SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
------------------
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _________________
Commission File Registrant; State of Incorporation; IRS Employer
Number Address and Telephone Number Identification No.
- ------ ---------------------------- ------------------
1-14764 Cablevision Systems Corporation 11-3415180
Delaware
1111 Stewart Avenue
Bethpage, New York 11714
(516) 803-2300
1-9046 CSC Holdings, Inc. 11-2776686
Delaware
1111 Stewart Avenue
Bethpage, New York 11714
(516) 803-2300
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Cablevision Systems Corporation Yes |X| No |_|
CSC Holdings, Inc. Yes |X| No |_|
Number of shares of common stock outstanding as of November 2, 1999:
Cablevision Systems Corporation Class A Common Stock - 129,808,421
Cablevision Systems Corporation Class B Common Stock - 43,126,836
CSC Holdings, Inc. Common Stock - 1,000
================================================================================
<PAGE>
TABLE OF CONTENTS
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three and Nine Months ended September 30, 1999
and 1998 (unaudited)..........................................3
Condensed Consolidated Balance Sheets -
September 30, 1999 (unaudited) and December 31, 1998..........4
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 30, 1999 and 1998 (unaudited).....6
Notes to Condensed Consolidated Financial Statements
(unaudited)...................................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................12
PART II - OTHER INFORMATION...................................................33
CSC HOLDINGS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three and Nine Months ended September 30, 1999 and 1998
(unaudited)..................................................34
Condensed Consolidated Balance Sheets -
September 30, 1999 (unaudited) and December 31, 1998.........35
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 30, 1999 and 1998 (unaudited)....37
Notes to Condensed Consolidated Financial Statements
(unaudited)..................................................38
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................43
PART II - OTHER INFORMATION...................................................44
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues .................................. $ 2,782,327 $ 2,287,789 $ 902,310 $ 806,871
----------- ----------- ----------- -----------
Operating expenses:
Technical and operating ................ 1,074,503 926,038 317,372 297,234
Cost of sales .......................... 336,863 226,329 118,667 109,811
Selling, general and
administrative ....................... 878,734 613,410 273,898 204,855
Depreciation and amortization .......... 627,909 497,868 212,737 178,922
----------- ----------- ----------- -----------
2,918,009 2,263,645 922,674 790,822
----------- ----------- ----------- -----------
Operating profit (loss) .......... (135,682) 24,144 (20,364) 16,049
----------- ----------- ----------- -----------
Other income (expense):
Interest expense ....................... (344,075) (317,969) (120,517) (106,438)
Interest income ........................ 6,937 20,016 2,077 6,754
Equity in net loss of affiliates ....... (8,857) (19,324) (4,497) (4,431)
Gain on sale of programming interests
and cable assets, net ............... -- 152,683 -- 11,195
Write off of deferred financing costs .. (4,425) (4,717) (19) (3,101)
Provision for preferential payment to
related party ........................ -- (980) -- --
Minority interests ..................... (88,796) (94,570) (32,521) (24,578)
Miscellaneous, net ..................... (9,659) (23,052) (2,222) (9,064)
----------- ----------- ----------- -----------
(448,875) (287,913) (157,699) (129,663)
----------- ----------- ----------- -----------
Net loss .................................. $ (584,557) $ (263,769) $ (178,063) $ (113,614)
=========== =========== =========== ===========
Basic and diluted net loss per common share $ (3.84) $ (1.90) $ (1.17) $ (.75)
=========== =========== =========== ===========
Average number of common shares
outstanding (in thousands) ............. 152,081 139,030 152,461 150,609
=========== =========== =========== ===========
</TABLE>
See accompanying notes to
condensed consolidated financial statements.
-3-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
ASSETS (unaudited)
<S> <C> <C>
Cash and cash equivalents .................................... $ 65,443 $ 173,826
Accounts receivable trade (less allowance for doubtful
accounts of $40,363 and $34,377) .......................... 204,834 197,726
Notes and other receivables .................................. 168,262 188,455
Inventory, prepaid expenses and other assets ................. 243,596 206,073
Property, plant and equipment, net ........................... 2,800,716 2,506,834
Investments in affiliates .................................... 284,380 276,231
Advances to affiliates ....................................... 46,654 36,964
Feature film inventory ....................................... 298,017 293,310
Net assets held for sale ..................................... 13,949 11,006
Franchises, net of accumulated amortization of
$779,352 and $640,735 ..................................... 712,037 850,653
Affiliation and other agreements, net of accumulated
amortization of $221,689 and $181,928 ..................... 169,889 206,456
Excess costs over fair value of net assets acquired and
other intangible assets, net of accumulated amortization of
$869,891 and $775,557 ..................................... 1,958,870 2,003,128
Deferred financing, acquisition and other costs, net of
accumulated amortization of $47,921 and $41,882 ........... 116,656 110,400
---------- ----------
$7,083,303 $7,061,062
========== ==========
</TABLE>
See accompanying notes
to condensed consolidated financial statements.
-4-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(continued)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
LIABILITIES AND STOCKHOLDERS' DEFICIENCY (unaudited)
<S> <C> <C>
Accounts payable ............................................ $ 399,092 $ 423,039
Accrued liabilities ......................................... 1,004,392 885,488
Feature film and contract obligations ....................... 332,521 373,722
Deferred revenue ............................................ 348,453 334,213
Bank debt ................................................... 2,047,111 2,051,549
Senior notes and debentures ................................. 2,692,430 2,194,443
Subordinated notes and debentures ........................... 1,048,476 1,048,375
Capital lease obligations and other debt .................... 93,585 63,241
----------- -----------
Total liabilities ........................................ 7,966,060 7,374,070
----------- -----------
Minority interests .......................................... 613,724 719,007
----------- -----------
Preferred stock of CSC Holdings, Inc. ....................... 1,684,958 1,579,670
----------- -----------
Commitments and contingencies
Stockholders' deficiency:
Preferred Stock, $.01 par value, 10,000,000 shares
authorized, none issued ............................. -- --
Class A Common Stock, $.01 par value, 200,000,000 shares
authorized, 109,611,552 and 108,267,606 shares issued 1,096 1,083
Class B Common Stock, $.01 par value, 80,000,000 shares
authorized, 43,126,836 and 43,226,836 shares issued . 431 432
Paid-in capital .......................................... 401,785 386,495
Accumulated deficit ...................................... (3,584,252) (2,999,695)
----------- -----------
(3,180,940) (2,611,685)
Treasury stock, at cost (7,118 shares) ................... (499) --
----------- -----------
Total stockholders' deficiency ........................... (3,181,439) (2,611,685)
----------- -----------
$ 7,083,303 $ 7,061,062
=========== ===========
</TABLE>
See accompanying notes
to condensed consolidated financial statements.
-5-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ....................................................... $ (584,557) $ (263,769)
----------- -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization ................................ 627,909 497,868
Equity in net loss of affiliates ............................. 8,857 19,324
Minority interests ........................................... 66,886 72,563
Gain on sale of programming interests and cable assets ....... -- (152,683)
Gain on sale of marketable securities ........................ (10,861) --
Write off of investment in affiliate ......................... 15,100 --
Write off of deferred financing costs ........................ 4,425 4,717
Amortization of deferred financing costs ..................... 6,212 5,875
Amortization of debenture discount ........................... 418 347
(Gain) loss on sale of equipment ............................. 3,269 (1,136)
Changes in assets and liabilities, net of effects of
acquisitions and dispositions ............................ 23,197 98,020
----------- -----------
Net cash provided by operating activities .................... 160,855 281,126
----------- -----------
Cash flows from investing activities:
Net proceeds from sale of programming interests and cable assets -- 437,543
Payments for acquisitions, net of cash acquired ................ (114,447) (165,980)
Proceeds from sale of marketable securities .................... 10,861 --
Capital expenditures ........................................... (595,429) (387,013)
Proceeds from sale of plant and equipment ...................... 722 8,579
Additions to intangible assets ................................. (7,740) (14,822)
Increase in investments in affiliates, net ..................... (32,106) (21,668)
----------- -----------
Net cash used in investing activities ........................ (738,139) (143,361)
----------- -----------
Cash flows from financing activities:
Proceeds from bank debt ........................................ 3,033,291 4,445,647
Repayment of bank debt ......................................... (3,037,729) (5,651,865)
Repayment of senior debt ....................................... -- (112,500)
Repayment of subordinated notes payable ........................ -- (151,000)
Issuance of senior notes and debentures ........................ 497,670 1,296,076
Issuance of common stock ....................................... 11,024 10,699
Purchase of treasury stock ..................................... (499) --
Decrease in obligation to related party ........................ -- (197,183)
Payments of capital lease obligations and other debt ........... (15,407) (8,913)
Additions to deferred financing and other costs ................ (19,449) (19,690)
Redemption of preferred stock of CSC Holdings, Inc. ............ -- (9,410)
----------- -----------
Net cash provided by (used in) financing activities .......... 468,901 (398,139)
----------- -----------
Net decrease in cash and cash equivalents ......................... (108,383) (260,374)
Cash and cash equivalents at beginning of year .................... 173,826 410,141
----------- -----------
Cash and cash equivalents at end of period ........................ $ 65,443 $ 149,767
=========== ===========
</TABLE>
See accompanying notes
to condensed consolidated financial statements.
-6-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
Note 1. The Company and Nature of Operations
CSC Parent Corporation ("CSC Parent") was formed on November 21, 1997 as a
wholly-owned subsidiary of Cablevision Systems Corporation ("Cablevision"). CSC
Parent did not conduct any business activities prior to March 4, 1998, other
than those incident to its formation and the execution of certain documents in
connection with contributions to CSC Parent of certain partnership interests and
assets of Tele-Communications, Inc. (the "TCI Transaction").
In connection with the TCI Transaction, a wholly-owned subsidiary of CSC Parent
was merged with and into Cablevision and Cablevision became a wholly-owned
subsidiary of CSC Parent (the "Merger"). In the Merger, each outstanding share
of Cablevision Class A Common Stock and Cablevision Class B Common Stock was
converted into one share of CSC Parent Class A Common Stock and CSC Parent Class
B Common Stock, respectively. Subsequent to the Merger, Cablevision changed its
name to CSC Holdings, Inc. ("CSC Holdings") and CSC Parent changed its name to
Cablevision Systems Corporation. The Merger was accounted for in a manner
similar to a pooling of interests, whereby the assets and liabilities of CSC
Holdings have been recorded at historical book value.
All share and per share information has been adjusted for two-for-one stock
splits effected on each of March 30, 1998 and August 21, 1998.
Note 2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Cablevision Systems Corporation and its majority owned subsidiaries (the
"Company") have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
Note 3. Responsibility for Interim Financial Statements
The financial statements as of and for the three and nine month periods ended
September 30, 1999 and 1998 presented in this Form 10-Q are unaudited; however,
in the opinion of management, such statements include all adjustments,
consisting solely of normal recurring adjustments, necessary for a fair
presentation of the results for the periods presented.
The interim financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's and CSC
Holdings' Annual Reports on Form 10-K for the year ended December 31, 1998.
The results of operations for the interim periods are not necessarily indicative
of the results that might be expected for future interim periods or for the full
year ending December 31, 1999.
