<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 2000
-------------------------------------------------
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 July 31, 2000:
Cablevision Systems Corporation Class A Common Stock - 131,563,491
Cablevision Systems Corporation Class B Common Stock - 42,246,836
CSC Holdings, Inc. Common Stock - 1,000
================================================================================
<PAGE>
TABLE OF CONTENTS
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three and Six Months ended June 30, 2000 and 1999 (unaudited)...............................3
Condensed Consolidated Balance Sheets -
June 30, 2000 (unaudited) and December 31, 1999.............................................4
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 2000 and 1999 (unaudited).........................................6
Notes to Condensed Consolidated Financial Statements (unaudited)............................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................29
PART II - OTHER INFORMATION...................................................................................30
CSC HOLDINGS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three and Six Months ended June 30, 2000 and 1999 (unaudited)..............................32
Condensed Consolidated Balance Sheets -
June 30, 2000 (unaudited) and December 31, 1999............................................33
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 2000 and 1999 (unaudited)........................................35
Notes to Condensed Consolidated Financial Statements (unaudited)...........................36
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................................40
Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................40
PART II - OTHER INFORMATION...................................................................................41
</TABLE>
-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>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------ -------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues, net.................................. $2,129,801 $1,880,017 $1,081,577 $ 946,309
---------- ---------- ---------- -----------
Operating expenses:
Technical and operating..................... 833,945 757,131 393,917 355,250
Retail electronics cost of sales............ 241,852 204,788 129,399 106,696
Selling, general and
administrative............................ 508,145 618,244 305,485 282,915
Depreciation and amortization............... 470,830 415,172 237,478 209,719
----------- ----------- ------------ ------------
2,054,772 1,995,335 1,066,279 954,580
---------- ---------- ----------- ------------
Operating income (loss)............... 75,029 (115,318) 15,298 (8,271)
------------ ----------- ------------- -------------
Other income (expense):
Interest expense............................ (271,547) (223,558) (139,468) (114,266)
Interest income............................. 2,704 4,860 1,403 1,981
Equity in net income (loss) of affiliates, net (2,269) (4,360) 47 (965)
Write off of deferred financing costs....... - (4,406) - (4,406)
Minority interests.......................... (86,855) (56,275) (45,460) (38,656)
Miscellaneous, net.......................... (4,305) (7,437) (3,568) (3,264)
----------- ----------- ------------ ------------
(362,272) (291,176) (187,046) (159,576)
----------- ----------- ------------ ------------
Net loss ...................................... $ (287,243) $ (406,494) $ (171,748) $ (167,847)
=========== =========== =========== ===========
Basic and diluted net loss per common share.... $ (1.66) $ (2.68) $ (.99) $ (1.10)
=========== =========== =========== ===========
Average number of common shares
outstanding (in thousands).................. 173,418 151,888 173,485 152,149
============ ============ ============ ============
</TABLE>
See accompanying notes to
condensed consolidated financial statements.
-3-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
ASSETS (unaudited)
Cash and cash equivalents ...................................................................... $ 33,931 $ 62,665
Accounts receivable trade (less allowance for doubtful accounts of
$38,501 and $35,357) ........................................................................ 269,960 226,304
Notes and other receivables .................................................................... 114,330 129,596
Inventory, prepaid expenses and other assets ................................................... 264,299 219,487
Property, plant and equipment, net ............................................................. 2,859,023 2,752,495
Investments in affiliates ...................................................................... 327,734 306,557
Advances to affiliates ......................................................................... 49,761 46,685
Feature film inventory, net .................................................................... 323,557 335,826
Net assets held for sale ....................................................................... 536,077 269,349
Franchises, net of accumulated amortization of
$702,783 and $703,237 ....................................................................... 497,643 651,777
Affiliation and other agreements, net of accumulated amortization of
$272,008 and $244,249 ....................................................................... 145,491 173,250
Excess costs over fair value of net assets acquired and other intangible assets,
net of accumulated amortization of
$741,900 and $727,134 ....................................................................... 1,840,803 1,816,030
Deferred financing, acquisition and other costs, net of
accumulated amortization of $70,708 and $51,063 ............................................. 147,946 140,287
---------- ----------
$7,410,555 $7,130,308
========== ==========
</TABLE>
See accompanying notes to
condensed consolidated financial statements.
-4-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(continued)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Accounts payable........................................................................ $ 433,252 $ 411,804
Accrued expenses........................................................................ 1,013,511 1,048,623
Feature film and contract obligations................................................... 240,863 371,126
Deferred revenue........................................................................ 208,404 274,043
Bank debt............................................................................... 2,912,442 2,254,487
Senior notes and debentures............................................................. 2,692,906 2,692,602
Subordinated notes and debentures....................................................... 1,048,580 1,048,513
Capital lease obligations and other debt................................................ 103,458 99,099
----------- -----------
Total liabilities.................................................................... 8,653,416 8,200,297
----------- -----------
Minority interests...................................................................... 616,353 592,583
----------- -----------
Preferred stock of CSC Holdings, Inc.................................................... 1,485,033 1,404,511
----------- -----------
Commitments and contingencies
Stockholders' deficiency:
Preferred Stock, $.01 par value, 10,000,000 shares
authorized, none issued......................................................... - -
Class A Common Stock, $.01 par value, 400,000,000 shares
authorized, 130,664,112 and 130,091,237 shares issued........................... 1,307 1,301
Class B Common Stock, $.01 par value, 160,000,000 shares
authorized, 43,126,836 shares issued............................................ 431 431
Paid-in capital...................................................................... 742,059 731,986
Accumulated deficit.................................................................. (4,087,545) (3,800,302)
----------- -----------
(3,343,748) (3,066,584)
Treasury stock, at cost (7,118 shares)............................................... (499) (499)
----------- -----------
Total stockholders' deficiency....................................................... (3,344,247) (3,067,083)
---------- ----------
$7,410,555 $7,130,308
========== ==========
</TABLE>
See accompanying notes to
condensed consolidated financial statements.
-5-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................................... $ (287,243) $ (406,494)
------------ ------------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization.................................... 470,830 415,172
Equity in net loss of affiliates, net............................ 2,269 4,360
Minority interests............................................... 86,848 41,605
Gain on sale of investments...................................... - (10,861)
Write off of investment in affiliate............................. - 15,100
Write off of deferred financing costs............................ - 4,406
Amortization of deferred financing and other costs............... 15,668 4,042
Amortization of debenture discount............................... 371 256
(Gain) loss on sale of equipment................................. (1,246) 2,115
Changes in assets and liabilities, net of effects of
acquisitions and dispositions................................ (230,939) (78,404)
------------ ------------
Net cash provided by (used in) operating activities........... 56,558 (8,703)
------------ ------------
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired.................. (116,183) (114,447)
Proceeds from sale of investments................................ - 10,861
Capital expenditures............................................. (554,406) (380,850)
Proceeds from sale of equipment.................................. 68 431
Additions to intangible assets................................... (120) (6,756)
Increase in investments in affiliates, net....................... (28,669) (33,559)
------------ ------------
Net cash used in investing activities......................... (699,310) (524,320)
------------ ------------
Cash flows from financing activities:
Proceeds from bank debt.......................................... 1,867,784 1,873,047
Repayment of bank debt........................................... (1,229,829) (1,448,882)
Issuance of common stock......................................... 10,079 8,713
Purchase of treasury stock....................................... - (498)
Payments of capital lease obligations and other debt............. (16,844) (9,072)
Additions to deferred financing and other costs.................. (17,172) (5,822)
------------ ------------
Net cash provided by financing activities..................... 614,018 417,486
------------ ------------
Net decrease in cash and cash equivalents............................. (28,734) (115,537)
Cash and cash equivalents at beginning of year........................ 62,665 173,826
------------ ------------
Cash and cash equivalents at end of period............................ $ 33,931 $ 58,289
============ =============
</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. 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 2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS
The financial statements as of and for the three and six month periods ended
June 30, 2000 and 1999 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, Inc.'s Annual Reports on Form 10-K for the year ended December 31,
1999.
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, 2000.
Note 3. RECLASSIFICATIONS
Certain reclassifications have been made to the 1999 financial statements to
conform to the 2000 presentation.
Note 4. 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.
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 $254,286 and $204,780 for the six months ended June 30, 2000 and
1999, respectively. The Company's noncash financing and investing activities for
the six months ended June 30, 2000 and 1999 included capital lease obligations
of $21,794 and $22,772, respectively, incurred when the Company entered into
leases for new equipment.
-7-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
Note 6. ACQUISITION
In January 2000, Regional Programming Partners acquired the 70% interest in
SportsChannel Florida Associates held by Front Row Communications for
approximately $130,600 (including the repayment of $20,000 in debt) increasing
its ownership to 100%. The acquisition was accounted for as a purchase with the
operations of the acquired business being consolidated with those of the Company
as of the acquisition date. The purchase price will be allocated to the specific
assets acquired when an independent appraisal is obtained.
