 13,375 $ 4,886,138
------------- ----------- -------------
------------- ----------- -------------
</TABLE>
- ------------------------
* See Note A of Notes to Unaudited Condensed Pro Forma Consolidated Financial
Information.
S-32
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS*
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 U.S. CABLE AND
NBC MSG WARBURG NEWARK THE
HISTORICAL TRANSACTION REDEMPTION TRANSACTIONS ACQUISITIONS OFFERINGS
---------- ----------- -------------- ------------ ---------------- -------------
Revenues............. $1,315,142 $121,591(2) $399,214(6) $142,575(11) $ 67,429(17)
---------- ----------- -------------- ------------ --------
Operating expenses:
Technical.......... 538,272 83,938(2) 253,618(6) 54,309(11) 30,820(17)
Selling, general
and
administrative... 313,476 38,592(2) 55,289(6) 32,591(11) 15,545(17)
(5,067)(12) (621)(18)
Depreciation and
amortization..... 388,982 3,870(2) 60,860(6) 46,686(11) 23,981(17)
5,391(3) 10,520(7) 3,456(13) 13,781(19)
---------- ----------- -------------- ------------ --------
1,240,730 131,791 380,287 131,975 83,506
---------- ----------- -------------- ------------ --------
Operating profit
(loss)......... 74,412 (10,200) 18,927 10,600 (16,077)
Other income
(expense):
Interest expense... (268,177) (424)(2) (17,850)(6) (45,884)(11) (14,137)(17) $ 2,078(22)
(66,185)(8) (13,018)(14) (2,214)(20)
1,786(12) 249(18)
Interest income.... 3,162 477(2) 53(11) 53(17)
Share of
affiliates' net
income (loss).... (82,028) 3,266(4) (2,041)(9) 73,166(15) 844(21)
Write-off of
deferred interest
and financing
costs............ (37,784) (3,495)(11)
Provision for
preferential
payment to
related party.... (5,600)
Minority
interest......... (9,417) 14,393(5) 18,547(10)
Miscellaneous,
net.............. (6,647) (498)(2) 1,766(6) (2,798)(11) (157)(17)
---------- ----------- -------------- ------------ -------- -------------
Net income (loss).... (332,079) 7,014 (46,836) 20,410(16) (31,439) 2,078
Dividend requirements
applicable to
preferred stock.... (127,780) 49,977(11)
(49,977)(12)
---------- ----------- -------------- ------------ -------- -------------
Net income (loss)
applicable to
common
stockholders....... $ (459,859) $ 7,014 $(46,836) $ 20,410 $(31,439) $ 2,078
---------- ----------- -------------- ------------ -------- -------------
---------- ----------- -------------- ------------ -------- -------------
Net loss per common
share.............. $ (18.52)
----------
----------
Average number of
common shares
outstanding (in
thousands)......... 24,827
----------
----------
<CAPTION>
<S> <C> <C>
PRO FORMA
----------
Revenues............. $2,045,951
----------
Operating expenses:
Technical.......... 960,957
Selling, general
and
administrative... 449,805
Depreciation and
amortization..... 557,527
----------
1,968,289
----------
Operating profit
(loss)......... 77,662
Other income
(expense):
Interest expense... (423,776 )
Interest income.... 3,745
Share of
affiliates' net
income (loss).... (6,793 )
Write-off of
deferred interest
and financing
costs............ (41,279 )
Provision for
preferential
payment to
related party.... (5,600 )
Minority
interest......... 23,523
Miscellaneous,
net.............. (8,334 )
----------
Net income (loss).... (380,852 )
Dividend requirements
applicable to
preferred stock.... (127,780 )
----------
Net income (loss)
applicable to
common
stockholders....... $(508,632 )
----------
----------
Net loss per common
share.............. $ (20.49 )
----------
----------
Average number of
common shares
outstanding (in
thousands)......... 24,827
----------
----------
</TABLE>
- ------------------------
* See Note B of Notes to Unaudited Condensed Pro Forma Consolidated Financial
Information.
S-33
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS*
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997
NBC MSG WARBURG THE
HISTORICAL TRANSACTION REDEMPTION TRANSACTIONS OFFERINGS PRO FORMA
---------- ----------- ----------- ------------- ----------------- -----------
Revenues................. $1,314,995 $ 33,905 (23 $ 194,337 (27 $ 71,506 (32 $1,614,743
---------- ----------- ----------- ------------- -----------
Operating expenses:
Technical.............. 568,259 21,388 (23 117,926 (27 27,083 (32 734,656
Selling, general and
administrative......... 347,405 11,251 (23 28,178 (27 17,644 (32 401,959
(2,519)(33)
Depreciation and
amortization........... 363,023 1,508 (23 28,289 (27 21,676 (32 422,758
1,348 (24 5,330 (28 1,584 (34
---------- ----------- ----------- ------------- -----------
1,278,687 35,495 179,723 65,468 1,559,373
---------- ----------- ----------- ------------- -----------
Operating profit
(loss)............. 36,308 (1,590) 14,614 6,038 55,370
Other income (expense):
Interest expense....... (261,533) (642) 23) (8,371) 27) (22,074)(32) $ (4,018)(37) (320,993)
(20,638) 29) (4,912)(35)
1,195 (33
Interest income........ 2,635 142 (23 22 (32 2,799
Share of affiliates'
net income (loss).... (32,243) 1,922 (25 (8,277) 30) 37,837 (36 (761)
Write-off of deferred
interest and
financing costs...... (13,710) (13,710)
Gain on redemption of
subsidiary preferred
stock................ 181,738 181,738
Provision for
preferential payment
to related party..... (4,200) (4,200)
Minority interest...... 14,145 1,269 (26 3,981(31) 19,395
Miscellaneous, net..... (7,059) (2,382)(32) (9,441)
---------- ----------- ----------- ------------- -------- -----------
Net income (loss)........ (83,919) 1,101 (18,691) 15,724 (4,018) (89,803)
Dividend requirements
applicable to preferred 28,297 (32
stock.................. (110,324) (28,297)(33) (110,324)
---------- ----------- ----------- ------------- -------- -----------
Net income (loss)
applicable to common
stockholders........... $ (194,243) $ 1,101 $ (18,691) $ 15,724 $ (4,018) $(200,127)
---------- ----------- ----------- ------------- -------- -----------
---------- ----------- ----------- ------------- -------- -----------
Net loss per common
share.................. $ (7.81) $ (8.05)
---------- -----------
---------- -----------
Average number of common
shares outstanding (in
thousands)............. 24,858 24,858
---------- -----------
---------- -----------
</TABLE>
- ------------------------
* See Note C of Notes to Unaudited Condensed Pro Forma Consolidated Financial
Information.
S-34
<PAGE>
NOTE A--NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF
SEPTEMBER 30, 1997
THE OFFERINGS
(1) Represents the issuance of the 7 7/8% Senior Notes and the Debentures at
discounts of 99.895% and 98.857% of par, respectively, the repayment of bank
debt and the payment of financing costs of $13,375 relating to the
Offerings. See "Use of Proceeds".
NOTE B-- NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996
NBC TRANSACTION
(2) As a result of the NBC Transaction, the results of operations of certain
companies previously accounted for under the equity method are now
consolidated with the Company's consolidated results of operations. The
adjustments referenced by this Note (2) reflect the consolidation of such
amounts for the year ended December 31, 1996.
(3) Represents the amortization, based on an average 10-year life, of the excess
costs resulting from the exchange of 25% of the Company's interest in
Rainbow Media for NBC's interests in certain individual entities.
(4) Represents the elimination of the Company's share of affiliates' net income
or loss previously recorded for entities that are now consolidated and
records the additional share of affiliates' net income or loss of interests
contributed by NBC in certain entities that continue to be recorded on an
equity basis.
(5) Represents NBC's minority interest in the net loss of Rainbow Media and a
minority interest in one of the companies previously accounted for under the
equity method.
MSG REDEMPTION
(6) As a result of the MSG Redemption, the results of operations of MSG will be
consolidated with those of the Company. The adjustments referenced by this
Note (6) reflect the consolidation of such amounts for the year ended
December 31, 1996.
(7) Represents the amortization, based on an average 30-year life, of the excess
costs resulting from the acquisition of 39.8% of MSG as a result of the MSG
Redemption and the contribution of SportsChannel New York to MSG.
(8) Represents interest expense on additional bank debt incurred to purchase
additional interests in MSG and the amortization of deferred financing costs
incurred in connection with obtaining the additional bank debt.
(9) Represents the elimination of the Company's share of net income of MSG
previously recorded using the equity method of accounting.
(10) Represents the minority interest in the pro forma net loss of MSG and
SportsChannel New York owned by ITT, and by NBC through its interest in
Rainbow Media.
1997 WARBURG TRANSACTIONS
(11) As a result of the 1997 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 (11) reflect
the consolidation of such amounts for the year ended December 31, 1996.
(12) Represents the elimination of preferred stock dividends recorded by A-R
Cable and management fees and accrued interest thereon earned by the Company
and recorded on the books of the Warburg
S-35
<PAGE>
NOTE B-- NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (CONTINUED)
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.
(13) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired of $34,558,000.
(14) Represents interest expense on the additional bank debt incurred to
complete the 1997 Warburg Transactions.
(15) Represents the elimination of the net losses of the Warburg Companies
previously recorded by the Company using the equity method of accounting.
(16) The Unaudited Condensed Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1996 does not give effect to the gain recorded
on the redemption of A-R Cable's Series A preferred stock.
U.S. CABLE AND NEWARK ACQUISITIONS
(17) As a result of the acquisition of the 80% partnership interest in U.S.
Cable and the acquisition of 75% of partnership interests in Cablevision of
Newark not already owned by the Company, the results of operations of U.S.
Cable and Cablevision of Newark, previously accounted for under the equity
method, are now consolidated with the Company's consolidated results of
operations as of the acquisition date. The adjustments referenced by this
Note (17) reflect the consolidation of such amounts for the period prior to
the acquisition date.
(18) Represents the elimination of management fees and interest thereon earned
by the Company and recorded on the books of U.S. Cable and Cablevision of
Newark. 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.
(19) 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.
(20) Represents the interest expense on the additional bank debt incurred to
complete the acquisition of Cablevision of Newark.
(21) Represents the elimination of the net loss of Cablevision of Newark
previously recorded by the Company using the equity method of accounting.
THE OFFERINGS
(22) Represents the reduction in interest expense resulting from the repayment
of bank debt, partially offset by the interest expense and amortization of
financing costs and the unamortized discount related to the issuance of the
7 7/8% Senior Notes and the Debentures.
NOTE C-- NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
NBC TRANSACTION
(23) As a result of the NBC Transaction, the results of operations of certain
companies previously accounted for on an equity basis are now consolidated
with the Company's consolidated results of operations. The adjustments
referenced by this Note (23) reflect the consolidation of such amounts for
the period prior to the date of the transaction.
(24) Represents the amortization, based on an average 10-year life, of the
excess costs resulting from the exchange of 25% of the Company's interest in
Rainbow Media for NBC's interests in certain entities.
S-36
<PAGE>
NOTE C-- NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (CONTINUED)
(25) Represents the elimination of the Company's share of affiliates' net income
or loss previously recorded for entities that are now consolidated and
records the additional share of affiliates' net income or loss of interests
contributed by NBC in certain entities that continue to be recorded on an
equity basis.
(26) Represents NBC's minority interest in the net loss of Rainbow Media and a
minority interest in one of the companies previously accounted for under the
equity method.