-7-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
Note 4. Reclassifications
Certain reclassifications have been made to the 1998 financial statements to
conform to the 1999 presentation.
Note 5. Loss Per Common Share
Basic and diluted net loss per common share is computed by dividing net loss by
the weighted average number of common shares outstanding. Potential dilutive
common shares were not included in the computation as their effect would be
antidilutive. Loss per share amounts have been adjusted to reflect the
two-for-one stock splits of the Company's common stock effective March 30, 1998
and August 21, 1998.
Note 6. Cash Flows
For purposes of the condensed consolidated statements of cash flows, the Company
considers short-term investments with a maturity at date of purchase of three
months or less to be cash equivalents. The Company paid cash interest expense of
approximately $325,220 and $274,359 for the nine months ended September 30, 1999
and 1998, respectively. The Company's noncash financing and investing activities
for the nine months ended September 30, 1999 and 1998 included capital lease
obligations of $45,751 and $25,610, respectively, incurred when the Company
entered into leases for new equipment, the issuance of common stock valued at
$497,987 in connection with the TCI Transaction in 1998, the issuance of common
stock valued at $4,848 to redeem certain limited partnership interests in a
subsidiary of the Company in 1998, and the receipt of warrants from At Home
Corporation valued at $74,788 in 1998.
Note 7. Acquisition
At various times in 1999, the Company acquired interests in the real property
and assets specifically related to certain movie theaters for an aggregate
purchase price of approximately $27,600. The acquisitions were accounted for as
a purchase with the operations of the acquired theaters being consolidated with
those of the Company as of the acquisition dates. The purchase price will be
allocated to the specific assets acquired when an independent appraisal is
obtained.
In April 1999, ITT Corporation ("ITT") exercised its second put for the
remainder of its minority interest in Madison Square Garden and settled certain
matters between the parties for a payment of approximately $87,000.
Note 8. At Home
As of September 30, 1999 and 1998, deferred revenue derived from the receipt of
At Home warrants, net of amortization taken, amounted to approximately $174,567
and $224,400,
-8-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
respectively. For the nine and three months ended September 30, 1999 and 1998,
the Company recognized approximately $37,602 and $12,534 and $23,734 and
$10,257, respectively, of this deferred revenue.
Note 9. Segment Information
The Company's reportable segments are strategic business units that are managed
separately. The Company evaluates segment performance based on several factors,
of which the primary financial measure is business segment adjusted operating
cash flow (defined as operating income (loss) before depreciation and
amortization and excluding incentive stock plan expense and the costs of year
2000 remediation).
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
------------------------------- --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Telecommunication Services............... $1,601,118 $1,382,392 $ 543,154 $ 497,038
Rainbow Media............................ 815,896 707,177 228,246 205,097
Retail Electronics....................... 396,853 264,771 137,505 130,051
All Other................................ 64,648 230 25,563 66
Intersegment Eliminations................ (96,188) (66,781) (32,158) (25,381)
---------- ---------- ----------- -----------
Total........................... $2,782,327 $2,287,789 $ 902,310 $ 806,871
========== ========== =========== ===========
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
------------------------------- --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Adjusted Operating Cash Flow
Telecommunication Services............... $ 679,320 $ 557,772 $ 232,172 $ 206,323
Rainbow Media............................ 119,451 77,977 44,604 16,435
Retail Electronics....................... (27,005) (16,356) (10,203) (2,876)
All Other................................ (35,193) (1,245) (13,224) (128)
---------- ---------- ----------- -----------
Total........................... $ 736,573 $ 618,148 $ 253,349 $ 219,754
========== ========== =========== ===========
</TABLE>
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<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
A reconciliation of reportable segment amounts to the Company's consolidated
balances is as follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
----------------- ------------------
September 30, September 30,
------------- -------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Total revenue for reportable segments ........... $ 2,813,867 $ 2,354,340 $ 908,905 $ 832,186
Other revenue and intersegment eliminations ..... (31,540) (66,551) (6,595) (25,315)
----------- ----------- ----------- -----------
Total consolidated revenue ................ $ 2,782,327 $ 2,287,789 $ 902,310 $ 806,871
=========== =========== =========== ===========
Adjusted Operating Cash Flow to Net Loss
Total adjusted operating cash flow for reportable
segments .................................. $ 771,766 $ 619,393 $ 266,573 $ 219,882
Other adjusted operating cash flow deficit ...... (35,193) (1,245) (13,224) (128)
Items excluded from adjusted operating cash flow:
Depreciation and amortization ............. (627,909) (497,868) (212,737) (178,922)
Incentive stock plan expense .............. (216,388) (96,136) (49,391) (24,783)
Year 2000 remediation ..................... (27,958) -- (11,585) --
Interest expense .......................... (344,075) (317,969) (120,517) (106,438)
Interest income ........................... 6,937 20,016 2,077 6,754
Equity in net loss of affiliates .......... (8,857) (19,324) (4,497) (4,431)
Gain on sale of programming interests and
cable assets, net .................... -- 152,683 -- 11,195
Write off of deferred financing costs ..... (4,425) (4,717) (19) (3,101)
Provision for preferential payment to
related party ........................ -- (980) -- --
Minority interests ........................ (88,796) (94,570) (32,521) (24,578)
Miscellaneous, net ........................ (9,659) (23,052) (2,222) (9,064)
----------- ----------- ----------- -----------
Net loss ........................ $ (584,557) $ (263,769) $ (178,063) $ (113,614)
=========== =========== =========== ===========
</TABLE>
Substantially all revenues and assets of the Company's reportable segments are
attributed to or located in the United States.
The Company does not have a single external customer which represents 10 percent
or more of its consolidated revenues.
Note 10. Financial Instruments
In July 1999, the Company entered into a $100 million facility with a third
party for the Company to acquire a beneficial interest in shares of its Class A
common stock through a forward swap contract facility that is available through
June 2000 with a final maturity date for all executed swaps of February 2001.
The terms of the facility provide for the settlement of any obligations of the
Company thereunder either in cash or the Company's Class A common stock. The
Company's obligation is guaranteed by CSC Holdings. Currently, there are no
outstanding contracts under this facility.
-10-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
Note 11. Recent Developments
In September 1999, CSC Holdings exercised its right to redeem all of its
outstanding shares of 8 1/2% Series I Cumulative Convertible Exchangeable
Preferred Stock ("Series I Preferred"). The redemption occurred on November 2,
1999, at a price equal to 102.8% of the liquidation preference, plus accrued
dividends. Investors held the Series I Preferred through interests in depositary
shares (each of which represented a 1/10th interest in a share of the Series I
Preferred) which were redeemable simultaneously. Each depositary share was
convertible into approximately 1.4828 shares of the Company's Class A Common
Stock. As of November 8, 1999, 13,797,625 depositary shares out of 13,800,000
depositary shares outstanding had been converted into 20,458,925 shares of the
Company's Class A Common Stock, with the remaining 2,375 depositary shares being
redeemed for cash.
In September 1999, the Company announced that it was pursuing strategic
alternatives for operation of its cable television systems in the greater
Boston, Massachusetts and Cleveland, Ohio metropolitan areas, as well as in
Kalamazoo, Michigan.
-11-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report 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;
(vi) other risks and uncertainties inherent in the cable television business;
(vii) financial community and rating agency perceptions of the Company and its
business, operations, financial condition and the industry in which it
operates; and
(viii) the factors described in the Company's registration statement on Form
S-3, including the section entitled "Risk Factors" contained therein.
The information contained herein concerning Year 2000 issues ("Y2K") constitutes
forward looking information. The identification and remediation of Y2K issues is
a technological effort that has never been undertaken before and estimates of
the outcome, time and expense of this endeavor are, for that reason,
particularly hard to make with any certainty. As a result, the Company's
estimates may prove to be materially inaccurate. More specifically, the
Company's forecasts may prove to be wrong for the following reasons, among
others:
(i) the Company's forecasts are dependent upon the representations of third
parties which may be inaccurate or mistaken;
(ii) the nature of the Y2K issue is such that detection of all issues is
difficult and cannot be assured and, as a result, problems may exist
which have not been, and are not, identified in a timely manner;
(iii) because of the lack of experience with problems of this nature and
magnitude, it is difficult to estimate remediation costs with accuracy;
(iv) remediation requires the efforts of third parties whose performance is
beyond the control of the Company; and
(v) because the Y2K issues are so widespread and because the number of third
parties who can provide meaningful remediation services is limited, the
Company may have difficulty obtaining the timely assistance of such third
parties, particularly as such services are needed closer to January 1,
2000.
The Company disclaims any obligation to update the forward-looking statements
contained or incorporated by reference herein.
-12-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Recent Transactions
1999 Acquisitions. In April 1999, CSC Holdings purchased ITT's remaining
minority interest in Madison Square Garden. In February 1999, the Company
purchased certain theater assets from Loews Cineplex Entertainment Corporation
("Loews").
1998 Acquisitions and Dispositions. In December 1998, the net assets of
Clearview Cinema Group, Inc. ("Clearview") and certain assets of Loews were
acquired. In June 1998, CSC Holdings purchased 50% of ITT's then remaining
minority interest in Madison Square Garden. In March 1998, the Company acquired
certain cable television systems in New York and New Jersey from
Tele-Communications, Inc. (the "TCI Systems"). In addition, in February 1998,
Cablevision Electronics Investments, Inc. ("Cablevision Electronics") acquired
substantially all of the assets associated with 40 The Wiz consumer electronics
store locations (the "Wiz Transaction").
In 1998, CSC Holdings completed the sale of substantially all of the assets of
U.S. Cable Television Group, L.P. ("U.S. Cable") and the sale of several smaller
cable television systems. In October 1998, CSC Holdings transferred its cable
television system in Rensselaer, New York plus approximately $16 million in cash
to Time Warner in exchange for Time Warner's Litchfield, Connecticut system. In
addition, in January 1998, Rainbow Media Holdings, Inc. ("Rainbow Media")
completed the sale of an interest in a regional sports programming business.
The above transactions completed in 1999 and 1998 are collectively referred to
as the "Net Acquisitions."
