Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --------- EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1995
-----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ---------- SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________________to _________________.
Commission File Number: 1-9046
------
Cablevision Systems Corporation
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2776686
- -------------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Media Crossways, Woodbury, New York 11797
- --------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 364-8450
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Class A Common Stock
Name of each exchange on which registered: American Stock Exchange
Securities registered pursuant to Section 12(g)
of the Act: None
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 by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
-------
Aggregate market value of voting stock held by nonaffiliates of the registrant
based on the closing price at which such stock was sold on the American Stock
Exchange on March 15, 1996: $745,341,699
Number of shares of common stock outstanding as of March 15, 1996:
Class A Common Stock - 14,340,782
Class B Common Stock - 11,572,709
Documents incorporated by reference - The Company intends to file with the
Securities and Exchange Commission, not later than 120 days after the close of
its fiscal year, a definitive proxy statement or an amendment on Form 8 to this
report containing the information required to be disclosed under Part III of
Form 10-K.
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business. 3
2. Properties. 28
3. Legal Proceedings. 28
4. Submission of Matters to a Vote of
Security Holders. 28
PART II
5. Market for the Registrant's Common Equity
and Related Stockholder Matters. 29
6. Selected Financial Data. 31
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 33
8. Consolidated Financial Statements. 48
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. 89
PART III
10. Directors and Executive Officers of the *
Registrant.
11. Executive Compensation. *
12. Security Ownership of Certain Beneficial
Owners and Management. *
13. Certain Relationships and Related
Transactions. *
PART IV
14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. 89
* These items are omitted because the registrant intends to file with the
Securities and Exchange Commission, not later than 120 days after the close
of its fiscal year, a definitive proxy statement or an amendment on Form 8
to this report containing the information required to be disclosed under
Part III of Form 10-K.
(2)
PART I
ITEM 1. BUSINESS
THE COMPANY
Cablevision Systems Corporation, a Delaware corporation and its majority
owned subsidiaries (the "Company") own and operate cable television systems
in six states with approximately 2,061,000 subscribers at December 31, 1995.
The Company also has ownership interests in and/or manages other cable
television systems which served an aggregate of approximately 662,000
subscribers at December 31, 1995 and has interests in companies that produce
and distribute national and regional programming services and that provide
advertising sales services for the cable television industry. The Company
was formed in 1985 to effect a reorganization of its predecessors.
Cable television is a service that delivers multiple channels of television
programming to subscribers who pay a monthly fee for the services they
receive. Television and radio signals are received over-the-air or via
satellite delivery by antennas, microwave relay stations and satellite earth
stations and are modulated, amplified and distributed over a network of
coaxial and fiber optic cable to the subscribers' television sets. Cable
television systems typically are constructed and operated pursuant to
non-exclusive franchises awarded by local governmental authorities for
specified periods of time.
The Company's cable television systems offer varying levels of service which
may include, among other programming, local broadcast network affiliates and
independent television stations, satellite-delivered "superstations" such as
WTBS (Atlanta), certain other news, information and entertainment channels
such as CNN, CNBC, ESPN, MTV, and certain premium services such as HBO,
Showtime, The Movie Channel and Cinemax.
The Company's cable television revenues are derived principally from monthly
fees paid by subscribers. In addition to recurring subscriber revenues, the
Company derives revenues from installation charges, from the sales of
pay-per-view movies and events, and from the sale of advertising time on
advertiser supported programming. Certain services and equipment provided by
substantially all of the Company's cable television systems are subject to
regulation. See "Business - Cable Television Operations - Regulation - 1992
Cable Act."
For financing purposes, the Company is structured as a restricted group and
an unrestricted group of subsidiaries. The restricted group consists of
Cablevision Systems Corporation and certain of its subsidiaries, including
Cablevision of New York City ("CNYC") and, as of December 15, 1995, a
subsidiary holding the cable television assets previously a part of
Cablevision of Boston Limited Partnership ("Cablevision of Boston") (the
"Restricted Group"). The unrestricted group of subsidiaries consists
primarily of V Cable, Inc. ("V Cable"), Cablevision MFR, Inc. ("Cablevision
MFR"), and Rainbow Programming Holdings, Inc. (including Rainbow Advertising
Sales Corporation ("Rainbow
(3)
Advertising"), American Movie Classics Company ("AMCC") and SportsChannel
Associates (New York) ("SportsChannel New York")) (collectively, "Rainbow
Programming"). In addition, the Company has an unrestricted group of
investments, consisting of investments in A-R Cable Services, Inc. ("A-R
Cable"), U.S. Cable Television Group, L.P. ("U.S. Cable"), Cablevision of
Framingham Holdings, Inc. ("CFHI"), A-R Cable Partners and Cablevision of
Newark.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources" for a discussion of the
financing of the Company including a discussion of restrictions on
investments by the Restricted Group.
The Company's consolidated cable television systems are concentrated in the
New York City greater metropolitan area (74.6% of the Company's total
subscribers) and the greater Cleveland metropolitan area (14.8% of total
subscribers). The Company believes that its cable systems on Long Island
comprise the largest group of contiguous cable television systems under
common ownership in the United States (measured by number of subscribers).
RECENT DEVELOPMENTS
V CABLE TRANSACTIONS
On February 2, 1996, the Company entered into an agreement, as amended, (the
"GECC Agreement") with General Electric Capital Corporation ("GECC"),
pursuant to which the Company plans to effect a reorganization and
recapitalization relating to its V Cable subsidiary. As of December 31,
1995, V Cable served approximately 378,000 subscribers, principally in the
suburbs of Cleveland, Ohio and on Long Island. As part of this
reorganization and recapitalization, (i) On March 18, 1996 the Company paid
$500 million of V Cable debt and $70 million of U.S. Cable debt, together
with accrued interest, with proceeds from the Company's issuance in February
1996 of $650 million aggregate liquidation preference of 11-1/8% Series L
Redeemable Exchangeable Preferred Stock (the "Series L Preferred Stock");
(ii) all remaining indebtedness of V Cable (which would have amounted to $399
million at December 31, 1995 after giving effect to the March 18, 1996
repayment of $500 million) will be paid with the remainder of the proceeds of
the Series L Preferred Stock, additional borrowings under the Restricted
Group's credit agreement and from funds available under a new Cablevision of
Ohio credit facility, referred to below; (iii) the Company will contribute
its North Coast Cable television system (which served approximately 88,000
subscribers in the Cleveland metropolitan area as of December 31, 1995),
which is currently part of the Company's Restricted Group, to a new
unrestricted subsidiary, Cablevision of Ohio which will also hold V Cable's
Ohio cable television systems and Cablevision of Ohio will enter into a new
$450 million credit facility with a group of banks; (iv) the Long Island
cable television systems of V Cable (161,000 subscribers as of December 31,
1995) will be designated as part of the Company's Restricted Group and the
balance of the debt owed to GECC associated with those systems will be repaid
with the proceeds of Restricted Group borrowings under the Company's credit
agreement; and (v) the 80% interest in U.S. Cable (which served
(4)
approximately 242,000 subscribers as of December 31, 1995), including U.S.
Cable's 19% interest in VC Holdings, will be acquired for an aggregate
additional cost of $151 million which will be raised through a separate bank
facility (U.S. Cable will be part of the Company's Unrestricted Group).
NEW CABLEVISION OF OHIO CREDIT FACILITY
As part of the V Cable reorganization and recapitalization, the Company will
combine its existing North Coast Cable television system and the Ohio cable
television systems of V Cable into Cablevision of Ohio, which will be a
wholly-owned subsidiary of the Company and a member of the Unrestricted
Group. A group of banks has committed to provide a $450 million credit
facility to Cablevision of Ohio, consisting of a $375 million nine-year
reducing revolving credit facility and a $75 million 9-1/2 year term loan.
In connection with the consummation of the reorganization and
recapitalization of V Cable, Cablevision of Ohio expects to draw
approximately $289 million under the $450 million credit facility which will
be used to repay outstanding V Cable debt to GECC and to repay Restricted
Group debt assumed by Cablevision of Ohio in connection with the contribution
of North Coast Cable.
U.S. CABLE ACQUISITION
On March 18, 1996, the Company contributed $70 million of proceeds of the
Series L Preferred Stock mentioned above to U.S. Cable. U.S. Cable applied
the $70 million to the prepayment to GECC of a portion of the indebtedness
under its credit facility.
The GECC Agreement contemplates that following the receipt of any required
franchise and regulatory approvals, the U.S. Cable partnership will (i)
redeem the 80% of U.S. Cable's partnership interests not already owned by V
Cable for approximately $4 million, (ii) refinance the remaining $151 million
of U.S. Cable indebtedness payable to GECC. The funds to redeem the
partnership interest and to repay indebtedness owed to GECC will be provided
by a drawdown under a $175 million credit facility arranged with a new group
of banks. As part of the acquisition of the 80% interest in U.S. Cable which
the Company does not already own, the Company will acquire the 19% interest
in VC Holdings currently held by U.S. Cable.
There can be no assurance that the V Cable reorganization, including the
acquisition of U.S. Cable partners' interests, will be consummated or will be
consummated in the form presently contemplated.
OFFERINGS AND ACQUISITION
In February 1996, the Company issued 6,500,000 depositary shares,
representing 65,000 shares of 11-1/8% Series L Preferred Stock with an
aggregate liquidation preference of $650 million. The depository shares are
exchangeable, in whole but not in part, at the option of the Company, on or
after April 1, 1996, for the Company's 11-1/8% Senior Subordinated Debentures
due 2008. The Company is required to redeem the Series L
(5)
Preferred Stock on April 1, 2008 at a redemption price equal to the
liquidation preference of $10,000 per share plus accumulated and unpaid
dividends. The Series L Preferred Stock is redeemable at various redemption
prices beginning at 105.563% at any time on or after April 1, 2003, at the
option of the Company, with accumulated and unpaid dividends thereon to the
date of redemption. The net proceeds of approximately $626 million was used
to repay $570 million of V Cable and U.S. Cable indebtedness in connection
with the V Cable Transactions, as discussed above, with the balance of
approximately $56 million initially used to repay borrowings under the
Company's Credit Agreement. Such amount is expected to be reborrowed at the
time of consummation of the V Cable Transactions, which is expected to occur
during the third quarter of 1996.
On December 15, 1995, the Company acquired the interests in Cablevision of
Boston that it did not previously own. Cablevision of Boston served
approximately 146,300 subscribers on the date of acquisition. In connection
with the acquisition, Cablevision of Boston became a member of the Restricted
Group, all outstanding subordinated advances made by the Company to
Cablevision of Boston became intercompany indebtedness and, effective
December 15, 1995, the results of operations of Cablevision of Boston are
consolidated with those of the Company. See "Consolidated Cable Affiliates -
Cablevision of Boston".
In November 1995, the Company issued 13,800,000 depositary shares
representing 1,380,000 shares of 8-1/2% Series I Cumulative Convertible
Exchangeable Preferred Stock with an aggregate liquidation preference of $345
million (the "Series I Preferred Stock"). The depositary shares are
convertible into shares of the Company's Class A Common Stock at an initial
conversion price of $67.44 per share of Class A Common Stock. The Company
applied the net proceeds of approximately $334 million to the repayment of
Restricted Group bank indebtedness.
Also in November 1995, the Company issued $300 million aggregate principal
amount of 9-1/4% Senior Subordinated Notes due 2005 (the "2005 Notes"). The
Company applied the net proceeds of approximately $292 million of the 2005
Notes to the repayment of Restricted Group bank indebtedness.
In September 1995, the Company issued 2,500,000 shares of its 11-3/4% Series
G Redeemable Exchangeable Preferred Stock with an aggregate liquidation
preference of $250 million (the "Series G Preferred Stock"). The net
proceeds of approximately $239 million were initially used to repay bank
borrowings.
(6)
CABLE TELEVISION OPERATIONS
GENERAL.
As of December 31, 1995, the Company's consolidated cable television systems
served approximately 2,061,000 subscribers in New York, Ohio, Connecticut,
New Jersey, Michigan, and Massachusetts.
The following table sets forth certain statistical data regarding the
Company's cable television operations (1). During 1995 Cablevision of
Boston, formerly an unconsolidated affiliate, became part of the Restricted
Group and Cablevision of Chicago was sold. During 1994 CNYC and North Coast
Cable became part of the Restricted Group.
As of December 31,
------------------------------
1995 1994 1993
---- ---- ----
Homes passed (2):
Restricted group. . . . . . . . 2,549,000 2,139,000 1,086,000
Unrestricted group. . . . . . . 779,000 760,000 509,000
--------- --------- ---------
Company consolidated. . . . . . 3,328,000 2,899,000 1,595,000
--------- --------- ---------
--------- --------- ---------
Managed unconsolidated cable
affiliates. . . . . . . . . . 988,000 1,427,000 2,181,000
--------- --------- ---------
--------- --------- ---------
Basic service subscribers: . . . . . . . .
Restricted group. . . . . . . . 1,512,000 1,243,000 815,000
Unrestricted group. . . . . . . 549,000 525,000 350,000
--------- --------- ---------
Company consolidated. . . . . . 2,061,000 1,768,000 1,165,000
--------- --------- ---------
--------- --------- ---------
Managed unconsolidated cable
affiliates. . . . . . . . . . 662,000 861,000 1,067,000
--------- --------- ---------
--------- --------- ---------
Average number of premium units per. . . .
basic subscriber:. . . . . . . . . . . .
Restricted group. . . . . . . . 2.2 2.2 1.8
Unrestricted group. . . . . . . 1.1 1.0 1.3
Company consolidated. . . . . . 1.9 1.8 2.2
Managed unconsolidated cable
affiliates . . . . . . . . . . 1.1 1.2 2.0
Average revenue per basic subscriber (3):.
Restricted group. . . . . . . . $38.82 $38.29 $38.01
Unrestricted group. . . . . . . $32.45 $31.72 $30.56
Company consolidated. . . . . . $37.07 $36.33 $36.59
Managed unconsolidated cable
affiliates. . . . . . . . . . $28.68 $29.71 $32.50
- --------------
(1) No information is provided in this table for any period in which
an entity was not a consolidated subsidiary of the Company.
(2) Homes passed is based upon homes actually marketed and does not
include multiple dwelling units passed by the cable plant that
are not connected to it.
(3) Based on recurring service revenues for the last month of the
period, excluding installation charges and certain other
non-recurring revenues such as pay-per-view, advertising and home
shopping revenues. See "Business - Cable Television Operations -
Subscriber Rates and Services; Marketing and Sales".
(7)
SUBSCRIBER RATES AND SERVICES; MARKETING AND SALES.
The Company's cable television systems offer a package of services, generally
marketed as "Family Cable", which includes, among other programming,
broadcast network local affiliates and independent television stations,
satellite-delivered "superstations" and certain other news, information and
entertainment channels such as CNN, CNBC, ESPN and MTV. For additional
charges, the Company's cable television systems provide certain premium
services such as HBO, Showtime, The Movie Channel and Cinemax, which may be
purchased either individually (in conjunction with Family Cable) or in
combinations or in tiers.
In addition, the Company's cable television systems offer a basic package
which includes broadcast network local affiliates and public, educational or
governmental channels and certain public leased access channels.
The Company offers premium services on an individual basis and as components
of different "tiers". Successive tiers include additional premium services
for additional charges that reflect discounts from the charges for such
services if purchased individually. For example, in most of the Company's
cable systems, subscribers may elect to purchase Family Cable plus one, two
or three premium services with declining incremental costs for each
successive tier. In addition, most systems offer a "Rainbow" package
consisting of between five and seven premium services, and a "Rainbow Gold"
package consisting of between eight and ten premium services.
In certain areas with sufficient system capacity, the Company has branded a
new product offering called OptimumTV. OptimumTV, which includes a minimum
of 77 analog channels, offers the Basic and Family packages noted above, as
well as premium services, and a group of three new packages containing
premium networks and ad-supported news, information and entertainment
channels. Depending upon the market, OptimumTV offers customers anywhere
from 20 to 30 new cable channels, including additional pay-per-view channels
that offer new films and sporting events on a transactional basis.
Since its existing cable television systems are substantially fully built,
the Company's sales efforts are primarily directed toward increasing
penetration and revenues in its franchise areas. The Company sells its cable
television services through door-to-door selling supported by telemarketing,
direct mail advertising, promotional campaigns and local media and newspaper
advertising.
Certain services and equipment (converters which are leased to subscribers)
provided by substantially all of the Company's cable television systems are
subject to regulation. See "Business - Cable Television Operations -
Regulation - 1992 Cable Act."
SYSTEM CAPACITY.
The Company is engaged in an ongoing effort to upgrade the technical
capabilities of its cable plant and to increase channel capacity for the
delivery of additional programming
(8)
and new services. The Company's cable television systems have a minimum
capacity of 35 channels and 85% of its subscribers are currently served by
systems having a capacity of at least 52 channels. As a result of currently
ongoing upgrades, the Company expects that by December 1996 approximately 70%
of its subscribers will be served by systems having a capacity of at least 77
channels. A substantial portion of the system upgrades either completed or
underway will utilize fiber optic cable.
PROGRAMMING.
Adequate programming is available to the Company from a variety of sources.
Program suppliers' compensation is typically a fixed, per subscriber monthly
fee based, in most cases, either on the total number of subscribers of the
cable systems of the Company and certain of its affiliates, or on the number
of subscribers subscribing to the particular service. The Company's
programming contracts are generally for a fixed period of time and are
subject to negotiated renewal. The Company's cable programming costs have
increased in recent years and are expected to continue to increase due to
additional programming being provided to most subscribers, increased costs to
produce or purchase cable programming and other factors. Management believes
that the Company will continue to have access to programming services at
reasonable price levels.
FRANCHISES.
The Company's cable television systems are operated primarily under
nonexclusive franchise agreements with local governmental franchising
authorities, in some cases with the approval of state cable television
authorities. Franchising authorities generally charge a fee of up to 5%
based on a percentage of certain revenues of the franchisee. In 1995
franchise fee payments made by the Company aggregated approximately 4% of
total revenues.
The Company's franchise agreements are generally for a term of ten to fifteen
years from the date of grant, although recently renewals have often been for
five to ten year terms. Some of the franchises grant the Company an option
to renew. Except for the Company's franchise for the Town of Brookhaven, New
York which expired in 1991, the expiration dates for the Company's ten
largest franchises range from 1995 to 2001. In certain cases, including the
Town of Brookhaven, the Company is operating under temporary licenses while
negotiating renewal terms with the franchising authorities. Franchises
usually require the consent of the franchising authority prior to the sale,
assignment, transfer or change in ownership or operating control of the
franchisee.
The Cable Communications Policy Act of 1984 (the "1984 Cable Act") and the
Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act") provide significant procedural protections for cable operators
seeking renewal of their franchises. See "Business - Cable Television
Operations -Regulation". In connection with a renewal, a franchising
authority may impose different and more stringent terms. The Company has
never lost a franchise as a result of a failure to obtain a renewal.
(9)
COMPETITION.
The Company's cable television systems generally compete with the direct
reception of broadcast television signals by antenna and with other methods
of delivering television signals to the home for a fee. The extent of such
competition depends upon the number and quality of the signals available by
direct antenna reception as compared to the number and quality of signals
distributed by the cable system. The Company's cable television systems also
compete to varying degrees with other communications and entertainment media,
including movies, theater and other entertainment activities.
The recently adopted Telecommunications Act of 1996 ("1996 Telecom Act")
signed into law on February 8, 1996, repeals the 1984 Act prohibition against
telco-cable cross-ownership and provides that a local exchange telephone
company may provide video programming directly to subscribers through a
variety of means, including (1) as a radio-based (MMDS or DBS) multichannel
video programming distributor; (2) as a cable operator, fully subject to the
franchising, rate regulation and other provisions of the 1984 and 1992 Cable
Acts; and (3) through an "open video system" that is certified by the FCC to
be offering nondiscriminatory access to a portion of its channel capacity for
unaffiliated program distributors, subject only to selected portions of the
regulations applicable to cable operators. A local telephone company also
may provide the "transmission of video programming" on a common carrier
basis. Telephone companies in several of the Company's franchise areas have
applied for franchises to offer cable service fully subject to the 1984 and
1992 Cable Acts.
The 1996 Telecom Act also prohibits a telephone company or a cable system
operator in the same market from acquiring each other, except in limited
circumstances, such as areas of smaller population.
Cable television also competes with the home video industry. Owners of
videocassette recorders are able to rent many of the same movies, special
events and music videos that are available on certain premium services. The
availability of videocassettes has affected the degree to which the Company
is able to sell premium service units and pay-per-view offerings to some of
its subscribers.
Multipoint distribution services ("MDS"), which deliver premium television
programming over microwave superhigh frequency channels received by
subscribers with a special antenna, and multichannel multipoint distribution
service ("MMDS"), which is capable of carrying four channels of television
programming, also compete with certain services provided by the Company's
cable television systems. By acquiring several MMDS licenses or subleasing
from several MMDS operators and holders of other types of microwave licenses,
a single entity can increase channel capacity to a level more competitive
with cable systems. MDS and MMDS systems are not required to obtain a
municipal franchise, are less capital intensive, require lower up-front
capital expenditures and are subject to fewer local and FCC regulatory
requirements than cable systems. The ability of MDS and MMDS systems to
serve homes and to appeal to consumers is affected by their less extensive
channel capacity and the need for unobstructed line of sight
(10)
over-the-air transmission. The Company competes with MDS and MMDS operators
generally in its metropolitan service areas.
