<PAGE>
UNITED STATES
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 MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______ .
COMMISSION FILE NUMBER: 33-43948
CABLEVISION
INDUSTRIES
CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 59-1353813
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
75 ROCKEFELLER PLAZA, NEW YORK, NY 10019
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
212-484-8000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT
WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
---------- --------
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
100 SHARES OF COMMON STOCK, NO PAR VALUE PER SHARE, WERE ISSUED AND OUTSTANDING
AS OF MAY 10, 1996
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (H) (1) (a)
AND (b) OF FORM 10-Q AND IS FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
PAGE 1 OF 14
<PAGE>
CABLEVISION INDUSTRIES CORPORATION AND SUBSIDIARIES
1996 FORM 10-Q QUARTERLY REPORT
FOR THE THREE MONTHS ENDED MARCH 31, 1996
TABLE OF CONTENTS
PAGE
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Financial Statements 3
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
2
<PAGE>
CABLEVISION INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
ASSETS MARCH 31, 1996 DECEMBER 31, 1995
- - ------ -------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents......................................... $ 38,100 $ 7,649
Accounts receivable, net of allowance
for doubtful accounts of 1,401 at March 31,1996 and
$1,236 at December 31, 1995 23,519 23,227
Other current assets.............................................. 3,231 3,780
---------- ----------
Total current assets 64,850 34,656
Investments and loans.............................................. 1,842 23,507
Property, plant and equipment, net................................. 389,885 367,470
Cable television franchises, net................................... 724,039 285,860
Other intangibles, net............................................. 281,413 248,546
---------- ----------
$1,462,029 $ 960,039
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
- - ----------------------------------------------
Current Liabilities:
Accounts payable.................................................. $ 34,617 $ 12,599
Accrued expenses.................................................. 29,241 68,100
Subscriber advance payments and deposits.......................... 19,273 14,842
Liability under employment arrangements........................... 1,754 93,185
---------- ----------
Total current liabilities 84,885 188,726
Note payable to TWI Cable Inc...................................... 1,525,000 --
Other long-term debt............................................... 500,000 1,481,406
Deferred income taxes.............................................. 35,620 17,732
Other noncurrent liabilities....................................... 3,327 --
Stockholder's deficit:
Common stock, no par value, 200 shares authorized, 100 issued
and outstanding at March 31, 1996; $1 par value, 80,000 shares
issued and outstanding at December 31, 1995, stated at
redemption value -- 100
Additional paid-in capital........................................ 125,109 32,565
Accumulated deficit............................................... (811,912) (760,490)
---------- ----------
Total stockholder's deficit (686,803) (727,825)
---------- ----------
$1,462,029 $ 960,039
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
CABLEVISION INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues................................................... $129,274 $103,634
Costs and expenses:
Operating............................................... 43,194 31,105
Selling, general and administrative..................... 23,045 24,574
Depreciation and amortization........................... 40,823 34,951
Long-term stock and deferred compensation............... -- 2,500
-------- --------
Total costs and expenses................................ 107,062 93,130
-------- --------
Income from operations..................................... 22,212 10,504
Interest expense, net................................... (37,991) (30,824)
Other (expense) income.................................. (120) 19,746
-------- --------
Loss before income taxes................................... (15,899) (574)
Income tax benefit......................................... (5,314) (188)
-------- --------
Loss before extraordinary item............................. (10,585) (386)
Extraordinary loss on retirement of debt
(less applicable income tax benefit
of $6,493).............................................. (9,658) --
-------- --------
Net loss................................................... $(20,243) $ (386)
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CABLEVISION INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
( DOLLAR IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
Additional
Paid-In Accumulated Common
Capital Deficit Stock
--------- ----------- ------
<S> <C> <C> <C>
Balance, December 31, 1995.............. $ 32,565 $(760,490) $ 100
Capital contribution.................... 92,444 -- --
Change in capital structure resulting
from merger with Time Warner........... 100 -- (100)
Distributions........................... -- (31,179) --
Net loss................................ -- (20,243) --
--------- --------- -----
Balance, March 31, 1996................. $ 125,109 $(811,912) --