Note 7. AT HOME
As of June 30, 2000 and 1999, deferred revenue derived from the receipt of At
Home warrants, net of amortization taken, amounted to approximately $131,419 and
$187,245, respectively. For the six months ended June 30, 2000 and 1999, the
Company recognized approximately $30,000 and $25,068, respectively, of this
deferred revenue.
On June 19, 2000, Cablevision commenced an action in the Delaware Court of
Chancery to protect its rights regarding an agreement, dated as of March 28,
2000, among Excite@Home, AT&T Corp., Comcast Corporation and Cox
Communications, Inc. On June 30, 2000, Excite@Home, AT&T, Comcast and Cox
filed answers in the Delaware Court of Chancery to Cablevision's complaint.
In addition, Excite@Home asserted counterclaims against Cablevision seeking
to rescind its agreements with Cablevision and cancel the Excite@Home
warrants owned by Cablevision.
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 income or expense and the costs
of Year 2000 remediation).
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
------------------------------ -------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Telecommunication Services............... $1,163,357 $1,057,964 $ 596,289 $ 532,474
Rainbow Media Holdings................... 708,794 587,650 347,312 289,055
Retail Electronics....................... 295,758 259,348 159,102 136,331
All Other................................ 36,017 39,085 17,844 20,778
Intersegment Eliminations................ (74,125) (64,030) (38,970) (32,329)
---------- ---------- ---------- ----------
Total........................... $2,129,801 $1,880,017 $1,081,577 $ 946,309
========== ========== ========== ==========
</TABLE>
-8-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
--------------------------- -----------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
ADJUSTED OPERATING CASH FLOW
Telecommunication Services............... $ 483,245 $ 447,148 $ 244,579 $ 228,790
Rainbow Media Holdings................... 118,132 74,847 71,176 46,597
Retail Electronics....................... (31,768) (16,802) (13,880) (5,497)
All Other................................ (26,622) (21,969) (13,407) (13,983)
----------- ----------- ----------- -----------
Total........................... $ 542,987 $ 483,224 $ 288,468 $ 255,907
=========== =========== =========== ===========
</TABLE>
A reconciliation of reportable segment amounts to the Company's consolidated
balances is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
-------------------------- ---------------------------
JUNE 30, JUNE 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE
Total revenue for reportable segments...................... $2,167,909 $1,904,962 $1,102,703 $ 957,860
Other revenue and intersegment eliminations................ (38,108) (24,945) (21,126) (11,551)
---------- ---------- ---------- ----------
Total consolidated revenue........................... $2,129,801 $1,880,017 $1,081,577 $ 946,309
========== ========== ========== ==========
ADJUSTED OPERATING CASH FLOW TO NET LOSS
Total adjusted operating cash flow for reportable
segments............................................. $ 569,609 $ 505,193 $ 301,875 $ 269,890
Other adjusted operating cash flow deficit................. (26,622) (21,969) (13,407) (13,983)
Items excluded from adjusted operating cash flow:
Depreciation and amortization........................ (470,830) (415,172) (237,478) (209,719)
Incentive stock plan income (expense)................ 6,345 (166,997) (34,779) (45,658)
Year 2000 remediation................................ (3,473) (16,373) (913) (8,801)
Interest expense..................................... (271,547) (223,558) (139,468) (114,266)
Interest income...................................... 2,704 4,860 1,403 1,981
Equity in net income (loss) of affiliates, net....... (2,269) (4,360) 47 (965)
Write off of deferred financing costs................ - (4,406) - (4,406)
Minority interests................................... (86,855) (56,275) (45,460) (38,656)
Miscellaneous, net................................... (4,305) (7,437) (3,568) (3,264)
----------- ----------- ----------- -----------
Net loss................................... $ (287,243) $ (406,494) $ (171,748) $ (167,847)
=========== =========== =========== ===========
</TABLE>
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<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)
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. NET ASSETS HELD FOR SALE
The net assets attributable to the Company's cable television systems located in
and around the greater Cleveland, Ohio metropolitan area, in Boston and Eastern
Massachusetts and in Kalamazoo, Michigan are classified in the accompanying
balance sheet as of June 30, 2000 as net assets held for sale.
Note 10. SUBSEQUENT EVENT
In August 2000, the Company filed preliminary proxy materials with the
Securities and Exchange Commission related to the vote of the Company's
shareholders that is required to amend the Company's charter to authorize and
issue a new series of common stock called Rainbow Media Group tracking stock.
The new series would be designed to track the economic performance of the
businesses and interests of the Rainbow Media Group, which are currently part,
but not all, of the Company's Rainbow Media Holdings, Inc. subsidiary.
-10-
<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 the Company's revenues;
(ii) subscriber demand, competition, the cost of programming and industry
conditions;
(iii) the regulatory environment in which the Company operates;
(iv) the level of capital expenditures and whether expenses of the Company
continue to increase or increase at a rate faster than expected;
(v) pending and future acquisitions and dispositions of assets;
(vi) whether any pending uncompleted transactions are completed on the terms
and at the times set forth (if at all);
(vii) new competitors entering the Company's franchise areas;
(viii) other risks and uncertainties inherent in the cable television
business, the programming and entertainment businesses and the
Company's other businesses;
(ix) financial community and rating agency perceptions of the Company's
business, operations, financial condition and the industry in which it
operates; and
(x) the factors described in CSC Holdings, Inc.'s most recent registration
statement on Form S-3, including the section entitled "Risk Factors"
contained therein.
The Company disclaims any obligation to update the forward-looking statements
contained or incorporated by reference herein.
TRANSACTIONS
2000 ACQUISITIONS. In January 2000, Regional Programming Partners ("RPP")
acquired the 70% interest in SportsChannel Florida Associates held by Front Row
Communications, Inc., increasing RPP's ownership to 100%. In June 2000, Rainbow
Media Holdings, Inc. ("Rainbow Media Holdings") acquired the 50% interest in
MuchMusic USA held by Chum, Ltd., increasing Rainbow Media Holdings' ownership
to 100%.
1999 ACQUISITIONS. In April 1999, CSC Holdings, Inc. ("CSC Holdings") purchased
ITT Corporation's remaining minority interest in Madison Square Garden, L.P.
("MSG"). In 1999, CSC Holdings acquired interests in the real property and
assets related to certain movie theaters.
The above transactions are collectively referred to as the "Acquisitions."
-11-
<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 JUNE 30,
----------------------------------------------------------------
2000 1999
------------------------------ ------------------------------ (INCREASE)
% OF NET % OF NET DECREASE
AMOUNT REVENUES AMOUNT REVENUES IN NET LOSS
------ -------- ----- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues, net .................................... $ 1,081,577 100% $ 946,309 100% $ 135,268
Operating expenses:
Technical and operating ...................... 393,917 36 355,250 38 (38,667)
Retail electronics cost of sales ............. 129,399 12 106,696 11 (22,703)
Selling, general and administrative .......... 305,485 28 282,915 30 (22,570)
Depreciation and amortization ................ 237,478 22 209,719 22 (27,759)
----------- ----------- -----------
Operating income (loss) .......................... 15,298 1 (8,271) (1) 23,569
Other income (expense):
Interest expense, net ........................ (138,065) (13) (112,285) (12) (25,780)
Equity in net income (loss) of
affiliates, net ........................... 47 -- (965) -- 1,012
Write off of deferred financing costs ........ -- -- (4,406) (1) 4,406
Minority interests ........................... (45,460) (4) (38,656) (4) (6,804)
Miscellaneous, net ........................... (3,568) -- (3,264) -- (304)
----------- ----------- -----------
Net loss ......................................... $ (171,748) (16)% $ (167,847) (18)% $ (3,901)
=========== =========== ===========
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------------------
2000 1999
------------------------------ ------------------------------ (INCREASE)
% OF NET % OF NET DECREASE
AMOUNT REVENUES AMOUNT REVENUES IN NET LOSS
------ -------- ----- -------- -----------
(DOLLARS IN THOUSANDS)
Revenues, net .................................... $ 2,129,801 100% $ 1,880,017 100% $ 249,784
Operating expenses:
Technical and operating ...................... 833,945 39 757,131 40 (76,814)
Retail electronics cost of sales ............. 241,852 11 204,788 11 (37,064)
Selling, general and administrative .......... 508,145 24 618,244 33 110,099
Depreciation and amortization ................ 470,830 22 415,172 22 (55,658)
----------- ----------- -----------
Operating income (loss) .......................... 75,029 4 (115,318) (6) 190,347
Other income (expense):
Interest expense, net ........................ (268,843) (13) (218,698) (12) (50,145)
Equity in net loss of affiliates, net ........ (2,269) -- (4,360) -- 2,091
Write off of deferred financing costs ........ -- -- (4,406) -- 4,406
Minority interests ........................... (86,855) (4) (56,275) (3) (30,580)
Miscellaneous, net ........................... (4,305) -- (7,437) -- 3,132
----------- ----------- -----------
Net loss ......................................... $ (287,243) (13)% $ (406,494) (22)% $ 119,251
=========== =========== ===========
</TABLE>
-12-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
COMPARISON OF THREE AND SIX MONTHS ENDED JUNE 30, 2000 VERSUS THREE AND SIX
MONTHS ENDED JUNE 30, 1999
CONSOLIDATED RESULTS
REVENUES for the three and six months ended June 30, 2000 increased $135.3
million (14%) and $249.8 million (13%), respectively, as compared to revenues
for the same periods in the prior year. Approximately $85.1 million (9%) and
$155.1 million (8%), respectively, was from increases in revenue sources such as
Rainbow Media Holdings' programming services, advertising on the Company's cable
television systems, revenue derived from the developing telephone and modem
businesses and revenue recognized in connection with the At Home transaction;
approximately $26.3 million (3%) and $49.9 million (3%), respectively, resulted
from higher revenue per subscriber; and approximately $14.9 million (1%) and
$26.4 million (1%), respectively, was attributable to the Acquisitions. The
remaining increase of $9.0 million (1%) and $18.4 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 six months ended June 30,
2000 increased $38.7 million (11%) and $76.8 million (10%), respectively,
compared to the same periods in 1999. Approximately $28.8 million (8%) and $59.3
million (8%), respectively, of the increase was attributable to increased costs
directly associated with the growth in revenues and subscribers discussed above,
as well as to increases in programming costs for cable television services, with
the remaining $9.9 million (3%) and $17.5 million (2%), respectively,
attributable to the Acquisitions. As a percentage of revenues, technical and
operating expenses decreased 2% during the three month period in 2000 and
decreased 1% during the six month period in 2000 as compared to the 1999
periods.