Satellite master antenna systems ("SMATV") generally serve large multiple
dwelling units. The FCC has preempted all state and local regulation of
SMATV operations. SMATV is limited to the buildings within which the
operator has received permission from the building owner to provide service.
The FCC has recently streamlined its MDS regulations and opened substantially
more microwave channels to MDS and SMATV operators, which could increase the
strength of their competition with cable television systems. The Company
competes with SMATV operators primarily in the New York City metropolitan
service area. The 1996 Telecom Act amends the definition of cable system to
exclude facilities that do not use public rights-of-way (e.g., SMATV
operators serving multiple buildings not under common ownership or control),
thus exempting such facilities from franchise and other requirements
applicable to cable operators.
In January 1993, the FCC proposed establishing a new local multipoint
distribution service ("LMDS", sometimes referred to as "cellular cable") in
the virtually unused 28 GHz band of the electromagnetic spectrum that could
be used to offer multichannel video in competition with cable systems, as
well as two-way communications services. The FCC has proposed issuing two
LMDS licenses per market, using auctions or lotteries to select licensees.
Suite 12 Group, the originator of this service, currently holds an
experimental license and has constructed a video transmission service using
the 28 Ghz band in a portion of the Company's New York City service area.
The 1984 Cable Act specifically legalized, under certain circumstances,
reception by private home earth stations of satellite-delivered cable
programming services. By law, dish owners have the right to receive
broadcast superstations and network affiliate transmissions in return for a
compulsory copyright fee. Cable programmers have developed new marketing
efforts to reach these viewers. Direct broadcast satellite ("DBS") systems
currently permit satellite transmissions from the low-power C-Band to be
received by antennae approximately 60 to 72 inches in diameter at the
viewer's home. New higher power DBS systems providing transmissions over the
Ku-Band permit the use of smaller receiver antennae and thus may be more
appealing to customers. Four DBS systems are now operational in the United
States. Both C-Band and Ku-Band DBS delivery of television signals are
competitive alternatives to cable television.
Other technologies supply services that may compete with certain services
provided by cable television. These technologies include translator stations
(which rebroadcast signals at different frequencies at lower power to improve
reception) and low-power television stations (which operate on a single
channel at power levels substantially below those of most conventional
broadcasters and, therefore, reach a smaller service area).
The full extent to which developing media will compete with cable television
systems may not be known for several years. There can be no assurance that
existing, proposed or as yet undeveloped technologies will not become
dominant in the future and render cable television systems less profitable or
even obsolete. In particular, certain major telephone
(11)
companies have demonstrated an interest in acquiring cable television systems
or providing video services to the home through fiber optic technology.
Changes in the laws and regulations mentioned above governing telephone
companies could allow these companies in the future to provide information
and entertainment services to the home.
Although substantially all the Company's cable television franchises are
non-exclusive, most franchising authorities have granted only one franchise
in an area. Other cable television operators could receive franchises for
areas in which the Company operates or a municipality could build a competing
cable system. One company has applied for and obtained a franchise to build
and operate a competing cable television system in several communities in
Connecticut in which the Company currently holds a cable franchise. This
franchise is subject to cancellation if the holders do not provide by August
1996, evidence of their ability to finance the construction of the cable
system. The Company has challenged the grant of this franchise in state
court. As mentioned above, telephone companies in several of the Company's
franchise areas have applied for franchises to offer cable service. The 1992
Cable Act described below prohibits municipalities from unreasonably refusing
to grant competitive franchises and facilitates the franchising of second
cable systems or municipally-owned cable systems. See "Regulation - 1992
Cable Act," below.
REGULATION.
1984 CABLE ACT. In 1984, Congress enacted the 1984 Cable Act, which set
uniform national guidelines for cable regulation under the Communications Act
of 1934. While several of the provisions of the 1984 Cable Act have been
amended or superseded by the 1992 Cable Act and/or the 1996 Telecom Act, each
described below, other provisions of the 1984 Act, including the principal
provisions relating to the franchising of cable television systems, remain in
place. The 1984 Cable Act authorizes states or localities to franchise cable
television systems but sets limits on their franchising powers. It sets a
ceiling on cable franchise fees of 5% of gross revenues and prohibits
localities from requiring cable operators to carry specific programming
services. The 1984 Cable Act protects cable operators seeking franchise
renewals by limiting the factors a locality may consider and requiring a due
process hearing before denial. The 1984 Cable Act does not, however, prevent
another cable operator from being authorized to build a competing system.
The 1992 Cable Act prohibits franchising authorities from granting exclusive
cable franchises and from unreasonably refusing to award an additional
competitive franchise.
The 1984 Cable Act allows localities to require free access to public,
educational or governmental channels, but sets limits on the number of
commercial leased access channels cable television operators must make
available for potentially competitive services. The 1984 Cable Act prohibits
obscene programming and requires the sale or lease of devices to block
programming considered offensive.
(12)
1992 CABLE ACT. On October 5, 1992, Congress enacted the 1992 Cable Act
which represents a significant change in the regulatory framework under which
cable television systems operate.
After the effective date of the 1984 Cable Act, and prior to the enactment of
the 1992 Cable Act, rates for cable services were unregulated for
substantially all of the Company's systems. The 1992 Cable Act reintroduced
rate regulation for certain services and equipment provided by most cable
systems in the United States, including substantially all of the Company's
systems. On April 1, 1993, the FCC adopted rules implementing the rate
regulation provisions of the 1992 Cable Act. While several of the provisions
of the 1992 Cable Act have been amended or superseded by the 1996 Telecom
Act, other provisions remain in place.
The 1992 Cable Act requires each cable system to establish a basic service
package consisting, at a minimum, of all local broadcast signals and all
non-satellite delivered distant broadcast signals that the cable system
wishes to carry, and all public, educational and governmental access
programming. The rates for the basic service package are subject to
regulation by local franchising authorities. Under the FCC's April 1, 1993
rate regulation rules, a cable operator whose per channel rates as of
September 30, 1992 exceeded an FCC established benchmark was required to
reduce its per channel rates for the basic service package by up to 10%
unless it could justify higher rates on the basis of its costs. On February
22, 1994, after reconsideration, the FCC ordered a further reduction of 7% in
rates for the basic service tier in effect on September 30, 1992, for an
overall reduction of 17% from those rates. The amount of this 17% decrease
that is below a new per channel benchmark need not be implemented pending
completion of FCC studies of the costs of below-benchmark cable systems. In
the interim, however, the amount of the 17% decrease that is below this
benchmark must be computed by the cable system and must be offset against
otherwise allowable rate increases by these systems. Franchise authorities
(local municipalities or state cable television regulators) are also
empowered to regulate the rates charged for the installation and lease of the
equipment used by subscribers to receive the basic service package (including
a converter box, a remote control unit and, if requested by a subscriber, an
addressable converter box or other equipment required to access programming
offered on a per channel or per program basis), including equipment that may
also be used to receive other packages of programming, and the installation
and monthly use of connections for additional television sets. The FCC's
rules require franchise authorities to regulate rates for equipment and
connections for additional television sets on the basis of an actual cost
formula developed by the FCC, plus a return of 11.25%. No additional charge
is permitted for the delivery of regulated services to additional sets unless
the operator incurs additional programming costs in connection with the
delivery of such services to multiple sets.
The FCC may, in response to complaints by a subscriber, municipality or other
governmental entity, reduce the rates for service packages other than the
basic service package if it finds that such rates are unreasonable. The FCC
will in response to complaints also regulate, on the basis of actual cost,
the rates for equipment used only to receive these higher packages. Services
offered on a per channel or per program basis or
(13)
packages comprised only of services that are also available on a per channel
or per program basis are not subject to rate regulation by either
municipalities or the FCC. The FCC on February 22, 1994 adopted criteria to
assess whether certain discounted packages of "a la carte" or per channel
offerings should be regulated as a tier of services by the FCC or should be
treated as unregulated per channel offerings.
The regulations adopted by the FCC on April 1, 1993, including the original
rate benchmarks, became effective on September 1, 1993. The new rate
regulations adopted by the FCC on February 22, 1994, including the new
benchmarks, became effective in May, 1994.
The FCC's rules provide that, unless a cable operator can justify higher
rates on the basis of its costs, increases in the rates charged by the
operator for the basic service package or any other regulated package of
service may not exceed an inflation indexed amount, plus increases in certain
costs beyond the cable operator's control, such as taxes, franchise fees and
increased programming costs that exceed the inflation index. A cable
operator may not pass through to subscribers any amounts paid by the operator
on or before October 6, 1994, to broadcast stations for the retransmission of
their signals. Increases in retransmission fees above those in effect on that
day may be passed through to subscribers. As part of the implementation of
its rate regulations, the FCC froze all cable service rates until May 15,
1994 and provided cable operators with the option to defer refund liabilities
by continuing rates in effect until July 15, 1994. The Company elected to
defer its refund liabilities.
On February 22, 1994, the FCC adopted guidelines for cost-of-service showings
that establish a regulatory framework pursuant to which a cable television
operator may attempt to justify rates in excess of the benchmarks. Such
justification would be based upon (i) the operator's costs in operating a
cable television system (including certain operating expenses, depreciation
and taxes) and (ii) a return on the investment the operator has made to
provide regulated cable television services in such system (such investment
being referred to as its "ratebase", which includes working capital and
certain costs associated with the construction of such system). The
guidelines (1) create a rebuttable presumption that excludes from a cable
television operator's ratebase any "excess acquisition costs" (equal to the
excess of the purchase price for a cable television system over the original
construction cost of such system, or its book value at the time of
acquisition), (2) include in the rate base the costs associated with certain
intangibles such as franchise rights and customer lists, and (3) set a
uniform rate of return for regulated cable television service of 11.25% after
taxes. The interim guidelines originally included a "productivity offset
feature" that could reduce otherwise justifiable rate increases based on a
claimed increase in a cable television system's operational efficiencies.
The FCC dropped this proposal in September, 1994.
On November 10, 1994, the FCC reversed its policy regarding rate regulation
of packages of a la carte services. A la carte services that are offered in
a package will now be subject to rate regulation by the FCC. In light of the
uncertainty created by the various criteria that the FCC previously applied
to a la carte packages, the FCC, in those cases in which
(14)
it was not clear how the FCC's previous criteria should have been applied to
the package at issue, and where only a "small number" of channels were moved
from a previously regulated tier to the package, will allow cable operators
to treat existing packages as new product tiers ("NPT") as discussed below.
The FCC, in addition to revising its rules governing a la carte channels,
also on November 10, 1994 revised its regulations governing the manner in
which cable operators may charge subscribers for new cable programming
services. The FCC instituted a three-year flat fee mark-up plan for charges
relating to new channels of cable programming services in addition to the
present formula for calculating the permissible rate for new services.
Commencing on January 1, 1995, operators may charge for new channels of cable
programming services added after May 14, 1994 at a markup of up to 20 cents
per channel over actual programming costs, but may not make adjustments to
monthly rates for these new services totaling more than $1.20, plus an
additional 30 cents solely for programming license fees, per subscriber over
the first two years of the three-year period. Cable operators may charge an
additional 20 cents in the third year only for channels added in that year.
Cable operators electing to use the 20 cent per channel adjustment may not
take a 7.5% mark-up on programming cost increases, which is permitted under
the FCC's current rate regulations. The FCC requested further comment on
whether cable operators should continue to receive the 7.5% mark-up on
increases in license fees on existing programming services.
Additionally, the FCC will permit cable operators to offer NPTs at rates
which they elect so long as, among other conditions, other service tiers that
are subject to rate regulation are priced in conformity with applicable FCC
regulations and cable operators do not remove programming services from
existing service tiers and offer them on the NPT.
Under the 1992 Cable Act, systems may not require subscribers to purchase any
service package other than the basic service package as a condition of access
to video programming offered on a per channel or per program basis. Cable
systems are allowed up to ten years to the extent necessary to implement the
necessary technology to facilitate this access. Substantially all of the
Company's systems are currently capable of implementing the technology
mandated by the 1992 Cable Act.
In addition, the 1992 Cable Act (i) requires cable programmers under certain
circumstances to offer their programming to present and future competitors of
cable television such as MMDS, SMATV and DBS, and prohibits new exclusive
contracts with program suppliers without FCC approval, (ii) directs the FCC
to set standards for limiting the number of channels that a cable television
system operator could program with programming services controlled by such
operator, (iii) bars municipalities from unreasonably refusing to grant
additional competitive franchises, (iv) requires cable television operators
to carry ("Must Carry") all local broadcast stations (including home shopping
broadcast stations), or, at the option of a local broadcaster, to obtain the
broadcaster's prior consent for retransmission of its signal ("Retransmission
Consent"), (v) requires cable television operators to obtain the consent of
any non-local broadcast station prior to retransmitting its signal, and (vi)
regulates the ownership by cable operators of
(15)
other media such as MMDS and SMATV. In connection with clause (ii) above
concerning limitations on affiliated programming, the FCC has established a
40% limit on the number of channels of a cable television system that can be
occupied by programming services in which the system operator has an
attributable interest and a national limit of 30% on the number of households
that any cable company can serve. In connection with clause (iv) above
concerning retransmission of a local broadcaster's signals, a substantial
number of local broadcast stations are currently carried by the Company's
cable television systems and have elected to negotiate with the Company for
Retransmission Consent. Although the Company has obtained Retransmission
Consent agreements with all broadcast stations it currently carries, a number
of these agreements are temporary in nature and the potential remains for
discontinuation of carriage if an agreement is not renewed following their
expiration. Renewal periods for several of these agreements expire in
October 1996.
The FCC has imposed new regulations under the 1992 Cable Act in the areas of
customer service, technical standards, equal employment opportunity, privacy,
rates for leased access channels, obscenity and indecency, disposition of a
customer's home wiring and compatibility between cable systems and other
consumer electronic equipment such as "cable ready" television sets and
videocassette recorders.
A number of lawsuits have been filed in federal court challenging the
constitutionality of various provisions of the 1992 Cable Act. A challenge
to the constitutionality of the 1992 Cable Act's Must Carry rules was denied
by a federal court in April 1993. On appeal, the United States Supreme Court
returned this decision to the lower court for further proceedings. The lower
court again upheld the Must Carry rules, but this decision is on appeal to
the Supreme Court. Most other challenged provisions of the 1992 Cable Act
have been upheld at the federal district court level, including provisions
governing rate regulation and retransmission consent, and appeal of the rate
regulation decision was unsuccessful. The Company cannot predict the outcome
of any of the foregoing litigation affecting the 1992 Cable Act.
1996 TELECOM ACT. The 1996 Telecom Act deregulates the rates for non-basic
tiers of service provided by all cable operators after March 31, 1999 and
immediately deregulates the upper tier rates of entities that operate small
cable systems as defined under the statute. It permits regulated equipment
rates to be computed by aggregating costs of broad categories of equipment at
the franchise, system, regional or company level. The 1996 Telecom act
eliminates the right of individual subscribers to file rate complaints with
the FCC concerning certain nonbasic cable programming service tiers.
The 1992 Cable Act provided that all rate regulation, for both the upper
tiers and for basic service, is eliminated when a cable system is subject to
"effective competition" from another multichannel video programming provider
such as MMDS, DBS, a telephone company, or a combination of all of these.
The 1996 Telecom Act expanded the definition of "effective competition" to
include instances in which a local telephone company or its affiliate (or a
multichannel video programming distributor using the facilities of a
telephone company or its affiliates) offers comparable video programming
(16)
directly to subscribers by any means (other than DBS) in the cable operator's
franchise area. Since telephone companies are providing or planning to
provide video services in several of the Company's franchise areas, this
provision will allow the Company greater flexibility in packaging and pricing
its product in those markets.
The 1996 Telecom Act also eliminates the uniform rate structure requirements
of the 1992 Cable Act for cable operators in areas subject to effective
competition or to video programming offered on a per channel or per program
basis, and allows non-uniform bulk discount rates to be offered to multiple
dwelling units.
OTHER FCC REGULATION. In addition to the rules and regulations promulgated
by the FCC under the 1984 Cable Act, the 1992 Cable Act and the 1996 Telecom
Act, the FCC has promulgated other rules affecting the Company. FCC rules
require that cable systems black out certain network and sports programming
on imported distant broadcast signals upon request. The FCC also requires
that cable systems delete syndicated programming carried on distant signals
upon the request of any local station holding the exclusive right to
broadcast the same program within the local television market and, in certain
cases, upon the request of the copyright owner of such programs. These rules
affect the diversity and cost of the Company's programming options for its
cable systems.
FCC regulation also includes matters regarding restrictions on origination
and cablecasting by cable system operators; application of the rules
governing political broadcasts; customer service; home wiring and limitations
on advertising contained in nonbroadcast children's programming.
Implementing provisions of the 1993 Budget Act, the FCC has adopted
requirements for payment of annual "regulatory fees". For 1994, cable
television systems were required to pay regulatory fees of $0.37 per
subscriber, which may be passed on to subscribers as "external cost"
adjustments to basic cable service. This fee was increased to $0.51 per
subscriber for 1995, and may be further increased in 1996. Fees are also
assessed for other licenses, including licenses for business radio, cable
television relay systems (CARS) and earth stations, which, however, may not
be collected directly from subscribers.
The FCC has the authority to regulate utility company rates for cable rental
of pole and conduit space. States can establish preemptive regulations in
this area, and the states in which the Company's cable television systems
operate have done so. The 1996 Telecom Act modifies the current pole
attachment provisions of the Communications Act by requiring that utilities
provide cable systems and telecommunications carriers with nondiscriminatory
access to any pole, conduit or right-of-way controlled by the utility. The
FCC is required to adopt new regulations to govern the charges for pole
attachments used by companies providing telecommunications services,
including cable operators. These regulations are likely to increase the rates
charged to cable companies providing voice and data, in addition to video
services. These new pole attachment regulations will not become effective,
however, until five years after enactment of the 1996 Telecom Act, and any
increase in attachment rates resulting from the FCC's new regulations will be
phased in equal annual increments over a period of five years.
(17)
The FCC's technical guidelines for signal leakage became substantially more
stringent in 1990, requiring upgrading expenditures by the Company. Two-way
radio stations, microwave-relay stations and satellite earth stations used by
the Company's cable television systems are licensed by the FCC.
FEDERAL COPYRIGHT REGULATION. There are no restrictions on the number of
distant broadcast television signals that cable television systems can
import, but cable systems are required to pay copyright royalty fees to
receive a compulsory license to carry them. The United States Copyright
Office has increased the royalty fee from time to time. The FCC has
recommended to Congress the abolition of the compulsory licenses for cable
television carriage of broadcast signals. Any such action by Congress could
adversely affect the Company's ability to obtain such programming and could
increase the cost of such programming.
CABLE TELEVISION CROSS-MEDIA OWNERSHIP LIMITATIONS. In addition to the
prohibition on telephone company-cable cross-ownership, now removed by the
1996 Telecom Act, the 1984 Cable Act prohibited any person or entity from
owning broadcast television and cable properties in the same market. The
1992 Cable Act imposed limits on new acquisitions of SMATV or MMDS systems by
cable operators in their franchise areas. The 1996 Telecom Act repeals the
statutory ban on cable-broadcast station cross-ownership to permit common
ownership or control of a television station and a cable system with
overlapping service areas. The 1996 Telecom Act leaves in place, however,
the cable system-television station cross-ownership restriction contained in
the FCC's rules and does not prejudge the Commission's review of the
regulation, which will occur this year. The 1996 Telecom Act also directs
the FCC to revise its existing regulations concerning broadcast network-cable
cross-ownership to permit common control of both a television network and a
cable system. The 1996 Telecom Act removes the statutory ban on cable-MMDS
cross-ownership on any cable operator in a franchise area where one cable
operator is subject to effective competition.
STATE AND MUNICIPAL REGULATION OF CABLE TELEVISION. Regulatory
responsibility for essentially local aspects of the cable business such as
franchisee selection, system design and construction, safety, and consumer
services remains with either state or local officials and, in some
jurisdictions, with both. The 1992 Cable Act expanded the factors that a
franchising authority can consider in deciding whether to renew a franchise
and limits the damages for certain constitutional claims against franchising
authorities for their franchising activities. New York law provides for
comprehensive state-wide regulation, including approval of transfers of cable
franchises and consumer protection legislation. State and local franchising
jurisdiction is not unlimited, however, and must be exercised consistently
with the provisions of the 1984 Cable Act and the 1992 Cable Act. Among the
more significant restrictions that the Cable Act imposes on the regulatory
jurisdiction of local franchising authorities is a 5% ceiling on franchise
fees and mandatory renegotiation of certain franchise requirements if
warranted by changed circumstances.
TELECOMMUNICATIONS REGULATION. The 1996 Telecom Act removes barriers to
entry in the local telephone market that is now monopolized by the BOCs and
other local exchange
(18)
carriers by preempting state and local laws that restrict competition and by
requiring incumbent local exchange telephone companies to provide
nondiscriminatory access and interconnection to potential competitors, such
as cable operators and long distance companies. At the same time, the new
law eliminates the Modified Final Judgment and permits the BOCs to enter the
market for long distance service (through a separate subsidiary) after they
satisfy a "competitive checklist." The 1996 Telecom Act also permits
interstate utility companies to enter the telecommunications market for the
first time.