========= ========= =====
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
CABLEVISION INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1996 1995
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss............................................................. $ (20,243) $ (386)
Adjustment to reconcile net loss to
net cash provided by (used in) operating activities:
Extraordinary loss on retirement of debt........................... 16,151 --
Depreciation and amortization...................................... 40,823 34,951
Equity in loss of affiliate........................................ 394 387
Deferred income tax benefit (expense).............................. (12,055) (326)
Long-term stock and deferred compensation.......................... -- 2,500
Changes in operating assets and
liabilities, net of effect of acquisitions:
Accounts receivable, net.......................................... 7,915 (49)
Other current assets.............................................. 2,491 338
Accounts payable and accrued expenses............................. (25,120) (7,488)
Subscriber advance payments and deposits.......................... 1,647 2,873
Long-term stock and deferred compensation......................... (91,431) (8,366)
----------- ---------
Net cash (used in) provided by operating activities.................. (79,428) 24,434
----------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment............................ (8,454) (23,193)
Acquisition of cable television systems............................... (189,171) --
Net increase in investment and loans.................................. -- (5,913)
----------- ---------
Net cash used in investing activities............................... (197,625) ( 29,106)
FINANCING ACTIVITIES:
New borrowings........................................................ 1,525,000 61,340
Repayment of debt..................................................... (1,216,732) (55,938)
Distributions......................................................... (764) --
----------- ---------
Net cash provided by financing activities........................... 307,504 5,402
----------- ---------
Net increase in cash and cash equivalents........................... 30,451 730
CASH AND CASH EQUIVALENTS, beginning of year............................. 7,649 3,698
----------- ---------
CASH AND CASH EQUIVALENTS, end of period................................. $ 38,100 $ 4,428
=========== =========
Supplemental disclosures of cash flow information:
Cash paid during the period:
Interest (net of amount capitalized) $ 33,437 $ 41,757
Income taxes 248 138
</TABLE>
See accompanying note to consolidated financial statements
6
<PAGE>
[S]
CABLEVISION INDUSTRIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
UNAUDITED
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Cablevision
Industries Corporation ("CVI") and its subsidiaries and partnerships
(collectively, the "Company") and have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission (the "SEC").
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. All significant intercompany accounts
and transactions have been eliminated in the consolidated financial statements.
The financial statements as of March 31, 1996 and 1995 are unaudited;
however, in the opinion of management, such statements include all adjustments
necessary for a fair presentation of the results for the periods presented. The
interim financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report filed with
the SEC on Form 10-K for the fiscal year ended December 31, 1995. 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 ended
December 31, 1996. Certain reclassifications have been made to the 1995
financial statements to conform with the 1996 presentation.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("FAS 121") which
established standards for the recognition and measurement of impairment losses
on long-lived assets and certain intangible assets. The adoption of FAS 121 did
not have a material effect on CVI's financial statements.
2. MERGERS AND ACQUISITIONS
On January 4, 1996, CVI merged with a wholly owned subsidiary ("TW
Acquisition Corp.") of Time Warner Inc. ("Time Warner"), with CVI being the
survivor of such merger (the "CVI Merger"). As a result of the CVI Merger, the
Company became a direct, wholly owned subsidiary of Time Warner. Concurrent with
the CVI Merger, Cablevision Management Corporation of Philadelphia ("CMP")
merged with a wholly owned subsidiary of Time Warner and became a direct, wholly
owned subsidiary of Time Warner (the "CMP Merger"). Immediately following the
CVI Merger, Cablevision Industries of Middle Florida, Inc. ("CIMF") merged into
CVI (the "CIMF Merger") and CVI and certain of its subsidiaries purchased the
entire equity interests or all of the assets (collectively, the "Gerry
Purchase") of each of Cablevision Industries of Tennessee L.P. ("CITLP"),
Cablevision Industries Limited Partnership ("CILP"), Cablevision Industries of
Saratoga Associates ("CISA"), Cablevision of Fairhaven/Acushnet ("CFA") and
Cablevision Industries of Florida, Inc. ("CIF") and, together with CIMF, CMP,
CITLP, CILP, CISA and CFA, the "Gerry Companies," and together with CVI, the
"Cablevision Companies." The CMP Merger, the CIMF Merger and the Gerry Purchase
are referred to herein as the "Gerry Acquisition."