MSG REDEMPTION
(27) As a result of the MSG Redemption, the results of operations of MSG will be
consolidated with those of the Company. The adjustments referenced by this
Note (27) reflect the consolidation of such amounts for the period prior to
the date of the transaction.
(28) Represents the amortization, based on an average 30-year life, of the
excess costs resulting from the acquisition of 39.8% of MSG as a result of
the MSG Redemption and the contribution of SportsChannel New York to MSG.
(29) Represents interest expense on additional bank debt incurred to purchase
additional interests in MSG and the amortization of deferred financing costs
incurred in connection with obtaining the additional bank debt.
(30) Represents the elimination of the Company's share of net income of MSG
previously recorded using the equity method of accounting.
(31) Represents the minority interest in the pro forma net loss of MSG and
SportsChannel New York owned by ITT, and by NBC through its interest in
Rainbow Media.
1997 WARBURG TRANSACTIONS
(32) As a result of the 1997 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 (32) reflect
the consolidation of such amounts for the periods prior to the date of the
transaction.
(33) Represents the elimination of preferred stock dividends recorded by A-R
Cable and 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.
(34) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired of $34,558,000.
(35) Represents interest expense on the additional bank debt incurred to
complete the 1997 Warburg Transactions.
(36) 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.
THE OFFERINGS
(37) Represents the interest expense and amortization of financing costs and the
unamortized discount related to the issuance of the 7 7/8% Senior Notes and
the Debentures, partially offset by the reduction in interest expense
resulting from the repayment of bank debt.
S-37
<PAGE>
DESCRIPTION OF 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. For purposes of that description, the
Debentures offered hereby are "Senior Debt Securities."
The Debentures will be issued under an Indenture dated as of December 1,
1997 (the "Indenture") between the Company and The Bank of New York ("BONY"),
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 following
summary are set forth under "Description of Debt Securities--Certain
Definitions" in the accompanying Prospectus.
GENERAL
The Debentures will mature on February 15, 2018, will be limited to
$300,000,000 aggregate principal amount and will be unsecured obligations of the
Company. Each Debenture will bear interest at the rate set forth on the cover
page hereof from February 6, 1998 or from the most recent interest payment date
to which interest has been paid, payable semi-annually on February 15 and August
15 of each year, commencing August 15, 1998, to the person in whose name the
Debenture (or any predecessor Debenture) is registered at the close of business
on the February 1 and August 1 next preceding such interest payment date.
Principal of 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 at 101 Barclay Street, 21st Floor, New York, New York
10286); PROVIDED, HOWEVER, that payment of interest may be made at the option of
the Company by check mailed to the person entitled thereto as shown on the
Debenture Register. The Debentures will be issued only in fully registered form
without coupons, in denominations of $1,000 or any integral multiple thereof. 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 below under "Certain Covenants of the
Company--Limitation on Indebtedness".
OPTIONAL REDEMPTION
The Debentures are not subject to redemption at the option of the Company
prior to maturity.
SINKING FUND
The Debentures will not be entitled to the benefits of a sinking fund.
RANKING
The Debentures are senior unsecured obligations of Cablevision and will rank
PARI PASSU in right of payment with all existing and future unsubordinated
indebtedness of Cablevision, including Cablevision's 7 7/8% Senior Notes and
8 1/8% Senior Debentures due 2009. All secured indebtedness of Cablevision will
have a prior claim with respect to the assets securing such indebtedness. The
liabilities, including trade
S-38
<PAGE>
payables, of Cablevision's subsidiaries will have a prior claim with respect to
the assets of those subsidiaries. In that regard, certain of the subsidiaries in
Cablevision's Restricted Group have guaranteed the indebtedness of Cablevision
under the Credit Agreement, but will not be guarantors of the Debentures. As of
September 30, 1997, after giving effect to the sale of the 7 7/8% Senior Notes
and the Debentures offered hereby and the application of the estimated net
proceeds therefrom, (i) Cablevision would have had $105 million outstanding
under the Credit Agreement, $1,195 million of senior unsecured indebtedness,
$1,048 million of subordinated and senior subordinated indebtedness and
obligations and $6 million of capitalized leases (other than certain guarantees
of subsidiary debt discussed below); (ii) subsidiaries in the Restricted Group
would have had $665 million of indebtedness and $4 million of capitalized
leases, in addition to the guarantees of Cablevision's borrowings under the
Credit Agreement of $105 million; and (iii) subsidiaries in the Unrestricted
Group would have had $2,102 million of indebtedness and capitalized leases. All
of the indebtedness of subsidiaries in the Restricted Group has been guaranteed
by Cablevision ($151 million on a senior subordinated basis and the balance on a
senior basis) and $1,282 million of the indebtedness of subsidiaries in the
Unrestricted Group has been guaranteed by Cablevision on a limited recourse
basis with the guarantee limited to the stock of the relevant subsidiary, which
stock has been pledged to the lender to secure the guarantee. See "Risk
Factors--Ranking of Debentures", "Recent Developments" and "Capitalization" for
additional information concerning indebtedness of Cablevision and its
subsidiaries and changes to the amounts of such indebtedness since September 30,
1997.
CERTAIN COVENANTS OF THE COMPANY
The Indenture contains, among others, the following covenants:
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 September 30, 1997, such Cash Flow Ratio was approximately 6.5 to 1.
LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that the Company
shall not, and shall 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.
For purposes of the "Limitation on Restricted Payments" covenant, the amount
of any 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, redemption, purchase, defeasance or other acquisition 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 sale (within
one year before or 180 days after such retirement, redemption, purchase,
defeasance or other acquisition) of, other shares of the Company's capital stock
or warrants, rights or options to acquire capital stock of the Company; and
(iii) the redemption of, or payments of cash dividends
S-39
<PAGE>
on, the Company's 8% Series C Cumulative Preferred Stock (the "Series C
Preferred Stock") outstanding on January 1, 1997, which redemption or dividends
are provided for by the terms of the Series C Preferred Stock in effect on such
date (or the 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 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 September 30, 1997, the Company would have been permitted to make
Restricted Payments of approximately $790 million.
LIMITATION ON INVESTMENTS IN UNRESTRICTED SUBSIDIARIES AND AFFILIATES. The
Indenture provides that the Company shall not, and shall 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 permitted
under "Limitation on Restricted Payments".
LIMITATION ON LIENS. The Indenture provides that the Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, create,
incur, assume or suffer to exist any Lien of any kind, except for Permitted
Liens, on or with respect to any of its property or assets, whether owned at the
date of the Indenture or thereafter acquired, or any income, profits or proceeds
therefrom, or assign or otherwise
S-40
<PAGE>
convey any right to receive income thereon, unless (x) in the case of any Lien
securing Indebtedness that is subordinated in right of payment to the
Debentures, the Debentures are secured by a Lien on such property, assets or
proceeds that is senior in priority to such Lien and (y) in the case of any
other Lien, the Debentures are equally and ratably secured.
REGARDING THE TRUSTEE
BONY is the Trustee under the Indenture and the indentures relating to the
Company's existing senior indebtedness and senior subordinated indebtedness.
BONY is a party to certain credit agreements with the Company and its
subsidiaries, including the Credit Agreement. BONY may also maintain other
banking arrangements with the Company in the ordinary course of business.
BOOK-ENTRY DELIVERY AND FORM
The certificates representing the Debentures will be issued in fully
registered form, without coupons. The Debentures will be deposited with, or on
behalf of, The Depository Trust Company, New York, New York ("DTC"), and
registered in the name of Cede & Co., as DTC's nominee, in the form of two or
more global Debenture certificates.
S-41
<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. ............................................................... $ 90,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................................. 90,000,000
Morgan Stanley & Co. Incorporated....................................................... 75,000,000
Salomon Brothers Inc.................................................................... 45,000,000
--------------
Total......................................................................... $ 300,000,000
--------------
--------------
</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.
Until the distribution of the Debentures is completed, rules of the
Commission may limit the ability of the Underwriters to bid for and purchase the
Debentures. As an exception to these rules, the Underwriters are permitted to
engage in certain transactions that stabilize the price of the Debentures. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Debentures. If the Underwriters create a short
position in the Debentures in connection with the offering, i.e., if they sell
more Debentures than are set forth on the cover page of this Prospectus
Supplement, the Underwriters may reduce that short position by purchasing
Debentures in the open market. The Underwriters may also impose a penalty bid on
certain Underwriters. This means that if the Underwriters purchase Debentures in
the open market to reduce the Underwriters' short position or to stabilize the
price of the Debentures, they may reclaim the amount of the selling concession
from the Underwriters who sold those Debentures as part of the offering. In
general, purchases of a security for the purpose of stabilization or to reduce a
short position could cause the price of the security to be higher than it might
be in the absence of such purchases. The imposition of a penalty bid might also
have an effect on the price of a security to the extent that it were to
discourage resales of the security.
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, the Company's Chairman) in connection with various
transactions and proposed transactions. In addition, Bear Stearns, Merrill Lynch
and Morgan Stanley & Co. Incorporated have acted as initial purchasers or
underwriters in various of the Company's debt and preferred stock offerings.
Bear Stearns acted as advisor for the Company in connection with the
S-42
<PAGE>
Fox/Liberty Transactions. In addition, Vincent Tese, a director of the Company,
is also a director of Bear Stearns.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
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.
EXPERTS
The consolidated financial statements and schedule of the Company and its
subsidiaries as of December 31, 1996 and 1995 and for each of the years in the
three-year period ended December 31, 1996 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, 1996 and 1995 and for each of the years in the
three-year period ended December 31, 1996 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-43
<PAGE>
PROSPECTUS
CABLEVISION SYSTEMS CORPORATION
DEBT SECURITIES
Cablevision Systems Corporation ("Cablevision") may from time to time offer,
together or separately, its debt securities (the "Debt Securities"), which may
be either senior debt securities (the "Senior Debt Securities") or subordinated
debt securities (the "Subordinated Debt Securities"), in amounts, at prices and
terms to be determined at the time of offering.
The Debt Securities offered pursuant to this Prospectus may be issued in one
or more series or issuances and will be limited to $1,000,000,000 aggregate
principal amount (or its equivalent (based on the applicable exchange rate at
the time of sale) in one or more foreign currencies, currency units or composite
currencies as shall be designated by the Company). Certain specific terms of the
particular Debt Securities in respect of which this Prospectus is being
delivered are set forth in the accompanying Prospectus Supplement (the
"Prospectus Supplement"), including, where applicable, the specific title,
aggregate principal amount, the denomination, whether such Debt Securities are
secured or unsecured obligations, maturity, premium, if any, the interest rate
(which may be fixed, floating or adjustable), the time and method of calculating
payment of interest, if any, the place or places where principal of (and
premium, if any) and interest, if any, on such Debt Securities will be payable,
the currency in which principal of (and premium, if any) and interest, if any,
on such Debt Securities will be payable, any terms of redemption at the option
of the Company or the holder, any sinking fund provisions, the initial public
offering price and other special terms. If so specified in the applicable
Prospectus Supplement, Debt Securities of a series may be issued in whole or in
part in the form of one or more temporary or permanent global securities.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness of Cablevision. The Subordinated Debt
Securities, when issued, will be subordinated in right of payment to all Senior
Indebtedness of Cablevision.
The Prospectus Supplement will contain information concerning U.S. federal
income tax considerations, if applicable to the Debt Securities offered.