-13-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Results of Operations
The following tables set forth on an unaudited historical basis certain items
related to operations as a percentage of net revenues for the periods indicated.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------------------------
1999 1998
------------------------- ----------------------- (Increase)
% of Net % of Net Decrease
Amount Revenues Amount Revenues in Net Loss
------ -------- ------ -------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues ................................. $ 902,310 100% $ 806,871 100% $ 95,439
Operating expenses:
Technical and operating .............. 317,372 35 297,234 37 (20,138)
Cost of sales ........................ 118,667 13 109,811 14 (8,856)
Selling, general and administrative .. 273,898 30 204,855 25 (69,043)
Depreciation and amortization ........ 212,737 24 178,922 22 (33,815)
--------- --------- ---------
Operating profit (loss) .................. (20,364) (2) 16,049 2 (36,413)
Other income (expense):
Interest expense, net ................ (118,440) (13) (99,684) (12) (18,756)
Equity in net loss of affiliates ..... (4,497) (1) (4,431) (1) (66)
Gain on sale of programming interests
and cable assets, net .............. -- -- 11,195 1 (11,195)
Write off of deferred financing costs (19) -- (3,101) -- 3,082
Minority interests ................... (32,521) (4) (24,578) (3) (7,943)
Miscellaneous, net ................... (2,222) -- (9,064) (1) 6,842
--------- --------- ---------
Net loss ................................. $(178,063) (20)% $(113,614) (14)% $ (64,449)
========= ========= =========
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------
1999 1998
------------------------- ----------------------- (Increase)
% of Net % of Net Decrease
Amount Revenues Amount Revenues in Net Loss
------ -------- ------ -------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues ................................. $ 2,782,327 100% $ 2,287,789 100% $ 494,538
Operating expenses:
Technical and operating .............. 1,074,503 38 926,038 40 (148,465)
Cost of sales ........................ 336,863 12 226,329 10 (110,534)
Selling, general and administrative .. 878,734 32 613,410 27 (265,324)
Depreciation and amortization ........ 627,909 23 497,868 22 (130,041)
----------- ----------- -----------
Operating profit (loss) .................. (135,682) (5) 24,144 1 (159,826)
Other income (expense):
Interest expense, net ................ (337,138) (12) (297,953) (13) (39,185)
Equity in net loss of affiliates ..... (8,857) (1) (19,324) (1) 10,467
Gain on sale of programming interests
and cable assets, net .............. -- -- 152,683 7 (152,683)
Write off of deferred financing costs (4,425) -- (4,717) -- 292
Provision for preferential payment to
related party ...................... -- -- (980) -- 980
Minority interests ................... (88,796) (3) (94,570) (4) 5,774
Miscellaneous, net ................... (9,659) -- (23,052) (1) 13,393
----------- ----------- -----------
Net loss ................................. $ (584,557) (21)% $ (263,769) (11)% $ (320,788)
=========== =========== ===========
</TABLE>
-14-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Comparison of Three and Nine Months ended September 30, 1999 versus Three and
Nine Months ended September 30, 1998.
Consolidated Results
Revenues for the three and nine months ended September 30, 1999 increased $95.4
million (12%) and $494.5 million (22%), respectively, as compared to revenues
for the same periods in the prior year. Approximately $38.2 million (5%) and
$274.2 million (12%), respectively, of the increase was attributable to the Net
Acquisitions; approximately $34.9 million (4%) and $151.8 million (7%),
respectively, was from increases in other revenue sources such as Rainbow
Media's programming services, revenue derived from the developing telephone and
modem businesses, revenue recognized in connection with the At Home transaction
and revenue from advertising on the Company's cable television systems; and
approximately $13.6 million (2%) and $42.8 million (2%), respectively, resulted
from higher revenue per subscriber. The remaining increase of $8.7 million (1%)
and $25.7 million (1%), respectively, was attributable to internal growth in the
average number of subscribers during the periods.
Technical and operating expenses for the three and nine months ended September
30, 1999 increased $20.1 million (7%) and $148.5 million (16%), respectively,
compared to the same periods in 1998. Approximately $19.3 million (7%) and $75.4
million (8%), respectively, was attributable to the Net Acquisitions, with the
remaining $.8 million and $73.1 million (8%), respectively, attributable to
increased costs directly associated with the growth in subscribers and revenues
discussed above, as well as to increases in programming costs for cable
television services, partially offset by lower expenses attributable to the
closing of Radio City Music Hall for restoration and fewer events at Madison
Square Garden. As a percentage of revenues, technical and operating expenses
decreased 2% during both of the 1999 periods as compared to the 1998 periods.
Cost of sales for the three and nine months ended September 30, 1999 amounted to
approximately $118.7 million and $336.9 million, respectively, (86% and 85%,
respectively, of retail electronics sales) compared to approximately $109.8
million and $226.3 million (84% and 85%, respectively, of retail electronics
sales) for the three months ended September 30, 1998 and from the date of the
Wiz Transaction through September 30, 1998, respectively. Cost of sales include
the cost of merchandise sold, including freight costs incurred, as well as store
occupancy and buying costs for the Company's retail electronics segment.
Selling, general and administrative expenses increased $69.0 million (34%) and
$265.3 million (43%), respectively, for the three and nine months ended
September 30, 1999 over the comparable periods in 1998. Approximately $9.8
million (5%) and $50.6 million (8%), respectively, was directly attributable to
the Net Acquisitions and approximately $24.0 million (12%) and $117.4 million
(19%), respectively, was due to a higher level of charges related to an
incentive stock plan. Approximately $24.4 million (12%) and $72.0 million (12%),
respectively, resulted from additional sales and marketing and administrative
costs and approximately $10.8 million (5%) and $25.3 million (4%), respectively,
was due to year 2000 remediation costs. As a percentage of revenues, selling,
general and administrative expenses increased 5% in both of the 1999 periods
compared to the 1998 periods. Excluding the effects of the incentive stock plan
and the year 2000 remediation costs, as a percentage of revenues such costs
increased 2% for the three months ended
-15-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
September 30, 1999 and remained relatively constant for the nine months ended
September 30, 1999 compared to the same periods in 1998.
Operating profit before depreciation and amortization decreased $2.6 million
(1%) for the three months ended September 30, 1999 and $29.8 million (6%) for
the nine months ended September 30, 1999 as compared to the same periods in
1998. The decrease for the three months ended September 30, 1999 was comprised
of an increase of $24.0 million (12%) in charges related to an incentive stock
plan, partially offset by an increase of $12.3 million (6%) resulting from the
combined effect of the revenue and other expense changes discussed above and an
increase of approximately $9.1 million (5%) attributable to the Net
Acquisitions. The decrease for the nine months ended September 30, 1999 resulted
from the $117.4 million (22%) increase in charges related to an incentive stock
plan, partially offset by an increase of $49.9 million (9%) resulting from the
combined effect of the revenue and other expense changes discussed above and an
increase of approximately $37.7 million (7%) attributable to the Net
Acquisitions. On a pro forma basis, giving effect to the Net Acquisitions as if
they had occurred on January 1, 1998 and excluding the incentive stock plan
charges referred to above and the costs of year 2000 remediation, operating
profit before depreciation and amortization would have increased 11.8% and 12.1%
for the three and nine months ended September 30, 1999 over the comparable 1998
periods. Operating profit before depreciation and amortization is presented here
to provide additional information about the Company's ability to meet future
debt service, capital expenditures and working capital requirements. Operating
profit before depreciation and amortization should be considered in addition to
and not as a substitute for net income (loss) and cash flows as indicators of
financial performance and liquidity as reported in accordance with generally
accepted accounting principles.
Depreciation and amortization expense increased $33.8 million (19%) and $130.0
million (26%), respectively, for the three and nine months ended September 30,
1999 as compared to the same periods in 1998. Approximately $14.8 million (8%)
and $74.8 million (15%), respectively, of the increase was directly attributable
to the Net Acquisitions. The remaining increase of $19.0 million (11%) and $55.2
million (11%), respectively, resulted primarily from depreciation on new plant
assets.
Net interest expense increased $18.8 million (19%) and $39.2 million (13%),
respectively, for the three and nine months ended September 30, 1999 compared to
the same periods in 1998. The net increase is primarily attributable to debt
incurred to fund acquisitions and capital expenditures, partly offset by lower
interest rates.
Equity in net loss of affiliates remained relatively constant for the three
months ended September 30, 1999 and 1998 and decreased to $8.9 million from
$19.3 million for the nine months ended September 30, 1999 compared to the same
period in 1998. Such amounts consist of the Company's share of the net losses of
certain programming businesses in which the Company has varying minority
ownership interests.
Gain on sale of programming interests and cable assets for the three and nine
months ended September 30, 1998 consisted primarily of a gain of approximately
$11.2 million and $135.0 million, respectively, which resulted from the sale of
certain cable television systems. Additionally, the gain for the nine months
ended September 30, 1998 includes a gain of
-16-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
approximately $17.7 million from the sale of an interest in a regional sports
programming business in the first quarter of 1998.
Provision for preferential payment to related party for the three and nine
months ended September 30, 1998 consisted of the expensing of the amount due
with respect to an annual payment to Charles F. Dolan made in connection with
the acquisition of Cablevision of New York City. Effective March 4, 1998, these
preferential payments were terminated upon the retirement of Mr. Dolan's
preferred interest.
Minority interests for the three and nine months ended September 30, 1999 and
1998 include CSC Holdings' preferred stock dividend requirements, Fox Liberty's
40% share of the net income (loss) of Regional Programming Partners, ITT's share
of the net loss of Madison Square Garden through April 8, 1999 and NBC's 25%
share of the net loss of Rainbow Media.
Net miscellaneous expense decreased to $2.2 million and $9.7 million,
respectively, for the three and nine months ended September 30, 1999 compared to
$9.1 million and $23.1 million, respectively, for the same periods in the prior
year. For the three and nine months ended September 30, 1999, miscellaneous
expense included $1.1 million and $4.4 million, respectively, relating to
federal, state and local income taxes and approximately $1.1 million, in each
period, relating to various other items. Additionally, the nine month period in
1999 included a charge of approximately $15.1 million resulting from the write
off of an investment held by Rainbow Media and a gain of approximately $10.9
million resulting from the sale of certain marketable securities. For the three
and nine months ended September 30, 1998, miscellaneous expense included $9.8
million and $19.0 million, respectively, relating to federal alternative minimum
and state income taxes and approximately $.7 million miscellaneous income and
$4.1 million miscellaneous expense, respectively, relating to various other
items.
-17-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Business Segments Results
The Company classifies its business interests into three fundamental areas:
Telecommunication Services, consisting principally of its cable television,
telephone and modem services operations; Rainbow Media, consisting principally
of interests in cable television programming networks and MSG, which owns and
operates professional sports teams, regional cable television networks, live
productions and entertainment venues; and Retail Electronics, which consists of
the operations of Cablevision Electronics' retail electronics stores. The
Company allocates certain costs to each segment based upon its proportionate
estimated usage of services.
Telecommunication Services
The tables below set forth, for the periods presented, certain unaudited
historical financial information and the percentage that those items bear to
revenues for the Company's telecommunication services segment.
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------------
1999 1998
------------------------ -----------------------
% of % of
Amount Revenues Amount Revenues
------ -------- ------ --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues............................................... $ 543,154 100% $ 497,038 100%
Technical and operating expenses....................... 218,150 40 203,809 41
Selling, general and administrative expenses........... 117,814 22 99,266 20
Depreciation and amortization.......................... 152,410 28 133,911 27
----------- -----------
Operating profit............................... $ 54,780 10% $ 60,052 12%
=========== ===========
<CAPTION>
Nine Months Ended September 30,
-----------------------------------------------------
1999 1998
------------------------ -----------------------
% of % of
Amount Revenues Amount Revenues
------ -------- ------ --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues.............................................. $ 1,601,118 100% $ 1,382,392 100%
Technical and operating expenses...................... 645,471 40 562,505 41
Selling, general and administrative expenses.......... 396,049 25 311,049 23
Depreciation and amortization......................... 455,199 28 373,895 27
----------- -----------
Operating profit............................... $ 104,399 7% $ 134,943 10%
=========== ===========
</TABLE>
Revenues for the three and nine months ended September 30, 1999 increased $46.1
million (9%) and $218.7 million (16%), respectively, as compared to revenues for
the same periods in the prior year. Approximately $8.0 million (2%) and $92.9
million (7%), respectively, was attributable to the Net Acquisitions;
approximately $13.6 million (3%) and $42.8 million (3%), respectively, resulted
from higher revenue per subscriber and approximately $8.7 million (2%) and $25.7
million (2%), respectively, was attributable to internal growth in the average
number of subscribers during the periods. In addition, approximately $9.9
million (2%) and $34.6 million (3%), respectively, was attributable to revenues
from the Company's developing telephone and modem businesses and
-18-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
revenue recognized in connection with the At Home transaction. The remaining
increase of approximately $5.9 million and $22.7 million (1%), respectively,
resulted from increases in other revenue sources, including advertising.