The CVI Merger did not result in a change in accounting basis of the net
assets of the Company as presented in its March 31, 1996 balance sheet due to
the Company's public debt which will remain outstanding (Note 4). As a result of
the Gerry Acquisition, CVI has acquired cable television systems serving
approximately 247,000 subscribers in exchange for 2,448,809 shares of Time
Warner common stock and the assumption or incurrence of approximately $433,000
of debt. CVI has accounted for the Gerry Acquisition under the purchase method
of accounting for business combinations and has, accordingly, preliminarily
allocated the estimated total acquisition cost of $304,000 to the underlying net
assets in proportion to their respective fair values as follows: cable
television franchises - $459,000; goodwill - $33,000; other current and
noncurrent assets - $103,000; long-term debt - $219,000; deferred income taxes -
$33,000; and other current liabilities - $39,000.
7
<PAGE>
The accompanying consolidated statement of operations includes the operating
results of the Gerry Companies from the acquisition date. On a pro forma basis,
giving effect to the Gerry Acquisition as if this transaction had occurred at
January 1, 1995, CVI would have approximately reported for the quarter ended
March 31, 1995: revenues of $125,000, income from operations of $12,000,
interest expense of $36,000, depreciation and amortization expense of $46,000
and net income of $2,000.
The CVI Merger and the Gerry Acquisition are referred to herein as the "Time
Warner Transactions." As a result of the Gerry Acquisition, the ownership of the
Gerry Companies have been consolidated within the Company. Effective January 4,
1996, the Company's systems are managed by Time Warner Entertainment Company,
L.P. ("TWE" - Note 3).
In the fourth quarter of 1995, the Company recorded a non-recurring charge
of $25,749 to reduce the carrying value of certain non-operating assets,
("Distributed Assets") to their aggregate net realizable value of $30,415. The
Distributed Assets, which included property, plant and equipment and investments
with net realizable values of $22,740 and $7,675, were distributed to the CVI
majority stockholder in January 1996 in contemplation of the Time Warner
Transactions. In addition, CVI made a cash distribution of $764 to the CVI
minority stockholders in January 1996 representing their pro rata share of the
net realizable value of the Distributed Assets.
3. INVESTMENTS AND LOANS
As of March 31, 1996 and December 31, 1995, investments and loans consisted
of the following:
March 31, December 31,
1996 1995
----------- -------------
Loans to affiliates $ --- $ 4,439
Investment in CVI-KKR Joint Venture 197 591
Marketable securities 190 190
Other investments and loans 1,455 18,287
--------- ----------
$ 1,842 $ 23,507
========= ==========
The Company entered into an agreement (the "Agreement") with its majority
stockholder on December 26, 1989, as amended on January 10, 1992, under which
the Company agreed to make one or more direct loans, or guarantee loans made by
third parties, to the majority stockholder or to his affiliates; provided that
any such loans or guarantees made with request to any of his affiliates had to
be guaranteed also by the majority stockholder. As security for any such
transactions undertaken under this Agreement, the majority stockholder pledged
20% of CVI's common stock to the Company. The Agreement was extended to January
4, 1996, whereupon the entire loan balance of $10,489 was repaid in connection
with the Time Warner Transactions.
On November 3, 1994, a subsidiary of the Company entered into an agreement
with a partner of one of the Company's consolidated partnerships to purchase the
remaining ownership interest in the partnership. The consummation of the
transaction was subject to the receipt of various consents. These consents were
obtained in December 1995 and the closing of this transaction occurred on
December 31, 1995. The purchase price of $21,422 was satisfied by forgiving
$15,372 of loans made to the partner and the remaining balance of $6,050 was
paid on January 3, 1996.
In September 1992, CVI finalized various agreements with Kohlberg, Kravis,
Roberts & Co. ("KKR") under which a joint venture ("CVI-KKR Joint Venture") was
formed to acquire certain cable television systems. CVI made a $6,259 equity
investment in the CVI-KKR Joint Venture, representing its share of the capital
required for an acquisition. The Company's investment in, and the results of
operations of, the CVI-KKR Joint Venture is accounted for under the equity
method of accounting. Since the January 4, 1996 consummation of the Time Warner
Transactions, the CVI-KKR Joint Venture is no longer managed by CVI. This does
not have a material effect on the Company.