INVESTMENT IN THE DEBT SECURITIES INVOLVES SIGNIFICANT RISKS, INCLUDING
THOSE DISCUSSED UNDER RISK FACTORS BEGINNING ON PAGE 5 OF THIS PROSPECTUS, WHICH
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Debt Securities will be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. If agents of the Company or any dealers or underwriters are involved in
the sale of the Debt Securities in respect of which this Prospectus is being
delivered, the names of such agents, dealers or underwriters and any applicable
commissions or discounts will be set forth in or may be calculated from the
Prospectus Supplement with respect to such Debt Securities.
The date of this Prospectus is October 1, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices: Seven World Trade Center, Suite 1300, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and are also available on the Commission's worldwide web site at
http://www.sec.gov. Copies of such material can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such reports, proxy statements and
other information also may be inspected at the offices of the American Stock
Exchange, 86 Trinity Place, New York, New York 10006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents or information filed with the Commission:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended by the Company's Form 10-K/A for the fiscal
year ended December 31, 1996 (collectively, the "Form 10-K");
(b) the Company's Quarterly Reports on Form 10-Q for the fiscal quarter
ended March 31, 1997 and June 30, 1997 (the "Form 10-Qs");
(c) the Company's Current Reports on Form 8-K filed February 18, 1997,
March 12, 1997, April 18, 1997, June 10, 1997, July 10, 1997, August 30,
1997 and September 9, 1997; and
(d) all documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act on or after the date of this Prospectus and
prior to the termination of the offering made hereby.
Any statement contained herein or in any document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for the purpose of this Prospectus to the extent that a subsequent statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of any such person, a copy of any or all of the information incorporated
herein by reference other than exhibits to such information (unless such
exhibits are specifically incorporated by reference into such information). The
Company's principal executive offices are located at One Media Crossways,
Woodbury, New York 11797, and its telephone number is (516) 364-8450. Requests
for such copies should be directed to the Secretary of the Company at its
executive offices.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE DEBT SECURITIES.
SUCH TRANSACTIONS MAY INCLUDE OVER-ALLOTMENT, STABILIZING, THE PURCHASE OF DEBT
SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION".
2
<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
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 or the Form 10-Qs, as
applicable.
------------------------
This Prospectus contains or incorporates by reference statements that
constitute forward looking information within the meaning of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that such
forward looking statements are not guarantees of future performance or results
and involve risks and uncertainties and that actual results or developments may
differ materially from the forward looking statements as a result of various
factors. Factors that may cause such differences to occur include but are not
limited to (i) the level of growth in the Company's revenues, (ii) subscriber
demand, competition, the cost of programming and industry conditions, (iii)
whether expenses of the Company continue to increase or increase at a rate
faster than expected, (iv) whether any unconsummated transactions are
consummated on the terms and at the times set forth (if at all), (v) new
competitors entering the Company's franchise areas and (vi) other risks and
uncertainties inherent in the cable television business. See "Risk Factors".
THE COMPANY
The Company is one of the largest operators of cable television systems in
the United States, with approximately 2,889,000 subscribers in 19 states as of
June 30, 1997, based on the number of basic subscribers in systems which are
currently majority owned and managed by the Company (after giving effect to the
closing of the A-R Cable Transaction, as described in the Company's Form 10-Q
for the quarter ended June 30, 1997). 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 and in Madison Square Garden, L.P. ("MSG"), a sports entertainment
company.
CABLE TELEVISION
The cable television systems that are currently majority owned and managed
by the Company (the "Company's cable television systems") served approximately
2,889,000 subscribers in 19 states as of June 30, 1997 (after giving effect to
the closing of the A-R Cable Transaction, as described in the Company's Form
10-Q for the quarter ended June 30, 1997). The Company's cable television
systems have generally been characterized by relatively high revenues per
subscriber ($38.19 for June 1997) and a high ratio of premium service units to
basic subscribers (1.4:1 for June 1997). 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 Company's Restricted Group of
subsidiaries (the "Restricted Group") served approximately 1,937,000 subscribers
as of June 30, 1997, primarily in and around metropolitan New York City
(including in the boroughs of Brooklyn and The Bronx, on Long Island, in
Fairfield County, Connecticut, in New Jersey and in Westchester County, New
York) and in and around Boston, Massachusetts. The revenue per subscriber and
ratio of premium service units to basic subscribers for cable television systems
in the Restricted Group for June 1997 were $41.51 and 1.6:1, respectively.
The cable television operations currently in the Company's Unrestricted
Group ("Unrestricted Cable") served approximately 952,000 subscribers as of June
30, 1997 in Ohio and 15 other states. The revenue per subscriber and ratio of
premium service units to basic subscribers for Unrestricted Cable for June 1997
were $31.47 and 1.1:1, respectively.
3
<PAGE>
PROGRAMMING AND ENTERTAINMENT SERVICES
The Company conducts its programming and entertainment activities through
Rainbow Media Holdings, Inc. ("Rainbow Media"), its 75% owned subsidiary and a
member of the Unrestricted Group, and through subsidiaries of Rainbow Media in
partnership with certain unaffiliated entities, including Liberty Media
Corporation. The remaining 25% interest in Rainbow Media is owned by NBC Cable
Holdings, Inc., a subsidiary of National Broadcasting Company, Inc. ("NBC").
Rainbow Media's businesses include MSG, seven regional SportsChannel networks,
five national entertainment networks (American Movie Classics ("AMC"), Bravo,
MuchMusic, Romance Classics and the Independent Film Channel ("IFC")), Rainbow
News 12 (regional news networks serving suburban areas surrounding New York
City) and the sports network of Prime SportsChannel Networks ("Prime Network").
MSG is a sports entertainment company that owns and operates the Madison Square
Garden arena and the adjoining Theater at MSG, the New York Knickerbockers
professional basketball team, the New York Rangers professional hockey team, the
Madison Square Garden Network and SportsChannel Associates ("Sports-Channel New
York"). MSG and Rainbow Media's SportsChannel networks provide regional sports
programming to the New York, New England, Chicago, Cincinnati, Cleveland, San
Francisco and Florida areas. AMC is a national entertainment network featuring
classic, unedited and non-colorized films from the 1930s through the 1970s.
Bravo is a national entertainment network offering international films and
performing arts programs, including jazz, dance, classical music, opera and
theatrical programs. Romance Classics is a national entertainment network
featuring classic, unedited and non-colorized films with romantic themes from
the 1930s through the 1970s. MuchMusic is a music network featuring a diverse
mix of new and established musical artists. IFC is a national entertainment
network that airs independent films made outside the traditional Hollywood
system. See "Business--Programming Operations--General" in the Form 10-K.
ADVERTISING SERVICES
Rainbow Advertising sells advertising time to national, regional and local
advertisers on behalf of the Company's cable television systems and the
SportsChannel and Rainbow News 12 programming networks, as well as on behalf of
unaffiliated cable television systems. Under the agreement with Fox Sports Net,
LLC ("Fox Sports") described in the Company's Form 8-K filed July 5, 1997,
Rainbow Media would contribute the national advertising assets of Rainbow
Advertising relating to its SportsChannel programming networks to a new 50/50
partnership with Fox Sports to be named National Advertising Partners.
4
<PAGE>
RISK FACTORS
Purchase of the Debt Securities offered hereby involves various risks,
including the following principal factors, which, together with the other
matters set forth herein, in any Prospectus Supplement or incorporated by
reference herein, should be carefully considered by prospective investors.
SUBSTANTIAL INDEBTEDNESS AND HIGH DEGREE OF LEVERAGE. The Company has
incurred substantial indebtedness and issued substantial amounts of mandatorily
redeemable preferred stock, primarily to finance acquisitions and expansion of
its operations, to refinance outstanding indebtedness and, to a lesser extent,
for investments in and advances to affiliates. The Company's consolidated debt
plus the Company's 11 3/4% Series H Redeemable Exchangeable Preferred Stock and
11 1/8% Series M Redeemable Exchangeable Preferred Stock aggregated
approximately $5.6 billion at June 30, 1997. See Note 4 of Notes to the
Consolidated Financial Statements. As a result of the Company's high level of
indebtedness and the significant amount of redeemable preferred stock, the
Company has significant cash requirements to service indebtedness and to pay
dividends and redemption amounts on redeemable preferred stock, increasing the
Company's vulnerability to adverse developments in its business and adverse
economic and industry conditions.
NET LOSSES AND STOCKHOLDERS' DEFICIENCY. The Company reported net losses
applicable to common stockholders for the six months ended June 30, 1997 and
1996 of $240.7 million and $218.6 million, respectively, and for the years ended
December 31, 1996, 1995 and 1994 of $459.9 million, $337.7 million and $321.5
million, respectively. At June 30, 1997, the Company had a stockholders'
deficiency of $2.6 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 1994, 1995 and 1996 and will continue at
high levels throughout 1997 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".
POSSIBLE NONCOMPLETION OF CERTAIN TRANSACTIONS. There can be no assurances
that the Company's pending transactions referred to in the Company's Form 8-Ks
filed June 10, 1997, July 10, 1997 and September 9, 1997 and in the Company's
Form 10-Q for the fiscal quarter ended June 30, 1997 will be consummated in a
timely manner or at all.
POSSIBLE SEPARATION OF RAINBOW MEDIA FROM THE COMPANY. If the pending
transactions with Tele-Communications, Inc. ("TCI") described in the Company's
Form 8-K dated June 10, 1997 are consummated, Cablevision, the issuer of the
Debt Securities, will be a wholly-owned subsidiary of CSC Parent Corporation
("CSC Parent"), the indirect subsidiaries of TCI contributed in such
transactions (the "TCI Contributed Entities") will be held as separate direct
subsidiaries of CSC Parent and Rainbow Media will continue to be a 75%-owned
subsidiary of Cablevision (with NBC owning the remaining 25% interest). The
Contribution and Merger Agreement with TCI permits the Company under certain
circumstances to restructure these holdings so that Rainbow Media becomes a
separate subsidiary of CSC Parent (and would no longer be a subsidiary of
Cablevision) and the TCI Contributed Entities become subsidiaries of
Cablevision. Following such transactions, the residual equity value of Rainbow
Media would no longer support the ability to pay interest and principal on the
Debt Securities and other debt.
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, the
offering of new services and the further participation in existing services, the
funding of costs of cable programming services prior to their becoming cash-flow
positive, and the servicing, repayment or refinancing of its indebtedness and
mandatorily redeemable preferred stock. The
5
<PAGE>
Company will require significant additional financing, through debt and/or
equity issuances, to meet its capital expenditure plans and to pay the principal
of and interest on its debt and to pay dividends and make redemption payments on
its preferred stock. The Company also 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 rollout of these businesses, the Company may require additional
capital. Depending on the scope of the Company's participation in the PCS and
DBS ventures, additional capital may also be required for these businesses. In
addition, the Company may require additional capital if it elects to pay cash to
(i) acquire ITT Corporation's remaining interest in MSG following an exercise by
ITT Corporation of its put rights or by the Company of its call rights or (ii)
make the Cablevision of NYC Payment (as defined herein) to Charles F. Dolan due
under the Cablevision of NYC Agreement (as defined herein). 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 intends to make
substantial capital expenditures, including major system upgrades, with respect
to its cable television systems over the next several years. In addition, the
Company, through Rainbow Media and its subsidiaries, 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 the
Consolidated Financial Statements for a discussion of commitments.