The 1996 Telecom Act also eliminates or streamlines many of the requirements
applicable to local exchange carriers, and requires the FCC and states to
review universal service programs and encourage access to advanced
telecommunications services provided by all entities, including cable
companies, by schools, libraries and other public institutions. The FCC and,
in some cases, states are required to conduct numerous rulemaking proceedings
to implement these provisions.
CONSOLIDATED CABLE AFFILIATES
V CABLE. In February 1996, the Company entered into the GECC Agreement
pursuant to which the Company plans to effect a reorganization and
recapitalization relating to V Cable and U.S. Cable. For a description see
"Recent Developments - V Cable Transactions" above and Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources". For a description of V Cable's debt at
December 31, 1995 see Note 4 of Notes to Financial Statements.
CABLEVISION OF BOSTON. On December 15, 1995, the Company acquired the
interests in Cablevision of Boston that it did not previously own pursuant to
an agreement entered into by the Company and Cablevision of Boston. In
connection with the acquisition, the limited partners (other than the
Company) of Cablevision of Boston received 682,454 shares (of which 680,266
shares were issued by December 31, 1995) of the Company's Class A Common
Stock and the Company paid approximately $83 million, (including fees and
expenses) primarily with funds borrowed under the Company's Credit Agreement,
to repay existing Cablevision of Boston indebtedness and to make certain
payments to Charles F. Dolan, ("Mr. Dolan") referred to below. Upon
consummation of the acquisition, Cablevision of Boston became a member of the
Restricted Group and all outstanding subordinated advances made by the
Company to Cablevision of Boston became intercompany indebtedness. Mr.
Dolan, a former general partner of Cablevision of Boston and the Chairman of
the Board of the Company, received 7,357 shares of the Company's Class A
Common Stock and approximately $20.8 million in cash to repay a portion of
Cablevision of Boston's indebtedness to him in connection with the
acquisition. The Company and its affiliates (other than Cablevision of
Boston's former general partners and their affiliates) received 1,041,553
shares of the Company's Class A Common Stock (such shares are reflected as
treasury shares at December 31, 1995) and assumed approximately $42.9 million
of intercompany indebtedness referred to above. As part of the acquisition
of Cablevision of Boston, the Company entered into an agreement with Mr.
Dolan with respect to his 0.5% general partnership interest in Cablevision of
Brookline
(19)
Limited Partnership ("Cablevision of Brookline"), a partnership
affiliated with Cablevision of Boston. The Company acquired the remaining
99.5% of the partnership interests in Cablevision of Brookline in the
acquisition of Cablevision of Boston. Under the agreement, the Company has a
right of first refusal to acquire Mr. Dolan's general partnership interest
and a right to acquire such interest on the earlier to occur of Mr. Dolan's
death or January 1, 2002 at the greater of $10,000 or the book value of such
interest. Mr. Dolan's estate has the right to put the interest to the
Company at the same price. Additionally, in the event of a change of control
of the Company or Cablevision of Brookline, Mr. Dolan will have the right to
put his general partnership interest in Cablevision of Brookline to the
Company at the greater of (i) prices declining from $3.9 million for the year
ended December 15, 1996 to $10,000 for the year ended December 15, 2002 and
(ii) the book value of such interest.
CABLEVISION MFR. In August 1994, Cablevision MFR, Inc. ("Cablevision MFR"),
a wholly-owned subsidiary of the Company, acquired substantially all of the
assets of Monmouth Cablevision Associates, L.P. ("Monmouth Cablevision") and
Riverview Cablevision Associates, L.P. ("Riverview Cablevision")
(collectively, "Monmouth/Riverview") consisting of cable television systems
in New Jersey. The operations of Monmouth Cablevision and Riverview
Cablevision are consolidated with those of the Company as of the date of
acquisition. The aggregate purchase price for the two New Jersey systems was
$391.2 million. Approximately $237.8 million of such purchase price was
financed by a senior credit facility of newly formed subsidiaries of
Cablevision MFR secured solely by the assets of the systems. The remaining
$153.4 million of such purchase price was paid with cash of approximately
$12.1 million and the issuance, by Cablevision MFR, of subordinated
promissory notes (the "MFR Notes") totalling $141.3 million due in 1998 and
bearing interest at 6% until the third anniversary and 8% thereafter
increasing to 8% and 10%, respectively, if the Company exercises its option
to pay interest in shares of the Company's Class A common stock.
Principal and interest on the Cablevision MFR promissory notes, which may be
paid in cash or, under certain circumstances at the Company's option, in
shares of the Company's Class A common stock, are guaranteed by the Company.
The Company's obligations under the guarantees rank pari passu with the
Company's public subordinated debt. In certain circumstances, Cablevision
MFR may extend the maturity date of the promissory notes until 2003 for
certain additional consideration. In the event the maturity is so extended,
the interest and principal of such notes may thereafter be paid only in cash.
CABLEVISION CLEVELAND. In March, 1994, Cablevision of Cleveland, L.P.
("Cablevision Cleveland"), a partnership comprised of subsidiaries of the
Company, purchased substantially all of the assets and assumed certain
liabilities of North Coast Cable Limited Partnership, which operates a cable
television system in Cleveland, Ohio (the "North Coast Cable Acquisition").
The net cash purchase price for interests not previously owned by the Company
(and excluding excess liabilities assumed by the Company) aggregated
approximately $103.4 million including expenses. The cost of the acquisition
was financed principally by borrowings under the Company's Credit Agreement.
Cablevision Cleveland was part of the Restricted Group at December 31, 1995.
(20)
CABLEVISION OF NEW YORK CITY. In July 1992, the Company acquired (the "CNYC
Acquisition") substantially all of the remaining interests in Cablevision of
New York City - Phase I through Phase V ("CNYC"), the operator of a cable
television system that is under development in The Bronx and parts of
Brooklyn, New York. Prior to the CNYC Acquisition, the Company had a 15%
interest in CNYC and Mr. Dolan owned the remaining interests. Mr. Dolan
remains a partner in CNYC, with a 1% interest and the right to certain
preferential payments.
CNYC holds franchises that permit construction of the franchised areas in
specified phases. Construction of the systems in the Brooklyn and The Bronx
franchises has been substantially completed.
Under the agreement between the Company and Mr. Dolan, a new limited
partnership ("CNYC LP") was formed and holds 99% of the partnership interests
in CNYC. The remaining 1% interest in CNYC is owned by the existing
corporate general partner, Cablevision Systems New York City Corporation,
which is a wholly-owned subsidiary of the Company. Subsidiaries of the
Company own a 1% general partnership interest and a 98% limited partnership
interest in CNYC LP and Mr. Dolan retains a 1% limited partnership interest
in CNYC LP plus certain preferential rights. Mr. Dolan's preferential rights
entitle him to an annual cash payment (the "Annual Payment") of 14%
multiplied by the outstanding balance of his "Minimum Payment". The Minimum
Payment is $40.0 million and is to be paid to Mr. Dolan prior to any
distributions from CNYC LP to partners other than Mr. Dolan. In addition,
Mr. Dolan has the right, exercisable on December 31, 1997, and as of the
earlier of (1) December 31, 2000 and (2) December 31 of the first year after
1997 during which CNYC achieves an aggregate of 400,000 subscribers, to
require the Company to purchase (Mr. Dolan's "put") his interest in CNYC LP.
The Company has the right to require Mr. Dolan to sell his interest in CNYC
LP to the Company (the Company's "call") during the three-year period
commencing one year after the expiration of Mr. Dolan's second put. In the
event of a put, Mr. Dolan will be entitled to receive from the Company the
Minimum Payment, any accrued but unpaid Annual Payments, a guaranteed return
on certain of his investments in CNYC LP and a Preferred Payment defined as a
payment (not exceeding $150.0 million) equal to 40% of the Appraised Equity
Value (as defined) of CNYC LP after making certain deductions including a
deduction of a 25% compound annual return on approximately 85% of the
Company's investments with respect to the construction of Phases III, IV and
V of CNYC and 100% of certain of the Company's other investments in CNYC,
including Mr. Dolan's Annual Payment. In the event the Company exercises its
call, the purchase price will be computed on the same basis as for a put
except that there will be no payment in respect of the Appraised Equity Value
amount.
The Company has the right to make payment of the put or call exercise price
in the form of shares of the Company's Class B Common Stock or, if Mr. Dolan
so elects, Class A Common Stock, except that all Annual Payments must be paid
in cash to the extent permitted under the Company's Credit Agreement (as
defined below). Under the Credit Agreement, the Company is currently
prohibited from paying the Preferred Payment in
(21)
cash and, accordingly, without the consent of the bank lenders, would be
required to pay it in shares of the Company's Common Stock.
The Company has agreed to invest in CNYC LP sufficient funds to permit CNYC
LP to make the required Annual Payments to Mr. Dolan. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources - Restricted Group."
OTHER CABLE AFFILIATES
A-R CABLE. In May 1992, the Company and A-R Cable consummated a
restructuring and refinancing transaction that had the effect of retiring a
substantial portion of A-R Cable's subordinated debt and reducing the
Company's economic and voting interest in A-R Cable. See Note 2 of Notes to
Consolidated Financial Statements.
CABLEVISION OF NEWARK. Cablevision of Newark is a partnership 25% owned and
managed by the Company and 75% owned by an affiliate of Warburg Pincus,
operating cable television systems located in Newark and South Orange, New
Jersey. The Company manages the operations of Cablevision of Newark for a
fee equal to 3-1/2% of gross receipts, as defined, plus reimbursement of
certain costs and an allocation of certain selling, general and
administrative expenses.
U.S. CABLE. In connection with the V Cable Reorganization, V Cable acquired
for $20.0 million a 20% interest in U.S. Cable. See Note 2 of Notes to
Financial Statements. The Company manages the properties of U.S. Cable under
management agreements that provide for cost reimbursement, including an
allocation of overhead charges.
In February 1996, the Company entered into the GECC Agreement, as amended,
pursuant to which the Company plans to effect a reorganization and
recapitalization relating to V Cable and U.S. Cable. For a further
description see "Business - Recent Developments - V Cable Transactions".
A-R CABLE PARTNERS. In June 1994, A-R Cable Partners, a partnership
comprised of subsidiaries of the Company and E.M. Warburg, Pincus & Co., Inc.
completed the purchase of certain assets of Nashoba Communications, a group
of three limited partnerships, for a purchase price of approximately $90.5
million of which $46.7 million was provided by a senior credit facility
secured by the assets of such systems. The remainder of the purchase price
was provided by equity contributions and subordinated loans from the partners
in A-R Cable Partners. The Company provided $11.9 million for its 30%
interest in A-R Cable Partners and $1.5 million in loans. The Company
manages the operations of A-R Cable Partners pursuant to a management
agreement which provides for a fee equal to 3-1/2% of gross receipts, as
defined, plus reimbursement of certain costs and an allocation of certain
selling, general and administrative expenses.
CABLEVISION OF FRAMINGHAM. In August 1994, Cablevision of Framingham
Holdings, Inc. ("CFHI"), a corporation owned by the Company and E.M. Warburg,
Pincus Investors,
(22)
L.P., acquired substantially all of the assets of Framingham Cablevision
Associates, L.P. ("Framingham Cablevision") consisting of cable television
systems in Massachusetts. The aggregate purchase price, including fees and
expenses, for Framingham Cablevision's assets was $37.5 million.
Approximately $22.7 million of such purchase price was financed by a senior
credit facility of a wholly-owned subsidiary of CFHI secured by the assets of
such system. Approximately $9.7 million of such purchase price was paid by
the issuance by CFHI of a promissory note, guaranteed by the Company, (the
"CFHI Note") due in 1998 and bearing interest at 6% until the third
anniversary and 8% thereafter (increasing to 8% and 10%, respectively, if
interest is paid in shares of the Company's Class A Common Stock). The
remaining amount was financed by loans and capital contributions from its
stockholders, of which the Company provided approximately $1.3 million as a
capital contribution and $0.3 million as a loan for its 30% interest in CFHI.
The Company manages the operations of CFHI pursuant to a management
agreement which provides for a fee equal to 3-1/2% of gross receipts, as
defined, plus reimbursement of certain costs and an allocation of certain
selling, general and administrative expenses.
CABLEVISION OF CHICAGO. Cablevision of Chicago owned cable television
systems operating in the suburban Chicago area. The Company did not have a
material ownership interest in Cablevision of Chicago but had loans and
advances outstanding to Cablevision of Chicago in the amount of $12.3 million
(plus accrued interest which the Company had fully reserved). In August
1995, Cablevision of Chicago sold its cable television systems to Continental
Cablevision, Inc. and the loans from the Company to Cablevision of Chicago,
together with accrued interest reserved by the Company, were repaid in full.
Accordingly, the Company recognized a net gain of approximately $15.3 million
representing the accrued interest which the Company had reserved.
PROGRAMMING OPERATIONS
GENERAL.
The Company conducts its programming activities through Rainbow Programming,
its wholly owned subsidiary, and through subsidiaries of Rainbow Programming
in partnership with certain unaffiliated entities, including National
Broadcasting Company, Inc. ("NBC") and Liberty Media Corporation. Rainbow
Programming's businesses include eight regional SportsChannel services, four
national entertainment services (American Movie Classics Company ("AMCC"),
Bravo Network ("Bravo") Much Music ("MM") and the Independent Film Channel
("IFC")), Rainbow News 12 (regional news services serving the suburban areas
surrounding New York City) and the sports services of Prime SportsChannel
Networks (Prime Network and NewSport). Rainbow Programming also owns an
interest in Madison Square Garden Corporation ("MSG") (discussed below).
Rainbow Programming acts as managing partner for each of these programming
businesses, other than MSG (which is managed jointly with ITT) and
SportsChannel Florida Associates (which is managed by Front Row
Communications, Inc.), and reflects its share of the profits or losses in
these businesses using the equity method of accounting
(23)
except for AMCC, SportsChannel New York and News 12 Long Island, whose
operations are consolidated with those of the Company. Certain of Rainbow
Programming's programming interests are held through Rainbow Program
Enterprises ("RPE"), which is substantially wholly owned by Rainbow
Programming.
In March 1995, MSG Holdings, L.P. ("MSG Holdings"), a partnership among
subsidiaries of Rainbow Programming and subsidiaries of ITT Corporation, a
Delaware corporation ("ITT"), acquired the business and assets of MSG in a
transaction in which MSG merged with and into MSG Holdings. MSG owns the
Madison Square Garden Arena and the adjoining Paramount Theater, the New York
Rangers professional hockey team, the New York Knicks professional basketball
team and the Madison Square Garden Network, a sports programming network with
over five million subscribers. The purchase price paid by MSG Holdings for
MSG was $1,009.1 million. The name of MSG Holdings has been changed to
Madison Square Garden, L.P.
MSG Holdings funded the purchase price of the acquisition through (i)
borrowings of $289.1 million under a $450 million credit agreement among MSG
Holdings, various lending institutions and Chemical Bank as administrative
agent, (ii) an equity contribution from Rainbow Programming of $110 million,
and (iii) an equity contribution from ITT of $610 million. ITT, Rainbow
Programming and the Company are parties to an agreement made as of August 15,
1994 as amended, (the "Bid Agreement") that, as amended, provides Rainbow
Programming the right to acquire interests in MSG Holdings from ITT
sufficient to equalize the interests of ITT and Rainbow Programming in MSG
Holdings by making certain scheduled payments totalling $250 million (plus
interest on any unpaid portion thereof) on specified dates up to and
including March 17, 1997. Rainbow Programming may acquire all or part of
such interests in MSG Holdings through (i) the payment of cash to ITT, (ii)
the delivery to ITT, at the option of the Company, of common or preferred
stock of the Company (together with the commitment of a nationally recognized
underwriter to promptly purchase such common or preferred stock for cash), or
a combination of cash and common or preferred stock (with such a commitment),
or (iii) the delivery to ITT, at the option of ITT, subject to certain
conditions and in lieu of payment of a limited amount of the required cash or
common or preferred stock for the purchase of a portion of such interests, of
certain designated programming interests of Rainbow Programming. If any
scheduled payment is not made on the applicable due date, then Rainbow
Programming will forfeit (a) its right to equalize the interests in MSG
Holdings and (b) certain minority rights. The Company and Rainbow
Programming may fund the interest payments on the unpaid portion of the $250
million amount required to equalize the interests of ITT and Rainbow
Programming in MSG Holdings from available cash balances or from funds
available from the Restricted Group's principal bank credit agreement.
Accordingly, the Company funded an approximate $29 million interest payment
on March 11, 1996 from funds available under the Restricted Group's principal
bank credit agreement. If certain conditions are met and Rainbow Programming
has forfeited its right to equalize the interests in MSG Holdings, then
Rainbow Programming will also have the right to require ITT to purchase all
of Rainbow Programming's interest in MSG Holdings for an amount equal to (i)
the price paid by Rainbow Programming for
(24)
such interest plus (ii) all interest paid by Rainbow Programming on the
unpaid portion of the $250 million of scheduled payments (as described above).
Initially MSG Holdings will be managed on a 50-50 basis by Rainbow
Programming and ITT. If, as discussed above, Rainbow Programming does not
equalize its ownership interest in MSG Holdings, its management role will be
effectively eliminated. Rainbow Programming also has the right to
voluntarily relinquish any power to direct the management and policies of MSG
Holdings.
In connection with obtaining the consent of the National Hockey League (the
"NHL") and the National Basketball Association ("NBA") to the indirect
transfers of the New York Rangers and the New York Knickerbockers,
respectively, resulting from the merger, the Company and Rainbow Programming
entered into agreements with the NHL and the NBA, agreeing, among other
things, to conduct themselves in accordance with the relevant rules of each
league.
In July 1995 Rainbow Programming consummated the purchase of NBC's interests
in SportsChannel New York and Rainbow News 12 Company for approximately $95.5
million, giving Rainbow Programming a 100% interest in SportsChannel New York
and Rainbow News 12 Company. The purchase was financed by an additional
drawdown of $94 million under Rainbow Programming's $202 million amended and
restated credit facility and by a $2.5 million equity contribution from the
Company for the balance of the purchase price and related fees.
In July 1994, the proceeds of the initial $105 million loan under the
original Rainbow Programming facility plus $76 million of equity from the
Company were used to purchase Liberty Media Corporation's 50% interest in
AMCC giving Rainbow Programming a 75% ownership interest in AMCC.
Rainbow Programming's financing needs have been funded by the Restricted
Group's investments in and advances to Rainbow Programming, by sales of
equity interests in the programming businesses and, through separate,
external debt financing. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources".
COMPETITION.
There are numerous programming services with which Rainbow Programming
competes for cable television system distribution and for subscribers,
including network television, other national and regional cable services,
independent broadcast television stations, television superstations, the home
videocassette industry, and developing pay-per-view
(25)
services. Rainbow Programming and the other programming services are
competing for limited channel capacity and for inclusion in the basic service
tier of the systems offering their programming services. Many of these
program distributors are large, publicly-held companies which have greater
financial resources than Rainbow Programming.
Rainbow Programming also competes for the availability of programming,
through competition for telecast rights to films and competition for rights
agreements with sports teams. The Company anticipates that such competition
will increase as the number of programming distributors increases.
In general, the programming services offered by Rainbow Programming compete
with other forms of television-related services and entertainment media on
the basis of the price of services, the variety and quality of programming
offered and the effectiveness of Rainbow Programming's marketing efforts.
REGULATION.
Cable television program distributors such as Rainbow Programming are not
regulated by the FCC under the Communications Act of 1934. To the extent
that regulations and laws, either presently in force or proposed, hinder or
stimulate the growth of the cable television and satellite industries, the
business of Rainbow Programming will be directly affected. As discussed
above under "Business - Cable Television Operations - Regulation", the 1992
Cable Act limits in certain ways the Company's ability to freely manage the
Rainbow Programming services or carry the Rainbow Programming services on
their affiliates' systems and imposes or could impose other regulations on
the Rainbow Programming companies. The "program access" provisions of the
1992 Cable Act require that Rainbow Programming services be sold, under
certain circumstances, to multichannel video programming providers that
compete with the Company's local cable systems. The 1996 Telecom Act extends
the program access requirements of the 1992 Cable Act to a telephone company
that provides video programming by any means directly to subscribers, and to
programming in which such a company holds an attributable ownership interest,
thus allowing the Company's cable systems similar access to programming
developed by their telephone company competitors.
The 1984 Cable Act prohibits localities from requiring carriage of specific
programming services, providing a more open market for Rainbow Programming
and other cable program distributors. The 1984 Cable Act limits the number
of commercial leased access channels that a cable television operator must
make available for potentially competitive services but the 1992 Cable Act
empowers the FCC to set the rates and conditions for such leased access
channels. The reimposition of the FCC's rules requiring blackout of
syndicated programming on distant broadcast signals for which a local
broadcasting station has an exclusive contract opened new channels for
Rainbow Programming's services.
Satellite common carriers, from whom Rainbow Programming and its affiliates
obtain transponder channel time to distribute their programming, are directly
regulated by the FCC. All common carriers must obtain from the FCC a
certificate for the construction
(26)
and operation of their interstate communications facilities. Satellite
common carriers must also obtain FCC authorization to utilize satellite
orbital slots assigned to the United States by the World Administrative Radio
Conference. Such slots are finite in number, thus limiting the number of
carriers that can provide satellite service and the number of channels
available for program producers and distributors such as Rainbow Programming
and its affiliates. Nevertheless, there are at present numerous competing
satellite services that provide transponders for video services to the cable
industry.