Prior to the Time Warner Transactions, other investments and loans included
the deferral of accrued management fees, accrued interest on loans to
affiliates, and other advances to affiliates, as well as investments in
unrelated cable programming entities.
8
<PAGE>
The Company earned management fees prior to the Time Warner Transactions,
for services provided to cable television systems owned or controlled by the
majority stockholder of the Company and to a cable television systems owned by
the CVI-KKR Joint Venture. These management fees were included in revenues and
amounted to approximately $1,388 for the three months ended March 31, 1995.
After the Time Warner Transactions were consummated, all balances related to
such management fee arrangements and affiliate advances were eliminated. At
March 31, 1996 other investments and loans were comprised of investments in
other cable television and programming entities.
4. DEBT
As of March 31, 1996 and December 31, 1995, debt consisted of:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
CVI:
9-1/4% senior debentures $ 200,000 $ 200,000
10-3/4% senior notes 300,000 300,000
Line of credit (8.5% interest rate) -- 3,000
Revolving note (LIBOR + 7/8%) 1,525,000 --
Subsidiaries:
9.86% senior notes -- 66,000
10.36% senior notes -- 100,000
Bank credit facilities -- 798,348
7.53% secured note -- 14,058
---------- ----------
$ 2,025,000 $1,481,406
========== ==========
</TABLE>
In connection with the consummation of the Time Warner Transactions on
January 4, 1996, TWI Cable Inc. ("TWI Cable"), a wholly owned subsidiary of Time
Warner, borrowed $1,525,000 under its five-year revolving credit agreement
entered into on June 30, 1995 (as amended, the "New Credit Agreement") and
loaned such proceeds to CVI under the same terms set forth in the New Credit
Agreement as more fully explained below. CVI used approximately $1,200,000 of
such proceeds to repay or redeem all of its outstanding indebtedness with the
exception of the Senior Debentures and Senior Notes, as well as $220,000 of
indebtedness that was assumed in the Gerry Acquisition, plus redemption premiums
thereon of $16,000 (the "CVI Debt Refinancing"). The New Credit Agreement
permits aggregate borrowings by TWI Cable of $4,000,000, subject to certain
limitations and adjustments, a portion of which will be used by TWI Cable to
fund the ongoing working capital, capital expenditures and other corporate needs
of CVI. Borrowings under the New Credit Agreement bear interest at rates
generally equal to LIBOR plus an initial margin of 87.5 basis points, which
margin will vary based on the credit rating or financial leverage of the
borrower. CVI has guaranteed the obligations of TWI Cable under the New Credit
Agreement.
In addition to the CVI Debt Refinancing, $211,000 was used to consummate the
Gerry Acquisition and $62,000 was used to pay for one-time costs related to the
CVI Merger and transaction costs related to the Gerry Acquisition.
On March 17, 1993, CVI issued the Senior Debentures. Interest is payable
semi-annually on April 1 and October 1. The Senior Debentures may be redeemed at
the option of CVI, in whole or in part, at any time on or after April 1, 2000,
at prices decreasing from 104.615% of their principal amount to 100% in 2003,
plus accrued interest. The Senior Debentures rank pari passu with the Senior
Notes (as defined below), and the indenture agreement for the Senior Debentures
stipulates, among other things, limitations on dividends and other
distributions, transactions with affiliates, liens, merger or sales of assets
and has cross-default provisions related to other debt of the Company.
9
<PAGE>
On January 30, 1992, CVI issued the Senior Notes. Interest is payable semi-
annually on January 30 and July 30. The Senior Notes may be redeemed at the
option of CVI, in whole or in part, at any time on or after January 30, 1997, at
prices decreasing from 105.375% of the principal amount to 100% in 1999, plus
accrued interest. The Senior Notes rank pari passu with the Senior Debentures,
and the indenture agreement for the Senior Notes stipulates, among other things,
limitations on dividends and other distributions, transactions with affiliates,
liens, merger or sales of assets and has cross-default provisions related to
other debt of the Company.