RETAIL ELECTRONICS COST OF SALES for the three and six months ended June 30,
2000 amounted to approximately $129.4 million and $241.9 million, respectively,
(81% and 82%, respectively, of retail electronics sales) compared to
approximately $106.7 million and $204.8 million (78% and 79%, respectively, of
retail electronics sales) for the three and six months ended June 30, 1999,
respectively. Cost of sales include the cost of merchandise sold, including
freight costs incurred and certain occupancy and buying costs, for the retail
electronics segment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased $22.6 million (8%) for
the three months ended June 30, 2000 and decreased $110.1 million (18%) for the
six months ended June 30, 2000 over the comparable periods in 1999. The change
for the three and six month periods consisted of increases of approximately
$37.7 million (14%) and $69.7 million (11%), respectively, in sales and
marketing and administrative costs and approximately $3.7 million (1%) and $6.4
million (1%), respectively, was directly attributable to the Acquisitions.
Offsetting these increases were net decreases of approximately $10.9 million
(4%) and $173.3 million (28%), respectively, related to an incentive stock plan
and approximately $7.9 million (3%) and $12.9 million (2%), respectively,
related to lower Year 2000 remediation costs. As a percentage of revenues,
selling, general and administrative expenses decreased 2% and 9%, respectively,
during the 2000 periods compared to
-13-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
the 1999 periods. Excluding the effects of the incentive stock plan and the Year
2000 remediation costs, as a percentage of revenues such costs increased 1% in
each of the periods.
OPERATING PROFIT BEFORE DEPRECIATION AND AMORTIZATION increased $51.3 million
(25%) to $252.8 million and $246.0 million (82%) to $545.9 million for the three
and six months ended June 30, 2000 from $201.4 million and $299.9 million for
the comparable periods in 1999. Approximately $10.9 million (5%) and $173.3
million (58%) of the increase resulted from the adjustment related to an
incentive stock plan and approximately $40.4 million (20%) and $72.7 million
(24%), respectively, resulted from the combined effect of the revenue and
expense changes discussed above. On a pro forma basis, giving effect to the
Acquisitions as if they had occurred on January 1, 1999 and excluding the
Company's systems held for sale, the incentive stock plan adjustments referred
to above and the costs of Year 2000 remediation, operating profit before
depreciation and amortization would have increased 14.0% and 13.7% for the three
and six month periods in 2000. 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 $27.8 million (13%) and $55.7
million (13%), respectively, for the three and six months ended June 30, 2000 as
compared to the same periods in 1999. The increases resulted primarily from
depreciation on new plant assets.
NET INTEREST EXPENSE increased $25.8 million (23%) and $50.1 million (23%),
respectively, for the three and six months ended June 30, 2000 compared to the
same periods in 1999. The net increases are primarily attributable to higher
interest rates and debt incurred to fund capital expenditures and acquisitions.
EQUITY IN NET INCOME (LOSS) OF AFFILIATES consisted of the Company's share of
the net income or losses of certain programming businesses in which the Company
has varying minority ownership interests.
MINORITY INTERESTS for the three and six months ended June 30, 2000 and 1999
include CSC Holdings' preferred stock dividend requirements, FOX Sports
Networks, LLC's 40% share of the net income (loss) of Regional Programming
Partners, ITT Corporation's share of the net loss of MSG through April 8, 1999
and NBC Cable Holding, Inc.'s 26% (25% in 1999) share of the net loss of Rainbow
Media Holdings.
NET MISCELLANEOUS EXPENSE increased $0.3 million to $3.6 million for the three
months ended June 30, 2000 and decreased $3.1 million to $4.3 million for the
six months ended June 30, 2000 as compared to the same periods in 1999. For the
three and six months ended June 30, 2000, miscellaneous expense consisted of
various items, primarily sales and use taxes. For the three and six months ended
June 30, 1999, miscellaneous expense included a charge of approximately
-14-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
$15.1 million resulting from the write off of an investment held by Rainbow
Media Holdings, and a gain of approximately $10.9 million resulting from the
sale of certain marketable securities.
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 Holdings, 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
represents the operations of Cablevision Electronics' retail electronics stores.
The Company allocates certain costs to each segment based upon their
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 JUNE 30,
-----------------------------------------------------
2000 1999
----------------------- -----------------------
% OF NET % OF NET
AMOUNT REVENUES AMOUNT REVENUES
------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues, net.......................................... $ 596,289 100% $ 532,474 100%
Technical and operating expenses....................... 235,962 40 211,378 40
Selling, general and administrative expenses........... 131,582 22 127,928 24
Depreciation and amortization.......................... 158,858 27 152,031 28
----------- ------------
Operating profit............................... $ 69,887 12% $ 41,137 8%
=========== ============
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------
2000 1999
----------------------- -----------------------
% OF NET % OF NET
AMOUNT REVENUES AMOUNT REVENUES
------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues, net......................................... $1,163,357 100% $1,057,964 100%
Technical and operating expenses...................... 466,771 40 427,321 40
Selling, general and administrative expenses.......... 212,830 18 278,235 26
Depreciation and amortization......................... 317,847 27 302,789 29
------------ ------------
Operating profit............................... $ 165,909 14% $ 49,619 5%
=========== ============
</TABLE>
REVENUES for the three and six months ended June 30, 2000 increased $63.8
million (12%) and $105.4 million (10%), respectively, as compared to revenues
for the same periods in the prior year. Approximately $26.3 million (5%) and
$49.9 million (5%), respectively, of the increases resulted from higher revenue
per subscriber; approximately $16.0 million (3%) and $29.0 million (2%),
-15-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
respectively, was attributable to revenues from the Company's developing
telephone and modem businesses and revenue recognized in connection with the At
Home transaction; and approximately $9.0 million (2%) and $18.4 million (2%),
respectively, was attributable to internal growth in the average number of
subscribers during the periods. The remaining increase of approximately $12.5
million (2%) and $8.1 million (1%), respectively, resulted from increases in
other revenue sources, including advertising.
TECHNICAL AND OPERATING EXPENSES for the three and six months ended June 30,
2000 increased $24.6 million (12%) and $39.5 million (9%), respectively, over
the same periods in 1999. The increased costs were directly associated with the
growth in revenues and subscribers discussed above, as well as to increases in
programming costs for cable television services. As a percentage of revenues,
technical and operating expenses remained relatively constant during the three
and six months ended June 30, 2000 as compared to the same periods in the prior
year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased $3.7 million (3%) for the
three months ended June 30, 2000 and decreased $65.4 million (24%) for the six
months ended June 30, 2000 as compared to the same periods in 1999. The increase
for the three months ended June 30, 2000 consisted of an increase of $23.4
million (18%) resulting from increased customer service and sales and marketing
costs, partially offset by a decrease of $16.1 million (12%) due to lower
charges related to an incentive stock plan and a decrease of approximately $3.6
million (3%) due to lower Year 2000 remediation costs. For the six months ended
June 30, 2000, the decrease consisted of a decrease of $92.1 million (33%)
resulting from lower charges related to an incentive stock plan and a decrease
of approximately $3.2 million (1%) resulting from lower Year 2000 remediation
costs. These decreases were partially offset by an increase of approximately
$29.9 million (10%) in customer service and sales and marketing costs. As a
percentage of revenues, selling, general and administrative expenses decreased
2% and 8%, respectively, during the three and six months ended June 30, 2000
compared to the same 1999 periods. Excluding the effects of the incentive stock
plan and the Year 2000 remediation costs, such costs increased 2% and 1%,
respectively, for the three and six months ended June 30, 2000 as compared to
the same periods in the prior year, as a percentage of revenues.