All common carriers must offer their communications service to Rainbow
Programming and others on a nondiscriminatory basis (including by means of a
lottery). A satellite carrier cannot unreasonably discriminate against any
customer in its charges or conditions of carriage.
ADVERTISING SERVICES
Rainbow Advertising sells advertising time to national, regional and local
advertisers on behalf of the Company's cable television systems and
SportsChannel and Rainbow News 12 programming services, as well as on behalf
of unaffiliated cable television systems.
OTHER AFFILIATES
ATLANTIC PUBLISHING. Atlantic Cable Television Publishing Corporation
("Atlantic Publishing") holds a minority equity interest and a debt interest
in a company that publishes a weekly cable television guide which is offered
to the Company's subscribers and to other unaffiliated cable television
operators. As of December 31, 1995, the Company had advanced an aggregate of
approximately $16.7 million to Atlantic Publishing, reflecting approximately
$1.0 million, $0.6 million and $0.5 million, net, paid back during 1995, 1994
and 1993, respectively. The Company has written off all of its advances to
Atlantic Publishing other than $2.4 million. Atlantic Publishing is owned by
a trust for certain Dolan family members; however, the Company has the option
to purchase Atlantic Publishing for an amount equal to the owner's net
investment therein plus interest. The current owner has made only a nominal
investment in Atlantic Publishing to date.
RADIO STATION WKNR. The Company is the owner of Cleveland Radio Associates
("WKNR"), an AM radio station serving the Cleveland metropolitan area with an
all-sports format.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 1995, the Company had 4,934 full-time, 567 part-time and
300 temporary employees. There are no collective bargaining agreements with
employees of the Company. The Company believes that its relations with its
employees are satisfactory.
(27)
ITEM 2. PROPERTIES
The Company generally leases the real estate where its business offices,
microwave receiving antennae, earth stations, transponders, microwave towers,
warehouses, headend equipment, hub sites, program production studios and
access studios are located. Significant leasehold properties include
fourteen business offices, comprising the Company's headquarters located in
Woodbury, New York with approximately 291,000 square feet of space, and the
headend sites. The Company believes its properties are adequate for its use.
The Company generally owns all assets (other than real property) related to
the cable television operations of the Restricted Group, including its
program production equipment, headend equipment (towers, antennae, electronic
equipment and satellite earth stations), cable system plant (distribution
equipment, amplifiers, subscriber drops and hardware), converters, test
equipment, tools and maintenance equipment. Similarly, the unconsolidated
entities managed by the Company generally own such assets related to their
cable television operations. The Company generally leases its service and
other vehicles.
Substantially all of the assets of the Restricted Group, V Cable, VC Holding
and Cablevision MFR are pledged to secure borrowings under their respective
credit agreements.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various lawsuits, some involving substantial amounts.
Management does not believe that such lawsuits will have a material adverse
impact on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
(28)
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Class A Common Stock, par value $.01 per share ("Class A Common
Stock"), is traded on the American Stock Exchange under the symbol "CVC".
The following table sets forth the high and low sales prices for the last two
years of Class A Common Stock as reported by the American Stock Exchange for
the periods indicated.
1995 1994
------------- -------------
Quarter High Low High Low
------- ---- --- ---- ---
First 58-3/4 48-7/8 67-7/8 52-3/8
Second 63-3/4 52-1/4 52-7/8 39
Third 69-3/4 58 61-3/8 45-7/8
Fourth 61 49-3/4 59-7/8 45-7/8
As of March 15, 1996, there were 915 holders of record of Class A Common Stock.
There is no public trading market for the Company's Class B Common Stock, par
value $.01 per share ("Class B Common Stock"). As of March 15, 1996, there were
25 holders of record of Class B Common Stock.
DIVIDENDS. The Company has not paid any dividends on shares of Class A or Class
B Common Stock. The Company intends to retain earnings to fund the growth of
its business and does not anticipate paying any cash dividends on shares of
Class A or Class B Common Stock in the foreseeable future.
The Company may pay cash dividends on its capital stock only from surplus as
determined under Delaware law. Holders of Class A and Class B Common Stock are
entitled to receive dividends equally on a per share basis if and when such
dividends are declared by the Board of Directors of the Company from funds
legally available therefor. No dividend may be declared or paid in cash or
property on shares of either Class A or Class B Common Stock unless the same
dividend is paid simultaneously on each share of the other class of common
stock. In the case of any stock dividend, holders of Class A Common Stock are
entitled to receive the same percentage dividend (payable in shares of Class A
Common Stock) as the holders of Class B Common Stock receive (payable in shares
of Class B Common Stock). The Company paid $4.4 million of cash dividends on
the Series I Preferred Stock and $7.8 million of dividends in additional shares
of Series G Preferred Stock. The Company is restricted from paying dividends on
its preferred stock (other than on the Company's 8% Series C Cumulative
Preferred Stock) under the provisions of its senior credit agreement if a
default has occurred and is continuing under such agreement. Additionally, the
Company's senior subordinated debt instruments may restrict the payment of
dividends in respect of any shares of capital stock in certain circumstances.
(29)
Dividends may not be paid in respect of shares of Class A or Class B Common
Stock unless all dividends due and payable in respect of the preferred stock of
the Company have been paid or provided for. Further, dividends may not be paid
in respect of shares of Class A or Class B Common Stock under the Company's
senior credit agreement. See Item 7.-"Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources-
Restricted Group."
(30)
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL AND STATISTICAL DATA
The operating and balance sheet data included in the following selected
financial data have been derived from the consolidated financial statements of
the Company. Acquisitions made by the Company were accounted for under the
purchase method of accounting and, accordingly, the acquisition costs were
allocated to the net assets acquired based on their fair value, except for
assets previously owned by Mr. Dolan or affiliates of Mr. Dolan which were
recorded at historical cost. Acquisitions are reflected in operating, balance
sheet and statistical data from the time of acquisition. The operating data for
1992 reflects the deconsolidation of the Company's A-R Cable subsidiary for
reporting purposes, effective January 1, 1992. The selected financial data
presented below should be read in conjunction with the financial statements of
the Company and notes thereto included in Item 8 of this Report.
Cablevision Systems Corporation
-------------------------------------------------------------
December 31,
-------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
OPERATING DATA:
Revenues....................................... $1,078,060 $ 837,169 $ 666,724 $ 572,487 $ 603,272
Operating expenses
Technical.................................... 412,479 302,885 241,877 204,449 213,059
Selling, general and administrative.......... 266,209 195,942 172,687 120,356 121,527
Restructuring charge......................... - 4,306 - - -
Depreciation and amortization................ 319,929 271,343 194,904 168,538 215,326
---------- --------- --------- --------- --------
Operating profit............................... 79,443 62,693 57,256 79,144 53,360
Other income (expense):
Interest expense, net........................ (311,887) (261,781) (230,327) (193,379) (257,189)
Share of affiliates' net loss................ (93,024) (82,864) (61,017) (47,278) (23,780)
Gain (loss) on sale of programming and
affiliate interests, net.................... 35,989 - (330) 7,053 15,505
Gain on sale of marketable securities, net... - - - 733 5,806
Provision for loss on Olympics venture....... - - - (50,000) -
Loss on sale of preferred stock.............. - - - (20,000) -
Write off of deferred financing costs........ (5,517) (9,884) (1,044) (12,284) -
Loss on redemption of debentures............. - (7,088) - - -
Settlement of litigation and
related matters............................. - - - (5,655) (9,677)
Provision for preferential payment
to related party............................ (5,600) (5,600) (5,600) (2,662) -
Minority interest.....................,,,.... (8,637) (3,429) 3,000 - -
Miscellaneous, net........................... (8,225) (7,198) (8,720) (6,175) (11,224)
---------- --------- --------- --------- --------
Net loss....................................... (317,458) (315,151) (246,782) (250,503) (227,199)
Preferred dividend requirement................. (20,249) (6,385) (885) (885) (4,464)
---------- --------- --------- --------- --------
Net loss applicable to common shareholders..... $ (337,707) $(321,536) $(247,667) $(251,388) $(231,663)
---------- --------- --------- --------- --------
---------- --------- --------- --------- --------
Net loss per common share...................... $ (14.17) $ (13.72) $ (10.83) $ (11.17) $ (10.32)
---------- --------- --------- --------- --------
---------- --------- --------- --------- --------
Average number of common shares outstanding
(in thousands)................................ 23,826 23,444 22,859 22,512 22,446
---------- --------- --------- --------- --------
---------- --------- --------- --------- --------
Cash dividends declared per common share....... $ - $ - $ - $ - $ -
---------- --------- --------- --------- --------
---------- --------- --------- --------- --------
(31)
Cablevision Systems Corporation
-------------------------------------------------------------
December 31,
-------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
BALANCE SHEET DATA:
Total assets................................ $2,502,305 $2,176,413 $1,327,418 $1,251,157 $1,475,672
Total debt.................................. 3,157,107 3,169,236 2,235,499 2,004,452 2,211,056
Deficit investment in affiliates............ 453,935 393,637 325,732 251,679 -
Redeemable preferred stock.................. 257,751 - - - 32,094
Stockholders' deficiency.................... (1,891,676) (1,818,535) (1,503,244) (1,250,248) (932,428)
STATISTICAL DATA:
Homes passed by cable....................... 3,328,000 2,899,000 2,240,000 2,019,000 2,005,000
Basic service subscribers................... 2,061,000 1,768,000 1,379,000 1,262,000 1,372,000
Basic service subscribers as a percentage of
homes passed............................... 61.9% 61.0% 61.6% 62.5% 68.4%
Number of premium television units.......... 3,990,000 3,208,000 3,003,000 2,802,000 2,326,000
Average number of premium units per basic
subscriber at period end................... 1.9 1.8 2.2 2.2 1.7
Average monthly revenue per basic
subscriber (1).............................. $37.07 $36.33 $36.59 $37.64 $34.43
- ------------------------
(1) Based on recurring service revenues divided by average subscribers for
the month of December.
(32)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RECENT ACQUISITIONS AND RESTRUCTURINGS
The Company's high levels of interest expense and depreciation and amortization,
largely associated with acquisitions made by the Company in the past, have had
and will continue to have a negative impact on the reported results of the
Company. Consequently, the Company expects to report substantial net losses for
at least the next several years.
1995 ACQUISITIONS In July 1995, the Company, through its wholly-owned
subsidiary Rainbow Programming, purchased NBC's interests in SportsChannel New
York and Rainbow News 12 Company, giving Rainbow Programming a 100% interest in
these companies. In December 1995, the Company acquired the interests in
Cablevision of Boston that it did not previously own and upon consummation of
the acquisition, Cablevision of Boston became a member of the Restricted Group.
The foregoing acquisitions will be referred to as the "1995 Acquisitions".
1994 ACQUISITIONS In March 1994, the Company completed the North Coast Cable
Acquisition. In July 1994, the Company through Rainbow Programming, purchased
an additional 50% interest in AMCC giving Rainbow Programming a 75% ownership
interest in AMCC and in August 1994, the Company consummated the acquisition of
Monmouth Cablevision and Riverview Cablevision. The foregoing acquisitions will
collectively be referred to as the "1994 Acquisitions".
The 1995 Acquisitions and the 1994 Acquisitions will collectively be referred to
as the "Acquisitions".
For a description of the Company's recent acquisitions and restructurings, see
Item 1 - "Business - Recent Developments, - Consolidated Cable Affiliates" and -
"Other Cable Affiliates" and Note 2 of Notes to Consolidated Financial
Statements.
(33)
RESULTS OF OPERATIONS
The following table sets forth on a historical basis certain items related to
operations as a percentage of net revenues for the periods indicated.
STATEMENT OF OPERATIONS DATA
Years Ended December 31,
-------------------------------------
1995 1994
------------------ ------------------ (Increase)
% of Net % of Net Decrease
Amount Revenues Amount Revenues in Net loss
------ -------- ------ -------- -----------
(Dollars in thousands)
Revenues................................................ $1,078,060 100% $ 837,169 100% $ 240,891
Operating expenses:
Technical.............................................. 412,479 38 302,885 36 (109,594)
Selling, general & administrative...................... 266,209 25 195,942 23 (70,267)
Restructuring charge................................... - - 4,306 1 4,306
Depreciation and amortization.......................... 319,929 30 271,343 32 (48,586)
--------- --------- --------
Operating profit........................................ 79,443 7 62,693 8 16,750
Other income (expense):
Interest expense, net.................................. (311,887) (29) (261,781) (31) (50,106)
Share of affiliates' net loss.......................... (93,024) (9) (82,864) (10) (10,160)
Gain on sale of affiliate interests, net............... 35,98 3 - - 35,989
Write off of deferred financing costs.................. (5,517) - (9,884) (1) 4,367
Loss on redemption of debt............................. - - (7,088) (1) 7,088
Provision for preferential payment to related party.... (5,600) - (5,600) (1) -
Minority interest...................................... (8,637) (1) (3,429) - (5,208)
Miscellaneous.......................................... (8,225) (1) (7,198) (1) (1,027)
--------- --------- --------
Net loss................................................ $(317,458) (29)% $(315,151) (38)% $ (2,307)
--------- --------- --------
--------- --------- --------
OTHER OPERATING DATA:
Operating profit before depreciation
and amortization (1)................................... $399,372 $334,036
Currently payable interest expense, net................. 254,930 208,685
Net cash provided by operating activities (2)........... 154,715 126,625
Net cash used in investing activities (2)............... 551,234 953,870
Net cash provided by financing activities (2)........... 400,501 825,651
(1) Operating profit before depreciation and amortization is presented
here to provide additional information about the Company's ability
to meet future debt service, capital expenditures and working
capital requirements. Operating profit before depreciation and
amortization should be considered in addition to and not as a
substitute for net income and cash flows as indicators of financial
performance and liquidity as reported in accordance with generally
accepted accounting principles.
(2) See Item 8. - "Consolidated Statements of Cash Flows".
(34)
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 VERSUS YEAR ENDED DECEMBER 31, 1994.
REVENUES for the year ended December 31, 1995 increased $240.9 million (29%) as
compared to net revenues for the prior year. Approximately $148.0 million (18%)
of the increase was attributable to the Acquisitions; approximately $64.3
million (8%) to internal growth of over 145,800 in the average number of
subscribers during the year; and approximately $28.6 million (3%) resulted from
higher revenue per subscriber as a result of rate increases and to increases in
other revenue sources such as advertising and pay per view.
TECHNICAL EXPENSES for 1995 increased $109.6 million (36%) over the 1994
amount. Approximately 19% was attributable to the Acquisitions with the
remaining 17% attributable to increased costs directly associated with the
growth in subscribers and revenues discussed above, as well as to increases
in programming rates for certain of the Company's cable television services.
As a percentage of revenues, technical expenses increased 2% during 1995 as
compared to 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased $70.3 million (36%)
for 1995 as compared to the 1994 level. Approximately 18% was directly
attributable to the Acquisitions. The remaining 18% increase resulted from
higher customer service, administrative and sales and marketing costs. As a
percentage of revenues, selling, general and administrative expenses
increased 1% in 1995 compared to 1994.
OPERATING PROFIT BEFORE DEPRECIATION AND AMORTIZATION increased $65.3 million
(20%) to $399.4 million for 1995 from $334.0 million (including a $4.3
million restructuring charge) for 1994. The 1995 increases were primarily
the result of the Acquisitions. Operating profit before depreciation and
amortization is presented here to provide additional information about the
Company's ability to meet future debt service, capital expenditures and
working capital requirements. Operating profit before depreciation and
amortization should be considered in addition to and not as a substitute for
net income and cash flows as indicators of financial performance and
liquidity as reported in accordance with generally accepted accounting
principles.
DEPRECIATION AND AMORTIZATION EXPENSE increased $48.6 million (18%) during
1995 as compared to 1994 primarily as a result of the Acquisitions.
Increased depreciation charges on capital expenditures made during 1995 and
1994 were completely offset by decreased amortization expense, primarily the
result of certain intangible assets which became fully amortized during the
periods.
NET INTEREST EXPENSE increased $50.1 million (19%) during 1995 compared to
1994. Approximately $29.8 million (11%) of the increase was attributable to
the Acquisitions. The remaining increase of 8% was due to higher average
debt balances (including borrowings of $110 million in March 1995 to acquire
an interest in MSG) and higher interest rates in 1995 compared to 1994, and
to the increasing accretion of interest on certain components of V Cable's
debt which require no current cash outlays.
(35)
SHARE OF AFFILIATES' NET LOSSES of $93.0 million for 1995 and $82.9 million
for 1994 consist primarily of the Company's share of net losses in certain
cable affiliates, primarily A-R Cable ($83.1 million in 1995 and $81.9
million in 1994), and the Company's net share of the profits and losses in
certain programming businesses in which the Company has varying ownership
interests, whose net losses amounted to $9.9 million in 1995 and $1.0 million
in 1994.
GAIN ON SALE OF AFFILIATE INTERESTS in 1995 resulted from the collection of
previously reserved interest, net of certain expenses, of $15.3 million on
advances to Cablevision of Chicago, a cable television affiliate which was
sold during 1995, and to a gain of $20.7 million on the sale of the Company's
interests in a programming partnership.
WRITE OFF OF DEFERRED FINANCING COSTS in 1995 relates primarily to costs
associated with former credit facilities of subsidiaries of the Company which
are now members of the Restricted Group's Credit Agreement and to costs
associated with Rainbow Programming's original $105 million credit facility
which was replaced in January 1995 with a new $202 million facility.
PROVISION FOR PREFERENTIAL PAYMENT TO RELATED PARTY in 1995 consists of the
expensing of $5.6 million representing the amount due with respect to an
annual payment made in connection with the CNYC Acquisition in 1992.
MINORITY INTEREST in 1995 represents NBC's share of the net income of AMCC.
(36)
RESULTS OF OPERATIONS
The following table sets forth on a historical basis certain items related to
operations as a percentage of net revenues for the periods indicated.
STATEMENT OF OPERATIONS DATA
Years Ended December 31,
-------------------------------------
1994 1993
------------------ ------------------ (Increase)
% of Net % of Net Decrease
Amount Revenues Amount Revenues in Net loss
------ -------- ------ -------- -----------
(Dollars in thousands)
Revenues.............................................. $ 837,169 100% $ 666,724 100% $ 170,445
Operating expenses:
Technical............................................ 302,885 36 241,877 36 (61,008)
Selling, general & administrative.................... 195,942 23 172,687 26 (23,255)
Restructuring charge................................. 4,306 1 - - (4,306)
Depreciation and amortization........................ 271,343 32 194,904 29 (76,439)
--------- --------- --------
Operating profit...................................... 62,693 8 57,256 9 5,437
Other income (expense):
Interest expense, net................................ (261,781) (31) (230,327) (35) (31,454)
Share of affiliates' net loss........................ (82,864) (10) (61,017) (9) (21,847)
Gain (loss) on sale of programming interests, net.... - - (330) - 330
Write off of deferred financing costs................ (9,884) (1) (1,044) - (8,840)
Loss on redemption of debt........................... (7,088) (1) - - (7,088)
Provision for preferential payment to
related party....................................... (5,600) (1) (5,600) (1) -
Minority interest.................................... (3,429) - 3,000 - (6,429)
Miscellaneous........................................ (7,198) (1) (8,720) (1) 1,522
--------- --------- --------
Net loss.............................................. $(315,151) (38)% $(246,782) (37)% $(68,369)
--------- --------- --------
--------- --------- --------
OTHER OPERATING DATA:
Operating profit before depreciation
and amortization (1)................................. $334,036 $252,160
Currently payable interest expense, net............... 208,685 182,225
Net cash provided by operating activities (2)......... 126,625 85,822
Net cash used in investing activities (2)............. 953,870 243,022
Net cash provided by financing activities (2)......... 825,651 167,423
(1) Operating profit before depreciation and amortization is presented
here to provide additional information about the Company's ability
to meet future debt service, capital expenditures and working
capital requirements. Operating profit before depreciation and
amortization should be considered in addition to and not as a
substitute for net income and cash flows as indicators of financial
performance and liquidity as reported in accordance with generally
accepted accounting principles.
(2) See Item 8. - "Consolidated Statements of Cash Flows".
(37)
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 VERSUS YEAR ENDED DECEMBER 31, 1993.
REVENUES for the year ended December 31, 1994 increased $170.4 million (26%) as
compared to net revenues for the prior year. Approximately $105.0 million (16%)
of the increase was attributable to the 1994 Acquisitions; approximately $58.4
million (9%) to internal growth of 129,200 in the average number of subscribers
during the year; and approximately $23.6 million (4%) resulted from an increase
in other revenue sources such as advertising. These increases were partially
offset by a decrease of approximately $16.6 million (3%) attributable to lower
revenue per subscriber resulting primarily from rate reductions effected in
compliance with FCC regulations and to subscribers purchasing, on average, lower
levels of service.
TECHNICAL EXPENSES for 1994 increased $61.0 million (25%) over 1993.