Under note agreements with insurance companies, a subsidiary issued $66,000
of 9.86% senior notes and $150,000 of 10.36% senior notes that were non-recourse
to CVI. Certain other subsidiaries and consolidated partnerships have also
entered into various stand-alone bank credit agreements. At December 31, 1995,
$798,348 was outstanding under these agreements. These agreements provided for
interest at varying rates based upon various borrowing options and the
attainment of certain financial ratios and for commitment fees of 1/4% to 3/8%
per annum on the unused portion of the available credit. The effective interest
rate at December 31, 1995 was 6.86% after giving effect to the interest rate
exchange agreements discussed below.
In connection with the Time Warner Transactions, the amounts outstanding
under the insurance company senior notes and the bank credit facilities were
repaid.
In conjunction with certain provisions in its bank credit agreements, the
Company entered into various interest rate exchange agreements (the " Swaps")
pursuant to which the interest rate on $365,000 was fixed at a weighted average
swap rate of 6.22% plus the applicable margin over the Eurodollar rate option
under the respective bank credit agreements. Under the terms of these Swaps,
which expire in 1996 through 1998, the Company is exposed to credit loss in the
event of nonperformance by the other parties to the Swaps. However, the Company
does not anticipate nonperformance by the counter parties.
The fair value of the Company's debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities.
Based on the level of interest rates prevailing at March 31, 1996, the fair
value of CVI's fixed-rate debt exceeded its carrying value by $60,000, which is
the equivalent of an unrealized loss of $60,000, and the cost to terminate the
related interest rate swap contracts would be immaterial. Based on the level of
interest rates prevailing at December 31, 1995, the fair value of CVI's fixed-
rate debt exceeded its carrying value by $59,000 and it would have cost $3,000
to terminate its interest rate swap contracts, which combined was the equivalent
of an unrealized loss of $62,000. Unrealized gains or losses on debt or interest
rate swap contracts are not recognized for financial reporting purposes unless
the debt is retired or the contracts are terminated prior to their maturity.
In connection with the Time Warner transactions on January 4, 1996, the
Company realized an extraordinary loss, net of applicable tax benefit, of $9,658
for the retirement of debt.
5. EMPLOYMENT ARRANGEMENTS
As a result of the CVI Merger, the Company entered into retention agreements
(the "Agreements") with some its executive officers and key employees
(collectively "Executives") whereby the Company agreed to make retention
payments to the Executives. The Agreements superseded any prior agreements
between the Company and the Executives relating to the payment of deferred
compensation or other forms of additional compensation, whether payable in the
form of cash or equity interests in the Company or its subsidiaries. The Company
also adopted a Severance Pay Plan (the "Severance Plan") whereby eligible
employees would receive a payment based upon a specified formula. The Agreements
and Severance Plans were fully accrued for in 1995.
As a result of the Agreements and Severance Plan, the Company paid out
approximately $91,000 during the three months ended March 31, 1996.
10
<PAGE>
6. RELATED PARTIES
On January 4, 1996 the company borrowed $1,525,000 from TWI Cable, Inc. This
loan provides for interest at LIBOR plus .875% per annum and is due on demand.
Interest expense for the quarter ended March 31, 1996 totaled $24,000.
Included in the Company's operating expense after the Merger are charges for
programming and promotional services provided by Home Box Office and other
affiliates of Time Warner. These charges are based on customary rates. For the
quarter ended March 31, 1996, these charges totaled $5,400. In addition, the
Company has entered into a management service arrangement with TWE, pursuant to
which TWE is responsible for the management and operation of the Company's cable
systems. The management fees to be paid to TWE by the Company are based on an
allocation of the corporate expenses of the TWE's cable division in proportion
to the respective number of subscribers of all cable systems to be managed by
TWE's cable division. For the period ended March 31, 1996, these fees totaled
$5,082.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
COMPARATIVE FIRST QUARTER OPERATING RESULTS
Overview
- - --------
CVI had revenues of $129,274 and a net loss of $20,243 for the three months
ended March 31, 1996, compared to revenues of $103,634 and a net loss of $386
for the three months ended March 31, 1995.