DEPRECIATION AND AMORTIZATION EXPENSE increased $6.8 million (4%) and $15.1
million (5%), respectively, for the three and six months ended June 30, 2000
over the comparable 1999 periods. The increases resulted primarily from
depreciation on new plant assets.
-16-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
RAINBOW MEDIA HOLDINGS
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 Holdings.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-----------------------------------------------------------
2000 1999
------------------------ ---------------------------
% OF NET % OF NET
AMOUNT REVENUES AMOUNT REVENUES
------ -------- ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues, net........................................ $ 347,312 100% $ 289,055 100%
Technical and operating expenses..................... 180,954 52 157,741 55
Selling, general and administrative expenses......... 112,885 33 99,874 34
Depreciation and amortization........................ 48,859 14 39,848 14
----------- -----------
Operating profit (loss)....................... $ 4,614 1% $ (8,408) (3)%
=========== ===========
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------
2000 1999
------------------------ ---------------------------
% OF NET % OF NET
AMOUNT REVENUES AMOUNT REVENUES
------ -------- ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues, net........................................ $ 708,794 100% $ 587,650 100%
Technical and operating expenses..................... 409,592 58 360,202 61
Selling, general and administrative expenses......... 175,826 25 233,057 40
Depreciation and amortization........................ 96,847 14 79,364 14
--------- ----------
Operating profit (loss)....................... $ 26,529 4% $ (84,973) (15)%
========= ==========
</TABLE>
REVENUES for the three and six months ended June 30, 2000 increased $58.3
million (20%) and $121.1 million (21%), respectively, as compared to revenues
for the same periods in the prior year. Approximately $34.2 million (12%) and
$55.3 million (10%), respectively, of the increase was attributable to internal
growth in programming network subscribers and rate increases, approximately
$14.9 million (5%) and $26.5 million (5%), respectively, was a direct result of
the Acquisitions and approximately $4.1 million (1%) and $25.6 million (4%),
respectively, was due to increases in advertising revenues. The remaining $5.1
million (2%) and $13.7 million (2%), respectively, of the increase was primarily
the result of a greater number of concerts, special events and sporting events
at Madison Square Garden and Radio City Music Hall.
TECHNICAL AND OPERATING EXPENSES for the three and six months ended June 30,
2000 increased $23.2 million (15%) and $49.4 million (14%), respectively, over
the comparable 1999 periods. Approximately $9.9 million (7%) and $17.6 million
(5%), respectively, of the increase was the direct result of the Acquisitions.
The remaining net increase of $13.3 million (8%) and $31.8 million (9%),
respectively, was primarily attributable to increased costs directly associated
with the net increases in revenues discussed above. As a percentage of revenues,
technical and operating expenses decreased 3% in each of the periods.
-17-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased $13.0 million (13%) for
the three month period and decreased $57.2 million (25%) for the six month
period compared to the same periods in the prior year. The increase for the
three months ended June 30, 2000 consisted of an increase of $6.8 million (7%)
attributable to sales and marketing initiatives, advertising related expenses
and other general cost increases; an increase of approximately $5.3 million (5%)
was attributable to charges related to an incentive stock plan; and an increase
of $3.7 million (4%) resulted from the Acquisitions, partially offset by a
decrease of $2.8 million (3%) attributable to lower Year 2000 remediation costs.
The decrease for the six months ended June 30, 2000 consisted of a decrease of
approximately $80.0 million (34%) attributable to an incentive stock plan and a
$5.7 million (3%) decrease due to lower Year 2000 costs, partially offset by an
increase of $22.1 million (9%) attributable to sales and marketing initiatives,
advertising related expenses and other general cost increases and an increase of
$6.4 million (3%) resulting from the Acquisitions. As a percentage of revenues,
selling, general and administrative expenses decreased 1% and 15% for the three
and six month periods, respectively. Excluding the effects of the incentive
stock plan and Year 2000 remediation costs, as a percentage of revenues such
costs decreased 2% for the three month period and remained relatively constant
for the six month period.
DEPRECIATION AND AMORTIZATION EXPENSE increased $9.0 million (23%) and $17.5
million (22%) for the three and six months ended June 30, 2000 over the same
1999 periods. Approximately $7.4 million (19%) and $14.3 million (18%) of the
increase resulted primarily from depreciation on capital expenditures made
during the periods and approximately $1.6 million (4%) and $3.2 million (4%),
respectively, was primarily attributable to amortization of intangible assets
resulting from the Acquisitions.
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 Investments,
Inc. ("Cablevision Electronics").
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
----------------------------------------------------------------
2000 1999
----------------------------- -----------------------------
% OF NET % OF NET
AMOUNT REVENUES AMOUNT REVENUES
------ -------- ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues, net ................................................ $ 159,102 100% $ 136,331 100%
Cost of sales ................................................ 129,399 81 106,696 78
Selling, general and administrative expenses ................. 43,823 28 35,613 26
Depreciation and amortization ................................ 4,382 3 1,502 1
--------- ---------
Operating loss .......................................... $ (18,502) (12)% $ (7,480) (6)%
========= =========
</TABLE>
-18-
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------------------
2000 1999
---------------------- -----------------------
% OF NET % OF NET
AMOUNT REVENUES AMOUNT REVENUES
-------- --------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues, net ................................. $ 295,758 100% $ 259,348 100%
Cost of sales ................................. 241,852 82 204,788 79
Selling, general and administrative expenses... 85,344 29 73,084 28
Depreciation and amortization ................. 8,143 3 2,954 1
--------- ---------
Operating loss ........................... $ (39,581) (13)% $ (21,478) (8)%
========= =========
</TABLE>
REVENUES for the three and six months ended June 30, 2000 amounted to
approximately $159.1 million and $295.8 million, respectively, compared to
revenues of approximately $136.3 million and $259.3 million for the three and
six months ended June 30, 1999, respectively. Comparable store sales accounted
for $18.3 million (13%) and $26.9 million (10%) of the increased revenue, while
new and relocated stores contributed $4.5 million (3%) and $9.5 million (4%) of
the increased revenue for the three and six months ended June 30, 2000,
respectively.
COST OF SALES for the three and six months ended June 30, 2000 amounted to
approximately $129.4 million and $241.9 million (81% and 82% of revenues),
respectively. For the three and six months ended June 30, 1999, costs of sales
amounted to $106.7 million and $204.8 million (78% and 79% of revenues),
respectively. Such costs include the cost of merchandise sold, including freight
costs incurred, as well as store occupancy and buying costs. The increase in
cost of sales, as a percentage of revenues, is attributable to changes in the
sales mix and inventory provisions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES amounted to approximately $43.8
million and $85.3 million for the three and six months ended June 30, 2000,
respectively and $35.6 million and $73.1 million for the three and six months
ended June 30, 1999, respectively. Selling, general and administrative expenses
consist of retail store expenses (excluding store occupancy costs), the salaries
and commissions of store personnel, the costs of advertising, operating the
distribution center and corporate support functions other than buying.
DEPRECIATION AND AMORTIZATION EXPENSE amounted to approximately $4.4 million and
$8.1 million for the three and six months ended June 30, 2000, respectively, and
$1.5 million and $3.0 million for the three and six months ended June 30, 1999,
respectively. Depreciation and amortization expense includes the depreciation of
all property and equipment in service, and, for the 1999 period, the
amortization of intangible assets which resulted from the Wiz acquisition.
- 19 -
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
Cablevision Systems Corporation ("Cablevision") does not have any operations
independent of its subsidiaries. In addition, Cablevision 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 does not have cash needs
independent of the needs of its subsidiaries.
Cablevision is currently 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 in Kalamazoo, Michigan and the
commercial telephone operations of the Company's subsidiary, Cablevision
Lightpath, Inc. on Long Island, New York. At June 30, 2000, the Restricted Group
encompassed approximately 3,544,500 cable television subscribers, including
approximately 716,000 subscribers in its Ohio, Massachusetts and Michigan
systems.
The Unrestricted Group includes principally Rainbow Media Holdings, including
Madison Square Garden, other companies engaged in certain developmental
activities ("New Media"), including high-speed cable modem service, residential
telephone service, developing (non-Long Island) commercial telephone service,
research and development expenses and deferred revenue amortization related to
the At Home transaction. The Unrestricted Group also includes Cablevision
Electronics, which operates 41 THE WIZ consumer electronics store locations, and
CCG Holdings, Inc. ("CCG Holdings"), which owns the Company's motion picture
theater assets.
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 six months ended June 30, 2000.