Approximately 16% was attributable to 1994 Acquisitions; the remaining 9% was
attributable to increased costs directly associated with the growth in
subscribers and revenues discussed above. As a percentage of net revenues,
technical expenses remained relatively constant during 1994 as compared to 1993.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased $23.3 million (13%) in
1994 as compared to the 1993 level. Increases of $27.3 million (15%) directly
attributable to the 1994 Acquisitions, $11.8 million (7%) relating to the
Company's growing New York City operations and $5.6 million (3%) resulting from
other general cost increases were partially offset by a $21.4 million (12%)
decrease in net expenses incurred in connection with incentive stock plans,
primarily due to a decrease in the market price of the Company's Class A Common
stock at December 31, 1994 compared to its market price at December 31, 1993.
The net decrease in such stock plan expenses reflects a charge of $13.2 million
made in the fourth quarter of 1994 attributable to the Company's cash settlement
of executive stock options granted under the Company's Employee Stock Plan. See
Note 10 of Notes to Consolidated Financial Statements.
RESTRUCTURING CHARGE The Company recorded a one time charge in the first quarter
of 1994 to provide for employee severance and related costs, resulting from a
restructuring of its operations. This restructuring was undertaken in response
to recent FCC mandated rate reductions in substantially all of the Company's
cable television systems.
OPERATING PROFIT BEFORE DEPRECIATION AND AMORTIZATION increased $81.9 million
(32%) to $334.0 million in 1994 from $252.2 million in 1993. The increase was
comprised of $39.8 million (16%) attributable to the 1994 Acquisitions, with the
remaining increase resulting from the combined effect of the revenue and expense
changes discussed above. Operating profit before depreciation and amortization
is presented here to provide additional information about the Company's ability
to meet future debt service, capital expenditures and working capital
requirements. Operating profit before depreciation and amortization should be
considered in addition to and not as a substitute for net income and cash flows
as indicators of financial performance and liquidity as reported in accordance
with generally accepted accounting principles.
(38)
DEPRECIATION AND AMORTIZATION EXPENSE increased $76.4 million (39%) during 1994
as compared to 1993. Approximately $53.3 million (27%) of this increase was a
direct result of the 1994 Acquisitions. The remaining $23.1 million (12%)
increase consisted of increased depreciation charges (including $12.6 million
(6%) for CNYC) relating to capital expenditures made throughout 1994 and 1993
offset partially by a decrease in amortization expense due to certain intangible
assets becoming fully amortized.
NET INTEREST EXPENSE increased $31.5 million (14%) during 1994 compared to
1993. Approximately $26.0 million (11%) of the increase is attributable to
the 1994 Acquisitions. The remaining increase of $5.5 million was the
combined result of the increasing accretion of interest on certain components
of V Cable's debt and the net effect of the Company's issuances of senior
subordinated debentures during 1993, the proceeds of which bore generally
higher average interest rates than the bank debt they replaced.
SHARE OF AFFILIATES' NET LOSSES increased $21.8 million (36%) in 1994
compared to 1993. Such amounts consist primarily of the Company's share in
the net losses of certain cable affiliates which, for the years ended
December 31, 1994 and 1993, amounted to $81.9 million and $69.8 million,
respectively, and in the net (income) or losses of certain programming
businesses (in which the Company has varying ownership interests) which
aggregated $1.0 million and $(8.8) million for the respective 1994 and 1993
years.
MINORITY INTEREST in 1994 represents NBC's 25% share in the net income of
AMCC from the date that the Company purchased its additional 50% interest in
AMCC and therefore began consolidating AMCC's results of operations. See
Note 4 of Notes to Consolidated Financial Statements. In 1993 minority
interest represents U.S. Cable's share of losses in a subsidiary of V Cable,
limited to its $3.0 million investment.
OTHER ITEMS
During 1994, the Company wrote off net deferred financing charges of
approximately $9.9 million associated with the Company's former credit
facility. The Company entered into a new $1.5 billion Restricted Group Credit
facility on October 14, 1994. See "Liquidity and Capital Resources", below,
and Note 4 of Notes to Consolidated Financial Statements.
In November 1994, the Company incurred a loss of $7.1 million related to the
redemption of its $200 million Senior Subordinated Reset Debentures (the
"Reset Debentures"). The loss reflects the payment of a $2.0 million premium
over the face amount; the write off of $4.5 million in unamortized deferred
finance costs incurred in connection with their issuance in November, 1988;
and $0.6 million representing the unamortized portion of their original issue
discount.
In connection with the CNYC Acquisition, the Company expensed $5.6 million in
1994 representing the amount due with respect to the Annual Payment. For the
year ended December 31, 1994, the Company has provided for an additional
$100.3 million due Mr. Dolan in respect of the Preferred Payment that would
be due him as further described under "Business - Cable Television Operations
- - Consolidated Cable Affiliates -
(39)
Cablevision of New York City". The additional provision is based on
management's estimate of the Appraised Equity Value of the system at December
31, 1994 and has been charged to par value in excess of capital contributed
in the accompanying consolidated financial statements. The total amount due
Mr. Dolan as of December 31, 1994 in respect of the Preferred Payment
amounted to $150 million. See Note 8 of Notes to Consolidated Financial
Statements.
EXPECTED IMPACT OF ACCOUNTING STANDARDS NOT YET ADOPTED
In March and October 1995 the Financial Accounting Standards Board issued its
Statements No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," and 123, "Accounting for
Stock-Based Compensation," respectively.
Statement 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. Management does not expect that
the adoption of Statement 121, effective January 1, 1996, will have a
significant impact on the Company's financial position or results of
operations.
Statement 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans and transactions in which an entity
issues its equity instruments to acquire goods and services from
nonemployees. Management currently intends to continue accounting for
stock-based compensation awarded to employees using the intrinsic value based
method of accounting prescribed by APB Opinion 25, "Accounting for Stock
Issued to Employees" and to present, beginning in 1996, the pro forma net
income and earnings per share disclosures as if the fair value method defined
in Statement 123 had been applied.
INFLATION. The effects of inflation on the Company's costs have generally
been offset by increases in subscriber rates.
LIQUIDITY AND CAPITAL RESOURCES
For financing purposes, the Company is structured as the Restricted Group,
consisting of Cablevision Systems Corporation and certain of its subsidiaries
(including Cablevision of Boston as of December 15, 1995) and an unrestricted
group of certain subsidiaries which includes V Cable, Rainbow Programming and
Cablevision MFR.
The Restricted Group has executed limited recourse guarantees with respect to
A-R Cable and V Cable, as described below, and has guaranteed the MFR Notes
and the CFHI Note. Otherwise, the Restricted Group does not guarantee the
indebtedness of any unrestricted subsidiary nor does any unrestricted
subsidiary guarantee the indebtedness of the Restricted Group.
(40)
The following table presents selected unaudited historical results of
operations and other financial information related to the captioned groups or
entities for the year ended December 31, 1995. Unrestricted Cable consists
of V Cable and Cablevision MFR. Rainbow Programming (including Rainbow
Advertising, SportsChannel New York and AMCC) is included in "Other
Unrestricted Subsidiaries".
Other
Restricted Unrestricted Unrestricted Total
Group Cable Subsidiaries Company
----------- ------------ ------------ -------
(Dollars in thousands)
Revenues $ 679,025 $ 226,130 $ 172,905 $1,078,060
Operating expenses:
Technical 267,929 85,927 58,623 412,479
Selling, general and
administrative 125,773 33,110 107,326 266,209
Depreciation and
amortization 168,067 124,488 27,374 319,929
---------- ---------- --------- ----------
Operating profit (loss) $117,256 $ (17,395) $ (20,418) $ 79,443
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Currently payable
interest expense $159,302 $ 78,362 $ 17,266 $ 254,930
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Total interest expense $162,340 $ 132,264 $ 19,246 $ 313,850
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Senior debt $567,249 $1,094,003 $ 238,034 $1,899,286
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Subordinated debt $923,608 $ 141,268(2) $ - $1,064,876
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Obligation to related
party $192,945(1) $ - $ - $ 192,945
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Deficit investment in
affiliates $451,933 $ - $ 2,002 $ 453,935
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Redeemable Exchangeable
Preferred Stock $257,751 $ - $ - $ 257,751
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Capital expenditures $234,516 $ 43,707 $ 9,095 $ 287,138(3)
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Ending Cable subscribers 1,512,000 549,000 - 2,061,000
---------- ---------- --------- ----------
---------- ---------- --------- ----------
- -----------------
(1) Obligation of NYC LP Corp., a wholly-owned Restricted Group subsidiary,
relating to the CNYC Acquisition.
(2) Guaranteed by the Restricted Group.
(3) Includes intercompany elimination of $180.
(41)
RESTRICTED GROUP
In February 1996, the Company issued 6,500,000 depositary shares,
representing 65,000 shares of 11-1/8% Series L Preferred Stock with an
aggregate liquidation preference of $650 million. The net proceeds of
approximately $626 million was used to repay $570 million of V Cable and U.S.
Cable indebtedness in connection with the V Cable Transactions, (see Item 1.
"Business - Recent Developments - V Cable Transactions") with the balance of
$56 million initially used to repay borrowings under the Company's Credit
Agreement. Such amount is expected to be reborrowed at the time of
consummation of the V Cable Transactions, which is expected to occur during
the third quarter of 1996.
In December 1995, the Company acquired the interests in Cablevision of Boston
that it did not previously own. In connection with the acquisition of
Cablevision of Boston, the Company paid approximately $83 million primarily
with funds borrowed under the Credit Agreement and upon consummation of the
acquisition of Cablevision of Boston, Cablevision of Boston became a member
of the Restricted Group and all outstanding subordinated advances made by the
Company to Cablevision of Boston became intercompany indebtedness. See
"Consolidated Cable Affiliates - Cablevision of Boston".
In November 1995, the Company issued 13,800,000 depositary shares
representing 1,380,000 shares of 8-1/2% Series I Preferred Stock with an
aggregate liquidation preference of $345 million. The depositary shares are
convertible into shares of the Company's Class A Common Stock at an initial
conversion price of $67.44 per share of Class A Common Stock. The Company
applied the net proceeds of approximately $334 million to the repayment of
bank indebtedness.
Also in November 1995, the Company issued $300 million aggregate principal
amount of 9-1/4% Senior Subordinated Notes due 2005 (the "2005 Notes"). The
Company applied the net proceeds of approximately $292 million to the
repayment of bank indebtedness.
In September 1995, the Company issued 2,500,000 shares of its 11-3/4% Series
G Redeemable Exchangeable Preferred Stock with an aggregate liquidation
preference of $100 per share (the "Series G Preferred Stock"). The net
proceeds of approximately $239 million were initially used to repay bank
debt. The Company reborrowed $103 million on October 26, 1995 to redeem its
outstanding Series E Preferred Stock.
On March 18, 1996, the Restricted Group had total usage under its $1.5
billion credit agreement (including the credit facility for Cablevision of
New Jersey, collectively the "Credit Agreement") of $573 million and letters
of credit of $17 million issued on behalf of the Company. Unrestricted and
undrawn funds available to the Restricted Group under the Credit Agreement
amounted to approximately $910 million at March 18, 1996. The Credit
Agreement consists of a $250 million Term Loan and $1.250 billion Reducing
Revolver facilities aggregating $1.5 billion. The Term Loan has a final
maturity of June 30, 2003 and begins amortizing on a scheduled quarterly
basis on June 30, 1997 with 24% being amortized by December 31, 1998. The
Reducing Revolver facilities have final maturities on June 30, 2003 and the
facilities begin to reduce on December 31, 1996. The
(42)
Credit Agreement contains certain financial covenants that may limit the
Restricted Group's ability to utilize all of the undrawn funds available
thereunder, including covenants requiring the Restricted Group to maintain
certain financial ratios and restricting the permitted uses of borrowed funds.
As of March 18, 1996 the Company had entered into interest exchange (swap and
interest rate cap) agreements with several of their banks on a notional
amount of $120 million, on which the Company pays a fixed rate of interest
and receives a variable rate of interest for specified periods, with an
average maturity of two and one half years. The average effective annual
interest rate on all bank debt outstanding as of February 29, 1996 was
approximately 8.1%.
The Restricted Group, excluding CNYC, made capital expenditures of
approximately $150.2 million in 1995 and $147.5 million in 1994, primarily in
connection with system rebuilds and upgrades, the expansion of existing cable
plant to pass additional homes and other general capital needs. CNYC made
capital expenditures of $84.3 million in 1995 and $103.5 million in 1994.
The cable systems located in New York State that are owned by the Restricted
Group are subject to agreements, as amended, (the "New York Upgrade
Agreements") with the New York State Commission on Cable Television (the "New
York Cable Commission"). The New York Upgrade Agreements applicable to the
Restricted Group requires the substantial upgrade of its systems to a 750
MHz capacity by the end of 1998 subject to certain minor exceptions. As part
of this planned upgrade of the Restricted Group's New York systems, the
Company expects to use fiber optic cable extensively in its trunk and
distribution networks. The Company believes that the remaining portion of
the upgrade, as of December 31, 1995, will cost up to an additional $195
million. The Company intends to upgrade certain other of its Restricted
Group systems as well as certain systems in the unrestricted group. The
Company anticipates that the capital costs of these additional upgrades may
be substantial.
Under the CNYC purchase agreement, the Restricted Group has guaranteed
certain payments to Mr. Dolan, consisting of an annual payment of $5.6
million (the "Annual Payment") a $40 million minimum payment (the "Minimum
Payment") and a preferred payment (not to exceed $150 million) based upon an
appraised value of CNYC (the "Preferred Payment"). The Minimum Payment and
the Preferred Payment are each payable in cash or common stock at the
Company's election. Under the Credit Agreement, the Company is currently
prohibited from paying amounts in respect of the Preferred Payment in cash.
During 1995 the Restricted Group contributed $26 million to Monmouth/Riverview
which was used by Monmouth/Riverview to reduce bank debt. In addition,
the Restricted Group contributed $8.7 million to Cablevision MFR in order for
Cablevision MFR to make cash interest payments on its promissory notes.
(43)
The Company believes that, for the Restricted Group, internally generated
funds together with funds available under its existing Credit Agreement will
be sufficient through 1997 to meet its debt service and preferred stock
dividend requirements including amortization requirements under the Credit
Agreement, and to fund its planned capital expenditures.
The Company intends to incur additional expenditures to sufficiently upgrade
its plant to significantly increase its analog channel capacity and add new
digital channel capacity that will facilitate the startup of such adjunct
businesses as information services, video on demand and near video on demand,
and residential telephony. To successfully roll out these adjunct new
businesses significantly beyond the initial development phases, the Company
will require additional capital from the sale of equity in the capital
markets or to a strategic investor.
Any further acquisitions and/or other investments by the Company will be
funded by undrawn borrowing capacity and by possible increases in the amount
available under the Credit Agreement, additional borrowings from other
sources, and/or possible future sales of debt, equity or equity related
securities.
The senior secured indebtedness incurred by A-R Cable and V Cable is
guaranteed by the Restricted Group, but recourse against the Restricted Group
is limited solely to the common stock of A-R Cable and of V Cable pledged to
A-R Cable's and V Cable's senior secured lenders, respectively. The
Cablevision MFR and CFHI promissory notes are guaranteed by the Company and
the obligations under the guarantees rank pari passu with the Company's
public subordinated debt. The promissory notes are payable in cash or, at
the Company's option through the first anniversary of the notes, in shares of
the Company's Class A Common Stock.
Under the terms of its Credit Agreement, as amended, the Company is permitted
to make unspecified investments of up to $250 million, subject to increase at
the Company's election arising from issuance of preferred stock, which
includes any future investment in Rainbow Programming and in any other
unrestricted subsidiaries or affiliates.
The terms of the instruments governing A-R Cable's, V Cable's, and
Cablevision MFR's indebtedness prohibit transfer of funds (except for certain
payments, related to corporate overhead allocations, by A-R Cable, V Cable
and Cablevision MFR and payments pursuant to income tax allocation agreements
with respect to V Cable and Cablevision MFR) from A-R Cable, V Cable,
Cablevision MFR and CFHI to the Restricted Group and are expected to prohibit
such transfer of funds for the foreseeable future. The Restricted Group does
not expect that such limitations on transfer of funds or payments will have
an adverse effect on the ability of the Company to meet its obligations.
V CABLE
In connection with the V Cable Transactions (see "Business-Recent
Developments-V Cable Transactions"), on March 18, 1996 the Company made a
$570 million capital contribution to V Cable which was used to repay $570
million of debt and accrued interest owed to
(44)
GECC under the V Cable, VC Holding and US Cable credit facilities. The
Company obtained the $570 capital contribution from the net proceeds
(approximately $626 million) of the Series L Preferred Stock issued in
February 1996. The contributions made by the Company were applied as
follows: 1) approximately $500 million was used to repay a portion of V
Cable and VC Holding debt (including certain U.S. Cable debt assumed by V
Cable) leaving a balance outstanding of $415.1 million and, 2) approximately
$70 million was contributed by V Cable and VC Holding to repay a portion of
US Cable's debt and accrued interest leaving a balance outstanding of
approximately $151 million of U.S. Cable debt.
Upon the repayment of V Cable's, VC Holding's and US Cable's debt referenced
above, each Company's credit agreement was amended to reflect such
prepayments and the cross-guarantees, cross-collateralization and
cross-default provisions previously in each agreement were amended and/or
terminated. The amended credit agreements expire on December 31, 2001. The
amended VC Holding credit agreement provides for a $409 million term loan and
a $125 million revolving loan. The term loan requires principal repayments
commencing in 1999. On March 18, 1996, VC Holding had approximately $6
million outstanding under its revolving line and had letters of credit issued
for approximately $1 million. Accordingly, unrestricted and undrawn funds
under the VC Holding revolving line amounted to approximately $118 million.
The amended VC Holding credit agreement contains certain financial covenants
that may limit VC Holding's ability to utilize all of the undrawn funds
available thereunder, including covenants requiring VC Holding to maintain
certain financial ratios and restricting the permitted uses of borrowed funds.
V Cable made capital expenditures of approximately $27.3 million during 1995
and $20.0 million during 1994, primarily in connection with the expansion of
existing cable plant to pass additional homes and for system upgrades and
other general capital needs. The New York Upgrade Agreement applicable to V
Cable required that by the end of 1995, the substantial upgrade of its
systems in New York State to 77 channel capacity be completed. This
requirement was met and certified by the State of New York in 1995. V Cable
plans to make significant capital expenditures for its Ohio properties over
the next several years in order to upgrade or rebuild its plant and increase
capacity. VC Holding believes that internally generated funds together with
funds available under the amended credit agreements will be sufficient
through June 30, 1997 to meet its debt service requirements and to fund its
capital expenditures through such date.
MONMOUTH AND RIVERVIEW
Monmouth/Riverview are party to a credit facility, as amended on May 12,
1995, with a group of banks led by Nations Bank of Texas, N.A., as agent (the
"Monmouth/Riverview Credit Facility"). The maximum amount available to
Monmouth/Riverview under the Monmouth/Riverview Credit Facility is $285
million with a final maturity at June 30, 2003. The facility is a reducing
revolving loan, with scheduled facility reductions beginning on March 31,
1996 resulting in a 15% reduction by December 31, 1998. As
(45)
of March 18, 1996, Monmouth/Riverview had outstanding bank borrowings of
$194.7 million. Unrestricted and undrawn funds available to
Monmouth/Riverview under the Monmouth/Riverview Credit Facility amounted to
approximately $90.3 million at March 18, 1996. The Monmouth/Riverview Credit
Facility contains certain financial covenants that may limit
Monmouth/Riverview's ability to utilize all of the undrawn funds available
thereunder, including covenants requiring Monmouth/Riverview to maintain
certain financial ratios. Under the terms of the Monmouth/Riverview Credit
Facility, Monmouth/Riverview is prohibited from transferring funds to
Cablevision MFR. The weighted average interest rate on all bank indebtedness
as of December 31, 1995 was approximately 8.1%.
As of March 18, 1996, Monmouth Cablevision and Riverview Cablevision have
entered into interest rate swap and cap agreements with several banks on a
notional amount of $130 million on which the Company pays a fixed rate of
interest and receives a variable rate of interest for specified period,with
an average maturity of approximately one year.
The Company believes that for Monmouth/Riverview, internally generated funds
together with funds available under its existing credit agreement, will be
sufficient to meet its debt service requirements including its amortization
requirements and to fund its capital expenditures through 1997.
On August 8, 1994, Cablevision MFR issued promissory notes totalling $141.3
million, due in 1998 and bearing interest at 6% until the third anniversary
and 8% thereafter (increasing to 8% and 10%, respectively, if interest is
paid in shares of the Company's Class A Common Stock). Principal and
interest on the notes is payable at Cablevision MFR's election, in cash or in
shares of the Company's Class A Common Stock. The promissory notes are
guaranteed by the Company and the obligations under the guarantee rank pari
passu with the Company's public subordinated debt. In certain circumstances,
Cablevision MFR may extend the maturity date of the promissory notes until
2003 for certain additional consideration.
RAINBOW PROGRAMMING
On January 27, 1995, Rainbow entered into an amended and restated credit
facility with Toronto-Dominion (Texas), Inc., and Canadian Imperial Bank of
Commerce, as co-agents, and a group of banks for $202 million of which $108
million was drawn on such date to refinance Rainbow Programming's original
$105 million credit facility. On July 12, 1995 Rainbow Programming
consummated the purchase of NBC's interests in SportsChannel New York and
Rainbow News 12 Company for approximately $95.5 million, giving Rainbow
Programming a 100% interest in SportsChannel New York and Rainbow News 12
Company. The purchase was financed by an additional drawdown of $94 million
under Rainbow Programming's $202 million amended and restated credit facility
and by a $2.5 million equity contribution from the Company for the balance of
the purchase price and related fees.