Technical and operating expenses for the three and nine months ended September
30, 1999 increased $14.3 million (7%) and $83.0 million (15%), respectively,
over the same periods in 1998. Approximately $12.3 million (6%) and $45.1
million (8%), respectively, was attributable to increased costs directly
associated with the growth in subscribers and revenues discussed above, as well
as to increases in programming costs for cable television services, with the
remaining $2.0 million (1%) and $37.9 million (7%), respectively, attributable
to the Net Acquisitions. As a percentage of revenues, technical and operating
expenses decreased 1% during the three and nine months ended September 30, 1999,
as compared to the same periods in the prior year.
Selling, general and administrative expenses increased $18.5 million (19%) and
$85.0 million (27%), respectively, for the three and nine months ended September
30, 1999 as compared to the same periods in 1998. Approximately $10.5 million
(11%) and $64.2 million (21%), respectively, was due to higher charges related
to an incentive stock plan; approximately $5.9 million (6%) and $8.2 million
(2%), respectively, resulted from increased customer service, subscriber billing
and sales and marketing costs; and approximately $1.6 million (2%) and $4.2
million (1%) was due to year 2000 remediation costs. The remaining increase of
$0.5 million and $8.4 million (3%), respectively, was directly attributable to
the Net Acquisitions. As a percentage of revenues, selling, general and
administrative expenses increased 2% in both the three and nine months ended
September 30, 1999 compared to the same 1998 periods. Excluding the effects of
the incentive stock plan and the year 2000 remediation costs, such costs
remained relatively constant as a percentage of revenues during the three months
ended September 30, 1999 and decreased 2% in the nine months ended September 30,
1999, as compared to the same periods in the prior year.
Depreciation and amortization expense increased $18.5 million (14%) and $81.3
million (22%), respectively, for the three and nine months ended September 30,
1999 over the comparable 1998 periods. Approximately $10.6 million (8%) and
$59.1 million (16%), respectively, of the increase was directly attributable to
the Net Acquisitions. The remaining increase of $7.9 million (6%) and $22.2
million (6%), respectively, resulted primarily from depreciation on new plant
assets.
-19-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Rainbow Media
The tables below set forth, for the periods presented, certain historical
financial information and the percentage that those items bear to revenues for
Rainbow Media.
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------------
1999 1998
------------------------ -----------------------
% of % of
Amount Revenues Amount Revenues
------ -------- ------ --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues............................................. $ 228,246 100% $ 205,097 100%
Technical and operating expenses..................... 111,053 49 117,686 57
Selling, general and administrative expenses......... 102,621 45 83,399 41
Depreciation and amortization........................ 40,228 18 37,404 18
--------- ---------
Operating loss................................ $ (25,656) (11) $ (33,392) (16)%
========= =========
<CAPTION>
Nine Months Ended September 30,
-----------------------------------------------------
1999 1998
------------------------ -----------------------
% of % of
Amount Revenues Amount Revenues
------ -------- ------ --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues............................................. $ 815,896 100% $ 707,177 100%
Technical and operating expenses..................... 471,255 58 426,291 60
Selling, general and administrative expenses......... 335,678 41 250,111 35
Depreciation and amortization........................ 119,592 15 109,761 16
--------- ---------
Operating loss................................ $(110,629) (14) $ (78,986) (11)%
========= =========
</TABLE>
Revenues for the three and nine months ended September 30, 1999 increased $23.1
million (11%) and $108.7 million (15%), respectively, as compared to revenues
for the same periods in the prior year. Approximately $25.7 million (12%) and
$71.4 million (10%), respectively, of the increase was attributable to internal
growth in programming network subscribers, rate increases and new channel
launches. Approximately $8.4 million (4%) and $22.6 million (3%), respectively,
of the net increase was attributable to an increase in advertising revenues. The
increase for the three month period was partially offset by an $11.0 million
(5%) decrease resulting primarily from the temporary closing of Radio City Music
Hall for restoration and fewer events at Madison Square Garden. For the nine
month period, revenues increased $14.7 million (2%) primarily attributable to a
greater number of events at Madison Square Garden, including the Knicks
advancing to the NBA finals and special events during the 1999 period, partially
offset by a decrease in revenues as a result of fewer performances at Radio City
Music Hall due to its closing for restoration.
Technical and operating expenses decreased $6.6 million (6%) for the three
months and increased $45.0 million (11%) for the nine months ended September 30,
1999 over the comparable 1998 periods. The three month decrease consists of
lower expenses of approximately $12.3 million (11%) attributable primarily to
the closing of Radio City Music Hall for restoration and fewer events at Madison
Square Garden. This decrease was partially offset by
-20-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
an increase of $3.3 million (3%) associated with new programming service
launches and an increase of $2.4 million (2%) attributable to other cost
increases directly associated with the increase in revenues, discussed above.
The nine month increase consisted of approximately $18.0 million (5%) which
resulted from a greater number of sporting events, including the Knicks
advancing to the NBA finals, partially offset by fewer concerts and other events
at Madison Square Garden. Increases of approximately $14.1 million (3%) were due
to new programming service launches with the remaining $12.9 million (3%)
increase attributable to those costs directly associated with the increase in
revenues discussed above.
As of percentage of revenues, technical and operating expenses decreased 8% and
2%, respectively, for the three and nine months ended September 30, 1999 over
the comparable periods in 1998.
Selling, general and administrative expenses increased $19.2 million (23%) and
$85.6 million (34%), respectively, for the three and nine months ended September
30, 1999 as compared to the same periods in 1998. Approximately $13.4 million
(16%) and $53.2 million (21%), respectively, of the increase for the three and
nine months was directly attributable to charges for an incentive stock plan.
Approximately $1.6 million (2%) and $22.3 million (9%), respectively, was
attributable to increases in sales and marketing initiatives including the
promotion of new channel launches, advertising related expenses and other
general cost increases. Approximately $4.2 million (5%) and $10.1 million (4%),
respectively, was attributable to year 2000 remediation costs. As a percentage
of revenues, selling, general and administrative expenses increased 4% and 6%,
respectively, for the three and nine month periods. Excluding the effects of the
incentive stock plan and the year 2000 remediation costs, as a percentage of
revenues such costs decreased 3% and 1%, respectively, for the three and nine
months ended September 30, 1999 as compared to the same periods in the prior
year.
Depreciation and amortization expense increased $2.8 million (8%) and $9.8
million (9%), respectively, for the three and nine months ended September 30,
1999 over the comparable periods in 1998 primarily due to depreciation on
additional fixed assets.
-21-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Retail Electronics
The tables below set forth, for the periods presented, certain historical
financial information and the percentage that those items bear to revenues for
the Company's retail electronics segment, Cablevision Electronics. The
information presented is for the three months ended September 30, 1999 and 1998
and for the nine months ended September 30, 1999 and the period from the date of
the Wiz Transaction, February 9, 1998 through September 30, 1998.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------
September 30, 1999 September 30, 1998
------------------------- ------------------------
% of % of
Amount Revenues Amount Revenues
------ -------- ------ --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues............................................ $ 137,505 100% $ 130,051 100%
Cost of sales....................................... 118,667 86 109,811 84
Selling, general and administrative expenses........ 29,766 22 23,116 18
Depreciation and amortization....................... 1,713 1 2,425 2
--------- ---------
Operating loss................................. $ (12,641) (9) $ (5,301) (4)%
========= =========
<CAPTION>
Nine Months Ended Period Ended
September 30, 1999 September 30, 1998
------------------------- ------------------------
% of % of
Amount Revenues Amount Revenues
------ -------- ------ --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues............................................ $ 396,853 100% $ 264,771 100%
Cost of sales....................................... 336,863 85 226,329 85
Selling, general and administrative expenses........ 89,442 23 54,798 21
Depreciation and amortization....................... 4,667 1 3,627 1
--------- ---------
Operating loss................................. $ (34,119) (9) $ (19,983) (8)%
========= =========
</TABLE>
Revenues for the three and nine months ended September 30, 1999 amounted to
approximately $137.5 million and $396.9 million, respectively, compared to
revenues of approximately $130.1 million for the three months ended September
30, 1998 and approximately $264.8 million for the period ended September 30,
1998. The revenues for the period ended September 30, 1998 include operations of
Cablevision Electronics from the date of the Wiz Transaction, February 9, 1998,
through September 30, 1998.
Cost of sales for the three and nine months ended September 30, 1999 amounted to
approximately $118.7 million and $336.9 million (86% and 85% of revenues),
respectively. For the three months ended September 30, 1998 and for the period
ended September 30, 1998, costs of sales amounted to $109.8 million and $226.3
million (84% and 85% of revenues), respectively. Such costs include the cost of
merchandise sold, including freight costs incurred, as well as store occupancy
and buying costs.
Selling, general and administrative expenses amounted to approximately $29.8
million and $89.4 million (22% and 23% of revenues) for the three and nine
months ended September 30, 1999, respectively and $23.1 million and $54.8
million (18% and 21% of revenues) for the three months ended September 30, 1998
and from the date of the Wiz Transaction through September 30, 1998,
respectively. Selling, general and administrative expenses consist of retail
-22-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
store expenses (excluding store occupancy costs), the salaries and commissions
of sales personnel, the costs of advertising, the costs of operating the
distribution center and corporate support functions other than buying.
Depreciation and amortization expense amounted to approximately $1.7 million and
$4.7 million for the three and nine months ended September 30, 1999,
respectively and $2.4 million and $3.6 million for the three months ended
September 30, 1998 and from the date of the Wiz Transaction through September
30, 1998, respectively. Depreciation and amortization expense includes the
depreciation of all property and equipment and the amortization of intangible
assets which resulted from the Wiz Transaction.
Liquidity and Capital Resources
Cablevision Systems Corporation does not have any operations independent of its
subsidiaries. In addition, Cablevision Systems Corporation has no borrowings and
does not have outstanding any securities other than its Class A Common Stock and
Class B Common Stock, on which it does not intend to pay any dividends in the
foreseeable future. Accordingly, Cablevision Systems Corporation does not have
cash needs independent of the needs of its subsidiaries.
Cablevision Systems Corporation is structured as a restricted group and an
unrestricted group of subsidiaries.