<TABLE>
<CAPTION>
INTEREST CAPITAL
REVENUES AOCF* EXPENSE EXPENDITURES
--------- --------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Restricted Group**....................... $1,107,815 $ 492,097 $ 226,726 $ 456,425
New Media***............................. 55,542 (34,593) 1 62,807
Rainbow Media Holdings (including
AMC and MSG)........................ 708,794 118,132 39,615 21,109
Retail Electronics....................... 295,758 (31,768) 6,118 12,516
Other.................................... (38,108) (881) (913) 1,549
---------- --------- ---------- ----------
Total $2,129,801 $ 542,987 $ 271,547 $ 554,406
========== ========= ========== ==========
</TABLE>
-------------------------------
* Defined as operating income (loss) before depreciation and amortization and
excluding incentive stock plan income of $6,345 and the costs of Year 2000
remediation of $3,473.
** Includes cable systems held for sale.
*** Consists of developmental operations, including those related to systems
held for sale.
- 20 -
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
GROUP GROUP TOTAL
------------ ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
DEBT AND REDEEMABLE PREFERRED STOCK
Senior debt ....................................... $1,888,241 $ -- $1,888,241
Senior notes and debentures ....................... 2,692,906 -- 2,692,906
Subordinated notes and debentures ................. 1,048,580 -- 1,048,580
---------- ---------- ----------
5,629,727 -- 5,629,727
---------- ---------- ----------
Redeemable preferred stock of CSC Holdings ........ 1,485,033 -- 1,485,033
---------- ---------- ----------
Rainbow Media Holdings:
RMHI senior debt .............................. -- 235,181 235,181
AMC senior debt ............................... -- 359,717 359,717
MSG senior debt ............................... -- 409,460 409,460
---------- ---------- ----------
Total Rainbow Media Holdings debt ........... -- 1,004,358 1,004,358
---------- ---------- ----------
Retail Electronics debt ........................... -- 96,852 96,852
Other debt ........................................ -- 26,449 26,449
---------- ---------- ----------
Total debt and redeemable preferred stock.... $7,114,760 $1,127,659 $8,242,419
========== ========== ==========
</TABLE>
RESTRICTED GROUP
The Restricted Group's plant upgrade, combined with additional amounts required
for the start up and operation of new businesses such as high speed internet
access, digital video services, the expansion of residential telephone services
and the roll out of non-Long Island based commercial telephone business, as well
as additional investments or acquisitions, will require significant additional
funding. The Company expects to obtain the requisite funds through internally
generated funds, amounts available under CSC Holdings' credit facilities,
proceeds from asset sales and/or additional capital market issuances.
In December 1999, the Company announced the sale of its Ohio system to Adelphia
Communications Corporation for $990 million in cash and $540 million in Adelphia
common stock, subject to certain adjustments. In March 2000, the Company entered
into a definitive agreement with Charter Communications, Inc. for the sale of
its Kalamazoo, Michigan system in exchange for $172.5 million in Charter
Communications, Inc. common stock. In April 2000, the Company announced the sale
of its cable systems in Boston and Eastern Massachusetts to AT&T Corporation
("AT&T") in exchange for cable systems in certain northern New York suburbs,
approximately $878 million in AT&T stock and approximately $284 million in cash,
subject to certain adjustments. The Company expects to apply the cash proceeds
from these transactions, which may include cash proceeds from the monetization
of stock, toward the reduction of outstanding debt. The consummation of each of
these transactions is subject to the receipt of franchise transfer and other
required approvals.
- 21 -
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
As of August 4, 2000, the Restricted Group had in total $2.2 billion in reducing
revolving credit facilities, consisting of a $1.2 billion facility available to
Cablevision MFR, Inc. and certain of the Company's New Jersey subsidiaries and a
$1.0 billion facility available to CSC Holdings and other Restricted Group
subsidiaries. Both facilities mature in March 2007 and begin to reduce in June
2001. On July 31, 2000, CSC Holdings closed on a new $450 million term loan
facility, which matures on July 31, 2001. This facility was intended to provide
additional availability until such time as the pending cable system sales close
and will be repaid with cash proceeds received in such sales. As of August 4,
2000, the Restricted Group had total drawings under all available credit
facilities of $1,994 million and letters of credit of $39 million. Unrestricted
and undrawn funds available to the Restricted Group amounted to approximately
$617.5 million as of August 4, 2000.
<TABLE>
<CAPTION>
-----------------------------------------------------------
AS OF AUGUST 4, 2000
(IN THOUSANDS)
-----------------------------------------------------------
CSC HOLDINGS MFR TOTAL
-------------- ----- -----
<S> <C> <C> <C>
Total revolving credit facility... $1,000,000 $1,200,000 $2,200,000
Total term loan facility.......... 450,000 - 450,000
Outstanding debt.................. 986,500 1,007,000 1,993,500
Outstanding letters of credit..... 38,994 - 38,994
----------- ----------- -----------
Availability................. $ 424,506 $ 193,000 $ 617,506
=========== =========== ===========
</TABLE>
Both the revolving credit agreements and the term loan facility contain 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 August 4, 2000, CSC Holdings had entered into interest exchange (swap)
agreements with several of its banks covering a notional principal amount of
$300 million. Swaps in the aggregate amount of $250 million require CSC Holdings
to pay a floating rate of interest and mature in 2001 and 2002. The remainder of
the swaps require payment of a fixed rate of interest by CSC Holdings and mature
in August 2000. The weighted average effective interest rate on all Restricted
Group bank debt outstanding, including the swap agreements, as of August 4,
2000, was approximately 8.2%.
- 22 -
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
RAINBOW MEDIA HOLDINGS AND AMERICAN MOVIE CLASSICS
As of August 4, 2000, Rainbow Media Holdings had a $300 million non-amortizing
revolving credit facility maturing on December 31, 2000, of which $74.5 million
was restricted to provide for repayment of a like amount of intercompany
borrowings from RPP as described below. On January 4, 2000 and July 17, 2000,
Rainbow Media Holdings repaid $100.5 million and $5 million, respectively, of
its $180 million loan from RPP with borrowings under its credit facility. Direct
borrowings as of August 4, 2000, amounted to $210.5 million, leaving a balance
of $15 million available to Rainbow Media Holdings under the credit facility as
of that date.
In May 1999, American Movie Classics, a wholly-owned subsidiary of Rainbow Media
Holdings, entered into 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. As
of August 4, 2000, American Movie Classics had outstanding borrowings of $359.5
million, leaving unrestricted funds available of $65.5 million.
Both the Rainbow Media Holdings and American Movie Classics 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.
Rainbow Media Holdings' potential investments in new programming content and
services, as well as its debt repayment obligations discussed above, will
require significant additional funding. The Company may obtain the requisite
funds through internally generated funds, through bank credit facilities, or
through capital markets transactions. The Company is currently in discussions
with banks to obtain a new credit facility, which would repay and replace the
existing Rainbow Media Holdings and American Movie Classics credit facilities
and provide additional availability to certain Rainbow Media Holdings entities.
However, there can be no assurance that Rainbow Media Holdings will be able to
obtain refinancing or funds from other sources on acceptable terms and
conditions or at all.
RPP
In June 1998, RPP, a partnership which is 60% owned by Rainbow Media Holdings
and 40% owned by Fox Sports Networks, LLC ("Fox"), made an intercompany loan to
Rainbow Media Holdings of $180 million, of which $74.5 million was outstanding
as of August 4, 2000. RPP funded this loan from cash on hand. The intercompany
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
Holdings' bank debt and requires that Rainbow Media Holdings maintain sufficient
availability under its revolving credit facility to permit the repayment in full
to RPP if RPP requires the funds for its own operating needs. On January 4, 2000
and July 17, 2000 Rainbow Media Holdings repaid $100.5 million and $5 million,
respectively, of the $180 million intercompany loan with borrowings under its
credit facility.
- 23 -
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
In January 2000, RPP acquired the 70% interest in SportsChannel Florida
Associates held by Front Row Communications for approximately $130.6 million
(including the repayment of $20 million in debt) increasing its ownership to
100%. The acquisition was funded with cash on hand and from the repayment by
Rainbow Media Holdings of $100.5 million of intercompany loans.
The Company believes that RPP's cash on hand of $16.5 million as of August 4,
2000, combined with the remaining intercompany loan receivable of $74.5 million
will be sufficient to meet its projected funding requirements for the next
twelve months.
MSG
MSG has a $500 million revolving credit facility maturing on December 31, 2004
(the "MSG Credit Facility"). As of August 4, 2000, outstanding debt under the
MSG Credit Facility was $355 million. In addition, MSG had outstanding letters
of credit of $13.1 million resulting in unrestricted and undrawn funds available
of $131.9 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 over the next twelve months.
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
which matures at the end of February 2001. 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 August 4, 2000, total outstanding debt under the credit facility
was $89.8 million with $2.5 million in additional availability. CSC Holdings'
investment in Cablevision Electronics was approximately $158.9 million at June
30, 2000. Cablevision Electronics has received other financial support of
approximately $140.0 million, through August 4, 2000, in the form of letters of
credit, guarantees and intercompany loans primarily in respect of Cablevision
Electronics' inventory purchases.