The Company has a commitment to fund annual payments to Charles F. Dolan
related to Cablevision of New York City, L.P. ("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 June 30, 1997 of $4.6
billion, of which $2.4 billion were intangible assets, consisting of franchises,
affiliation agreements, excess cost over fair value of net assets acquired and
deferred financing, acquisition and other costs. It is possible that no cash
would be recoverable from the voluntary or involuntary sale of these intangible
assets.
VOTING CONTROL BY MAJORITY STOCKHOLDERS; DISPARATE VOTING RIGHTS. As of
June 30, 1997, Charles F. Dolan beneficially owned and possessed sole voting
power with respect to 10,805 shares or 0.1% of the Company's outstanding Class A
common stock (the "Class A Common Stock") and 4,859,281 shares or 43.7% 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 June 30, 1997, an aggregate of 1,240,000 shares or 11.2% of the outstanding
Class B Common Stock were held by a Grantor Retained Annuity Trust (the "GRA
Trust") 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 Trust due to his right to reacquire the Class B Common Stock held by
the GRA Trust by substituting other property of equivalent value, but, until
such event, the GRA Trust, through its co-trustees (who are Mr. Dolan and his
spouse) has the power to vote and dispose of the shares of Class B Common Stock
held by it. As a result of his beneficial ownership of the shares held by the
GRA Trust, as of June 30, 1997, Mr. Dolan beneficially owned 10,805 shares or
0.1% of the Company's outstanding Class A Common Stock and 6,099,281 shares or
54.9% of the Company's outstanding Class B Common Stock. On a combined basis,
these shares represented 24.6% of the total number of shares of both classes of
Common Stock and 48.8% of the total voting power of the Common Stock. 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 June 30,
1997, an additional 40,000 shares of Class A Common Stock or 0.3% of the Class A
Common Stock and 5,019,928 shares of the Class B Common Stock or 45.1% of the
Class B Common Stock and 40.2% of the total voting power of all classes of the
Common Stock. As a result of this
6
<PAGE>
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 the Dolan family members will not
be modified as a result of any transfer of legal or beneficial ownership
thereof. If the pending transactions with TCI are consummated, the Common Stock
of the Dolan family members will be converted into shares of common stock of CSC
Parent and the Dolan family members will continue to maintain the voting rights
set forth above, including the voting rights resulting from the ownership of a
majority of the total voting power of CSC Parent's common stock.
RESTRICTIVE COVENANTS. The Company's principal bank credit facility (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 (i) to restrict the Company's ability
to borrow undrawn funds under the Credit Agreement and (ii) 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 1993 and 1994, the Federal Communications
Commission ("FCC") ordered reductions in cable television rates. In 1995, a
Federal appeals court upheld the material aspects of the FCC's rate regulation
scheme. Congress subsequently enacted legislation (the "Telecommunications Act
of 1996") that relaxes the regulation of cable television rates; however, the
most significant rate regulation relaxation affecting the Company will not occur
until after March 31, 1999. See "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, DBS, multichannel multipoint
distribution services ("MMDS"), satellite master antenna systems ("SMATV") and
private home dish earth stations. For example, four DBS systems are now
operational in the United States, some with investment by companies with
substantial resources such as Hughes Electronics Corp., AT&T Corp. and News
Corporation. The 1992 Cable Act prohibits a cable programmer that is owned by or
affiliated with a cable operator (such as Rainbow Media) 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
7
<PAGE>
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. The Telecommunications Act of 1996 gives telephone companies and
other video providers the option of providing video programming to subscribers
through "open video systems" ("OVS"), a wired video delivery system similar to a
cable television system that would not require a local cable franchise. Several
OVS operators have sought to enter New York City, Boston and Westchester County,
New York. Additional video competition to cable systems is possible from new
wireless local multipoint distribution services ("LMDS") authorized by the FCC,
for which spectrum will be auctioned by the FCC in early 1998.
COMPETITION FROM TELEPHONE COMPANIES. The 1984 Cable Act barred
co-ownership of telephone companies and cable television systems operating in
the same service areas. 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, and in
certain locations have commenced offering service. Neither the 1984 Cable Act
nor the 1992 Cable Act bars a telephone company from acquiring cable systems
outside its telephone service area. Several Regional Bell operating companies
have purchased or made investments in such 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 non-exclusive 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 either temporary operating agreements or without
a license while negotiating renewal terms with the franchising authorities. See
"Business--Cable Television Operations-- Franchises" in the Form 10-K.
8
<PAGE>
USE OF PROCEEDS
Except as may otherwise be set forth in the applicable Prospectus
Supplement, the net proceeds from the sale of the Debt Securities will be added
to the Company's general funds and used for general corporate purposes,
including the repayment of indebtedness.
DEFICIENCY OF EARNINGS AVAILABLE TO COVER FIXED CHARGES
As set forth below, the Company has a deficiency of earnings available to
cover fixed charges for each of 1996, 1995, 1994, 1993 and 1992 and for the six
months ended June 30, 1997 on an historical basis.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------------------------------------------
JUNE 30, 1997 1996 1995 1994 1993 1992
------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Deficiency of earnings available to cover
fixed charges........................... $ (167,966) $ (332,079) $ (317,458) $ (315,151) $ (246,782) $ (250,503)
</TABLE>
9
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities may be issued from time to time in one or more series.
The particular terms of each series of Debt Securities offered by any Prospectus
Supplement or Prospectus Supplements will be described therein. The Senior Debt
Securities will be issued under an Indenture (the "Senior Indenture"), between
the Company and The Bank of New York (the "Senior Trustee") prior to the
issuance of the Senior Debt Securities. The Subordinated Debt Securities will be
issued under an Indenture (the "Subordinated Indenture"), between the Company
and The Bank of New York (the "Subordinated Trustee") prior to the issuance of
the Subordinated Debt Securities. The Senior Indenture and the Subordinated
Indenture are referred to herein individually as an "Indenture" and collectively
as the "Indentures", and the Senior Trustee and the Subordinated Trustee are
referred to herein individually as a "Trustee" and collectively as the
"Trustees". A copy of each Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Indentures are subject to
and are governed by the Trust Indenture Act of 1939, as amended.
The Debt Securities offered pursuant to this Prospectus will be limited to
$1,000,000,000 aggregate principal amount (or (i) its equivalent (based on the
applicable exchange rate at the time of sale), if Debt Securities are issued
with principal amounts denominated in one or more foreign currencies or currency
units as shall be designated by the Company, or (ii) such greater amount, if
Debt Securities are issued at an original issue discount, as shall result in
aggregate proceeds of $1,000,000,000 to the Company). The statements herein
relating to the Debt Securities and the Indentures are summaries and are subject
to the detailed provisions of the Indentures. Where no distinction is made
between the Senior Debt Securities and the Subordinated Debt Securities or
between the Senior Indenture and the Subordinated Indenture, such summaries
refer to any Debt Securities and either Indenture. The following summaries of
certain provisions of the Indentures do not purport to be complete, and where
reference is made to particular provisions of the Indentures, 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 following
summary are set forth below under "Certain Definitions".
GENERAL
The Debt Securities may be secured or general unsecured obligations of the
Company. The Indentures do not limit the aggregate amount of Debt Securities
which may be issued thereunder, and Debt Securities may be issued thereunder
from time to time in separate series up to the aggregate amount from time to
time authorized by the Company for each series. Unless otherwise specified in
the Prospectus Supplement, the Senior Debt Securities when issued will be
unsubordinated obligations of the Company and will rank equally and ratably with
all other unsubordinated indebtedness of the Company. The Subordinated Debt
Securities when issued will be subordinated in right of payment to the prior
payment in full of all Senior Indebtedness (as defined) of the Company as
described under "Subordination of Subordinated Debt Securities" and in the
Prospectus Supplement applicable to an offering of Subordinated Debt Securities.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the series of Debt Securities in respect of which this
Prospectus is being delivered: (1) the title and ranking of such Debt Securities
and whether they will be Senior Debt Securities or Subordinated Debt Securities;
(2) any limit on the aggregate principal amount of such Debt Securities; (3) the
person to whom any interest on any Debt Security of the series shall be payable
if other than the person in whose name the Debt Security is registered on the
regular record date; (4) the date or dates on which such Debt Securities will
mature; (5) the rate or rates of interest, if any, or the method of calculation
thereof, which such Debt Securities will bear, the date or dates from which any
such interest will accrue, the interest payment dates on which any such interest
on such Debt Securities will be payable and the regular record date for any
interest payable on any interest payment date; (6) the place or places where the
principal of, premium, if
10
<PAGE>
any, and interest on such Debt Securities will be payable; (7) the period or
periods within which, the events upon the occurrence of which, and the price or
prices at which, such Debt Securities may, pursuant to any optional or mandatory
provisions, be redeemed or purchased, in whole or in part, by the Company and
any terms and conditions relevant thereto; (8) the obligations of the Company,
if any, to redeem or repurchase such Debt Securities at the option of the
Holders; (9) the denominations in which any such Debt Securities will be
issuable, if other than denominations of $1,000 and any integral multiple
thereof; (10) any index or formula used to determine the amount of payments of
principal of and any premium and interest on such Debt Securities; (11) the
currency, currencies or currency unit or units of payment of principal of and
any premium and interest on such Debt Securities if other than U.S. dollars;
(12) if the principal of, or premium, if any, or interest on such Debt
Securities is to be payable, at the election of the Company or a holder thereof,
in one or more currencies or currency units other than that or those in which
such Debt Securities are stated to be payable, the currency, currencies or
currency units in which payment of the principal of and any premium and interest
on Debt Securities of such series as to which such election is made shall be
payable, and the periods within which and the terms and conditions upon which
such election is to be made; (13) if other than the principal amount thereof,
the portion of the principal amount of such Debt Securities of the series which
will be payable upon acceleration of the maturity thereof; (14) if the principal
amount of any Debt Securities which will be payable at the maturity thereof will
not be determinable as of any date prior to such maturity, the amount which will
be deemed to be the outstanding principal amount of such Debt Securities; (15)
any change in the applicability of the provisions described under "Defeasance";
(16) whether any of such Debt Securities are to be issuable in permanent global
form ("Global Security") and, if so, the terms and conditions, if any, upon
which interests in such Securities in global form may be exchanged, in whole or
in part, for the individual Debt Securities represented thereby; (17) any change
in the applicability of the provisions described under "Event of Default" and
any additional Event of Default applicable thereto; (18) any deletions from,
modifications of or additions to the covenants applicable to such Debt
Securities; (19) whether such Debt Securities are secured; and (20) any other
terms of such Debt Securities not inconsistent with the provisions of the
applicable Indenture.
Debt Securities may be issued at a discount from their principal amount.
United States Federal income tax considerations and other special considerations
applicable to any such original issue discount Debt Securities will be described
in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units or if the
principal of and any premium and interest on any series of Debt Securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
the restrictions, elections, general tax considerations, specific terms and
other information with respect to such issue of Debt Securities will be set
forth in the applicable Prospectus Supplement.
Since the Company is primarily a holding company, the rights of the Company,
and hence the right of creditors of the Company (including the Holders of Debt
Securities), to participate in any distribution of the assets of any subsidiary
upon its liquidation or reorganization or otherwise is necessarily subject to
the prior claims of creditors of any such subsidiary, including trade creditors,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized.
The Indentures do not contain any provisions that limit the ability of the
Company to incur indebtedness or that afford Holders of the Debt Securities
protection in the event of a highly leveraged or similar transaction involving
the Company, other than as described below under "Certain Covenants of the
Company--Covenants Applicable to All Debt Securities--Limitation on
Indebtedness".