The Restricted Group includes all of CSC Holdings' cable operations in and
around the greater New York City Metropolitan area, in and around the greater
Cleveland, Ohio Metropolitan area and in and around the Boston, Massachusetts
Metropolitan area and the commercial telephone operations of the Company's
subsidiary, Cablevision Lightpath, Inc. on Long Island, New York. As of April 4,
1999, the cable television subscribers of the TCI Systems (847,432 at March 31,
1999) became part of the Restricted Group upon the transfer of the TCI Systems
from Cablevision Systems Corporation to CSC Holdings, Inc.
The Unrestricted Group principally includes Rainbow Media, including Madison
Square Garden, other companies engaged in certain development activities ("New
Media"), Cablevision Electronics which acquired substantially all of the assets
associated with 40 The Wiz consumer electronics store locations on February 9,
1998 and Cablevision Cinemas, LLC which owns the Company's motion picture
theater assets.
-23-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
The following table presents selected historical results of operations and other
financial information related to the captioned groups or entities as of and for
the nine months ended September 30, 1999.
<TABLE>
<CAPTION>
Interest Capital
Revenues AOCF* Expense Expenditures
-------- ----- ------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Restricted Group**....................... $1,549,955 $ 678,142 $ 290,534 $ 453,173
New Media................................ 51,163 1,178 99 63,917
Rainbow Media (including MSG and AMC).... 815,896 119,451 41,062 51,783
Retail Electronics....................... 396,853 (27,005) 6,348 14,708
Other (including eliminations)........... (31,540) (35,193) 6,032 11,848
---------- ---------- ---------- ----------
Total ............................... $2,782,327 $ 736,573 $ 344,075 $ 595,429
========== ========== ========== ==========
</TABLE>
- ----------
* Defined as operating income (loss) before depreciation and amortization
and excluding incentive stock plan expense of $216,388 and the costs of
year 2000 remediation of $27,958.
** Includes the TCI Systems.
<TABLE>
<CAPTION>
Restricted Unrestricted
Group Group Total
----- ----- -----
(dollars in thousands)
<S> <C> <C> <C>
Debt and Redeemable Preferred Stock
Senior debt ................................... $1,314,306 $ -- $1,314,306
Senior notes and debentures ................... 2,692,430 -- 2,692,430
Subordinated notes and debentures ............. 1,048,476 -- 1,048,476
---------- ---------- ----------
5,055,212 -- 5,055,212
---------- ---------- ----------
Redeemable preferred stock of CSC Holdings .... 1,365,905 -- 1,365,905
Rainbow Media:
RMHI senior debt .......................... -- 76,403 76,403
AMC senior debt ........................... -- 277,688 277,688
MSG senior debt ........................... -- 359,852 359,852
---------- ---------- ----------
Total Rainbow Media debt ................ -- 713,943 713,943
---------- ---------- ----------
Retail Electronics debt ....................... -- 87,080 87,080
Other debt .................................... -- 25,367 25,367
---------- ---------- ----------
Total debt and redeemable preferred stock $6,421,117 $ 826,390 $7,247,507
========== ========== ==========
</TABLE>
-24-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Restricted Group
The Company believes that, for the Restricted Group, internally generated funds,
together with funds available under the Restricted Group's Credit Agreement,
will be sufficient through 2000 to fund its required spending. Planned
acceleration of the Company's plant upgrade, combined with additional amounts in
respect of the start up and operation of new businesses, such as high speed
internet access and digital video services, the expansion of residential
telephone services and the roll out of non-Long Island based commercial
telephone services, as well as additional investments or acquisitions, will
require raising additional capital. The Company may obtain the requisite funds
through assets sales, the monetization of certain investments, the issuance of
trust preferred securities and/or the incurrence of additional indebtedness.
However, it is the Company's intent to obtain any such additional capital in a
manner that does not adversely affect its debt ratings.
In July 1999, the Company issued $500 million face amount of 8 1/8% Senior Notes
due 2009. The net proceeds of $491 million were used to repay outstanding
borrowings under CSC Holdings' credit facility.
In September 1999, the Company announced that it was pursuing strategic
alternatives for operation of its cable television systems in the greater
Boston, Massachusetts and Cleveland, Ohio metropolitan areas, as well as in
Kalamazoo, Michigan.
In September 1999, the Company announced the redemption of CSC Holdings' Series
I Cumulative Convertible Exchangeable Preferred Stock. A total of 13,797,625
depositary shares (out of 13,800,000 outstanding) have been converted to
20,458,925 shares of the Company's Class A Common Stock, with the remaining
2,375 depositary shares being redeemed for cash.
CSC Holdings and certain other subsidiaries of the Company have a $2.2 billion
revolving credit facility maturing in March 2007 consisting of a $1 billion CSC
Holdings credit facility and a $1.2 billion MFR credit facility for its New
Jersey cable operations.
On November 1, 1999, the Restricted Group had total usage under its existing
credit agreement (including the MFR credit facility) of $1.3 billion and letters
of credit of $39.4 million issued on behalf of CSC Holdings. Unrestricted and
undrawn funds available to the Restricted Group amounted to approximately $847.1
million as of November 1, 1999.
----------------------------------------------
As of November 1, 1999
(in thousands)
----------------------------------------------
CSC
Holdings MFR Total
-------- --- -----
Total facility $1,000,000 $1,200,000 $2,200,000
Outstanding debt 424,000 889,500 1,313,500
Outstanding letters of credit 39,420 -- 39,420
---------- ---------- ----------
Availability $ 536,580 $ 310,500 $ 847,080
========== ========== ==========
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CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
The Credit Agreement contains certain financial covenants that may limit the
Restricted Group's ability to utilize all of the undrawn funds available
thereunder, including covenants requiring the Restricted Group to maintain
certain financial ratios and restricting the permitted uses of borrowed funds.
As of November 1, 1999, CSC Holdings had outstanding interest exchange (swap)
agreements with several of its banks with a total notional value of $475
million. Swaps in the aggregate amount of $250 million require CSC Holdings to
pay a floating rate of interest and have a maturity of two to three years. The
remainder of the swaps require payment of a fixed rate of interest by CSC
Holdings and have a maturity of less than 30 days to nine months. The average
effective annual interest rate as of November 1, 1999, on all Restricted Group
bank debt, including the interest exchange agreements, was approximately 6.5%.
TCI Systems
In May 1998, the TCI Systems entered into an $800 million credit facility which
was reduced by $100 million in July 1998.
On April 4, 1999, the TCI Systems were transferred to CSC Holdings. The
commitments under the TCI facility were terminated and the balance outstanding
was repaid on April 5, 1999 with borrowings under the MFR credit facility.
Rainbow Media
RMHI/AMC
Rainbow Media has a $300 million non-amortizing revolving credit facility
maturing on December 31, 2000, of which $20 million is restricted for specific
purposes. Of the $280 million balance of the facility, a further $180 million is
restricted to provide for repayment of a like amount of inter-company borrowings
from Regional Programming Partners ("RPP") as described below. As of November 1,
1999, there were outstanding borrowings of $51 million, leaving a balance of $49
million available to Rainbow Media under the credit facility as of that date.
On May 12, 1999, American Movie Classics, a wholly-owned subsidiary of Rainbow
Media, closed on a new $425 million credit facility consisting of a $200 million
reducing revolving credit facility and a $225 million amortizing term loan, both
of which mature on March 31, 2006. The amount of the available commitment under
the revolver will not begin to be reduced until June 2004. On May 12, 1999,
American Movie Classics distributed to its parent, Rainbow Media, approximately
$97 million, which Rainbow Media used to repay outstanding borrowings plus
interest and fees under its credit facility. As of November 1, 1999, American
Movie Classics had outstanding borrowings of $254 million, leaving unrestricted
funds available of $171 million.
Both credit facilities contain certain financial covenants that may limit the
ability to utilize all of the undrawn funds available, including covenants
requiring that certain financial ratios be maintained.
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CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
The Company believes that for Rainbow Media and its wholly-owned subsidiaries,
which includes American Movie Classics, internally generated funds, together
with funds available under their credit agreements, will be sufficient through
2000 to meet its projected funding requirements. Repayment of Rainbow Media's
credit facility at maturity may be met by refinancing the facility or funds
provided by other sources, including, without limitation, the Company. There can
be no assurance that Rainbow Media will be able to obtain refinancing or funds
from other sources on acceptable terms or at all.
RPP
In June 1998, Regional Programming Partners ("RPP"), a partnership which is 60%
owned by Rainbow Media and 40% owned by Fox/Liberty Networks, LLC, made an
inter-company loan to Rainbow Media of $180 million, which Rainbow Media used to
repay bank debt. RPP funded this loan from cash on hand. The inter-company loan
is a four year demand note maturing March 31, 2002, which requires quarterly
interest payments at LIBOR plus 7/8% per annum, is subordinated to Rainbow
Media's bank debt and requires that Rainbow Media maintain sufficient
availability under its revolving credit to permit the repayment in full to RPP
if RPP requires the funds for its own operating needs.
MSG
MSG has a $500 million revolving credit facility maturing on December 31, 2004
(the "MSG Credit Facility"). As of November 1, 1999, outstanding debt under the
MSG Credit Facility was $330 million. In addition, MSG had outstanding letters
of credit of $3.3 million resulting in unrestricted and undrawn funds available
of $166.7 million. The MSG Credit Facility contains certain financial covenants
that may limit its ability to utilize all of the undrawn funds available
thereunder, including covenants requiring MSG to maintain certain financial
ratios. The Company believes that for MSG, internally generated funds, together
with funds available under its existing credit agreement, will be sufficient to
meet its projected funding requirements through 2000.
Garden Programming, LLC, an unrestricted subsidiary of MSG, has a $20 million
term loan maturing on July 11, 2002. Garden Programming, LLC has in turn made a
$40 million loan to an unrelated entity, maturing on November 1, 2011.
Retail Electronics
Cablevision Electronics has a $130 million stand alone revolving credit
facility. Under the terms of the credit facility, the total amount of borrowings
available to Cablevision Electronics is subject to an availability calculation
based on a percentage of eligible inventory. On November 1, 1999, total
outstanding debt under the credit facility was $104.7 million with $2.0 million
in additional availability, based on the level of inventory as of that date. CSC
Holdings' investment in Cablevision Electronics was approximately $87.9 million
at September 30, 1999. Cablevision Electronics has received other financial
support of approximately $92.3 million through November 1, 1999 in the form of
letters of credit, guarantees and intercompany loans and receivables primarily
in respect of Cablevision Electronics' inventory purchases.
-27-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
The Company believes that Cablevision Electronics will require additional
financial support from CSC Holdings in respect of planned increases in inventory
purchases and other requirements through 2000 and that funds available under
Cablevision Electronics' credit agreement, together with this additional
financial support, will be sufficient to meet its projected funding requirements
through 2000.
Cablevision Cinemas, LLC
Cablevision Cinemas, LLC has a $15 million revolving credit bank facility
maturing on June 30, 2003. As of November 1, 1999, there was $10 million
outstanding under this bank facility.