(46)
In July 1994, the proceeds of the initial $105 million loan under the
original facility plus $76 million of equity from the Company were used to
purchase Liberty Media Corporation's 50% interest in AMCC giving Rainbow
Programming a 75% ownership interest in AMCC. The credit facility is payable
in full at maturity on December 31, 1996 and bears interest at varying rates
based upon the banks' Base Rate or Eurodollar Rate, as defined in the credit
agreement. Repayment of the loan is anticipated to be made by Rainbow
Programming from one or a combination of the following: (i) internally
generated funds; (ii) refinancing the existing Rainbow Programming $202
million credit facility; (iii) refinancing the existing $51 million credit
agreement of AMCC ($36 million outstanding as of December 31, 1995); (iv) the
sale of equity interests in, or assets of, the programming businesses; and
(v) investments or advances from the Restricted Group. The loan is secured
by a pledge of the Company's stock in Rainbow Programming and is guaranteed
by the subsidiaries of Rainbow Programming as permitted.
Rainbow Programming's financing needs have been funded by the Restricted
Group's investments in and advances to Rainbow Programming, by sales of
equity interests in the programming businesses and through separate external
debt financing. The Company expects that the future cash needs of Rainbow
Programming's current programming partnerships will increasingly be met by
internally generated funds, although certain of such partnerships will at
least in the near future rely to some extent upon their partners (including
Rainbow Programming) for certain cash needs. The partners' contributions may
be supplemented through the sale of additional equity interests in, or
through the incurrence of indebtedness by, such programming businesses.
On March 10, 1995, MSG Holdings, L.P. ("Holdings"), a partnership between a
subsidiary of Rainbow Programming and a subsidiary of ITT Corporation, a
Delaware corporation ("ITT"), acquired Madison Square Garden Corporation
("MSG") in a transaction in which MSG merged with and into Holdings. The
purchase price paid by Holdings for MSG was $1,009.1 million. See
Item 1.-"Business -Programming Operations".
(47)
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS.
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report . . . . . . . . . . . . . . . . 49
Consolidated Balance Sheets - December 31, 1995 and 1994 . . 50
Consolidated Statements of Operations - years
ended December 31, 1995, 1994 and 1993. . . . . . . . . . 52
Consolidated Statements of Stockholders' Deficiency -
years ended December 31, 1995, 1994 and 1993 . . . . . . . 53
Consolidated Statements of Cash Flows - years ended
December 31, 1995, 1994 and 1993. . . . . . . . . . . . . 54
Notes to Consolidated Financial Statements . . . . . . . . . 56
(48)
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cablevision Systems Corporation
We have audited the accompanying consolidated balance sheets of Cablevision
Systems Corporation and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders' deficiency
and cash flows for each of the years in the three-year period ended December
31, 1995. In connection with our audits of the consolidated financial
statements, we also audited the financial statement schedule listed in Item
14(a)(2). These consolidated financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Cablevision Systems Corporation and subsidiaries at December 31, 1995 and
1994, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1995, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule referred to above, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Jericho, New York
March 18, 1996
(49)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(Dollars in thousands)
ASSETS 1995 1994
---- ----
Cash and cash equivalents. . . . . . . . . . . . . . . $ 15,332 $ 11,350
Accounts receivable trade (less allowance for
doubtful accounts of $12,678 and $10,087) . . . . . . 100,506 72,881
Notes receivable affiliates. . . . . . . . . . . . . . - 2,143
Notes and other receivables. . . . . . . . . . . . . . 16,762 14,280
Prepaid expenses and other assets. . . . . . . . . . . 19,353 20,794
Property, plant and equipment, net . . . . . . . . . . 1,026,355 886,028
Investments in affiliates. . . . . . . . . . . . . . . 141,345 42,954
Advances to affiliates . . . . . . . . . . . . . . . . 6,909 36,681
Feature film inventory . . . . . . . . . . . . . . . . 143,916 129,496
Franchises, net of accumulated amortization of
$314,218 and $240,609 . . . . . . . . . . . . . . . . 363,077 436,686
Affiliation agreements, net of accumulated
amortization of $20,598 and $6,053. . . . . . . . . . 124,848 139,097
Excess costs over fair value of net assets
acquired and other intangible assets, net of
accumulated amortization of $518,178 and $469,620 . . 468,133 290,931
Deferred financing, acquisition and other
costs, net of accumulated amortization of
$23,899 and $18,422. . . . . . . . . . . . . . . . . . 47,673 50,949
Deferred interest expense, net of accumulated
amortization of $42,142 and $28,095. . . . . . . . . . 28,096 42,143
---------- ----------
$2,502,305 $2,176,413
---------- ----------
---------- ----------
See accompanying notes to
consolidated financial statements.
(50)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(Dollars in thousands, except per share amounts)
1995 1994
---- ----
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . $ 156,470 $ 120,627
Accrued liabilities:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,908 39,322
Payroll and related benefits. . . . . . . . . . . . . . . . . . 47,997 34,085
Franchise fees. . . . . . . . . . . . . . . . . . . . . . . . . 21,980 19,179
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,125 86,047
Accounts payable to affiliates. . . . . . . . . . . . . . . . . . 12,708 22,273
Feature film rights payable . . . . . . . . . . . . . . . . . . . 128,000 110,542
Bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 992,469 1,335,419
Senior debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 898,803 862,440
Subordinated debentures . . . . . . . . . . . . . . . . . . . . . 923,608 623,534
Subordinated notes payable. . . . . . . . . . . . . . . . . . . . 141,268 141,268
Obligation to related party . . . . . . . . . . . . . . . . . . . 192,945 193,079
Capital lease obligations and other debt. . . . . . . . . . . . . 8,014 13,496
----------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 3,682,295 3,601,311
----------- ----------
Deficit investment in affiliates. . . . . . . . . . . . . . . . . 453,935 393,637
----------- ----------
Series G Redeemable Exchangeable Preferred Stock . . . . . . . . . 257,751 -
----------- ----------
Commitments and contingencies
Stockholders' deficiency:
8% Series C Cumulative Preferred Stock, $.01 par value,
112,500 shares authorized, 110,622 shares issued
($100 per share liquidation preference). . . . . . . . . . . . 1 1
8% Series D Cumulative Preferred Stock, $.01 par value,
112,500 shares authorized, none issued ($100 per
share liquidation preference). . . . . . . . . . . . . . . . . - -
Series E Redeemable Exchangeable Convertible Preferred
Stock, $.01 par value, 100,000 shares authorized, 100,000
shares issued at December 31, 1994 ($1,000 per share
liquidation preference). . . . . . . . . . . . . . . . . . . . - 1
8-1/2% Series I Cumulative Convertible Exchangeable Preferred
Stock, $.01 par value, 1,380,000 shares authorized,
1,380,000 shares issued at December 31, 1995 ($250
per share liquidation preference). . . . . . . . . . . . . . . 14 -
Class A Common Stock, $.01 par value, 50,000,000 shares
authorized, 14,210,599 and 11,850,242 shares issued. . . . . . 142 119
Class B Common Stock, $.01 par value,
20,000,000 shares authorized, 11,572,709 and
11,787,622 shares issued . . . . . . . . . . . . . . . . . . . 116 118
Paid-in capital (par value in excess of
capital contributed) . . . . . . . . . . . . . . . . . . . . . 247,671 (74,016)
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . (2,079,228) (1,741,521)
----------- ----------
(1,831,284) (1,815,298)
Less treasury stock, at cost (1,091,553 and
50,000 shares) . . . . . . . . . . . . . . . . . . . . . . . . (60,392) (3,237)
----------- ----------
Total stockholders' deficiency . . . . . . . . . . . . . . . . . (1,891,676) (1,818,535)
----------- ----------
$ 2,502,305 $2,176,413
----------- ----------
----------- ----------
See accompanying notes
to consolidated financial statements.
(51)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in thousands, except per share amounts)
1995 1994 1993
---- ---- ----
Revenues (including affiliate amounts of
$7,087, $8,290 and $7,558). . . . . . . . . $1,078,060 $ 837,169 $ 666,724
---------- --------- ---------
Operating expenses:. . . . . . . . . . . . . .
Technical (including affiliate amounts of
$37,756, $20,232 and $26,732). . . . . . . 412,479 302,885 241,877
Selling, general and administrative
(including affiliate amounts of $0,
$(1,003) and $(1,479)) . . . . . . . . . . . 266,209 195,942 172,687
Restructuring charge. . . . . . . . . . . . . - 4,306 -
Depreciation and amortization . . . . . . . . 319,929 271,343 194,904
---------- --------- ---------
998,617 774,476 609,468
---------- --------- ---------
Operating profit. . . . . . . . . . . . . . . 79,443 62,693 57,256
---------- --------- ---------
Other income (expense):. . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . (313,850) (263,299) (232,434)
Interest income (including affiliate amounts
of $468, $493 and $567) . . . . . . . . . . 1,963 1,518 2,107
Share of affiliates' net loss . . . . . . . . (93,024) (82,864) (61,017)
Gain (loss) on sale of programming and
affiliate interests, net. . . . . . . . . . 35,989 - (330)
Write off of deferred financing costs . . . . (5,517) (9,884) (1,044)
Loss on redemption of debentures. . . . . . . - (7,088) -
Provision for preferential payment to
related party . . . . . . . . . . . . . . . (5,600) (5,600) (5,600)
Minority interest . . . . . . . . . . . . . . (8,637) (3,429) 3,000
Miscellaneous, net. . . . . . . . . . . . . . (8,225) (7,198) (8,720)
---------- --------- ---------
(396,901) (377,844) (304,038)
---------- --------- ---------
Net loss . . . . . . . . . . . . . . . . . . . (317,458) (315,151) (246,782)
Dividend requirements applicable to
preferred stock. . . . . . . . . . . . . . . (20,249) (6,385) (885)
---------- --------- ---------
Net loss applicable to common shareholders . . $ (337,707) $(321,536) $(247,667)
---------- --------- ---------
---------- --------- ---------
Net loss per common share. . . . . . . . . . . $ (14.17) $ (13.72) $ (10.83)
---------- --------- ---------
---------- --------- ---------
Average number of common shares outstanding
(in thousands) . . . . . . . . . . . . . . . 23,826 23,444 22,859
---------- --------- ---------
---------- --------- ---------
See accompanying notes
to consolidated financial statements.
(52)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
Years Ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
Paid-in Capital
(Par Value
Series C Series E Series I Class A Class B in Excess
Preferred Preferred Preferred Common Common of Capital Accumulated Treasury
Stock Stock Stock Stock Stock Contributed) Deficit Stock Total
--------- --------- --------- ------- ------- ------------- ----------- --------- -----
Balance December 31, 1992 . . $ 1 $ - $ - $ 102 $ 124 $ (78,157) $(1,172,318) $ - $(1,250,248)
Net loss. . . . . . . . . . - - - - - - (246,782) - (246,782)
Cost of acquisitions. . . . - - - 2 - (11,977) - - (11,975)
Employee stock
transactions . . . . . . . - - - 2 2 9,879 - - 9,883
Purchase of treasury
stock. . . . . . . . . . . - - - - - - - (3,237) (3,237)
Conversion of Class B to
Class A. . . . . . . . . . - - - 2 (2) - - - -
Preferred dividend
requirement. . . . . . . . - - - - - - (885) - (885)
----- ----- ---- ---- ---- -------- ----------- -------- ----------
Balance December 31, 1993. . 1 - - 108 124 (80,255) (1,419,985) (3,237) (1,503,244)
Net loss . . . . . . . . . - - - - - - (315,151) - (315,151)
Issuance of Series E
preferred stock . . . . . - 1 - - - 98,406 - - 98,407
Cost of acquisition. . . . - - - - - (101,600) - - (101,600)
Employee stock
transactions. . . . . . . - - - 5 - 9,433 - - 9,438
Conversion of Class B to
Class A . . . . . . . . . - - - 6 (6) - - - -
Preferred dividend
requirements. . . . . . . - - - - - - (6,385) - (6,385)
----- ----- ---- ---- ---- -------- ----------- -------- ----------
Balance December 31, 1994. . 1 1 - 119 118 (74,016) (1,741,521) (3,237) (1,818,535)
Net loss . . . . . . . . . - - - - - - (317,458) - (317,458)
Issuances of preferred
stock . . . . . . . . . . - - 14 - - 323,317 - - 323,331
Redemption of Series E
preferred stock . . . . . - (1) - - - (103,002) - - (103,003)
Employee stock
transactions. . . . . . . - - - 5 - 7,715 - - 7,720
Payment for acquisition,
net . . . . . . . . . . . - - - 16 - 93,657 - (57,155) 36,518
Conversion of Class B to
Class A . . . . . . . . . - - - 2 (2) - - - -
Preferred dividend
requirements. . . . . . . - - - - - - (20,249) - (20,249)
----- ----- ---- ---- ---- -------- ----------- -------- ----------
Balance December 31, 1995. . $ 1 $ - $ 14 $142 $116 $247,671 $(2,079,228) $(60,392) $(1,891,676)
----- ----- ---- ---- ---- -------- ----------- -------- ----------
----- ----- ---- ---- ---- -------- ----------- -------- ----------
See accompanying notes
to consolidated financial statements.
(53)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
(Dollars in thousands)
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . $(317,458) $(315,151) $(246,782)
--------- --------- ---------
Adjustments to reconcile net loss to
net cash provided by
operating activities:
Depreciation and amortization. . . . . . 319,929 271,343 194,904
Share of affiliates' net loss. . . . . . 93,024 82,864 61,017
Minority interest. . . . . . . . . . . . 8,637 3,429 (3,000)
(Gain) loss on sale of programming
and affiliates interests, net. . . . . (35,989) - 330
Write off of deferred financing
costs. . . . . . . . . . . . . . . . . 5,517 9,884 1,044
Loss on redemption of debentures . . . . - 7,088 -
Loss on sale of equipment, net . . . . . 4,077 3,844 2,106
Amortization of deferred financing . . . 5,320 4,844 3,950
Amortization of deferred interest
expense. . . . . . . . . . . . . . . . 14,047 14,048 14,047
Amortization of debenture discount . . . 74 148 138
Accretion of interest on debt. . . . . . 39,479 35,574 32,074
Change in assets and liabilities,
net of effects of acquisitions:
Increase in accounts receivable
trade. . . . . . . . . . . . . . . . (17,200) (3,923) (6,888)
Decrease in notes receivable
affiliates . . . . . . . . . . . . . 357 715 812
(Increase) decrease in notes and
other receivables. . . . . . . . . . (2,421) (3,076) 753
(Increase) decrease in prepaid
expenses and other assets. . . . . . (3,189) (8,675) 1,058
Decrease in advances to
affiliates . . . . . . . . . . . . . 3,994 1,326 3,275
Increase (decrease) in feature
film inventory . . . . . . . . . . . (14,420) 7,760 -
Increase in accounts payable . . . . . 24,685 19,069 27,070
Increase (decrease) in accrued
liabilities. . . . . . . . . . . . . 22,412 (2,126) 48,463
Decrease in accrued obligation,
Olympics venture . . . . . . . . . . - - (50,000)
Increase (decrease) in accounts
payable to affiliates. . . . . . . . (2,746) 6,037 1,451
Increase (decrease) in feature
film rights payable 6,586 (8,397) -
--------- --------- ---------
Total adjustments. . . . . . . . . . . . . 472,173 441,776 332,604
--------- --------- ---------
Net cash provided by operating
activities . . . . . . . . . . . . . . . 154,715 126,625 85,822
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures. . . . . . . . . . . . (287,138) (284,858) (214,604)
Payments for acquisitions, net of
cash acquired. . . . . . . . . . . . . . (293,902) (673,611) (31,201)
Proceeds from sale of programming and
affiliate interests . . . . . . . . . . . 32,850 - 543
Proceeds from sale of equipment . . . . . . 1,873 1,515 3,643
(Increase) decrease in investments
in affiliates, net. . . . . . . . . . . . (3,901) 3,457 (425)
Additions to intangible assets, net . . . . (1,016) (373) (978)
--------- --------- ---------
Net cash used in investing activities. . . (551,234) (953,870) (243,022)
--------- --------- ---------
See accompanying notes
to consolidated financial statements.
(54)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
(Dollars in thousands)
(continued)
1995 1994 1993
---- ---- ----
Cash flows from financing activities:
Issuance of bank debt to finance acquisitions . . . . . . . . . . . . . . . $ 293,902 $ 542,608 $ -
Proceeds from bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . 425,916 965,654 197,286
Repayment of bank debt. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,062,768) (698,435) (373,479)
Proceeds from senior debt . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 2,500 25,750
Repayment of senior debt. . . . . . . . . . . . . . . . . . . . . . . . . . (13,116) (8,500) (23,750)
Redemption of debentures. . . . . . . . . . . . . . . . . . . . . . . . . . - (202,000) -
Issuance of subordinated notes payable and other debt. . . . . . . . . . . - 145,268 -
Issuance of subordinated debentures . . . . . . . . . . . . . . . . . . . . 300,000 - 348,396
Net proceeds from issuances of redeemable
exchangeable convertible preferred stock . . . . . . . . . . . . . . . . . 573,331 98,407 -
Redemption of redeemable exchangeable
convertible preferred stock. . . . . . . . . . . . . . . . . . . . . . . . (103,003) - -
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . (12,498) (6,385) (885)
Issuance of common stock. . . . . . . . . . . . . . . . . . . . . . . . . . 7,720 9,438 9,883
Purchase of treasury stock. . . . . . . . . . . . . . . . . . . . . . . . . - - (3,237)
Obligation to related party . . . . . . . . . . . . . . . . . . . . . . . . (134) - 5,600
Payments on capital lease obligations and other debt . . . . . . . . . . . (6,583) (2,678) (2,682)
Additions to deferred financing and other . . . . . . . . . . . . . . . . . (12,266) (20,226) (15,459)
----------- --------- ---------
Net cash provided by financing activities. . . . . . . . . . . . . . . . . 400,501 825,651 167,423
----------- --------- ---------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . 3,982 (1,594) 10,223
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . 11,350 12,944 2,721
----------- --------- ---------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . $ 15,332 $ 11,350 $ 12,944
----------- --------- ---------
----------- --------- ---------
See accompanying notes
to consolidated financial statements.
(55)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per amounts)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY AND RELATED MATTERS
Cablevision Systems Corporation and its majority-owned subsidiaries (the
"Company") own and operate cable television systems. The Company also has
ownership interests in and manages other cable television systems and has
interests in companies that produce and distribute national and regional
programming services and that provide advertising sales services for the
cable television industry. The Company's revenues are derived principally
from the provision of cable television services, which include recurring
monthly fees paid by subscribers. For financing purposes, Cablevision
Systems Corporation and certain of its subsidiaries are structured as a
restricted group and an unrestricted group (see Note 4).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Cablevision
Systems Corporation and its majority-owned subsidiaries. The Company's
interests in less than majority-owned entities and its 100% common stock
interest in A-R Cable Services, Inc. (see Note 2) are carried on the equity
method. Advances to affiliates are recorded at cost, adjusted when
recoverability is doubtful. All significant intercompany transactions and
balances are eliminated in consolidation.
REVENUE RECOGNITION
The Company recognizes cable television and programming revenues as services
are provided to subscribers. Advertising revenues are recognized when
commercials are telecast.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including construction materials, are carried
at cost, which includes all direct costs and certain indirect costs
associated with the construction of cable television transmission and
distribution systems, and the costs of new subscriber installations.
FEATURE FILM INVENTORY
Rights to feature film inventory acquired under license agreements along with
the related obligations are recorded at the contract value. Costs are
amortized on the straight-line
(56)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
method over either the contract period or the intended number of days to be
aired. Amounts payable during the five years subsequent to December 31, 1995
related to feature film telecast rights amount to $20,994 in 1996, $23,126 in
1997, $16,505 in 1998, $15,320 in 1999 and $13,790 in 2000.
DEFERRED FINANCING COSTS
Costs incurred to obtain debt are deferred and amortized, on the
straight-line basis, over the life of the related debt.
FRANCHISES, AFFILIATION AGREEMENTS AND OTHER INTANGIBLE ASSETS
Franchises are amortized on the straight-line basis over the average
remaining terms (7 to 11 years) of the franchises at the time of acquisition.
Affiliation agreements are amortized on a straight-line basis over an
average life of approximately 10 years. Other intangible assets are
amortized on the straight-line basis over the periods benefited (2 to 10
years), except that excess costs over fair value of net assets acquired are
being amortized on the straight line basis over periods ranging from 5 to 20
years. The Company assesses the recoverability of such excess costs based
upon undiscounted anticipated future cash flows of the businesses acquired.
INCOME TAXES
Income taxes are provided based upon the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", which requires
the liability method of accounting for deferred income taxes and permits the
recognition of deferred tax assets, subject to an ongoing assessment of
realizability.
LOSS PER SHARE
Net loss per common share is computed based on the average number of common
shares outstanding after giving effect to dividend requirements on the
Company's preferred stock. Common stock equivalents were not included in the
computation as their effect would be to decrease net loss per share.