FORM, EXCHANGE, REGISTRATION, CONVERSION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, the Debt
Securities will be issued only in fully registered form in denominations of
$1,000 or integral multiples thereof. Unless otherwise indicated in the
applicable Prospectus Supplement, payment of principal, premium, if any, and
11
<PAGE>
interest on the Debt Securities will be payable, and the exchange, conversion
and transfer of Debt Securities will be registerable, at the office or agency of
the Company maintained for such purposes and at any other office or agency
maintained for such purpose. No service charge will be made for any registration
of transfer or exchange of the Debt Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
All monies paid by the Company to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed for two years after such principal, premium or interest has become due
and payable may be repaid to the Company and thereafter the Holder of such Debt
Security may look only to the Company for payment thereof.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a Depositary ("Depositary") or its nominee identified in the applicable
Prospectus Supplement. In such a case, one or more Global Securities will be
issued in a denomination or aggregate denomination equal to the portion of the
aggregate principal amount of Outstanding Debt Securities of the series to be
represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in registered form, a Global
Security may not be registered for transfer or exchange except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any nominee to a successor Depositary or a
nominee of such successor Depositary and except in the circumstances described
in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Global Security will be
described in the applicable Prospectus Supplement. The Company expects that the
following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interest in such Global Security will be limited to participants or Persons that
may hold interests through participants. Ownership of beneficial interests by
participants in such Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by the
Depositary or its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by Persons that hold through participants will
be shown on, and the transfer of such ownership interests within such
participant will be effected only through, records maintained by such
participant. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. The
foregoing limitations and such laws may impair the ability to transfer
beneficial interests in such Global Securities.
Debt Securities will be issued in fully registered, certificated form
("Definitive Securities") to holders or their nominees, rather than to the
Depositary or its nominee, only if (i) the Depositary advises the applicable
Trustee in writing that the Depositary is no longer willing or able to discharge
properly its responsibilities as depository with respect to such Debt Securities
and it is unable to locate a qualified successor, (ii) the Company, at its
option, elects to terminate the book-entry system or (iii) after the
12
<PAGE>
occurrence of an Event of Default with respect to such Debt Securities, a holder
of Debt Securities advises the applicable Trustee in writing that it wishes to
receive a Definitive Security.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable Trustee will be required to notify all applicable
holders through the Depositary and its Participants of the availability of
Definitive Securities. Upon surrender by the Depositary of the definitive
certificates representing the corresponding Debt Securities and receipt of
instructions for re-registration, the applicable Trustee will reissue such Debt
Securities as Definitive Securities to such holders.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Securities
represented by such Global Security for all purposes under the applicable
Indenture. Unless otherwise specified in the applicable Prospectus Supplement,
owners of beneficial interests in such Global Security will not be entitled to
have Debt Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of such series in certificated form and will not be
considered the holders thereof for any purposes under the applicable Indenture.
Accordingly, each Person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such Person is not a
participant, on the procedures of the participant through which such Person owns
its interest, to exercise any rights of a Holder under the applicable Indenture.
The Company understands that under existing industry practices, if the Company
requests any action of Holders or an owner of a beneficial interest in such
Global Security desires to give any notice or take any action a Holder is
entitled to give or take under the applicable Indenture, the Depositary would
authorize the participants to give such notice or take such action, and
participants would authorize beneficial owners owning through such participants
to give such notice or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
CERTAIN DEFINITIONS
Unless otherwise specified in the applicable Prospectus Supplement, the
following definitions are applicable to the Indenture relating to the Debt
Securities being offered pursuant to such Prospectus Supplement. Reference is
made to the applicable Indenture for the full definition of all such terms.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (a) existing at the
time such Person is merged with or into the Company or a subsidiary of the
Company or becomes a subsidiary of the Company or (b) assumed in connection with
the acquisition of assets from such Person.
"AFFILIATE" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
control when used with respect to any specified Person means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"ANNUALIZED OPERATING CASH FLOW" means, for any period of three complete
consecutive calendar months, an amount equal to Operating Cash Flow for such
period multiplied by four.
"AVERAGE LIFE" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"BANKS" means the lenders from time to time under the Credit Agreement.
13
<PAGE>
"CAPITALIZED LEASE OBLIGATION" means any obligation of a person to pay rent
or other amounts under a lease with respect to any property (whether real,
personal or mixed) acquired or leased by such Person and used in its business
that is required to be accounted for as a liability on the balance sheet of such
Person in accordance with U.S. generally accepted accounting principles ("GAAP")
and the amount of such Capitalized Lease Obligation shall be the amount so
required to be accounted for as a liability.
"CASH FLOW RATIO" means, as at any date, the ratio of (i) the sum of the
aggregate outstanding principal amount of all Indebtedness of the Company and
the Restricted Subsidiaries determined on a consolidated basis but excluding all
Interest Swap Obligations entered into by the Company or any Restricted
Subsidiary and one of the Banks outstanding on such date plus (but without
duplication of Indebtedness supported by Letters of Credit) the aggregate
undrawn face amount of all Letters of Credit outstanding on such date to (ii)
Annualized Operating Cash Flow determined as at the last day of the most recent
month for which financial information is available.
"CONSOLIDATED NET TANGIBLE ASSETS" of any Person means, as of any date, (a)
all amounts that would be shown as assets on a consolidated balance sheet of
such Person and its Restricted Subsidiaries prepared in accordance with GAAP,
less (b) the amount thereof constituting goodwill and other intangible assets as
calculated in accordance with GAAP.
"CUMULATIVE CASH FLOW CREDIT" means the sum of:
(a) cumulative Operating Cash Flow during the period commencing on July
1, 1988 and ending on the last day of the most recent month preceding the
date of the proposed Restricted Payment for which financial information is
available or, if cumulative Operating Cash Flow for such period is negative,
minus the amount by which cumulative Operating Cash Flow is less than zero,
plus
(b) the aggregate net proceeds received by the Company from the issuance
or sale (other than to a Restricted Subsidiary) of its capital stock (other
than Disqualified Stock) on or after January 1, 1992, plus
(c) the aggregate net proceeds received by the Company from the issuance
or sale (other than to a Restricted Subsidiary) of its capital stock (other
than Disqualified Stock) on or after January 1, 1992, upon the conversion
of, or exchange for, Indebtedness of the Company or any Restricted
Subsidiary or from the exercise of any options, warrants or other rights to
acquire capital stock of the Company.
For purposes of this definition, the net proceeds in property other than cash
received by the Company as contemplated by clauses (b) and (c) above shall be
valued at the fair market value of such property (as determined by the Board of
Directors of the Company, whose good faith determination shall be conclusive) at
the date of receipt by the Company.
"CUMULATIVE INTEREST EXPENSE" means, for the period commencing on July 1,
1988 and ending on the last day of the most recent month preceding the proposed
Restricted Payment for which financial information is available, the aggregate
of the interest expense of the Company and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP, including
interest expense attributable to Capitalized Lease Obligations.
"DEBT" with respect to any Person means, without duplication, any liability,
whether or not contingent, (i) in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements with respect thereto), but excluding reimbursement
obligations under any surety bond, (ii) representing the balance deferred and
unpaid of the purchase price of any property (including pursuant to Capitalized
Lease Obligations), except any such balance that constitutes a trade payable,
(iii) under Interest Swap Agreements (as defined in the Credit Agreement)
entered into pursuant to the Credit Agreement, (iv) under any other agreement
related to the fixing of interest rates on any Indebtedness, such as an interest
swap, cap or collar agreement (if and to the extent any of the foregoing would
appear as a liability upon a balance sheet of such Person prepared on a
consolidated basis
14
<PAGE>
in accordance with GAAP) or (v) guarantees of items of other Persons which would
be included within this definition for such other Persons (whether or not the
guarantee would appear on such balance sheet). "Debt" does not include (i)
Disqualified Stock, (ii) any liability for federal, state, local or other taxes
owed or owing by such Person or (iii) any accounts payable or other liability to
trade creditors arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities).
"DISQUALIFIED STOCK" means, with respect to any series of Debt Securities,
any capital stock of the Company or any Restricted Subsidiary which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of such series of Debt Securities.
"INDEBTEDNESS" with respect to any Person, means the Debt of such Person;
PROVIDED, HOWEVER, that, with respect to the Company, the "Minimum Payment" or
the "Preferred Payment" (each, a "Cablevision of NYC Payment"), as defined in
and pursuant to the Purchase and Reorganization Agreement (the "Cablevision of
NYC Agreement"), dated as of December 20, 1991, between the Company and Charles
F. Dolan, as amended as of March 28, 1992 and as further amended from time to
time, payable by a subsidiary of the Company and guaranteed by the Company as a
result of the acquisition of Cablevision of NYC (the "Cablevision of NYC
Acquisition") shall not be deemed to be "Indebtedness" so long as the Company
and such subsidiary are permitted to make such Cablevision of NYC Payment in one
or more classes of the Company's capital stock (other than Disqualified Stock)
pursuant to the terms of the Cablevision of NYC Agreement and the Company and
the Restricted Subsidiaries are prohibited from making such Cablevision of NYC
Payment in cash, debt securities, Disqualified Stock or any combination thereof,
pursuant to the terms of any mortgage, indenture, credit agreement or other
instrument that secures or evidences Indebtedness for money borrowed or
guaranteed by the Company or a Restricted Subsidiary in an aggregate amount of
$10,000,000 or more; PROVIDED that, for purposes of the definition of
"Indebtedness" (including the term "Debt" to the extent incorporated in such
definition) and for purposes of the definition of "Event of Default", the term
"guarantee" shall not be interpreted to extend to a guarantee under which
recourse is limited to the capital stock of an entity that is not a Restricted
Subsidiary.
"INTEREST SWAP OBLIGATIONS" means, with respect to any Person, the
obligations of such Person pursuant to any arrangement with any other Person
whereby, directly or indirectly, such Person is entitled to receive from time to
time periodic payments calculated by applying either a floating or a fixed rate
of interest on a stated notional amount in exchange for periodic payments made
by such Person calculated by applying a fixed or a floating rate of interest on
the same notional amount.
"INVESTMENT" means any advance, loan, account receivable (other than an
account receivable arising in the ordinary course of business), or other
extension of credit (excluding, however, accrued and unpaid interest in respect
of any advance, loan or other extension of credit) or any capital contribution
to (by means of transfers of property to others, payments for property or
services for the account or use of others, or otherwise), any purchase or
ownership of any stock, bonds, notes, debentures or other securities (including,
without limitation, any interests in any partnership, joint venture or joint
adventure) of, or any bank accounts with or guarantee of any Indebtedness or
other obligations of, any Unrestricted Subsidiary or Affiliate that is not a
subsidiary of the Company, PROVIDED that (i) the term "Investment" shall not
include any transaction that would otherwise constitute an Investment of the
Company or a subsidiary of the Company to the extent that the consideration
provided by the Company or such subsidiary in connection therewith shall consist
of capital stock of the Company (other than Disqualified Stock) and (ii) the
term "guarantee" shall not be interpreted to extend to a guarantee under which
recourse is limited to the capital stock of an entity that is not a Restricted
Subsidiary.
15
<PAGE>
"LIEN" means any lien, security interest, charge or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in
the nature of a security interest and any agreement to give any security
interest). A Person shall be deemed to own subject to a Lien any property which
such Person has acquired or holds subject to the interest of a vendor or lessor
under a conditional sale agreement, capital lease or other title retention
agreement.