In February 1999, Cablevision Cinemas, LLC completed the previously announced
acquisition of a motion picture theater from Loews for an aggregate purchase
price of approximately $21.8 million funded by an equity contribution from CSC
Holdings. In addition, Cablevision Cinemas, LLC acquired certain other movie
theaters for an additional $5.8 million from its available funds under its bank
facility.
The Company believes that for Cablevision Cinemas, LLC, internally generated
funds, together with funds available under the existing credit agreement, will
be sufficient to meet its projected funding requirements through 2000.
Operating Activities
Net cash provided by operating activities amounted to $160.9 million for the
nine months ended September 30, 1999 compared to $281.1 million for the nine
months ended September 30, 1998. The 1999 cash provided by operating activities
consisted primarily of $137.7 million of income before depreciation,
amortization and other non-cash items and changes in assets and liabilities of
$23.2 million.
The 1998 cash provided by operating activities of $281.1 million consisted
primarily of approximately $183.1 million of income before depreciation,
amortization and other non-cash items and changes in assets and liabilities of
$98.0 million.
Investing Activities
Net cash used in investing activities for the nine months ended September 30,
1999 was $738.1 million compared to $143.4 million for the nine months ended
September 30, 1998. The 1999 investing activities consisted of $595.4 million of
capital expenditures, $114.4 million of payments for acquisitions and other
items of $39.2 million, partially offset by proceeds from the sale of marketable
securities of $10.9 million.
Net cash used in investing activities for the nine months ended September 30,
1998 of $143.4 million consisted of $387.0 million of capital expenditures,
$166.0 million of payments for acquisitions and other items of $27.9 million,
partially offset by the net proceeds of $437.5 million from the sale of
programming interests and cable assets.
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<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Financing Activities
Net cash provided by financing activities amounted to $468.9 million for the
nine months ended September 30, 1999 compared to net cash used in financing
activities of $398.1 million for the nine months ended September 30, 1998. In
1999, the Company's financing activities consisted primarily of $497.7 million
derived from the issuance of senior notes and debentures, partially offset by
the net repayment of bank debt of $4.4 million and by other cash payments
aggregating $24.4 million.
Net cash used in financing activities of $398.1 million for the nine months
ended September 30, 1998 consisted primarily of the net repayment of bank debt,
subordinated notes and senior debt of $1,469.7 million, the repayment of an
obligation to a related party of $197.2 million, the redemption of preferred
stock of subsidiary of $9.4 million and other net cash payments aggregating
$17.9 million, partially offset by $1,296.1 million derived from the issuance of
senior notes and debentures.
Year 2000
The year 2000 issue ("Y2K") refers to the inability of certain computerized
systems and technologies to recognize and/or correctly process dates beyond
December 31, 1999. As a result of these issues, the potential exists for
computer system failure or miscalculations by computer programs, which could
cause disruption of the Company's operations.
The Company recognizes the need to ensure that any disruption of its operations
resulting from the Y2K issue is minimized. Accordingly, the Company developed a
plan to identify and address Y2K issues. The Company retained an independent
consulting firm to assist in the development and implementation of this plan.
Pursuant to the Y2K plan, each of the Company's business units has designated a
team (including a Y2K coordinator assisted by a member of the consulting firm)
which is responsible for the Y2K compliance of the systems used by that business
unit. The efforts of each of these business unit teams is coordinated through,
and directed by, a Central Program Management Office (the "CPMO"), consisting of
representatives of the Company's information systems, internal audit,
controllers, legal and finance departments. The CPMO operates under the
direction of the Company's Chief Information Officer, Mr. Thomas Dolan. Y2K
issues that cross business unit lines and cannot be resolved between the CPMO
and the business unit teams, are referred to an Operations Steering Committee
(the "Steering Committee") consisting of the most senior officers of each of the
Company's principal business units. The Steering Committee meets periodically to
review the progress of the Company's Y2K compliance efforts. The Board of
Directors has designated a committee of the Board, consisting of Messrs. James
Dolan, Thomas Dolan and Richard Hochman, to monitor the Company's progress and
report to the full Board.
Y2K Program - Phases
The Company has developed a six phase program to assess and address the Y2K
issue. These phases consist of the following:
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<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Phase One - Awareness - The Company maintains an ongoing program of
communications with its management and employee base to ensure that all
employees are aware of the Y2K issue and the importance of the Company's efforts
to address the issue. This is accomplished, among other means, through the
distribution of memoranda, the establishment and maintenance of an intranet web
site, and meetings and seminars. This phase will continue into 2000 to cover
awareness of potential Y2K issues after January 1, 2000.
Phase Two - Inventory and Assessment - This phase consisted of the Company's
efforts to identify all of the information technology ("IT") and non-IT systems
used in each area of its businesses. Each identified system has been assessed
for its criticality to the Company's businesses and assigned a criticality
rating on a five point scale. We continue to assess the criticality of these
systems to reflect changes in the business environment and greater understanding
of potential Y2K impacts. The scale consists of (1) "Critical" (required for
continued operation); (2) "High" (major business impact); (3) "Medium"
(significant business impact); (4) "Low" (minor business impact); and (5)
"Minimal" (insignificant or no business impact). Additionally, during this phase
the Company contacted the vendors of each of its systems to determine which
systems are Y2K compliant or non-compliant. Based upon its Phase Two review,
which has been completed, the Company believes that approximately 35% of its IT
and non-IT systems may be non-compliant and that approximately 65% of these
non-compliant systems are of a criticality rating of (3) "Medium" (significant
business impact) or above. Following completion of the initial inventory and
assessment, the Company developed procedures to assess compliance of products
and services purchased after completion of the initial inventory. These
procedures include seeking agreements in contracts and purchase orders requiring
vendors to deliver compliant products, as well as testing of all new technology
installations.
Phase Three - Strategy and Planning - During this phase, the Company developed a
testing plan for all compliant systems and developed a strategy for remediating
and testing non-compliant systems. Remediation strategies range from software
upgrades to replacement, discontinuance or bypass of non-compliant systems. The
Company has substantially completed the strategy and planning stage for all of
its systems and continues to develop plans as necessary to address Y2K issues
found in new systems through the ongoing inventory and assessment phases
described above.
Phase Four - Portfolio Transformation/Remediation - During this phase, the
Company executed the remediation strategies for non-compliant systems as
identified during Phase Three. Upon completion of any remediation, inventory
items are tested as described below as part of Phase Five.
Phase Five - Testing - During this phase, which is running concurrently with the
remediation phase, the Company is testing all of its compliant systems (of Level
4 or above), and, in conjunction with its Phase Four remediation efforts, its
non-compliant systems.
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<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Phase Six - Implementation - During this phase, all of the Company's remediated
and tested systems will be redeployed. Evidence of successful implementation is
required for completion of Phase Six.
As of November 8, 1999, the six phases of approximately 97% of the Company's
plans were essentially complete, with the remainder expected to be completed by
mid-December 1999.
The completion of phases across the Company's businesses is not expected to
occur sequentially. As the Company will focus initially on its most critical
systems, it is likely that a number of critical systems will be in Phases Four
and Five, while less critical systems are in Phase Three. It is the Company's
expectation that substantially all IT and non-IT systems with a criticality
rating of 1, 2, 3 and 4 will be tested and implemented by November 30, 1999 with
the remainder expected to be completed by mid-December 1999. However, there can
be no assurance that the Company's expectation will be met.
Costs of Compliance - Because the Company has not completed testing of compliant
or non-compliant systems, it is not possible to predict with certainty the costs
that will be incurred in connection with the Y2K program. Further, in many
cases, the Company planned to replace or upgrade certain non-compliant systems
irrespective of Y2K compliance issues. In such cases the portion of such
expenditure attributable to Y2K issues is often not reasonably determinable.
Based on its review to date, the Company believes that the costs associated with
its Y2K program, including costs of replacing or upgrading non-compliant systems
that were not already scheduled to be replaced or upgraded, accelerating
programs that were already contemplated specifically for the purpose of
addressing Y2K issues, and including both internal and external resources, will
range between $50 to $60 million for its existing businesses. This estimate
includes amounts for the Company's telecommunications systems, including cable,
modem and telephone, for Rainbow Media's programming operations, for Madison
Square Garden including the arena, its professional sports teams, its cable
television networks, and for Radio City Entertainment, for The Wiz, for
Cablevision Cinemas and for corporate and company-wide needs. For the nine
months ended September 30, 1999, the Company recorded approximately $28.0
million of expenses relating to Y2K remediation. Additionally, through September
30, 1999, the Company incurred $6.6 million of capital expenditures. In 1998,
the Company recorded approximately $7.6 million of expenses relating to Y2K
remediation. There can be no assurance that actual expenditures will not deviate
from these estimates and that the amount of such deviation will not be material.
Such expenditures are expected to be funded from cash flow from operations and
borrowings.
Risks of the Company's Y2K Issues - Many of the IT and non-IT systems that are
necessary for the continued operation of the Company's businesses are dependent
upon components that may not be Y2K compliant. While the Company's Y2K
compliance program is designed to identify and remediate these systems in order
to avoid interruption of its operations, there can be no assurance that it will
be able to identify all non-compliant systems or successfully remediate all
those that are identified. Failure of IT or non-IT systems that are necessary
for the operation of the Company's businesses, including, without limitation,
its billing systems, addressable controller and converter systems, purchasing,
finance and inventory systems, marketing databases and point of sale systems,
could have a material adverse effect on the Company.
The Company is dependent upon third-party products and services, such as utility
services and programming uplinks, for the operation of its businesses. While, as
part of the Inventory and
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<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Assessment phase of its Y2K program, the Company has contacted third party
product and service providers to ascertain whether Y2K compliance issues may
exist, it has in many cases not received assurances from such suppliers.
Moreover, in most cases, the Company does not have the ability to verify any
assurances it does receive from third party suppliers. If critical IT or non-IT
systems used by such third party suppliers fail as a result of a Y2K compliance
issue, and as a result of such failure the ability of such supplier to continue
to provide such product or service to the Company is interrupted, the Company's
ability to continue to provide services to its customers may be interrupted.
Such an interruption could have a material adverse effect on the Company. The
Company has developed contingency plans to address those risks, with major risk
areas identified and plans substantially completed. Refinement of those
contingency plans will continue throughout 1999, as information about the
potential risks is received. There can be no assurance that any such plan would
resolve such problems in a satisfactory manner. In addition to the risks
associated with failure of IT systems due to Y2K problems, the failure of non-IT
systems would pose significant risks to the Company. For example, the Company
and its subsidiaries operate facilities for both employees and the public.
Failure of the non-IT systems at such facilities could result in health and
safety risks that could lead to the closure or unavailability of such
facilities. This could result in lost revenues to the Company and the risk of
actions against the Company if the businesses of others are disrupted. Also, the
failure of such non-IT systems could result in injury to individuals which could
expose the Company to actions on, by, or on behalf of such individuals. Subject
to the risks and uncertainties referred to herein, the Company is not aware of
any existing Y2K issue that could reasonably be expected to have a material
adverse effect on the Company.