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 over the next twelve months. Funds available
under Cablevision Electronics' credit agreement, assuming the credit facility
can be renewed at maturity, together with this additional financial support,
will be sufficient to meet its projected funding requirements over the next
twelve months; however, no assurances as to the Company's ability to renew the
credit facility at
- 24 -
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
maturity on acceptable terms and conditions, or to renew the credit facility at
all, can be provided.
CCG HOLDINGS
CCG Holdings, which owns the Company's motion picture theater assets, currently
has a $15 million revolving credit bank facility maturing on June 30, 2003.
As of August 4, 2000, there was $9 million outstanding under this bank facility.
The Company believes that for CCG Holdings internally generated funds, together
with funds available under the existing credit agreement and available from CSC
Holdings, will be sufficient to meet its projected funding requirements for the
next twelve months.
RAINBOW MEDIA GROUP TRACKING STOCK PROPOSAL
If the proposed Rainbow Media Group tracking stock issuance is completed as
currently planned, the Company's financing structure would be separated between
the proposed Cablevision NY Group and Rainbow Media Group. Rainbow Media
Holdings' entities which are part of the proposed Rainbow Media Group tracking
stock would secure funding arrangements independent from the Cablevision NY
Group, and the Rainbow Media Holdings' entities which are not included in the
tracking stock (referred to as the Rainbow NY Group), principally Madison Square
Garden and its subsidiaries, the MetroChannels, Rainbow Advertising Sales
Corporation and News 12 businesses, would be part of the Cablevision NY Group
funding group.
Funding for the Cablevision NY Group's ongoing capital investment and
operational requirements would be provided, in part, through separate financial
arrangements made available to the Restricted Group, Madison Square Garden,
Cablevision Electronics, and CCG Holdings, as described above. The Rainbow NY
Group's cash requirements would be funded in combination with the financing
requirements of either the Restricted Group or by Madison Square Garden.
Financing for the Rainbow Media Group would be provided, in part, by the
existing Rainbow Media Holdings and American Movie Classics credit facilities,
which the Company expects to replace with a new combined credit facility as
described above.
The Cablevision NY Group's principal financing groups, including the Restricted
Group, Madison Square Garden, Cablevision Electronics, and CCG Holdings, will
continue to have financing requirements substantially similar to those described
above, and the Company expects to be able to raise the requisite funding in the
same manner as described above.
The Rainbow Media Group's potential investments in new programming content and
services, as well as its debt repayment obligations discussed above, will
require significant additional funding. The Company may obtain the requisite
funds through internally generated funds, through bank credit facilities,
through debt or equity capital markets transactions, or through a combination of
the foregoing. As described above, the Company is currently in discussions with
banks to obtain funding through a new credit facility. However, there can be no
assurance that
- 25 -
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
the Rainbow Media Group will be able to obtain refinancing or funds from other
sources on acceptable terms and conditions or at all.
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. In August 2000, the
availability of this facility was extended to June 2001 with a final maturity
for any swaps executed of February 2002. The terms of this 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.
OPERATING ACTIVITIES
Net cash provided by operating activities amounted to $56.6 million for the six
months ended June 30, 2000 compared to net cash used in operating activities of
$8.7 million for the six months ended June 30, 1999. The 2000 cash provided by
operating activities consisted primarily of $287.5 million of income before
depreciation, amortization and other non-cash items, partially offset by a net
decrease in cash resulting from changes in assets and liabilities of $230.9
million.
The 1999 cash used in operating activities of $8.7 million consisted primarily
of a decrease in cash resulting from changes in assets and liabilities of $78.4
million, partially offset by approximately $69.7 million of income before
depreciation, amortization and other non-cash items.
INVESTING ACTIVITIES
Net cash used in investing activities for the six months ended June 30, 2000 was
$699.3 million compared to $524.3 million for the six months ended June 30,
1999. The 2000 investing activities consisted of $554.4 million of capital
expenditures, $116.2 million of payments for acquisitions and other items of
$28.7 million.
Net cash used in investing activities for the six months ended June 30, 1999 of
$524.3 million consisted of $380.9 million of capital expenditures, $114.4
million of payments for acquisitions and other items of $39.9 million, partially
offset by proceeds from the sale of marketable securities of $10.9 million.
FINANCING ACTIVITIES
Net cash provided by financing activities amounted to $614.0 million for the six
months ended June 30, 2000 compared to $417.5 million for the six months ended
June 30, 1999. In 2000, the Company's financing activities consisted primarily
of additional bank borrowings of $638.0 million, partially offset by other items
aggregating $24.0 million.
Net cash provided by financing activities of $417.5 million for the six months
ended June 30, 1999 consisted primarily of additional bank borrowings of $424.2
million, partially offset by other items aggregating $6.7 million.
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.
For the six months ended June 30, 2000 and 1999, the Company recorded
approximately $3.5 million and $16.4 million, respectively, of expenses relating
to Y2K remediation.
- 26 -
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
RAINBOW MEDIA GROUP
FINANCIAL INFORMATION
The information set forth herein for the Rainbow Media Group sets forth
information for certain businesses and interests included within the Rainbow
Media Holdings subsidiary referred to as the Rainbow Media Group. The Company
has filed preliminary proxy materials with the Securities and Exchange
Commission related to the vote of Cablevision shareholders that is required to
amend the Cablevision charter to authorize and issue a new series of Cablevision
common stock called Rainbow Media Group tracking stock. That series of
Cablevision common stock would be designed to track the economic performance of
the Rainbow Media Group. No solicitation is being made hereby and such a
solicitation will only be made following the mailing of definitive proxy
materials to Cablevision shareholders.
The preliminary proxy materials filed with the Securities and Exchange
Commission state that Rainbow Media Group tracking stock may be issued following
a favorable shareholder vote, but there are no assurances that an issuance will
be made or as to the manner in which an issuance may be accomplished. In
addition, the Company may change the composition of the Rainbow Media Group
prior to the mailing of definitive proxy materials. Only the definitive proxy
materials should be relied upon in reviewing the businesses, financial condition
or results of operations of the Rainbow Media Group.
A Cablevision tracking stock, such as the Rainbow Media Group common stock that
may be issued after a Cablevision shareholder vote, represents an interest in
Cablevision and is not a direct interest in the businesses and interests
included in the Rainbow Media Group. If the Rainbow Media Group tracking stock
is issued, dividends (if any), entitlements in the event of a merger or similar
transaction and rights in liquidation will not necessarily be related to the
performance of the Rainbow Media Group or the value of the assets in the Rainbow
Media Group. Instead, such determinations will be made by the Cablevision Board
of Directors, subject to the provisions of the Cablevision charter. The Company
does not expect to pay any dividends on any series of Cablevision common stock
for the foreseeable future.
In connection with the preparation of the financial information for the Rainbow
Media Group tracking stock, the Company has made certain cost allocations of
Cablevision costs based on existing policies. If the Company were to alter those
policies, which the Company is entitled to do at any time, there could be
material adverse effects on the Rainbow Media Group financial statements. This
factor should be considered in analyzing the financial information set forth.
- 27 -
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED
Statement of Financial Accounting Standards No. 133, "ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES" ("SFAS 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. SFAS 133, as amended,
is effective for fiscal years beginning after June 15, 2000. The Company does
not expect that the adoption of SFAS 133 will have a material effect on its
financial condition or results of operations.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "REVENUE
RECOGNITION IN FINANCIAL STATEMENTS" ("SAB 101") which summarizes certain of the
SEC staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. The Company will be required to
adopt the accounting provisions of SAB 101 during the fourth quarter of 2000.
The Company does not believe that the implementation of SAB 101 will have a
significant effect on its financial condition or results of operations.
Statement of Position 00-02 "ACCOUNTING BY PRODUCERS OR DISTRIBUTORS OF FILMS"
("SOP 00-02") replaces Statement of Financial Accounting Standards No. 53, and
provides guidance covering revenue recognition for sales or licenses of films
and the accounting and reporting of film production costs. SOP 00-02 is
effective for financial statements for fiscal years beginning after December 31,
2000. The Company does not believe that the adoption of SOP 00-02 will have a
significant effect on its financial position or results of operations.
EITF Issue No. 00-14, "ACCOUNTING FOR CERTAIN SALES INCENTIVES" ("EITF 00-14")
addresses among other things, (i) the recognition, measurement, and income
statement classification for sales incentives offered voluntarily by a vendor
without charge to customers; (ii) vendor offers that entitle a customer to
receive a reduction in the price of a product or service by submitting a form or
claim for a refund or rebate of a specified amount, and (iii) offers by a vendor
for a free product or service when the customer purchases another specified item
if the vendor will deliver that free product or service to the customer at the
point of sale of the specified item. EITF 00-14 is effective for all reporting
periods beginning after May 18, 2000, and will be applied prospectively. The
Company does not believe that the adoption of EITF 00-14 will have a significant
effect on its financial position or results of operations.