"MANDATORILY REDEEMABLE PREFERRED STOCK" means the Company's Series H
Redeemable Exchangeable Preferred Stock, Series M Redeemable Exchangeable
Preferred Stock and any other series of capital stock of the Company that is
Disqualified Stock outstanding at the time of issuance of the applicable series
of Debt Securities and any series of preferred stock of the Company issued in
exchange for, or the proceeds of which are used to repurchase, redeem, defease
or otherwise acquire, all or any portion of the Series H Redeemable Exchangeable
Preferred Stock, Series M Redeemable Exchangeable Preferred Stock or any other
Mandatorily Redeemable Preferred Stock.
"OPERATING CASH FLOW" means, for any period, the sum of the following for
the Company and the Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (except for the amortization of
deferred installation income which shall be excluded from the calculation of
Operating Cash Flow for all purposes of the Indenture): (i) aggregate operating
revenues minus (ii) aggregate operating expenses (including technical,
programming, sales, selling, general and administrative expenses and salaries
and other compensation, net of amounts allocated to Affiliates, paid to any
general partner, director, officer or employee of the Company or any Restricted
Subsidiary, but excluding interest, depreciation and amortization and the amount
of non-cash compensation in respect of the Company's employee incentive stock
programs for such period (not to exceed in the aggregate for any calendar year
7% of the Operating Cash Flow for the previous calendar year) and, to the extent
otherwise included in operating expenses, any losses resulting from a write-off
or write-down of Investments by the Company or any Restricted Subsidiary in
Affiliates). For purposes of determining Operating Cash Flow, there shall be
excluded all management fees until actually paid to the Company or any
Restricted Subsidiary in cash.
"PERMITTED LIENS" means the following types of Liens:
(a) Liens existing on the date of the applicable issuance date of Debt
Securities of a series;
(b) Liens on shares of the capital stock of an entity that is not a
Restricted Subsidiary, which Liens solely secure a guarantee by the Company
or a Restricted Subsidiary, or both, of Indebtedness of such entity;
(c) Liens on Receivables and Related Assets (and proceeds thereof)
securing only Indebtedness otherwise permitted to be incurred by a
Securitization Subsidiary;
(d) Liens on shares of the capital stock of a subsidiary of the Company
securing Indebtedness under the Credit Agreement or any renewal of or
replacement of the Credit Agreement;
(e) Liens granted in favor of the Company or any Restricted Subsidiary;
(f) Liens securing the Debt Securities;
(g) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness
by the Company or a Restricted Subsidiary; PROVIDED that such Lien does not
extend to any property or assets of the Company or any Restricted Subsidiary
other than the assets acquired in connection with the incurrence of such
Acquired Indebtedness;
(h) Liens securing Interest Swap Obligations or "margin stock", as
defined in Regulations G and U of the Board of Governors of the Federal
Reserve System;
(i) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens arising in the
ordinary course of business of the Company or any
16
<PAGE>
Restricted Subsidiary and with respect to amounts not yet delinquent or
being contested in good faith by appropriate proceedings;
(j) Liens for taxes, assessments, government charges or claims not yet
due or that are being contested in good faith by appropriate proceedings;
(k) zoning restrictions, easements, rights-of-way, restrictions and
other similar charges or encumbrances or minor defects in title not
interfering in any material respect with the business of the Company or any
of its Restricted Subsidiaries;
(l) Liens arising by reason of any judgment, decree or order of any
court, arbitral tribunal or similar entity so long as any appropriate legal
proceedings that may have been initiated for the review of such judgment,
decree or order shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired;
(m) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security or similar legislation;
(n) Liens securing the performance of bids, tenders, leases, contracts,
franchises, public or statutory obligations, surety, stay or appeal bonds,
or other similar obligations arising in the ordinary course of business;
(o) Leases under which the Company or any Restricted Subsidiary is the
lessee or the lessor;
(p) purchase money mortgages or other purchase money liens (including
without limitation any Capital Lease Obligations) upon any fixed or capital
assets acquired after the applicable issuance date of Debt Securities of a
series, or purchase money mortgages (including without limitation
Capitalized Lease Obligations) on any such assets hereafter acquired or
existing at the time of acquisition of such assets, whether or not assumed,
so long as (i) such mortgage or lien does not extend to or cover any other
asset of the Company or any Restricted Subsidiary and (ii) such mortgage or
lien secures the obligation to pay the purchase price of such asset,
interest thereon and other charges incurred in connection therewith (or the
obligation under such Capitalized Lease Obligation) only;
(q) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(r) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(s) Liens to secure other Indebtedness; PROVIDED, HOWEVER, that the
principal amount of any Indebtedness secured by such Liens, together with
the principal amount of any Indebtedness refinancing any Indebtedness
incurred under this clause (s) as permitted by clause (t) below (and
successive refinancings thereof), may not exceed 15% of the Company's
Consolidated Net Tangible Assets as of the last day of the Company's most
recently completed fiscal year for which financial information is available;
and
(t) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (a) through (s); PROVIDED that any
such extension, renewal or replacement shall be no more restrictive in any
material respect than the Lien so extended, renewed or replaced and shall
not extend to any additional property or assets.
"RECEIVABLES AND RELATED ASSETS" means (i) accounts receivable, instruments,
chattel paper, obligations, general intangibles, equipment and other similar
assets, including interests in merchandise or goods, the sale or lease of which
gives rise to the foregoing, related contractual rights, guarantees, insurance
proceeds, collections and other related assets, (ii) equipment, (iii) inventory
and (iv) proceeds of all of the foregoing.
17
<PAGE>
"REFINANCING INDEBTEDNESS" means, with respect to any series of Senior Debt
Securities, Indebtedness of the Company incurred to redeem, repurchase, defease
or otherwise acquire or retire for value other Indebtedness that is subordinate
in right of payment to such Senior Debt Securities, so long as any such new
Indebtedness (i) is made subordinate to such Senior Debt Securities at least to
the same extent as the Indebtedness being refinanced and (ii) does not have (x)
an Average Life less than the Average Life of the Indebtedness being refinanced,
(y) a final scheduled maturity earlier than the final scheduled maturity of the
Indebtedness being refinanced or (z) permit redemption at the option of the
holder earlier than the earlier of (A) the final scheduled maturity of the
Indebtedness being refinanced or (B) any date of redemption at the option of the
holder of the Indebtedness being refinanced.
"RESTRICTED PAYMENT" means, with respect to any series of Debt Securities,
(a) any Stock Payment by the Company or a Restricted Subsidiary;
(b) any direct or indirect payment to redeem, purchase, defease or
otherwise acquire or retire for value, or permit any Restricted Subsidiary
to redeem, purchase, defease or otherwise acquire or retire for value, prior
to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment, any Indebtedness of the Company that is subordinate in right of
payment to such Debt Securities; PROVIDED, HOWEVER, that, with respect to
any series of Senior Debt Securities, any direct or indirect payment to
redeem, purchase, defease or otherwise acquire or retire for value, or
permit any Restricted Subsidiary to redeem, repurchase, defease or otherwise
acquire or retire for value, prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Indebtedness that is
subordinate in right of payment to such Senior Debt Securities shall not be
a Restricted Payment if either (i) after giving effect thereto, the ratio of
the Senior Debt of the Company and the Restricted Subsidiaries to Annualized
Operating Cash Flow determined as of the last day of the most recent month
for which financial information is available is less than or equal to 5 to 1
or (ii) such subordinate Indebtedness is redeemed, purchased, defeased or
otherwise acquired or retired in exchange for, or out of, (x) the proceeds
of a sale (within one year before or 180 days after such redemption,
purchase, defeasance, acquisition or retirement) of Refinancing Indebtedness
or capital stock of the Company or warrants, rights or options to acquire
capital stock of the Company or (y) any source of funds other than the
incurrence of Indebtedness; or
(c) any direct or indirect payment to redeem, purchase, defease or
otherwise acquire or retire for value any Disqualified Stock at its
mandatory redemption date or other maturity date if and to the extent that
Indebtedness is incurred to finance such redemption, purchase, defeasance or
other acquisition or retirement; PROVIDED, HOWEVER, that the redemption,
purchase, defeasance or other acquisition or retirement of Mandatorily
Redeemable Preferred Stock at its mandatory redemption or other maturity
date shall not be a Restricted Payment if and to the extent any Indebtedness
incurred to finance all or a portion of the purchase or redemption price
does not have a final scheduled maturity date, or permit redemption at the
option of the holder thereof, earlier than the final scheduled maturity of
such series of Debt Securities.
Notwithstanding the foregoing, Restricted Payments shall not include (x)
payments by any Restricted Subsidiary to the Company or any other Restricted
Subsidiary or (y) any Investment or designation of a Restricted Subsidiary as an
Unrestricted Subsidiary permitted under the "Limitation on Investments in
Unrestricted Subsidiaries and Affiliates" covenant.
"RESTRICTED SUBSIDIARY" means any subsidiary of the Company, whether
existing on the date of the applicable Indenture or created subsequent thereto,
designated from time to time by the Company as a "RESTRICTED SUBSIDIARY";
PROVIDED, HOWEVER, that no subsidiary that is not a Securitization Subsidiary
can be or remain so designated unless (i) at least 67% of each of the total
equity interest and the voting control of such subsidiary is owned, directly or
indirectly, by the Company or another Restricted Subsidiary and (ii) such
subsidiary is not restricted, pursuant to the terms of any loan agreement, note,
indenture or other evidence of indebtedness, from (a) paying dividends or making
any distribution on such subsidiary's capital stock or other equity securities
or paying any Indebtedness owed to the Company or to any Restricted
18
<PAGE>
Subsidiary, (b) making any loans or advances to the Company or any Restricted
Subsidiary or (c) transferring any of its properties or assets to the Company or
any Restricted Subsidiary (it being understood that a financial covenant any of
the components of which are directly impacted by the taking of the action (E.G.,
the payment of a dividend) itself (such as a minimum net worth test) would be
deemed to be a restriction on the foregoing actions, while a financial covenant
none of the components of which is directly impacted by the taking of the action
(E.G., the payment of a dividend) itself (such as a debt to cash flow test)
would not be deemed to be a restriction on the foregoing actions); and PROVIDED,
FURTHER, that the Company may, from time to time, redesignate any Restricted
Subsidiary as an Unrestricted Subsidiary in accordance with the provisions of
the "Limitation on Investments in Unrestricted Subsidiaries and Affiliates"
covenant.
"SECURITIZATION SUBSIDIARY" means a Restricted Subsidiary that is
established for the limited purpose of acquiring and financing Receivables and
Related Assets and engaging in activities ancillary thereto; PROVIDED that (i)
no portion of the Indebtedness of a Securitization Subsidiary is guaranteed by
or is recourse to the Company or any other Restricted Subsidiary (other than
recourse for customary representations, warranties, covenants and indemnities,
none of which shall relate to the collectibility of the Receivables and Related
Assets) and (ii) none of the Company or any other Restricted Subsidiary has any
obligation to maintain or preserve such Securitization Subsidiary's financial
condition.
"SENIOR DEBT" means, with respect to any Person, all principal of (premium,
if any) and interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to such Person whether or
not a claim for post filing interest is allowed in such proceedings) with
respect to all Indebtedness of such Person; PROVIDED that Senior Debt shall not
include (i) any Indebtedness of such Person that, by its terms or the terms of
the instrument creating or evidencing such Indebtedness, is expressly
subordinate in right of payment to the Senior Debt Securities of a Series, (ii)
any guarantee of Indebtedness of any subsidiary of such Person if recourse
against such guarantee is limited to the capital stock or other equity interests
of such subsidiary, (iii) any obligation of such Person to any subsidiary of
such Person or, in the case of a Restricted Subsidiary, to the Company or any
other subsidiary of the Company or (iv) any Indebtedness of such Person (and any
accrued and unpaid interest in respect thereof) which is subordinate or junior
in any respect to any other Indebtedness or other obligation of such Person.