Accounting Standards Issued But Not Yet Adopted
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"), requires that all derivative
financial instruments, such as interest rate swap contracts, be recognized in
the financial statements and measured at fair value regardless of the purpose or
intent for holding them. Changes in the fair value of derivative financial
instruments are either recognized periodically in income or stockholders' equity
(as a component of comprehensive income), depending on whether the derivative is
being used to hedge changes in fair value or cash flows. FAS 133, as amended, is
effective for fiscal years beginning after June 15, 2000. The Company does not
expect that the adoption of FAS 133 will have a material effect on the Company's
financial condition or results of operations.
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<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Part II. Other Information
Item 1. Legal Proceedings
The Company is party to various lawsuits, some involving substantial
amounts. Management does not believe that such lawsuits will have a
material adverse impact on the financial position of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The index to exhibits is on page 46.
(b) The Company has not filed any Current Reports on Form 8-K with
the Commission during the quarter for which this report is
filed.
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CSC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues ................................ $ 2,782,327 $ 2,287,789 $ 902,310 $ 806,871
----------- ----------- ----------- -----------
Operating expenses:
Technical and operating .............. 1,074,503 926,038 317,372 297,234
Cost of sales ........................ 336,863 226,329 118,667 109,811
Selling, general and
administrative ..................... 878,734 613,410 273,898 204,855
Depreciation and amortization ........ 627,909 497,868 212,737 178,922
----------- ----------- ----------- -----------
2,918,009 2,263,645 922,674 790,822
----------- ----------- ----------- -----------
Operating profit (loss) ........ (135,682) 24,144 (20,364) 16,049
----------- ----------- ----------- -----------
Other income (expense):
Interest expense ..................... (344,075) (317,969) (120,517) (106,438)
Interest income ...................... 6,937 20,016 2,077 6,754
Equity in net loss of affiliates ..... (8,857) (19,324) (4,497) (4,431)
Gain on sale of programming interests
and cable assets, net ............. -- 152,683 -- 11,195
Write off of deferred financing costs (4,425) (4,717) (19) (3,101)
Provision for preferential payment to
related party ...................... -- (980) -- --
Minority interests ................... 42,680 25,435 12,265 16,339
Miscellaneous, net ................... (9,659) (23,052) (2,222) (9,064)
----------- ----------- ----------- -----------
(317,399) (167,908) (112,913) (88,746)
----------- ----------- ----------- -----------
Net loss ................................ (453,081) (143,764) (133,277) (72,697)
Dividend requirements applicable to
preferred stock ...................... (131,476) (120,005) (44,786) (40,917)
----------- ----------- ----------- -----------
Net loss applicable to common shareholder $ (584,557) $ (263,769) $ (178,063) $ (113,614)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to
condensed consolidated financial statements.
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<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
ASSETS (unaudited)
<S> <C> <C>
Cash and cash equivalents ...................................................... $ 65,443 $ 173,826
Accounts receivable trade (less allowance for doubtful accounts of
$40,363 and $34,377) ........................................................ 204,834 197,726
Notes and other receivables .................................................... 168,262 188,455
Inventory, prepaid expenses and other assets ................................... 243,596 206,073
Property, plant and equipment, net ............................................. 2,800,716 2,506,834
Investments in affiliates ...................................................... 284,380 276,231
Advances to affiliates ......................................................... 46,654 36,927
Feature film inventory ......................................................... 298,017 293,310
Net assets held for sale ....................................................... 13,949 11,006
Franchises, net of accumulated amortization of
$779,352 and $640,735 ....................................................... 712,037 850,653
Affiliation and other agreements, net of accumulated amortization of
$221,689 and $181,928 ....................................................... 169,889 206,456
Excess costs over fair value of net assets acquired and other intangible
assets, net of accumulated amortization of $869,891 and $775,557 ............ 1,958,870 2,003,128
Deferred financing, acquisition and other costs, net of
accumulated amortization of $47,921 and $41,882 ............................. 116,656 110,400
---------- ----------
$7,083,303 $7,061,025
========== ==========
</TABLE>
See accompanying notes
to condensed consolidated financial statements.
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<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(continued)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
LIABILITIES AND STOCKHOLDER'S DEFICIENCY (unaudited)
<S> <C> <C>
Accounts payable ............................................................... $ 406,374 $ 423,039
Accrued liabilities ............................................................ 1,004,392 883,841
Feature film and contract obligations .......................................... 332,521 373,722
Deferred revenue ............................................................... 348,453 334,213
Bank debt ...................................................................... 2,047,111 2,051,549
Senior notes and debentures .................................................... 2,692,430 2,194,443
Subordinated notes and debentures .............................................. 1,048,476 1,048,375
Capital lease obligations and other debt ....................................... 93,585 63,241
----------- -----------
Total liabilities ........................................................... 7,973,342 7,372,423
----------- -----------
Minority interests ............................................................. 613,724 719,007
----------- -----------
Series H Redeemable Exchangeable Preferred Stock ............................... 398,065 364,953
----------- -----------
Series M Redeemable Exchangeable Preferred Stock ............................... 967,840 891,386
----------- -----------
Commitments and contingencies
Stockholder's deficiency:
Series A Cumulative Convertible Preferred Stock,
200,000 shares authorized, none issued ................................. -- --
Series B Cumulative Convertible Preferred Stock,
200,000 shares authorized, none issued ................................. -- --
8% Series D Cumulative Preferred Stock, $.01 par value,
112,500 shares authorized, none issued ($100 per share
liquidation preference) ................................................ -- --
8-1/2% Series I Cumulative Convertible Exchangeable Preferred Stock,
$.01 par value, 1,380,000 shares authorized, 1,361,742 and 1,380,000
shares issued and outstanding ($250 per share liquidation preference) .. 14 14
Common Stock, $1.00 par value, 1,000 shares authorized,
1,000 shares issued .................................................... 1 1
Paid-in capital ............................................................. 756,628 754,995
Accumulated deficit ......................................................... (3,626,311) (3,041,754)
----------- -----------
Total stockholder's deficiency .............................................. (2,869,668) (2,286,744)
----------- -----------
$ 7,083,303 $ 7,061,025
=========== ===========
</TABLE>
See accompanying notes
to condensed consolidated financial statements.
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<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ....................................................... $ (453,081) $ (143,764)
----------- -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization ................................ 627,909 497,868
Equity in net loss of affiliates ............................. 8,857 19,324
Minority interests ........................................... (42,680) (25,435)
Gain on sale of programming interests and cable assets ....... -- (152,683)
Gain on sale of marketable securities ........................ (10,861) --
Write off of investment in affiliate ......................... 15,100 --
Write off of deferred financing costs ........................ 4,425 4,717
Amortization of deferred financing costs ..................... 6,212 5,875
Amortization of debenture discount ........................... 418 347
(Gain) loss on sale of equipment ............................. 3,269 (1,136)
Changes in assets and liabilities, net of effects of
acquisitions and dispositions ............................ 32,089 94,681
----------- -----------
Net cash provided by operating activities ...................... 191,657 299,794
----------- -----------
Cash flows from investing activities:
Net proceeds from sale of programming interests and cable assets -- 437,543
Payments for acquisitions, net of cash acquired ................ (114,447) (154,387)
Proceeds from sale of marketable securities .................... 10,861 --
Capital expenditures ........................................... (595,429) (387,013)
Proceeds from sale of plant and equipment ...................... 722 8,579
Additions to intangible assets ................................. (6,107) (14,822)
Increase in investments in affiliates, net ..................... (32,106) (21,668)
----------- -----------
Net cash used in investing activities ........................ (736,506) (131,768)
----------- -----------
Cash flows from financing activities:
Proceeds from bank debt ........................................ 3,033,291 4,445,647
Repayment of bank debt ......................................... (3,037,729) (5,651,865)
Repayment of senior debt ....................................... -- (112,500)
Repayment of subordinated notes payable ........................ -- (151,000)
Issuance of senior notes and debentures ........................ 497,670 1,296,076
Dividends applicable to preferred stock ........................ (21,910) (22,007)
Issuance of common stock ....................................... -- 2,444
Decrease in obligation to related party ........................ -- (197,183)
Payments of capital lease obligations and other debt ........... (15,407) (8,913)
Additions to deferred financing and other costs ................ (19,449) (19,690)
Redemption of preferred stock .................................. -- (9,409)
----------- -----------
Net cash provided by (used in) financing activities .......... 436,466 (428,400)
----------- -----------
Net decrease in cash and cash equivalents ......................... (108,383) (260,374)
Cash and cash equivalents at beginning of year .................... 173,826 410,141
----------- -----------
Cash and cash equivalents at end of period ........................ $ 65,443 $ 149,767
=========== ===========
</TABLE>
See accompanying notes
to condensed consolidated financial statements.
-37-
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of CSC
Holdings, Inc. and its majority owned subsidiaries (the "Company") have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
In April 1999, Cablevision Systems Corporation contributed certain cable
television systems acquired from Tele-Communications, Inc. (the "TCI Systems")
on March 4, 1998 to the Company. This transaction was accounted for in a manner
similar to a pooling of interests, whereby the assets and liabilities of the TCI
Systems were recorded at historical book value (net assets of $509,574). Prior
period consolidated financial statements of the Company have been restated to
include the financial position and results of operations of the TCI Systems from
March 4, 1998.
Note 2. Responsibility for Interim Financial Statements
The financial statements as of and for the three and nine month periods ended
September 30, 1999 and 1998 presented in this Form 10-Q are unaudited; however,
in the opinion of management, such statements include all adjustments,
consisting solely of normal recurring adjustments, necessary for a fair
presentation of the results for the periods presented.
The interim financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1998.
The results of operations for the interim periods are not necessarily indicative
of the results that might be expected for future interim periods or for the full
year ending December 31, 1999.
Note 3. Reclassifications
Certain reclassifications have been made to the 1998 financial statements to
conform to the 1999 presentation.
Note 4. Loss Per Common Share
Net loss per common share for the three and nine months ended September 30, 1999
and 1998 is not presented since the Company is a wholly owned subsidiary of
Cablevision Systems Corporation.
-38-
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
Note 5. Cash Flows
For purposes of the condensed consolidated statements of cash flows, the Company
considers short-term investments with a maturity at date of purchase of three
months or less to be cash equivalents. The Company paid cash interest expense of
approximately $325,220 and $274,359 for the nine months ended September 30, 1999
and 1998, respectively. The Company's noncash financing and investing activities
for the nine months ended September 30, 1999 and 1998 included capital lease
obligations of $45,751 and $25,610, respectively, incurred when the Company
entered into leases for new equipment, preferred stock dividend requirements of
$109,566 and $97,998, respectively, the issuance of common stock valued at
$4,848 to redeem certain limited partnership interests in a subsidiary of the
Company in 1998, and the receipt of warrants from At Home Corporation valued at
$74,788 in 1998.
Note 6. Acquisitions
At various times in 1999, the Company acquired interests in the real property
and assets specifically related to certain movie theaters for an aggregate
purchase price of approximately $27,600. The acquisitions were accounted for as
a purchase with the operations of the acquired theaters being consolidated with
those of the Company as of the acquisition dates. The purchase price will be
allocated to the specific assets acquired when an independent appraisal is
obtained.
In April 1999, ITT Corporation ("ITT") exercised its second put for the
remainder of its minority interest in Madison Square Garden and settled certain
matters between the parties for a payment of approximately $87,000.