On a pro forma basis, giving effect to the Gerry Acquisition as if this
transaction had occurred as of January 1, 1995, CVI would have approximately
reported the following operating results for the quarter ended March 31, 1995:
revenues of $125,000, income from operations of $12,000, depreciation and
amortization expense of $46,000 and net income of $2,000.
Income From Operations
- - ----------------------
Revenues increased to $129,274, compared to $103,634 in the first quarter of
1995. Income from operations increased to $22,212, compared to $10,504 in the
first quarter of 1995. Current year revenue and operating results benefitted
from the Gerry Acquisition on January 4, 1996. Excluding the Gerry Acquisition,
revenue increased primarily due to increases in regulated cable rates phased in
during February 1996 as permitted under Time Warner Cable's "social contract",
and basic subscriber growth approaching 6%. Excluding the positive impact from
the Gerry Acquisition, income from operations increased as a result of the
revenue gain, lower programming expenses resulting from the transition to Time
Warner's programming contracts and lower selling, general and administrative
expenses reflecting the reduction of corporate expenses in connection with the
closing of CVI corporate and regional facilities and the subsequent termination
of related personnel as a direct result of the integration of the operations of
CVI into Time Warner's existing operating structure.
Other Income and Expense
- - ------------------------
Other expense, net increased to $38,111, compared to $11,078 in the first
quarter of 1995. This increase is primarily attributable to a realized gain of
$20,133 on a sale of marketable securities during the first quarter of 1995. In
addition, interest expense, net increased to $37,991, compared to $30,824 in the
first quarter of 1995 due to increased borrowing levels reflecting the
assumption or incurrence of approximately $433,000 of debt relating to the Gerry
Acquisition, which has been partially offset by interest savings achieved
through the CVI Debt Refinancing.
Extraordinary Loss on Retirement of Debt
- - ----------------------------------------
An extraordinary loss on retirement of debt of $9,658 was recorded during
the first quarter of 1996. This extraordinary loss related to redemption
premiums incurred as a result of the CVI Debt Refinancing.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
There were no material legal proceedings instituted during the three months
ended March 31, 1996. There were also no material developments in any of the
other existing legal proceedings which were previously reported in the Company's
Annual Report filed with the SEC on Form 10-K for the fiscal year ended December
31, 1995.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
CVI filed a Current Report on form 8-K dated January 4, 1996, reporting in Items
1 and 2 that Time Warner had completed its previously announced transactions
with Cablevision Industries and the "Gerry Companies" regarding the acquisition
of the "Gerry Companies" by CVI and CVI's merger into a wholly owned subsidiary
of Time Warner. In addition, it was reported in Item 4, that CVI approved the
engagement for the year ended December 31, 1995 of Ernst & Young LLP an
independent auditors.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CABLEVISION INDUSTRIES CORPORATION
Date: May 13, 1996 By: /s/ RICHARD M. PETTY
------------ ----------------------
Richard M. Petty
Vice President and Controller
(Principal Accounting Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 0 7,649
<SECURITIES> 38,100 0
<RECEIVABLES> 24,920 21,991
<ALLOWANCES> 1,401 1,236
<INVENTORY> 0 0
<CURRENT-ASSETS> 64,850 34,656
<PP&E> 1,018,889 865,534
<DEPRECIATION> 629,004 498,064
<TOTAL-ASSETS> 1,462,029 960,039
<CURRENT-LIABILITIES> 84,885 188,726
<BONDS> 2,025,000 1,481,406
0 0
0 0
<COMMON> 0 100
<OTHER-SE> (686,803) (727,925)
<TOTAL-LIABILITY-AND-EQUITY> 1,462,029 960,039
<SALES> 129,274 103,634
<TOTAL-REVENUES> 129,274 103,634
<CGS> 43,194 31,105
<TOTAL-COSTS> 43,194 31,105
<OTHER-EXPENSES> 40,823<F1> 34,951<F1>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 37,991 30,824
<INCOME-PRETAX> (15,899) (574)
<INCOME-TAX> (5,314) (188)
<INCOME-CONTINUING> (10,585) (386)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (9,658) 0
<CHANGES> 0 0
<NET-INCOME> (20,243) (386)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1>Depreciation and amortization
</FN>
</TABLE>