"SENIOR INDEBTEDNESS" means, with respect to the Subordinated Debt
Securities of any series except as otherwise provided in the applicable
Prospectus Supplement, the principal, premium, if any, interest (including
post-petition interest in any proceeding under any Bankruptcy Law, whether or
not such interest is an allowed claim enforceable against the debtor in a
proceeding under such Bankruptcy Law), penalties, fees and other liabilities
payable with respect to (i) all Debt of the Company, other than the Subordinated
Debt Securities and the Company's 9 1/4% Senior Subordinated Notes due 2005,
9 7/8% Senior Subordinated Notes due 2006, 9 7/8% Senior Subordinated Debentures
due 2013, 10 1/2% Senior Subordinated Debentures due 2016 and 9 7/8% Senior
Subordinated Debentures due 2023 (with which the Securities of such series are
intended to rank on a parity), whether outstanding on the date of the Indenture
or thereafter created, incurred or assumed, which is (x) for money borrowed, (y)
evidenced by a note or similar instrument given in connection with the
acquisition of any business, properties or assets of any kind or (z) in respect
of any Capitalized Lease Obligations and (ii) all renewals, extensions,
refundings, increases or refinancings thereof, unless, in the case of (i) or
(ii) above, the instrument under which the Debt is created, incurred, assumed or
guaranteed expressly provides that such Debt is not senior in right of payment
to the Subordinated Debt Securities of any series. Notwithstanding anything to
the contrary contained herein, "Senior Indebtedness" shall mean and include all
amounts of Senior Indebtedness that are such by virtue of clause (i) and (ii) of
the foregoing definition that are repaid by the Company and subsequently
recovered from the holder of such Senior Indebtedness under any applicable
Bankruptcy Laws or otherwise (other than by reason of some wrongful conduct on
the part of the holders of such Debt.)
"STOCK PAYMENT" means, with respect to any Person, the payment or
declaration of any dividend, either in cash or in property (except dividends
payable in common stock or common shares of capital stock of such Person), or
the making by such Person of any other distribution, on account of any shares of
any class
19
<PAGE>
of its capital stock, now or hereafter outstanding, or the redemption, purchase,
retirement or other acquisition for value by such Person, directly or
indirectly, of any shares of any class of its capital stock, now or hereafter
outstanding, other than the redemption, purchase, defeasance or other
acquisition or retirement for value of any Disqualified Stock at its mandatory
redemption date or other maturity date.
"UNRESTRICTED SUBSIDIARY" means any subsidiary of the Company which is not a
Restricted Subsidiary.
CERTAIN COVENANTS OF THE COMPANY
COVENANTS APPLICABLE TO ALL DEBT SECURITIES. Unless otherwise specified in
the applicable Prospectus Supplement, the following covenants contained in the
Indentures shall be applicable with respect to any series of Debt Securities:
LIMITATION ON INDEBTEDNESS. The Indentures provide 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.
LIMITATION ON RESTRICTED PAYMENTS. The Indentures provide that, so long as
any of the Debt Securities of such series remain outstanding, the Company shall
not, and shall 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.
For purposes of the "Limitation on Restricted Payments" covenant, the amount
of any 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, redemption, purchase, defeasance or other acquisition 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 sale (within
one year before or 180 days after such retirement, redemption, purchase,
defeasance or other acquisition) of, other shares of the Company's capital stock
or warrants, rights or options to acquire capital stock of the Company; 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, 1997, which redemption or dividends are provided for by the terms
of the Series C Preferred Stock in effect on such date (or the 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 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
20
<PAGE>
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.
LIMITATION ON INVESTMENTS IN UNRESTRICTED SUBSIDIARIES AND AFFILIATES. The
Indentures provide that the Company shall not, and shall 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 Indentures provide 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 permitted
under "Limitation on Restricted Payments".
COVENANTS APPLICABLE TO SENIOR DEBT SECURITIES. Unless otherwise specified
in the applicable Prospectus Supplement, the following covenant contained in the
Senior Indenture shall be applicable with respect to any series of Senior Debt
Securities:
LIMITATION ON LIENS. The Senior Indenture provides that the Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
create, incur, assume or suffer to exist any Lien of any kind, except for
Permitted Liens, on or with respect to any of its property or assets, whether
owned at the date of the Senior Indenture or thereafter acquired, or any income,
profits or proceeds therefrom, or assign or otherwise convey any right to
receive income thereon, unless (x) in the case of any Lien securing Indebtedness
that is subordinated in right of payment to the Senior Debt Securities of the
series offered pursuant to such Prospectus Supplement, the Senior Debt
Securities of such series are secured by a Lien on such property, assets or
proceeds that is senior in priority to such Lien and (y) in the case of any
other Lien, the Senior Debt Securities of such series are equally and ratably
secured.
COVENANTS APPLICABLE TO SUBORDINATED DEBT SECURITIES. Unless otherwise
specified in the applicable Prospectus Supplement, the following covenant
contained in the Subordinated Indenture shall be applicable with respect to any
series of Subordinated Debt Securities:
LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS. The Subordinated 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 Subordinated Debt Securities of any series
and (ii) expressly subordinate in right of payment to any
21
<PAGE>
other Indebtedness of the Company. For purposes of this covenant, Indebtedness
is deemed to be senior in right of payment of the Subordinated Debt Securities
of a series if it is not subordinate in right of payment to Senior Indebtedness
at least to the same extent as such Subordinated Debt Securities are subordinate
to Senior Indebtedness.
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, the Company will be subject to the
covenants described therein.
EVENTS OF DEFAULT
The following are Events of Default under the Indentures with respect to
Debt Securities of any series (unless they are inapplicable to such series of
Debt Securities or they are specifically deleted in the supplemental indenture
or Board Resolution under which such series of Debt Securities is issued or has
been modified): (a) default for 30 days in payment of interest on any Debt
Security; (b) default in payment of principal or premium, if any, of any Debt
Security at maturity, upon acceleration, redemption or otherwise; (c) default in
the deposit of any sinking fund payment when and as due; (d) failure to comply
with any other covenant or agreement of the Company, continued for 60 days (or,
with respect to certain covenants or agreements, 30 days) after written notice
as provided in the Indentures; (e) a default or defaults under any mortgage,
indenture or instrument which secures or evidences any Indebtedness for money
borrowed or guaranteed by the Company or a Restricted Subsidiary in an aggregate
amount of $10,000,000 or more (but excluding any Indebtedness for the deferred
purchase price of property or services owed to the Person providing such
property or services as to which the Company or such Restricted Subsidiary is
contesting its obligation to pay the same in good faith and by proper
proceedings
and for which the Company or such Restricted Subsidiary has established
appropriate reserves) which result from the failure to pay such Indebtedness at
final maturity or which have resulted in the acceleration of such Indebtedness;
(f) the entry of a final judgment or final judgments for the payment of money by
a court or courts of competent jurisdiction against the Company or any
Restricted Subsidiary in an aggregate amount exceeding $10,000,000, which remain
undischarged and unbonded for a period (during which execution shall not be
effectively stayed) of 60 days or as to which an enforcement proceeding has been
commenced by any creditor; (g) certain events of bankruptcy, insolvency or
reorganization; and (h) any other Event of Default as may be specified for such
series.
If an Event of Default (other than as specified in (g) above) shall occur
and be continuing under the Indenture applicable to any series of Debt
Securities, either the Trustee with respect to such series or the Holders of not
less than 25% in aggregate principal amount of the outstanding Debt Securities
of such series by written notice to the Company (and to the Trustee if such
notice is given by the Holders) and, in the case of Subordinated Debt
Securities, the agents, if any, under the Credit Agreement, may declare all the
unpaid principal of, premium, if any, and interest on the Debt Securities of
such series to be due and payable as provided in the applicable Indenture. Upon
a declaration of acceleration with respect to a series outstanding under the
applicable Indenture (or of all series, as the case may be), such principal,
premium, if any, and accrued interest shall be due and payable upon the first to
occur of an acceleration under the Credit Agreement or ten days after receipt by
the Company and, in the case of Subordinated Debt Securities, the agents, if
any, under the Credit Agreement, of such written notice. No action on the part
of the Trustee or any Holder of the Debt Securities of any series is required
for such acceleration if an Event of Default specified in (g) above shall occur
and be continuing. The Holders of at least a majority in principal amount of the
Debt Securities of any series then outstanding may rescind an acceleration and
its consequences if (i) all existing Events of Default, other than the
nonpayment of principal of, premium, if any, or interest on the Debt Securities
of such series which have become due solely because of the acceleration, have
been cured or waived and (ii) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction. A declaration of
acceleration because of an Event of Default specified in clause (e) of the
preceding paragraph would be automatically annulled if the Indebtedness referred
to therein were discharged, or the Holders thereof rescinded their declaration
of acceleration referred to therein, within 30 days after the acceleration of
the Debt Securities of such series and no other
22
<PAGE>
Event of Default had occurred and not been cured or waived during such period.
The Holders of a majority in principal amount of the Debt Securities of any
series outstanding also have the right to waive certain past defaults under the
Indentures.
No Holder of Debt Securities of any series issued under either Indenture has
any right to institute any proceeding with respect to the Debt Securities of
such series, such Indenture or for any remedy thereunder, unless (i) such Holder
has previously given to the applicable Trustee written notice of a continuing
Event of Default under such Indenture, (ii) with respect to certain Events of
Default designated in the Prospectus Supplement related to a series of Debt
Securities, if any, the Holders of at least 25% in principal amount of the
outstanding Debt Securities of such series issued under such Indenture have made
written request and offered reasonable indemnity to the Trustee to institute
such proceeding as Trustee under such Indenture, and (iii) with respect to
certain Events of Default designated in the Prospectus Supplement related to a
series of Debt Securities, if any, the Trustee with respect to that series has
not received from the Holders of a majority in principal amount of the
outstanding Debt Securities of such series a direction inconsistent with such
request and the Trustee has failed to institute such proceeding within 60 days
after receipt of such notice. Such limitations do not apply, however, to a suit
instituted by a Holder of a Debt Security of a series for the enforcement of
payment of the principal of or premium, if any, or interest on such Debt
Security on or after the respective due dates expressed in such Debt Security.
During the existence of an Event of Default, the applicable Trustee is
required to exercise such rights and powers vested in it under the related
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs. Subject to the provisions of the applicable Indenture
relating to the duties of the Trustee thereunder, in case an Event of Default
shall occur and be continuing, the Trustee is not under any obligation to
exercise any of its rights or powers under such Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable security or indemnity. Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in principal amount of
the outstanding Debt Securities of any series have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee under the
applicable Indenture.
The Company is required to furnish to each Trustee an annual statement as to
the performance by the Company of its obligations under the applicable Indenture
and as to any default in such performance.