(57)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
CASH FLOWS
For purposes of the consolidated statements of cash flows, the Company
considers short-term investments with a maturity at date of purchase of three
months or less to be cash equivalents. The Company paid cash interest
expense of approximately $252,344, $198,535 and $173,073 during 1995, 1994
and 1993, respectively. During 1995, 1994 and 1993, the Company's noncash
investing and financing activities included capital lease obligations of
$1,086, $4,020 and $2,695, respectively, incurred when the Company entered
into leases for new equipment; obligations to related party of $101,460 and
$19,019 during 1994 and 1993 (see Note 8), respectively; Series G preferred
stock dividend requirements in 1995 of $7,751 (See Note 5); the issuance in
1995 of 687,623 shares of the Company's Class A Common Stock (fair value of
$37,733) for the acquisition of Cablevision of Boston (See Note 2); and the
issuance in 1993 of 164,051 shares of the Company's Class A Common Stock
(fair value of $10,725) for the remaining interests in Cablevision of
Connecticut (see Note 2).
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 consolidated financial
statements to conform to the 1995 presentation.
(58)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
NOTE 2. ACQUISITIONS, DISPOSITIONS AND RESTRUCTURINGS
ACQUISITIONS
1995 ACQUISITIONS:
In March 1995, MSG Holdings, L.P. ("MSG Holdings"), a partnership among
subsidiaries of Rainbow Programming Holdings, Inc., a wholly-owned subsidiary
of the Company, ("Rainbow Programming") and subsidiaries of ITT Corporation,
a Delaware corporation ("ITT"), acquired the business and assets of Madison
Square Garden Corporation ("MSG") in a transaction in which MSG merged with
and into MSG Holdings. The purchase price paid by MSG Holdings for MSG was
$1,009,100. MSG Holdings funded the purchase price of the acquisition
through (i) borrowings of $289,100 under a $450,000 credit agreement among
MSG Holdings, various lending institutions and Chemical Bank as
administrative agent, (ii) an equity contribution from Rainbow Programming of
$110,000, and (iii) an equity contribution from ITT of $610,000. ITT, Rainbow
Programming and the Company are parties to an agreement made as of August 15,
1994, as amended, (the "Bid Agreement") that provides Rainbow Programming the
right to acquire interests in MSG Holdings from ITT sufficient to equalize
the interests of ITT and Rainbow Programming in MSG Holdings by making
certain scheduled payments totalling $250,000 (plus interest on any unpaid
portion thereof) on specified dates up to and including March 17, 1997.
Rainbow Programming may acquire all or part of such interests in MSG Holdings
through (i) the payment of cash to ITT, (ii) the delivery to ITT, at the
option of the Company, of common or preferred stock of the Company (together
with the commitment of a nationally recognized underwriter to promptly
purchase such common or preferred stock for cash), or a combination of cash
and common or preferred stock (with such a commitment), or (iii) the delivery
to ITT, at the option of ITT, subject to certain conditions and in lieu of
payment of a limited amount of the required cash or common or preferred stock
for the purchase of a portion of such interests, of certain designated
programming interests of Rainbow Programming. If any scheduled payment is
not made on the applicable due date, then Rainbow Programming will forfeit
(a) its right to equalize the interests in MSG Holdings and (b) certain
minority rights. The Company funded an approximate $29,000 interest payment
on March 11, 1996 from funds available under the Restricted Group's principal
bank credit agreement. If certain conditions are met and Rainbow Programming
has forfeited its right to equalize the interests in MSG Holdings, then
Rainbow Programming will also have the right to require ITT to purchase all
of Rainbow Programming's interest in MSG Holdings for an amount equal to (i)
the price paid by Rainbow Programming for such interest plus (ii) all
interest
(59)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
paid by Rainbow Programming on the unpaid portion of the $250,000 of
scheduled payments (as described above).
In July 1995, Rainbow Programming consummated the purchase from National
Broadcasting Company ("NBC") of the approximate 50% interests in each of
SportsChannel Associates (New York) ("SportsChannel New York") and Rainbow
News 12 Company ("Rainbow News 12") that NBC owned for approximately $95,500,
giving Rainbow Programming a 100% interest in SportsChannel New York and
Rainbow News 12. The purchase was financed by an additional drawdown of
$94,000 under Rainbow Programming's $202,000 amended and restated credit
facility and by a $2,500 equity contribution from the Company for the balance
of the purchase price and related fees.
In December 1995, the Company acquired the interests in Cablevision of Boston
Limited Partnership ("Cablevision of Boston") that it did not previously own
pursuant to an agreement entered into by the Company and Cablevision of
Boston. In connection with the acquisition, the limited partners (other than
the Company) of Cablevision of Boston received approximately 680,266 shares
of the Company's Class A Common Stock valued at $37,329 and the Company paid
approximately $83,456 for the repayment of bank debt, fees and expenses and
to fund payments to Charles F. Dolan ("Mr. Dolan"), as described below,
primarily with funds borrowed under the Company's Credit Agreement. Upon
consummation of the acquisition, Cablevision of Boston became a member of the
Restricted Group (see Note 4). Mr. Dolan, a former general partner of
Cablevision of Boston and the Chairman of the Board of the Company, received
7,357 shares of the Company's Class A Common Stock valued at $404 and
approximately $20,782 in cash to repay a portion of Cablevision of Boston's
indebtedness to him. In connection with the acquisition, the Company
received 1,041,553 shares of its Class A Common Stock valued at $57,155 (such
shares are reflected as treasury shares at December 31, 1995). As part of
the acquisition of Cablevision of Boston, the Company acquired 99.5% of the
partnership interests in Cablevision of Brookline Limited Partnership
("Cablevision of Brookline"), a partnership affiliated with Cablevision of
Boston, and entered into an agreement with Mr. Dolan with respect to his
remaining 0.5% general partnership interest in Cablevision of Brookline,
whereby the Company has a right of first refusal to acquire such interest
through January 1, 2002.
(60)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
The acquisition of Cablevision of Boston and the purchase of interests in
SportsChannel New York and Rainbow News 12 were accounted for as purchases
with the operations of these companies being consolidated with those of the
Company as of the acquisition dates. The excess of the purchase price over
the book value of assets acquired approximates $210,976 ($115,759 for the
acquisition of Cablevision of Boston and $95,217 for the acquisition of
SportsChannel New York and Rainbow News 12) and will be allocated to the
specific assets acquired when independent appraisals are completed. For
purposes of the 1995 consolidated financial statements, the excess purchase
price has been recorded as excess costs over fair value of net assets
acquired and is being amortized over an average period of approximately 10
years.
1994 ACQUISITIONS:
In March 1994, Cablevision of Cleveland, L.P. ("Cablevision Cleveland"), a
partnership whose partners are subsidiaries of the Company, purchased
substantially all of the assets and assumed certain liabilities of North
Coast Cable Limited Partnership, which operates a cable television system in
Cleveland, Ohio (the "North Coast Cable Acquisition"). The operations of
North Coast Cable are consolidated with those of the Company as of the date
of acquisition. The net cash purchase price for interests not previously
owned by the Company (and excluding excess liabilities assumed by the
Company) aggregated approximately $103,359 including expenses. The cost of
the acquisition was financed principally by borrowings under the Company's
credit agreement.
In June 1994, A-R Cable Partners, a partnership comprised of subsidiaries of
the Company and E.M. Warburg, Pincus & Co., Inc. completed the purchase of
certain assets of Nashoba Communications, a group of three limited
partnerships, for a purchase price of approximately $90,500, of which
approximately $47,000 was provided by a senior credit facility secured by the
assets of such systems. The remainder of the purchase price was provided by
equity contributions and subordinated loans from the partners in A-R Cable
Partners. The Company provided approximately $12,000 for its 30% interest in
A-R Cable Partners and $1,500 in loans.
In July 1994, Rainbow Programming purchased an additional 50% interest in
American Movie Classics Company ("AMCC") for a purchase price of
approximately $181,000, increasing Rainbow Programming's interest in AMCC to
approximately 75%. The results of AMCC's operations are consolidated with
those of the Company as of the date of acquisition. The acquisition was
financed with a separate $105,000 credit facility entered into by Rainbow
Programming and by borrowings under the Company's credit agreement of
approximately $76,000 which was contributed to Rainbow Programming.
(61)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
In August 1994, Cablevision MFR, Inc. ("Cablevision MFR"), a wholly-owned
subsidiary of the Company, acquired substantially all of the assets of
Monmouth Cablevision Associates, L.P. ("Monmouth Cablevision") and Riverview
Cablevision Associates, L.P. ("Riverview Cablevision") consisting of cable
television systems in New Jersey. The operations of Monmouth Cablevision and
Riverview Cablevision are consolidated with those of the Company as of the
date of acquisition. The aggregate purchase price for the two New Jersey
systems was $391,215. Approximately $237,800 of such purchase price was
financed by a senior credit facility of newly formed subsidiaries of
Cablevision MFR secured solely by the assets of the systems. The remaining
$153,415 of such purchase price was paid with cash of approximately $12,147
and the issuance, by Cablevision MFR, of subordinated promissory notes (the
"MFR Notes") totalling $141,268 due in 1998.
Also in August 1994, Cablevision of Framingham Holdings, Inc. ("CFHI"), a
corporation owned 30% by the Company and 70% by E.M. Warburg, Pincus
Investors, L.P., acquired substantially all of the assets of Framingham
Cablevision Associates, L.P. ("Framingham Cablevision") consisting of cable
television systems in Massachusetts. The aggregate purchase price, including
fees and expenses, for Framingham Cablevision's assets was $37,517.
Approximately $22,700 of the purchase price was financed by a senior credit
facility of a wholly-owned subsidiary of CFHI secured by the assets of
Framingham Cablevision; approximately $9,732 was paid by the issuance by CFHI
of a promissory note, guaranteed by the Company, due in 1998 and the
remaining amount was financed by capital contributions and loans to CFHI from
its stockholders. The Company provided a capital contribution of
approximately $1,320 and $300 as a loan for its 30% interest in CFHI.
The acquisitions of North Coast Cable, AMCC, Monmouth Cablevision and
Riverview Cablevision were accounted for as purchases whereby the acquisition
costs were allocated to the various assets acquired and liabilities assumed
based upon their respective fair values. The excess of the purchase price
over the book value of net assets acquired of these entities, aggregating
$625,946, has been allocated to the specific assets acquired based on
independent appraisals as follows:
Plant and equipment $ 31,200
Affiliation agreements 145,150
Franchises 362,301
Excess cost over fair value of
net assets acquired 87,295
---------
$ 625,946
---------
---------
(62)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
1993 ACQUISITIONS:
In December 1986, the Company had purchased substantially all the limited
partnership interests in Cablevision of Connecticut. In November 1993, the
Company purchased the remaining interests in exchange for 164,051 shares of
the Company's Class A Common Stock which had a fair market value of
approximately $10,725. Such amount was charged to excess cost over fair
value of net assets acquired and is being amortized over the remaining
original amortization period.
In November 1993, the Company purchased the business of CATV Enterprises,
Inc. ("CATV") in Riverdale, The Bronx, New York following the expiration of
CATV's temporary permit to operate its cable television system in Riverdale.
The cost of $8,500 is included in excess cost over fair value of net assets
acquired.
PRO FORMA RESULTS OF OPERATIONS
The following unaudited pro forma condensed results of operations are
presented for the years ended December 31, 1995 and 1994 as if the
acquisition of Cablevision of Boston had occurred on January 1, 1995 and
1994, respectively, and as if the acquisitions of Monmouth Cablevision and
Riverview Cablevision; the purchase of the 50% interest in AMCC; and the
North Coast Cable Acquisition had occurred on January 1, 1994.
Years Ended December 31,
------------------------
1995 1994
---- ----
Net revenues $1,137,878 $1,001,187
---------- ----------
---------- ----------
Net loss $ (327,312) $ (369,137)
---------- ----------
---------- ----------
Net loss per common share $ (14.20) $ (15.56)
---------- ----------
---------- ----------
The proforma information presented above gives effect to certain adjustments,
including the amortization of acquired intangible assets and increased
interest expense on acquisition debt. The proforma information has been
prepared for comparative purposes only and does not purport to indicate the
results of operations which would actually have occurred had the acquisitions
been made at the beginning of the periods indicated, or which may occur in
the future.
(63)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
DISPOSITIONS
In July 1995, Rainbow Programming sold a minority general partnership
interest in Courtroom Television Network to NBC for cash totalling $5,000.
The Company recognized a net gain of $20,662 on the sale.
In August 1995, Cablevision of Chicago ("Cablevision of Chicago"), an
affiliate of the Company, sold its cable television systems to Continental
Cablevision, Inc. The Company did not have a material ownership interest in
Cablevision of Chicago but had loans and advances outstanding to Cablevision
of Chicago in the amount of $12,346 (plus accrued interest which the Company
had fully reserved). The Company recognized a net gain of approximately
$15,327 on the sale, representing the accrued interest which the Company had
reserved.
RESTRUCTURINGS
V CABLE, INC.
On December 31, 1992, the Company consummated a significant restructuring and
reorganization (the "V Cable Reorganization") involving its subsidiary, V
Cable, Inc. ("V Cable"), U.S. Cable Television Group, L.P. ("U.S. Cable") and
General Electric Capital Corporation ("GECC"), V Cable's principal creditor.
In the V Cable Reorganization, V Cable acquired a 20% interest in U.S. Cable
for $20,000 and U.S. Cable acquired a 19% non-voting interest in a newly
incorporated subsidiary of V Cable that holds substantially all of V Cable's
assets ("VC Holding") for $3,000. As a result, V Cable owns an effective
84.8% interest in VC Holding. GECC has provided long-term credit facilities
to each of V Cable, VC Holding and U.S. Cable, secured in each case by the
assets of the borrower and in most cases cross-collateralized by the assets
of the other two entities. The credit facilities are non-recourse to the
Company other than with respect to the common stock of V Cable owned by the
Company (see Note 4). The Company accounts for its investment in U.S. Cable
using the equity method of accounting and, accordingly, recorded its share of
losses in U.S. Cable for 1995, 1994 and 1993 amounting to $2,840, $8,594 and
$8,566, respectively. Also in 1993, included in the accompanying
consolidated statements of operations is U.S. Cable's share of losses in VC
Holding, limited to its $3,000 investment described above.
In February 1996, the Company entered into an agreement with GECC (the "GECC
Agreement"), as amended in March 1996, pursuant to which the Company plans to
effect a reorganization and recapitalization relating to V Cable and U.S.
Cable (See Note 14).
(64)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
A-R CABLE. In 1992 the Company and A-R Cable Services, Inc. ("A-R Cable")
consummated a restructuring and refinancing transaction (the "A-R Cable
Restructuring"). Among other things, this transaction involved an additional
$45,000 investment in A-R Cable by the Company to purchase a new Series B
Preferred Stock and the purchase of a new Series A Preferred Stock in A-R
Cable by Warburg Pincus Investors, L.P. ("Warburg Pincus") for $105,000.
After the receipt of certain regulatory approvals, the Company will have a
40% economic and voting interest in A-R Cable. As a result of the A-R Cable
Restructuring, the Company no longer has financial or voting control over A-R
Cable's operations. For reporting purposes, the Company accounts for its
investment in A-R Cable using the equity method of accounting whereby the
Company records 100% of the net losses of A-R Cable since it continues to own
100% of A-R Cable's outstanding common stock.
Included in share of affiliates' net loss in the accompanying consolidated
statements of operations for the years ended December 31, 1995, 1994 and 1993
is $72,257, $67,092 and $56,420, respectively, representing A-R Cable's net
loss plus dividend requirements for the Series A Preferred Stock of A-R
Cable, which is not owned by the Company. Included in deficit investment in
affiliates is $442,940 and $374,423 at December 31, 1995 and 1994,
respectively, representing A-R Cable losses and external dividend
requirements recorded by the Company in excess of amounts invested by the
Company therein. At December 31, 1995 and 1994 and for the years then ended,
A-R Cable's total assets, liabilities (including preferred stock) and net
revenues amounted to $222,831 and $246,125; $738,581 and $681,717; $113,292
and $107,026, respectively.
The Company continues to guarantee the debt of A-R Cable to GECC under a
limited recourse guarantee wherein recourse to the Company is limited solely
to the common and Series B Preferred Stock of A-R Cable owned by the Company.
The Company manages A-R Cable under a management agreement that provides for
cost reimbursement, an allocation of overhead charges and a management fee of
3-1/2% of gross receipts, as defined, with interest on unpaid amounts thereon
at a rate of 10% per annum. The 3-1/2% fee and interest thereon is payable
by A-R Cable only after repayment in full of its senior debt and certain
other obligations. Under certain circumstances, the fee is subject to
reduction to 2-1/2% of gross receipts.
During 1995 and 1994, Warburg Pincus purchased additional shares
of Series A Preferred Stock for a cash investment of $210 and
$998, respectively, and CSC purchased additional shares of Series
B Preferred Stock for a cash investment of $3,740 and $427,
respectively.
(65)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
After May 11, 1997, either Warburg Pincus or the Company may irrevocably
cause the sale of A-R Cable, subject to certain conditions. In certain
circumstances, Warburg Pincus may cause the sale of A-R Cable prior to that
date. Upon the sale of A-R Cable, the net sales proceeds, after repayment of
all outstanding indebtedness and other liabilities, will be used as follows:
first, to repay Warburg Pincus' investment in the Series A Preferred Stock;
second, to repay the Company's investment in the Series B Preferred Stock;
third, to repay the accumulated unpaid dividends on the Series A Preferred
Stock (19% annual rate); fourth, to repay the accumulated unpaid dividends on
the Series B Preferred Stock (12% annual rate); fifth, to pay the Company for
all accrued and unpaid management fees together with accrued but unpaid
interest thereon; sixth, pro rata 60% to the Series A Preferred Stockholders,
4% to the Series B Preferred Stockholders and 36% to the common
stockholder(s).
NOTE 3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following items, which are
depreciated or amortized primarily on a straight-line basis over the
estimated useful lives shown below:
December 31,
---------------------- Estimated
1995 1994 Useful Lives
---- ---- -------------
Cable television transmission
and distribution systems:
Converters . . . . . . . . . . . . . . . . $ 329,091 $ 270,660 3 to 5 years
Headends . . . . . . . . . . . . . . . . . 85,763 66,583 6 to 9 years
Distribution systems . . . . . . . . . . . 1,127,836 963,545 10 to 15 years
Program, service and test
equipment . . . . . . . . . . . . . . . . 105,759 80,384 4 to 7 years
Microwave equipment. . . . . . . . . . . . 5,442 5,082 7 1/2 years
Construction in progress (including
materials and supplies) . . . . . . . . . 74,499 54,709 -
Furniture and fixtures . . . . . . . . . . . 26,038 20,758 5 to 12 years
Transportation equipment . . . . . . . . . . 41,352 33,508 2 to 12 years
Building and building improvements . . . . . 23,033 19,446 22 to 39 years
Leasehold improvements . . . . . . . . . . . 41,939 34,627 Term of lease
Land and land improvements . . . . . . . . . 9,118 8,995 -
1,869,870 1,558,297
---------- ----------
Less accumulated depreciation and
amortization . . . . . . . . . . . . . . . 843,515 672,269
---------- ----------
$1,026,355 $ 886,028
---------- ----------
---------- ----------
(66)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
NOTE 4. DEBT
BANK DEBT
RESTRICTED GROUP
For financing purposes, Cablevision Systems Corporation and certain of its
subsidiaries (including Cablevision of Boston as of December 15, 1995) are
collectively referred to as the "Restricted Group". On October 14, 1994, the
Restricted Group entered into new $1.5 billion credit facilities (the "Credit
Agreement") with a group of banks led by Toronto-Dominion (Texas), as agent.
The Credit Agreement consists of a $400,000 Term Loan and Reducing Revolver
facilities aggregating $1,100,000. The Term Loan has a final maturity of
June 30, 2003 and begins amortizing on a scheduled quarterly basis on June
30, 1997. The Reducing Revolver facilities begin to reduce on December 31,
1996 and have a final maturity of June 30, 2003. The total amount of bank
debt outstanding at December 31, 1995 and 1994 was $559,244 and $956,419,
respectively. As of December 31, 1995, approximately $20,400 was restricted
for certain letters of credit issued for the Company.
Unrestricted and undrawn funds available to the Restricted Group under the
Credit Agreement amounted to approximately $929,600 at December 31, 1995.
The Credit Agreement contains certain financial covenants that may limit the
Restricted Group's ability to utilize all of the undrawn funds available
thereunder. The Credit Agreement contains various restrictive covenants,
among which are limitations on the amount of investments that may be made in
affiliated entities and certain other subsidiaries, the maintenance of
various financial ratios and tests, and limitations on various payments,
including preferred dividends. The Company is restricted from paying any
dividends on its common stock. The Company was in compliance with the
covenants of its Credit Agreements at December 31, 1995.