- 28 -
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks from changes in interest rates and
certain equity security prices. The Company's exposure to interest rate
movements results from its use of floating and fixed rate debt to fund its
working capital, capital expenditures, and other operational and investment
requirements. To manage interest rate risk, the Company has from time to time
entered into interest rate swap contracts to adjust the proportion of total debt
that is subject to variable and fixed interest rates. Such contracts fix the
borrowing rates on floating rate debt to hedge against the risk of rising rates
and/or convert fixed rate borrowings to variable rate to hedge against the risk
of higher borrowing costs in a declining interest rate environment. The Company
does not enter into interest rate derivative contracts for speculative or
trading purposes. The Company's exposure to changes in equity security prices
stems from its investment in At Home Corporation common stock warrants. The
value of these warrants fluctuates based on changes in the stock price of the
underlying security.
FAIR VALUE OF DEBT: Based on the level of interest rates prevailing at June 30,
2000, the carrying cost of the Company's fixed-rate debt and redeemable
preferred stock of $5,227 million exceeded its fair value by approximately $18
million. The fair value of these financial instruments is estimated based on
reference to quoted market prices for these or comparable securities. The
Company's floating rate borrowings bear interest at current market rates and
thus approximate fair value. The effect of a hypothetical 100 basis point
decrease in interest rates prevailing at June 30, 2000 would increase the
estimated fair value of debt and redeemable preferred stock instruments by
approximately $277 million. This estimate is based on the assumption of an
immediate and parallel shift in interest rates across all maturities.
INTEREST RATE HEDGE CONTRACTS: As of June 30, 2000, the Company had outstanding
interest rate swap contracts to pay fixed rates of interest (generally at 8.0%
through August 2000) and to receive variable rates of interest (based upon LIBOR
with the latest maturity in 2002) covering a total notional principal amount of
$300 million. As of June 30, 2000, the fair market liability of all interest
rate hedge contracts was approximately $3.8 million. Assuming an immediate and
parallel shift in interest rates across the yield curve, a 100 basis point
increase in interest rates from June 30, 2000 prevailing levels would increase
the fair market value liability of all hedge contracts by $0.6 million to a
liability of $4.4 million.
EQUITY PRICE RISK: As of June 30, 2000, the fair market value of the Company's
warrants to acquire At Home Corporation's common stock was $414.4 million, which
exceeded its carrying value of $248.1 million. The potential change in the fair
value of this investment, assuming a 10% change in price, would be approximately
$42.5 million.
- 29 -
<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.
On June 19, 2000, Cablevision commenced an action in the Delaware Court
of Chancery to protect its rights regarding an agreement, dated as of
March 28, 2000, among Excite@Home, AT&T Corp., Comcast Corporation and
Cox Communications, Inc. See Cablevision's Form 8-K filed on July 3,
2000.
Item 4. Submission of Matters to a Vote of Security-Holders.
The Company's Annual Meeting of Stockholders was held on June 6, 2000.
The following matters were voted upon at the Company's Annual Meeting of
Stockholders:
ELECTION OF DIRECTORS:
<TABLE>
<S> <C> <C> <C>
Class A Directors:
Charles D. Ferris: For: 109,774,903
Votes withheld: 4,993,554
Richard H. Hochman: For: 113,220,160
Votes withheld: 1,548,297
Victor Oristano: For: 113,207,357
Votes withheld: 1,561,100
Vincent Tese: For: 109,757,206
Votes withheld: 5,011,251
Class B Directors:
William J. Bell Robert S. Lemle For: 431,268,360
Charles F. Dolan Sheila A. Mahony Against: -
James L. Dolan Daniel E. Somers
Patrick F. Dolan John Tatta
Thomas C. Dolan
Each nominee for election by the Class B common stockholders
received the same vote as indicated above.
</TABLE>
- 30 -
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
<TABLE>
<S> <C> <C>
RATIFICATION AND APPROVAL OF KPMG LLP
Class A Common Stock: For: 114,681,506
Against: 60,000
Abstain: 26,951
Class B Common Stock: For: 431,268,360
Against: -
Abstain: -
VOTE ON SHAREHOLDER PROPOSAL REGARDING INDEPENDENT DIRECTORS
Class A Common Stock: For: 19,996,131
Against: 77,431,221
Abstain: 4,411,637
Class B Common Stock: For: -
Against: 431,268,360
Abstain: -
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(7) Exhibits.
The index to exhibits is on page 43.
(7) The Company filed a Current Report on Form 8-K with the
Commission on May 5, 2000.
- 31 -
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CSC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues, net.................................. $2,129,801 $1,880,017 $1,081,577 $ 946,309
---------- ---------- ---------- ----------
Operating expenses:
Technical and operating..................... 833,945 757,131 393,917 355,250
Retail electronics cost of sales............ 241,852 204,788 129,399 106,696
Selling, general and
administrative............................ 508,145 618,244 305,485 282,915
Depreciation and amortization............... 470,830 415,172 237,478 209,719
---------- ---------- ---------- ----------
2,054,772 1,995,335 1,066,279 954,580
---------- ---------- ---------- ----------
Operating income (loss)............... 75,029 (115,318) 15,298 (8,271)
----------- ---------- ---------- ----------
Other income (expense):
Interest expense............................ (271,547) (223,558) (139,468) (114,266)
Interest income............................. 2,704 4,860 1,403 1,981
Equity in net income (loss) of affiliates, net (2,269) (4,360) 47 (965)
Write off of deferred financing costs....... - (4,406) - (4,406)
Minority interests....................... (6,326) 30,415 (4,634) 5,191
Miscellaneous, net....................... (4,305) (7,437) (3,568) (3,264)
----------- ----------- ---------- ---------------
(281,743) (204,486) (146,220) (115,729)
---------- ---------- ---------- ----------
Net loss ................................... (206,714) (319,804) (130,922) (124,000)
Dividend requirements applicable to
preferred stock.......................... (80,529) (86,690) (40,826) (43,847)
---------- ----------- ---------- ----------
Net loss applicable to common shareholder... $ (287,243) $ (406,494) $ (171,748) $ (167,847)
========== ========== ========== ==========
</TABLE>
See accompanying notes to
condensed consolidated financial statements.
- 32 -
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------ -----
ASSETS (UNAUDITED)
<S> <C> <C>
Cash and cash equivalents............................................................... $ 33,931 $ 62,665
Accounts receivable trade (less allowance for doubtful accounts of
$38,501 and $35,357)................................................................. 269,960 226,304
Notes and other receivables............................................................. 114,330 129,596
Inventory, prepaid expenses and other assets............................................ 264,299 219,487
Property, plant and equipment, net...................................................... 2,859,023 2,752,495
Investments in affiliates............................................................... 327,734 306,557
Advances to affiliates.................................................................. 49,761 46,685
Feature film inventory, net............................................................. 323,557 335,826
Net assets held for sale................................................................ 536,077 269,349
Franchises, net of accumulated amortization of
$702,783 and $703,237................................................................ 497,643 651,777
Affiliation and other agreements, net of accumulated amortization of
$272,008 and $244,249................................................................ 145,491 173,250
Excess costs over fair value of net assets acquired and other intangible assets,
net of accumulated amortization of $741,900 and $727,134............................. 1,840,803 1,816,030
Deferred financing, acquisition and other costs, net of
accumulated amortization of $70,708 and $51,063...................................... 147,946 140,287
------------ ------------
$7,410,555 $7,130,308
============ ============
</TABLE>
See accompanying notes to
condensed consolidated financial statements.
- 33 -
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---- ----
LIABILITIES AND STOCKHOLDER'S DEFICIENCY (UNAUDITED)
<S> <C> <C>
Accounts payable........................................................................ $ 454,661 $ 423,158
Accrued expenses........................................................................ 1,013,511 1,048,599
Feature film and contract obligations................................................... 240,863 371,126
Deferred revenue........................................................................ 208,404 274,043
Bank debt............................................................................... 2,912,442 2,254,487
Senior notes and debentures............................................................. 2,692,906 2,692,602
Subordinated notes and debentures....................................................... 1,048,580 1,048,513
Capital lease obligations and other debt................................................ 103,458 99,099
------------ -------------
Total liabilities.................................................................... 8,674,825 8,211,627
----------- -----------
Minority interests...................................................................... 616,353 592,583
------------ ------------
Series H Redeemable Exchangeable Preferred Stock........................................ 434,181 409,757
------------ ------------
Series M Redeemable Exchangeable Preferred Stock........................................ 1,050,852 994,754
----------- ------------
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)......................................................... - -
Common Stock, $.01 par value, 10,000,000 shares authorized,
1,000 shares issued............................................................. - -
Paid-in capital...................................................................... 763,948 763,948
Accumulated deficit.................................................................. (4,129,604) (3,842,361)
----------- -----------
Total stockholder's deficiency....................................................... (3,365,656) (3,078,413)
----------- -----------
$7,410,555 $7,130,308
=========== ===========
</TABLE>
See accompanying notes to
condensed consolidated financial statements.