SATISFACTION AND DISCHARGE OF THE INDENTURES AND THE DEBT SECURITIES
The Indentures will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of Debt Securities of any series
outstanding under the applicable Indenture, as expressly provided for therein)
as to such series when either (i) all Debt Securities of such series outstanding
thereunder theretofore authenticated and delivered (except for lost, stolen or
destroyed Debt Securities of such series which have been replaced or paid) have
been delivered to the applicable Trustee for cancellation and the Company has
paid all sums payable by it under the related Indenture or (ii) all Debt
Securities of such series not theretofore delivered to the related Trustee for
cancellation (a) have become due and payable, or (b) will become due and payable
within one year, or (c) are to be called for redemption within one year, and the
Company has irrevocably deposited or caused to be deposited with such Trustee
funds in an amount sufficient to pay the entire indebtedness on the Debt
Securities of such series not theretofore delivered to such Trustee for
cancellation, for principal (and premium, if any) and interest to the date of
deposit (if the Debt Securities of such series are then due and payable) or to
the applicable maturity or redemption date (as the case may be), and the Company
has paid all other sums payable by it under the applicable Indenture.
MODIFICATION AND WAIVER
Modifications and amendments of the applicable Indenture or the Debt
Securities of any series may be made by the Company and the applicable Trustee
with the consent of the Holders of not less than a
23
<PAGE>
majority in aggregate principal amount of the outstanding Debt Securities of
such series; PROVIDED, HOWEVER, that no such modification or amendment may,
without the consent of the Holder of each outstanding Debt Security of such
series, (i) change the stated maturity of the principal of, or premium, if any,
or any installment of interest on, any Debt Securities of such series, (ii)
reduce the principal amount of, or the premium, if any, or interest on, the Debt
Securities of such series, (iii) change the coin or currency in which any Debt
Securities of such series or any premium or the interest thereon is payable,
(iv) impair the right to institute suit for the enforcement of any payment on or
with respect to the Debt Securities of such series, (v) reduce the percentage in
principal amount of outstanding Debt Securities of such series necessary to
waive compliance with certain provisions of the applicable Indenture or to waive
certain defaults, (vi) modify any of the provisions relating to supplemental
indentures requiring the consent of Holders or relating to the waiver of past
defaults, except to increase the percentage of outstanding Debt Securities of
such series required for such actions or to provide that certain other
provisions of the applicable Indenture cannot be modified or waived without the
consent of the Holder of each Debt Security of such series affected thereby, or
(vii) modify any of the provisions of the Indenture applicable to a series of
Subordinated Debt Securities relating to the subordination of the Subordinated
Debt Securities of such series in a manner adverse to the Holders thereof.
The Holders of a majority in aggregate principal amount of the Debt
Securities of any series then outstanding under any Indenture may waive
compliance with certain restrictive covenants and provisions of such Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets to, any Person, unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or disposition shall have been made
shall be a corporation organized and existing under the laws of the United
States, any State thereof or the District of Columbia, and shall assume by a
supplemental indenture all the obligations of the Company under the Outstanding
Debt Securities and the Indentures; (ii) immediately before and immediately
after such transaction, after giving effect thereto, no Default or Event of
Default shall have occurred and be continuing; and (iii) immediately after such
transaction, and after giving effect thereto, the Person formed by or surviving
any such consolidation or merger or to which such sale, assignment, transfer,
lease or conveyance or disposition shall have been made shall have a Cash Flow
Ratio not in excess of 9 to 1.
DEFEASANCE
Unless the Prospectus Supplement relating to the Offered Debt Securities
otherwise provides, the Company at its option at any time may terminate all of
its obligations with respect to the Debt Securities of any series
("defeasance"), except for certain obligations, including those regarding the
Defeasance Trust (as defined below) and obligations to register the transfer or
exchange of the Debt Securities of such series, to replace mutilated, destroyed,
lost or stolen Debt Securities of such series and to maintain agencies in
respect of the Debt Securities of such series. The Company may also at any time
terminate its obligations under the covenants set forth in the applicable
Indenture, which are described under "Certain Covenants of the Company", and any
omission to comply with such obligations shall not constitute a Default or an
Event of Default with respect to the Debt Securities of such series ("covenant
defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit in trust, for the benefit of the Holders, with
the applicable Trustee money or U.S. government obligations, or a combination
thereof, in such amounts as will be sufficient to pay the principal of and
premium, if any, and interest on the Debt Securities of such series to
redemption or maturity (the "Defeasance Trust"), (ii) the Company must deliver
opinions of counsel to the effect that such Holders will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner
24
<PAGE>
and at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred (in the case of defeasance, such opinion must refer
to and be based upon a ruling of the Internal Revenue Service or a change in
applicable federal income tax laws), (iii) the Company must comply with certain
other conditions, and (iv) in the case of Subordinated Debt Securities, no event
or condition shall exist that, pursuant to certain provisions described under
"Subordination of Subordinated Debt Securities" below, would prevent the Company
from making payments of principal of and premium, if any, and interest on the
Debt Securities of such series at the date of the irrevocable deposit referred
to above or at any time during the period ending on the 91st day after such
deposit date.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The indebtedness represented by the Subordinated Debt Securities is
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 Subordinated Debt Securities of
any series or before any acquisition of Subordinated Debt Securities of any
series 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 Subordinated 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 Subordinated Debt Securities (other than
payments made in Junior Securities) or to acquire any of the Subordinated Debt
Securities or on account of the redemption provisions of the Subordinated Debt
Securities (except mandatory redemption payments made, in accordance with the
terms of the Subordinated Debt Securities, in Subordinated Debt Securities
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 Subordinated Indenture will provide that, upon any payment by or
distribution of the assets of the Company to creditors upon any dissolution,
winding up, liquidation bankruptcy, reorganization, assignment for the benefit
of creditors, or any insolvency, receivership or similar proceeding relating to
the Company, all Senior Indebtedness must be paid in full, or such payment duly
provided for, before any payment or distribution (other than in Junior
Securities) is made on account of the principal of or premium, if any, or
interest on the Subordinated Debt Securities of any series.
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 Subordinated Debt
Securities may recover more, ratably, than the Holders of the Subordinated Debt
Securities.
25
<PAGE>
A Holder of Subordinated Debt Securities by his acceptance of Subordinated
Debt Securities agrees to be bound by such provisions and authorizes and
expressly directs the Subordinated Trustee, on his behalf to take such action as
may be necessary or appropriate to effectuate the subordination provided for in
the Subordinated Indenture and appoints the Subordinated Trustee his
attorney-in-fact for such purpose.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Indebtedness, which may include indebtedness that is senior to
the Subordinated Debt Securities, but subordinate to other obligations of the
Company. The Senior Debt Securities, when issued, will constitute Senior
Indebtedness.
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
REGARDING THE TRUSTEES
The Indentures contain certain limitations on the right of the respective
Trustees, should they become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize for their own accounts on certain
property received in respect of any such claim as security or otherwise. The
Trustees will be permitted to engage in certain other transactions; however, if
they acquire any conflicting interest and there is a default under the Debt
Securities, they must eliminate such conflict or resign.
Any Trustee may resign or be removed with respect to one or more series of
Debt Securities and a successor Trustee may be appointed to act with respect to
such series. In the event that two or more persons are acting as Trustee with
respect to different series of Debt Securities, each such Trustee shall be
a Trustee of a trust under the related Indenture separate and apart from the
trust administered by any other such Trustee, and any action described herein to
be taken by the "Trustee" may then be taken by each such Trustee with respect
to, and only with respect to, the one or more series of Debt Securities for
which it is Trustee.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities to one or more underwriters for
public offering and sale by them or may sell the Debt Securities to investors
directly or through agents. Any such underwriter or agent involved in the offer
and sale of the Debt Securities will be named in the related Prospectus
Supplement. The Company has reserved the right to sell the Debt Securities
directly to investors on its own behalf in those jurisdictions where it is
authorized to do so.
Underwriters may offer and sell the Debt Securities at a fixed price or
prices that may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Company also may, from time to time, authorize dealers, acting as the Company's
agents, to offer and sell the Debt Securities upon such terms and conditions as
set forth in the related Prospectus Supplement. In connection with the sale of
the Debt Securities, underwriters may receive compensation from the Company in
the form of underwriting discounts or commissions and may also receive
commissions from purchasers of the Debt Securities for whom they may act as
agent. Underwriters may sell the Debt Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions (which may be changed from
time to time) from the purchasers for whom they may act as agents.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of the Debt Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the related Prospectus Supplement. Dealers and agents
26
<PAGE>
participating in the distribution of the Debt Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Debt Securities may be deemed to be
underwriting discounts and commissions under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution towards certain civil
liabilities, including any liabilities under the Securities Act.
Until the distribution of the Debt Securities is completed, rules of the
Commission may limit the ability of the Underwriters to bid for and purchase the
Debt Securities. As an exception to these rules, the Underwriters are permitted
to engage in certain transactions that stabilize the price of the Debt
Securities. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Debt Securities. If the
Underwriters create a short position in the Debt Securities in connection with
the offering, I.E., if they sell more Debt Securities than are set forth on the
cover page of the applicable Prospectus Supplement, the Underwriters may reduce
that short position by purchasing Debt Securities in the open market. The
Underwriters may also impose a penalty bid on certain Underwriters. This means
that if the Underwriters purchase the Debt Securities in the open market to
reduce the Underwriters' short position or to stabilize the price of the Debt
Securities, they may reclaim the amount of the selling concession from the
Underwriters who sold those shares as part of the offering. In general,
purchases of a security for the purpose of stabilization or to reduce a short
position could cause the price of the security to be higher than it might be in
the absence of such purchases. The imposition of a penalty bid might also have
an effect on the price of a security to the extent that it were to discourage
resales of the security.
Any Debt Securities issued hereunder will be new issues of securities with
no established trading market. Any underwriters or agents to or through whom
such Debt Securities are sold by the Company for public offering and sale may
make a market in such Debt Securities, but such underwriters or agents will not
be obligated to do so and may discontinue any market at any time without notice.
No assurance can be given as to the liquidity of the trading market for any such
Debt Securities.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with, and perform services for, the Company and certain
of its affiliates in the ordinary course of business.
VALIDITY OF THE DEBT SECURITIES
The validity of any Debt Securities issued hereunder will be passed upon for
the Company by Sullivan & Cromwell, New York, New York, counsel to the Company.
The validity of any Debt Securities issued hereunder will be passed upon for any
underwriters by Shearman & Sterling, New York, New York.
EXPERTS
The consolidated financial statements and schedule of the Company and its
subsidiaries as of December 31, 1996 and 1995 and for each of the years in the
three-year period ended December 31, 1996 that are incorporated in this
Prospectus 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, 1996 and 1995 and for each of the years in the
three-year period ended December 31, 1996 that are incorporated in this
Prospectus 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.
27
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 ANY 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-11
The Company..................................... S-17
Recent Developments............................. S-19
Use of Proceeds................................. S-28
Capitalization.................................. S-29
Unaudited Condensed Pro Forma Consolidated
Financial Information......................... S-31
Description of Debentures....................... S-38
Underwriting.................................... S-42
Validity of Debentures.......................... S-43
Experts......................................... S-43
PROSPECTUS
Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 2
The Company..................................... 3
Risk Factors.................................... 5
Use of Proceeds................................. 9
Deficiency of Earnings Available to Cover Fixed
Charges....................................... 9
Description of Debt Securities.................. 10
Plan of Distribution............................ 26
Validity of the Debt Securities................. 27
Experts......................................... 27
</TABLE>
$300,000,000
[LOGO]
CABLEVISION SYSTEMS
CORPORATION
7 7/8% SENIOR DEBENTURES DUE 2018
---------------------
PROSPECTUS SUPPLEMENT
--------------------------
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
February 3, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