Note 7. At Home
As of September 30, 1999 and 1998, deferred revenue derived from the receipt of
At Home warrants, net of amortization taken, amounted to approximately $174,567
and $224,400, respectively. For the nine and three months ended September 30,
1999 and 1998, the Company recognized approximately $37,602 and $12,534 and
$23,734 and $10,257, respectively, of this deferred revenue.
Note 8. Segment Information
The Company's reportable segments are strategic business units that are managed
separately. The Company evaluates segment performance based on several factors,
of which the primary financial measure is business segment adjusted operating
cash flow (defined as operating income (loss) before depreciation and
amortization and excluding incentive stock plan expense and the costs of year
2000 remediation).
-39-
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
------------------------------- --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Telecommunication Services............. $1,601,118 $1,382,392 $ 543,154 $ 497,038
Rainbow Media.......................... 815,896 707,177 228,246 205,097
Retail Electronics..................... 396,853 264,771 137,505 130,051
All Other.............................. 64,648 230 25,563 66
Intersegment Eliminations.............. (96,188) (66,781) (32,158) (25,381)
---------- ---------- ----------- -----------
Total......................... $2,782,327 $2,287,789 $ 902,310 $ 806,871
========== ========== =========== ===========
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
------------------------------- --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Adjusted Operating Cash Flow
Telecommunication Services............. $ 679,320 $ 557,772 $ 232,172 $ 206,323
Rainbow Media.......................... 119,451 77,977 44,604 16,435
Retail Electronics..................... (27,005) (16,356) (10,203) (2,876)
All Other.............................. (35,193) (1,245) (13,224) (128)
---------- ---------- ----------- -----------
Total......................... $ 736,573 $ 618,148 $ 253,349 $ 219,754
========== ========== =========== ===========
</TABLE>
-40-
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
A reconciliation of reportable segment amounts to the Company's consolidated
balances is as follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
----------------- ------------------
September 30, September 30,
------------- -------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Total revenue for reportable segments ........... $ 2,813,867 $ 2,354,340 $ 908,905 $ 832,186
Other revenue and intersegment eliminations ..... (31,540) (66,551) (6,595) (25,315)
----------- ----------- ----------- -----------
Total consolidated revenue ................ $ 2,782,327 $ 2,287,789 $ 902,310 $ 806,871
=========== =========== =========== ===========
Adjusted Operating Cash Flow to Net Loss
Total adjusted operating cash flow for reportable
segments .................................. $ 771,766 $ 619,393 $ 266,573 $ 219,882
Other adjusted operating cash flow deficit ...... (35,193) (1,245) (13,224) (128)
Items excluded from adjusted operating cash flow:
Depreciation and amortization ............. (627,909) (497,868) (212,737) (178,922)
Incentive stock plan expense .............. (216,388) (96,136) (49,391) (24,783)
Year 2000 remediation ..................... (27,958) -- (11,585) --
Interest expense .......................... (344,075) (317,969) (120,517) (106,438)
Interest income ........................... 6,937 20,016 2,077 6,754
Equity in net loss of affiliates .......... (8,857) (19,324) (4,497) (4,431)
Gain on sale of programming interests and
cable assets, net .................... -- 152,683 -- 11,195
Write off of deferred financing costs ..... (4,425) (4,717) (19) (3,101)
Provision for preferential payment to
related party ........................ -- (980) -- --
Minority interests ........................ 42,680 25,435 12,265 16,339
Miscellaneous, net ........................ (9,659) (23,052) (2,222) (9,064)
----------- ----------- ----------- -----------
Net loss ........................ $ (453,081) $ (143,764) $ (133,277) $ (72,697)
=========== =========== =========== ===========
</TABLE>
Substantially all revenues and assets of the Company's reportable segments are
attributed to or located in the United States.
The Company does not have a single external customer which represents 10 percent
or more of its consolidated revenues.
Note 9. Financial Instruments
In July 1999, Cablevision Systems Corporation ("Cablevision") entered into a
$100 million facility with a third party for Cablevision to acquire a beneficial
interest in shares of its Class A common stock through a forward swap contract
facility that is available through June 2000 with a final maturity date for all
executed swaps of February 2001. The terms of the facility provide for the
settlement of any obligations of Cablevision thereunder either in cash or
Cablevision's
-41-
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
Class A common stock. Cablevision's obligation is guaranteed by the Company.
Currently, there are no outstanding contracts under this facility.
Note 10. Recent Developments
In September 1999, the Company exercised its right to redeem all of its
outstanding shares of 8 1/2% Series I Cumulative Convertible Exchangeable
Preferred Stock ("Series I Preferred"). The redemption occurred on November 2,
1999, at a price equal to 102.8% of the liquidation preference, plus accrued
dividends. Investors held the Series I Preferred through interests in depositary
shares (each of which represented a 1/10th interest in a share of the Series I
Preferred) which were redeemable simultaneously. Each depositary share was
convertible into approximately 1.4828 shares of Cablevision System Corporation's
Class A Common Stock. As of November 8, 1999, 13,797,625 depositary shares out
of 13,800,000 depositary shares outstanding had been converted into 20,458,925
shares of Cablevision System Corporation's Class A Common Stock, with the
remaining 2,375 depositary shares being redeemed for cash.
In September 1999, the Company announced that it was pursuing strategic
alternatives for operation of its cable television systems in the greater
Boston, Massachusetts and Cleveland, Ohio metropolitan areas, as well as in
Kalamazoo, Michigan.
-42-
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
In April 1999, Cablevision Systems Corporation contributed certain cable
television systems acquired from Tele-Communications, Inc. (the "TCI Systems")
on March 4, 1998 to the Company. This transaction was accounted for in a manner
similar to a pooling of interests, whereby the assets and liabilities of the TCI
Systems were recorded at historical book value. Prior period consolidated
financial statements of the Company have been restated to include the financial
position and results of operations of the TCI Systems from March 4, 1998. As a
result, the operations of CSC Holdings, Inc. are identical to the operations of
Cablevision Systems Corporation, except for dividends attributable to the
preferred stock of CSC Holdings, Inc. which have been reported in minority
interests in the consolidated financial statements of Cablevision Systems
Corporation. Refer to Cablevision Systems Corporation's Management's Discussion
and Analysis of Financial Condition and Results of Operations on pages 12
through 32 of this Form 10-Q.
-43-
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
Part II. Other Information
Item 1. Legal Proceedings
The Company is party to various lawsuits, some involving substantial
amounts. Management does not believe that such lawsuits will have a
material adverse impact on the financial position of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The index to exhibits is on page 46.
(b) The Company has not filed any Current Reports on Form 8-K with
the Commission during the quarter for which this report is
filed.
-44-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
CABLEVISION SYSTEMS CORPORATION
CSC HOLDINGS, INC.
Date: November 12, 1999 /s/ William J. Bell
---------------------- ----------------------------------------
By: William J. Bell, as Vice Chairman,
Director and Principal Financial Officer
of Cablevision Systems Corporation and
CSC Holdings, Inc.
Date: November 12, 1999 /s/ Andrew B. Rosengard
----------------------- ----------------------------------------
By: Andrew B. Rosengard, as Executive Vice
President, Finance and Controller and
Principal Accounting Officer of
Cablevision Systems Corporation and CSC
Holdings, Inc.
-45-
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
3.5 Certificate of Amendment of the Amended and Restated
Certificate of Incorporation of Cablevision Systems
Corporation
27 Financial Data Schedule - Cablevision Systems Corporation
and Subsidiaries
27.1 Financial Data Schedule - CSC Holdings, Inc. and Subsidiaries
-46-
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CABLEVISION SYSTEMS CORPORATION
Pursuant to Section 242 of the General Corporation Law of the State of Delaware
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is Cablevision Systems Corporation.
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking out the first paragraph of Article FOURTH thereof and by
substituting in lieu thereof the following paragraph:
The aggregate number of shares which the Corporation shall have
authority to issue shall be 570,000,000 shares: (a) 400,000,000
shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), (b) 160,000,000 shares of Class B Common Stock, par
value $.01 per share ("Class B Common Stock"), and (c) 10,000,000
shares of Preferred Stock, par value $.01 per share ("Preferred
Stock").
3. The amendment of the Certificate of Incorporation herein
certified has been duly adopted in accordance with the provision of Section 242
of the General Corporate Law of the State of Delaware.
In Witness Whereof, Cablevision Systems Corporation has caused this
certificate to be signed by William J. Bell, its Vice Chairman on the 5th day of
October 1999.
Cablevision Systems Corporation
By: /s/ William J. Bell
--------------------------------------
William J. Bell, Vice Chairman
Attest:
/s/ Robert S. Lemle
- --------------------------
Robert S. Lemle, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001053112
<NAME> CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 65,443
<SECURITIES> 0
<RECEIVABLES> 245,197
<ALLOWANCES> (40,363)
<INVENTORY> 298,017
<CURRENT-ASSETS> 0
<PP&E> 4,875,176
<DEPRECIATION> (2,074,460)
<TOTAL-ASSETS> 7,083,303
<CURRENT-LIABILITIES> 0
<BONDS> 5,881,602
0
0
<COMMON> 1,527
<OTHER-SE> (3,182,966)
<TOTAL-LIABILITY-AND-EQUITY> 7,083,303
<SALES> 0
<TOTAL-REVENUES> 2,804,381
<CGS> 336,863
<TOTAL-COSTS> 1,074,503
<OTHER-EXPENSES> 627,909
<LOSS-PROVISION> (22,054)
<INTEREST-EXPENSE> 344,075
<INCOME-PRETAX> (584,557)
<INCOME-TAX> 0
<INCOME-CONTINUING> (584,557)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (584,557)
<EPS-BASIC> (3.84)
<EPS-DILUTED> 0<F1>
<FN>
<F1> Not presented as the resultant computation would be a decrease in net loss
per share and therefore not meaningful.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000784681
<NAME> CSC HOLDINGS, INC. AND SUBSIDIARIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 65,443
<SECURITIES> 0
<RECEIVABLES> 245,197
<ALLOWANCES> (40,363)
<INVENTORY> 298,017
<CURRENT-ASSETS> 0
<PP&E> 4,875,176
<DEPRECIATION> (2,074,460)
<TOTAL-ASSETS> 7,083,303
<CURRENT-LIABILITIES> 0
<BONDS> 5,881,602
1,365,905
14
<COMMON> 1
<OTHER-SE> (2,869,683)
<TOTAL-LIABILITY-AND-EQUITY> 7,083,303
<SALES> 0
<TOTAL-REVENUES> 2,804,381
<CGS> 336,863
<TOTAL-COSTS> 1,074,503
<OTHER-EXPENSES> 627,909
<LOSS-PROVISION> (22,054)
<INTEREST-EXPENSE> 344,075
<INCOME-PRETAX> (453,081)
<INCOME-TAX> 0
<INCOME-CONTINUING> (453,081)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (453,081)
<EPS-BASIC> (0)
<EPS-DILUTED> 0<F1>
<FN>
<F1> Not presented as the resultant computation would be a decrease in net loss
per share and therefore not meaningful.
</FN>
</TABLE>