- 34 -
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
-------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................................... $ (206,714) $ (319,804)
------------ ------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization.................................... 470,830 415,172
Equity in net loss of affiliates, net............................ 2,269 4,360
Minority interests............................................... 6,326 (30,415)
Gain on sale of investments...................................... - (10,861)
Write off of investment in affiliate............................. - 15,100
Write off of deferred financing costs............................ - 4,406
Amortization of deferred financing and other costs............... 15,668 4,042
Amortization of debenture discount............................... 371 256
(Gain) loss on sale of equipment................................. (1,246) 2,115
Changes in assets and liabilities, net of effects of
acquisitions and dispositions................................ (220,860) (71,525)
------------ ------------
Net cash provided by operating activities.................... 66,644 12,846
------------ ------------
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired.................... (116,183) (114,447)
Proceeds from sale of marketable securities........................ - 10,861
Capital expenditures............................................... (554,406) (380,850)
Proceeds from sale of plant and equipment.......................... 68 431
Additions to intangible assets..................................... (120) (5,420)
Increase in investments in affiliates, net......................... (28,669) (33,559)
------------ ------------
Net cash used in investing activities........................ (699,310) (522,984)
------------ ------------
Cash flows from financing activities:
Proceeds from bank debt............................................ 1,867,784 1,873,047
Repayment of bank debt............................................. (1,229,829) (1,448,882)
Dividends applicable to preferred stock............................ (7) (14,670)
Payments of capital lease obligations and other debt............... (16,844) (9,072)
Additions to deferred financing and other costs ................... (17,172) (5,822)
------------ ------------
Net cash provided by financing activities.................... 603,932 394,601
------------ ------------
Net decrease in cash and cash equivalents............................. (28,734) (115,537)
Cash and cash equivalents at beginning of year........................ 62,665 173,826
------------ ------------
Cash and cash equivalents at end of period............................ $ 33,931 $ 58,289
============ =============
</TABLE>
See accompanying notes to
condensed consolidated financial statements.
- 35 -
<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 six month periods ended
June 30, 2000 and 1999 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, 1999.
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, 2000.
Note 3. RECLASSIFICATIONS
Certain reclassifications have been made to the 1999 financial statements to
conform to the 2000 presentation.
Note 4. LOSS PER COMMON SHARE
Net loss per common share for the three and six months ended June 30, 2000 and
1999 is not presented since the Company is a wholly owned subsidiary of
Cablevision Systems Corporation ("Cablevision").
- 36 -
<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 $254,286 and $204,780 for the six months ended June 30, 2000 and
1999, respectively. The Company's noncash financing and investing activities for
the six months ended June 30, 2000 and 1999 included capital lease obligations
of $21,794 and $22,772, respectively, incurred when the Company entered into
leases for new equipment and preferred stock dividend requirements of $80,522
and $72,020, respectively.
Note 6. ACQUISITION
In January 2000, Regional Programming Partners acquired the 70% interest in
SportsChannel Florida Associates held by Front Row Communications for
approximately $130,600 (including the repayment of $20,000 in debt) increasing
its ownership to 100%. The acquisition was accounted for as a purchase with the
operations of the acquired business being consolidated with those of the Company
as of the acquisition date. The purchase price will be allocated to the specific
assets acquired when an independent appraisal is obtained.
Note 7. AT HOME
As of June 30, 2000 and 1999, deferred revenue derived from the receipt of At
Home warrants, net of amortization taken, amounted to approximately $131,419 and
$187,245, respectively. For the six months ended June 30, 2000 and 1999, the
Company recognized approximately $30,000 and $25,068, respectively, of this
deferred revenue.
On June 19, 2000, Cablevision commenced an action in the Delaware Court of
Chancery to protect its rights regarding an agreement, dated as of March 28,
2000, among Excite@Home, AT&T Corp., Comcast Corporation and Cox
Communications, Inc. On June 30, 2000, Excite@Home, AT&T, Comcast and Cox
filed answers in the Delaware Court of Chancery to Cablevision's complaint.
In addition, Excite@Home asserted counterclaims against Cablevision seeking
to rescind its agreements with Cablevision and cancel the Excite@Home
warrants owned by Cablevision.
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 income or expense and the costs
of Year 2000 remediation).
- 37 -
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
------------------------ ---------------------------
2000 1999 2000 1999
----- ---- ----- ----
<S> <C> <C> <C> <C>
REVENUES
Telecommunication Services............... $1,163,357 $1,057,964 $ 596,289 $ 532,474
Rainbow Media Holdings................... 708,794 587,650 347,312 289,055
Retail Electronics....................... 295,758 259,348 159,102 136,331
All Other................................ 36,017 39,085 17,844 20,778
Intersegment Eliminations................ (74,125) (64,030) (38,970) (32,329)
---------- ---------- ---------- -----------
Total........................... $2,129,801 $1,880,017 $1,081,577 $ 946,309
========== ========== ========== ===========
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
------------------------ ---------------------------
2000 1999 2000 1999
----- ---- ----- ----
ADJUSTED OPERATING CASH FLOW
Telecommunication Services............... $ 483,245 $ 447,148 $ 244,579 $ 228,790
Rainbow Media Holdings................... 118,132 74,847 71,176 46,597
Retail Electronics....................... (31,768) (16,802) (13,880) (5,497)
All Other................................ (26,622) (21,969) (13,407) (13,983)
----------- ----------- ----------- -----------
Total........................... $ 542,987 $ 483,224 $ 288,468 $ 255,907
=========== =========== =========== ===========
A reconciliation of reportable segment amounts to the Company's consolidated
balances is as follows:
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ---------------------------
2000 1999 2000 1999
---- ---- ---- ----
REVENUE
Total revenue for reportable segments...................... $2,167,909 $1,904,962 $1,102,703 $ 957,860
Other revenue and intersegment eliminations................ (38,108) (24,945) (21,126) (11,551)
---------- ----------- ---------- -----------
Total consolidated revenue........................... $2,129,801 $1,880,017 $1,081,577 $ 946,309
========== ========== ========== ===========
</TABLE>
- 38 -
<PAGE>
CSC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ---------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
ADJUSTED OPERATING CASH FLOW TO NET LOSS
Total adjusted operating cash flow for reportable
segments............................................. $ 569,609 $ 505,193 $ 301,875 $ 269,890
Other adjusted operating cash flow deficit................. (26,622) (21,969) (13,407) (13,983)
Items excluded from adjusted operating cash flow:
Depreciation and amortization........................ (470,830) (415,172) (237,478) (209,719)
Incentive stock plan income (expense)................ 6,345 (166,997) (34,779) (45,658)
Year 2000 remediation................................ (3,473) (16,373) (913) (8,801)
Interest expense..................................... (271,547) (223,558) (139,468) (114,266)
Interest income...................................... 2,704 4,860 1,403 1,981
Equity in net income (loss) of affiliates, net....... (2,269) (4,360) 47 (965)
Write off of deferred financing costs - (4,406) - (4,406)
Minority interests................................... (6,326) 30,415 (4,634) 5,191
Miscellaneous, net................................... (4,305) (7,437) (3,568) (3,264)
------------ ----------- ----------- -----------
Net loss................................... $ (206,714) $ (319,804) $ (130,922) $ (124,000)
=========== =========== =========== ===========
</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. NET ASSETS HELD FOR SALE
The net assets attributable to the Company's cable television systems located in
and around the greater Cleveland, Ohio metropolitan area, in Boston and Eastern
Massachusetts and in Kalamazoo, Michigan are classified in the accompanying
balance sheet as of June 30, 2000 as net assets held for sale.
Note 10. SUBSEQUENT EVENT
In August 2000, Cablevision filed preliminary proxy materials with the
Securities and Exchange Commission related to the vote of Cablevision's
shareholders that is required to amend Cablevision's charter to authorize and
issue a new series of common stock called Rainbow Media Group tracking stock.
The new series would be designed to track the economic performance of the
businesses and interests of the Rainbow Media Group, which are currently part,
but not all, of the Company's Rainbow Media Holdings, Inc. subsidiary.
- 39 -
<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 11
through 28 of this Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Refer to Cablevision Systems Corporation's Quantitative and Qualitative
Disclosures About Market Risk on page 29 of this Form 10-Q.
- 40 -
<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.
On June 19, 2000, Cablevision commenced an action in the Delaware
Court of Chancery to protect its rights regarding an agreement,
dated as of March 28, 2000, among Excite@Home, AT&T Corp.,
Comcast Corporation and Cox Communications, Inc. See
Cablevision's Form 8-K filed on July 3, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The index to exhibits is on page 43.
(b) The Company filed a Current Report on Form 8-K with the
Commission on May 5, 2000.
- 41 -
<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: AUGUST 14, 2000 /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: AUGUST 14, 2000 /S/ANDREW B. ROSENGARD
------------------------- -----------------------------------
By: Andrew B. Rosengard, as Executive
Vice President, Finance and
Principal Accounting Officer
of Cablevision Systems Corporation
and CSC Holdings, Inc.
- 42 -
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. DESCRIP NO.
27 Financial Data Schedule - Cablevision Systems Corporation
and Subsidiaries
27.1 Financial Data Schedule - CSC Holdings, Inc. and Subsidiaries
- 43 -