Interest on outstanding amounts may be paid, at the option of the Company,
based on various formulas which relate to the prime rate, rates for
certificates of deposit or other prescribed rates. In addition, the Company
has entered into interest rate swap agreements with several banks on a
notional amount of $270,000 as of December 31, 1995 whereby the Company pays
a fixed rate of interest and receives a variable rate. Interest rates and
terms vary in accordance with each of the agreements. The Company enters
into interest
(67)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
rate swap agreements to hedge against interest rate risk, as required by its
credit agreements, and therefore accounts for these agreements as hedges of
floating rate debt, whereby interest expense is recorded using the revised
rate, with any fees or other payments amortized as yield adjustments. As of
December 31, 1995, the interest rate agreements expire at various times
through the year 2000 and have a weighted average life of approximately two
years. The Company is exposed to credit loss in the event of nonperformance
by the other parties to the interest rate swap agreements; however, the
Company does not anticipate nonperformance by the counterparties. The
weighted average interest rate on all bank indebtedness was 8.6% and 8.2% on
December 31, 1995 and 1994, respectively. The Company is also obligated to
pay fees of 3/8 of 1% per annum on the unused loan commitment and from 1-3/8%
to 1-5/8% per annum on letters of credit issued under the Credit Agreement.
Substantially all of the assets of the Restricted Group (excluding the assets
of CNYC), amounting to approximately $1,356,100 at December 31, 1995, have
been pledged to secure the borrowings under the Credit Agreement.
CABLEVISION MFR
Cablevision MFR and its subsidiaries, Monmouth Cablevision and Riverview
Cablevision, are party to a credit facility with a group of banks led by
Nations Bank of Texas, N.A., as agent (the "MFR Credit Facility"). The
maximum amount available to Cablevision MFR under the MFR Credit Facility is
$285,000 with a final maturity at June 30, 2003. The facility is a reducing
revolving loan, with scheduled facility reductions beginning on March 31,
1996 resulting in a 15% reduction by December 31, 1998. As of December 31,
1995, Cablevision MFR had outstanding bank borrowings of $195,200.
Unrestricted and undrawn funds available to Cablevision MFR under the MFR
Credit Facility amounted to approximately $89,800 at December 31, 1995. The
MFR Credit Facility contains certain financial covenants that may limit
Cablevision MFR's ability to utilize all of the undrawn funds available
thereunder, including covenants requiring Cablevision MFR to maintain certain
financial ratios. Under the terms of the MFR Credit Facility, Monmouth
Cablevision and Riverview Cablevision are prohibited from transferring funds
to the Company. The loan is secured by a pledge of the Company's stock in
Cablevision MFR and substantially all of Cablevision MFR's assets which
amounted to approximately $324,800 at December 31, 1995. Monmouth
Cablevision and Riverview Cablevision have entered into interest rate swap
and cap agreements with several banks on a notional amount of $130,000 as of
December 31, 1995, whereby Monmouth Cablevision and
(68)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
Riverview Cablevision pay a fixed rate of interest and receive a variable
rate. Monmouth Cablevision and Riverview Cablevision account for their
interest rate swap and cap agreements as hedging of floating rate debt, as
may be required under the MFR Credit Facility whereby interest expense is
recorded using the revised rate, with any fees or other payments amortized as
yield adjustments. Cablevision MFR is exposed to credit loss in the event of
nonperformance by the other parties to the agreements; however, Cablevision
MFR does not anticipate nonperformance by the counterparties. The interest
rate agreements expire in 1997. The weighted average interest rate on all
bank indebtedness was approximately 8.1% and 8.3%, on December 31, 1995 and
1994, respectively. The MFR Credit Facility contains various restrictive
covenants with which Cablevision MFR was in compliance or had obtained
waivers of compliance at December 31, 1995.
RAINBOW PROGRAMMING
In July 1994, Rainbow Programming entered into a $105,000 credit facility
with a group of banks. At December 31, 1994, $105,000 was outstanding under
this facility. On January 27, 1995 Rainbow Programming entered into an
amended and restated credit facility for $202,000, the entire amount of which
was outstanding on December 31, 1995. The credit facility is payable on
December 31, 1996 and bears interest at varying rates based upon the banks'
Base Rate or LIBOR Rate, as defined in the credit agreement. The loan is
secured by a pledge of the Company's stock in Rainbow Programming and is
guaranteed by the subsidiaries of Rainbow Programming as permitted. The
weighted average interest rate during 1995 and 1994 was 8.7% and 7.8%,
respectively. The credit agreement contains various restrictive covenants
with which Rainbow Programming was in compliance at December 31, 1995.
AMERICAN MOVIE CLASSICS COMPANY
AMCC is party to a loan agreement (the "AMCC Loan Agreement") with a group of
banks (with the Toronto Dominion Bank as Lead Bank). The AMCC Loan
Agreement, which permits maximum borrowings of $51,025 and matures on June
30, 1998, is comprised of a $36,025 term loan and a $15,000 revolver. At
December 31, 1995 and 1994, there were no borrowings under the revolver and
an outstanding balance of $36,025 and $44,000, respectively under the term
loan. Borrowings under the AMCC Loan Agreement bear interest at varying
rates above the Lead Bank's Base, CD or LIBOR rate depending on the ratio of
debt to cash flow, as defined in the Loan Agreement. AMCC has entered into
an interest rate swap agreement on a notional amount of $20,000 under which
AMCC pays a fixed rate and receives a variable rate. The interest rate swap
agreement expires on October 6, 1997. AMCC is exposed to credit loss in the
event of
(69)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
nonperformance by the other parties to the interest rate swap agreement;
however, it does not anticipate nonperformance by the counterparties. At
December 31, 1995 and 1994 the weighted average interest rate on bank
indebtedness approximated 6.8% and 7.3%, respectively. Substantially all of
the assets of AMCC, amounting to $165,576 at December 31, 1995, have been
pledged to secure the borrowings under the AMCC Loan Agreement. The AMCC
Loan Agreement contains various restrictive covenants with which AMCC was in
compliance at December 31, 1995.
SENIOR DEBT
Under the credit agreement between V Cable and GECC (the "V Cable Credit
Agreement"), GECC has provided a term loan (the "V Cable Term Loan") in the
amount of $20,000 to V Cable, which accretes interest at a rate of 10.62%
compounded semi-annually until December 31, 1997 (the reset date). In
addition, GECC has extended to VC Holding a $505,000 term loan (the "Series A
Term Loan), a $25,000 revolving line of credit (the "Revolving Line") and a
$202,554 term loan (the "Series B Term Loan"), all of which comprise the VC
Holding Credit Agreement. Interest on the Series A Term Loan and on any
amounts drawn under the Revolving Line of credit is payable currently.
Interest on the Series B Term Loan accretes at a rate of 10.62% compounded
semi-annually until December 31, 1997 (the reset date) and is payable in full
on December 31, 2001. At December 31, 1995 and 1994, amounts outstanding
under the V Cable Term Loan, the Series A Term Loan and the Series B Term
Loan were $27,288 and $24,606; $501,884 and $505,000; and 272,272 and
$245,507, respectively. There were no amounts outstanding under the
Revolving Line at December 31, 1995 and 1994. Unrestricted and undrawn funds
available to VC Holding at December 31, 1995 amounted to $24,105.
Interest rates on $254,000 of the Series A Term Loan are fixed at 10.12%
through December 31, 1997. The remaining $247,884 bears interest at rates
based on either GECC's Index Rate (as defined) or LIBOR plus applicable
percentages. Interest on any borrowings under the Revolving Line is paid
based on either GECC's Index Rate (as defined) or LIBOR plus applicable
percentages which vary depending upon certain prescribed financial ratios.
Scheduled quarterly principal payments on the Series A Term Loan commence
June 30, 1997 and continue through December 31, 2001.
V Cable has agreed to assume, on December 31, 1997, approximately $121,000 of
debt of U.S. Cable, which amount is subject to adjustment, upward or
downward, depending on U.S. Cable's ratio of debt to cash flow (as defined)
in 1997 and thereafter. Included in Senior Debt at December 31, 1995 and 1994
is $97,359 and $87,327, respectively,
(70)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
representing the present value of debt of U.S. Cable to be assumed in 1997.
The difference at December 31, 1995 of approximately $23,641 will be charged
to interest expense during the period from January 1, 1996 to December 31,
1997. The effective interest rate on this debt is approximately 11%. This
debt matures on December 31, 2001. Amortization of deferred interest expense
in connection with the assumption of U.S. Cable's debt, which is being
amortized on a straight line basis through December 31, 1997, amounted to
$14,047, $14,048 and $14,047 in 1995, 1994 and 1993, respectively.
The debt of V Cable and VC Holding is guaranteed by, and secured by a pledge
of all of the assets of, V Cable, VC Holding and each of their subsidiaries,
including a pledge of all direct and indirect ownership interests in such
subsidiaries. U.S. Cable's debt is also guaranteed and cross-collateralized
by each of V Cable, VC Holding and each of their subsidiaries. All of the V
Cable, VC Holding and U.S. Cable credit facilities are non-recourse to the
Company other than with respect to the common stock of V Cable owned by the
Company. Substantially all of the assets of V Cable, amounting to
approximately $391,600 at December 31, 1995, have been pledged to secure
borrowings under the V Cable and VC Holding Credit Agreements. At December
31, 1995 V Cable's liabilities exceeded its assets by approximately $551,800.
The V Cable and VC Holding Credit Agreements contain various restrictive
covenants, among which are the maintenance of certain financial ratios,
limitations regarding certain transactions, prohibitions against the transfer
of funds to the parent company (except for reimbursement of certain
expenses), and limitations on levels of permitted capital expenditures. V
Cable and VC Holding were in compliance or had obtained waivers of compliance
with all of the covenants of their loan agreements at December 31, 1995.
(71)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
SUBORDINATED DEBENTURES
In November 1995, the Company issued $300,000 principal amount of 9-1/4%
Senior Subordinated Notes due 2005 (the "2005 Notes"). The 2005 Notes are
redeemable at the Company's option, in whole or in part, on November 1, 2000,
November 1, 2001 and November 1, 2002 at the redemption price of 104.625%,
103.1% and 101.5%, respectively, of the principal amount and thereafter at
100% of the principal amount, in each case together with accrued interest to
the redemption date. The indenture under which the 2005 Notes were issued
contains various covenants, which are generally less restrictive than those
contained in the Company's Credit Agreement, with which the Company was in
compliance at December 31, 1995. The net proceeds of approximately $292,200
were used to reduce bank borrowings.
In October 1994, the Company redeemed its $200,000 face amount 12-1/4% Senior
Subordinated Reset Debentures due November 15, 2003, (the "Reset
Debentures"). In connection with the redemption, the Company paid a premium
over face amounting to $2,000, incurred a loss of $605 representing the
unamortized portion of the original issue discount and wrote off $4,483 of
deferred finance costs. The total loss incurred related to the redemption of
the Reset Debentures amounted to $7,088.
In February 1993, the Company issued $200,000 face amount ($198,930 and
$198,867 amortized amounts at December 31, 1995 and 1994, respectively) of
its 9-7/8% Senior Subordinated Debentures due 2013 (the "2013 Debentures").
The 2013 Debentures are redeemable, at the Company's option, on February 15,
2003, February 15, 2004, February 15, 2005 and February 15, 2006 at the
redemption price of 104.80%, 103.60%, 102.40% and 101.20%, respectively, of
the principal amount and thereafter at the redemption price of 100% of the
principal amount, in each case together with accrued interest to the
redemption date. The indenture under which the 2013 Debentures were issued
contains various covenants, which are generally less restrictive than those
contained in the Company's Credit Agreement, with which the Company was in
compliance at December 31, 1995.
Also in 1993, the Company issued $150,000 face amount ($149,678 and $149,667
amortized amounts at December 31, 1995 and 1994, respectively) of its 9-7/8%
Senior Subordinated Debentures due 2023 (the "2023 Debentures"). The 2023
Debentures are redeemable, at the Company's option, on and after April 1,
2003 at the redemption price of 104.938% reducing ratably to 100% of the
principal amount on and after April 1, 2010, in each case together with
accrued interest to the redemption date. The indenture under
(72)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
which the 2023 Debentures were issued contains various covenants, which are
generally less restrictive than those contained in the Company's Credit
Agreement, with which the Company was in compliance at December 31, 1995.
In April 1992, the Company issued $275,000 of its 10-3/4% Senior Subordinated
Debentures due 2004 (the "2004 Debentures"). The 2004 Debentures are
redeemable, at the Company's option, on April 1, 1997 and April 1, 1998 at
the redemption price of 103.071% and 101.536%, respectively, of the principal
amount, and on April 1, 1999 and thereafter at the redemption price of 100%
of the principal amount, in each case together with accrued interest to the
redemption date. The Indenture under which the 2004 Debentures were issued
contains various covenants, which are generally less restrictive than those
contained in the Company's Credit Agreement, with which the Company was in
compliance at December 31, 1995. The Indenture requires a sinking fund
providing for the redemption on April 1, 2002 and April 1, 2003 of $68,750
principal amount of the 2004 Debentures, at a redemption price equal to 100%
of the principal amount, plus accrued interest to the redemption date.
SUBORDINATED NOTES PAYABLE
In connection with the acquisition of Monmouth Cablevision and Riverview
Cablevision, in August 1994, Cablevision MFR issued promissory notes
totalling $141,268, due in 1998 and bearing interest at 6% until the third
anniversary and 8% thereafter (increasing to 8%and 10% respectively, if
interest is paid in shares of the Company's Class A Common Stock). Principal
and interest on the notes is payable, at Cablevision MFR's election, in cash
or in shares of the Company's Class A Common Stock. The promissory notes are
guaranteed by the Company and the obligations under the guarantee rank pari
passu with the Company's subordinated debentures. In certain circumstances,
Cablevision MFR may extend the maturity date of the promissory notes until
2003 for certain additional consideration.
(73)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
SUMMARY OF FIVE YEAR DEBT MATURITIES
Total amounts payable by the Company and its subsidiaries under its various
debt obligations, including capital leases, during the five years subsequent
to December 31, 1995 are as follows:
Restricted Cablevision Rainbow
Group V Cable MFR Programming AMCC Total
---------- ------- ----------- ----------- ---- -----
1996 $ 2,810 $ - $ - $202,000 $16,995 $221,805
1997 38,796 18,000 - - 12,980 69,776
1998 61,953 20,000 141,268 - 6,050 229,271
1999 84,455 30,000 - - - 114,455
2000 92,000 40,000 41,300 - - 173,300
NOTE 5. PREFERRED STOCK
In November 1995, the Company issued 13,800,000 depositary shares
representing 1,380,000 shares of 8-1/2% Series I Cumulative Convertible
Exchangeable Preferred Stock (the "Series I Preferred Stock") with an
aggregate liquidation preference of $345,000. The depositary shares are
convertible into shares of the Company's Class A Common Stock, at any time
after January 8, 1996 at the option of the holder, at an initial conversion
price of $67.44 per share of Class A Common Stock subject to adjustment under
certain conditions. The Series I Preferred Stock is exchangeable into 8-1/2%
Convertible Subordinated Debentures due 2007, at the option of the Company,
in whole but not in part, on or after January 1, 1998 at a rate of $25.00
principal amount of exchange debentures for each depositary share. The
Series I Preferred Stock is redeemable at the option of the Company, in whole
or in part, on November 1, 1999, November 1, 2000, and November 1, 2001 and
thereafter at 102.8%, 101.4% and 100.0%, respectively, of the principal
amount plus accrued and unpaid dividends thereon. The net proceeds of the
Series I Preferred Stock of approximately $334,200 were used to repay bank
borrowings. The Company paid a cash dividend of approximately $4,399 in 1995.
(74)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
In September 1995, the Company issued 2,500,000 shares of its $.01 par value
11-3/4% Series G Redeemable Exchangeable Preferred Stock (the "Series G
Preferred Stock") with an aggregate liquidation preference of $100 per share.
The Company is required to redeem the Series G Preferred Stock on October 1,
2007 at a redemption price per share equal to the liquidation preference of
$100 per share, plus accrued and unpaid dividends thereon. Before October 1,
2000, dividends may, at the option of the Company, be paid in cash or by
issuing fully paid and nonassessable shares of Series G Preferred Stock with
an aggregate liquidation preference equal to the amount of such dividends.
On and after October 1, 2000, dividends must be paid in cash. The terms of
the Series G Preferred Stock permit the Company, at its option, after January
1, 1996, to exchange the Series G Preferred Stock for the Company's 11-3/4%
Senior Subordinated Debentures due 2007 in an aggregate principal amount
equal to the aggregate liquidation preference of the shares of Series G
Preferred Stock. The net proceeds of approximately $239,300 were initially
used to repay bank debt. In 1995, the Company satisfied its dividend
requirements by issuing 77,510 additional shares of Series G Preferred Stock.
In October, 1995, the Company borrowed approximately $103,000 under its
Credit Agreement to redeem its outstanding Series E Redeemable Exchangeable
Convertible Preferred Stock (the "Series E Preferred Stock") in the principal
amount of $100,000 along with accrued dividends. The Company paid cash
dividends on the Series E Preferred Stock during 1995 and 1994 of
approximately $7,213 and $5,500, respectively.
The holders of the Company's 8% Series C Cumulative Preferred Stock ("Series
C Preferred Stock") may require the Company to redeem for cash at any time
commencing December 31, 1997 all or a portion of the outstanding shares of
the Series C Preferred Stock. The Company has the right, upon notice to the
holders requesting redemption, to convert all or a part of such shares into
shares of Class B Common Stock. If, in the future, holders require the
Company to redeem their Series C Preferred Stock, it is the Company's
intention to convert such shares into Class B Common Stock. The Company paid
cash dividends on the Series C Preferred Stock during each of 1995 and 1994
of $885.
(75)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
NOTE 6. INCOME TAXES
The Company and its majority-owned subsidiaries file consolidated federal
income tax returns. At December 31, 1995 the Company had consolidated net
operating loss carry forwards for tax purposes of approximately $1,023,586,
which expire between 2001 and 2010.
The tax effects of temporary differences which give rise to significant
portions of deferred tax assets or liabilities and the corresponding
valuation allowance at December 31, 1995 and 1994 are as follows:
1995 1994
---- ----
DEFERRED ASSET (LIABILITY)
Depreciation and amortization......... $ (45,358) $ (74,833)
Receivables from affiliates........... 19,179 19,312
Benefit plans......................... 11,025 15,046
Allowance for doubtful accounts....... 5,202 3,192
Deficit investment in affiliate....... 226,662 200,111
Benefits of tax loss carry forwards... 429,906 364,522
Other................................. 2,180 8,643
--------- ---------
Net deferred tax assets............. 648,796 535,993
Valuation allowance................... (648,796) (535,993)
--------- ---------
$ - $ -
--------- ---------
--------- ---------
The Company has provided a valuation allowance for the total amount of net
deferred tax assets since realization of these assets was not assured due
principally to the Company's history of operating losses.
(76)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
NOTE 7. OPERATING LEASES
The Company leases certain office, production and transmission facilities
under terms of leases expiring at various dates through 2004. The leases
generally provide for fixed annual rentals plus certain real estate taxes and
other costs. Rent expense for the years ended December 31, 1995, 1994 and
1993 amounted to $16,823, $12,036 and $10,849, respectively.
In addition, the Company rents space on utility poles for its operations.
The Company's pole rental agreements are for varying terms, and management
anticipates renewals as they expire. Pole rental expense for the years ended
December 31, 1995, 1994 and 1993 amounted to approximately $7,790, $6,947 and
$6,177, respectively. The minimum future annual rentals for all operating
leases during the next five years, including pole rentals from January 1,
1996 through December 31, 2000, and thereafter, at rates now in force are
approximately: 1996, $20,480; 1997, $18,377; 1998, $16,315; 1999, $14,386;
2000, $12,677; thereafter, $8,800.
NOTE 8. AFFILIATE TRANSACTIONS
The Company has affiliation agreements with certain cable television
programming companies, including MSG Holdings, varying ownership interests in
which were held, directly or indirectly, by Rainbow Programming during the
three years ended December 31, 1995. Rainbow Programming's investment in
these programming companies is accounted for on the equity method of
accounting. Accordingly, the Company recorded income (losses) of
approximately $(9,930), $(1,007) and $8,828 in 1995, 1994 and 1993,
respectively, representing its percentage interests in the results of
operations of these programming companies. Such amounts include $4,304 and
$5,656 for 1994 and 1993, respectively, of the Company's share of the net
income of AMCC prior to its consolidation with the Company in July 1994. In
addition, such amounts include $(3,293), $(175) and $5,240 for 1995, 1994 and
1993, respectively, of the Company's share of net income (losses) in
SportsChannel New York and Rainbow News 12 prior to their consolidation with
the Company in July 1995. At December 31, 1995 and 1994, the Company's
investment in these programming companies amounted to approximately $134,969
and $30,096, respectively. Costs incurred by the Company for programming
services provided by these non-consolidated affiliates and included in
technical expense for the years ended December 31, 1995, 1994 and 1993
amounted to approximately $37,756, $20,232 and $26,732, respectively. At
December 31, 1995 and 1994, amounts due from certain of these programming
affiliates aggregated $584 and $62, respectively, and are included in
advances to affiliates. Also, at December 31, 1995 and 1994 amounts
(77)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
due to certain of these affiliates, primarily for programming services
provided to the Company, aggregated $12,607 and $13,731, respectively, and
are included in accounts payable to affiliates.
Summarized combined financial information relating to these programming
companies at December 31, 1995, 1994 and 1993 and for the years then ended is
as follows:
1995 1994 1993
-------- -------- --------
Current assets.......... $ 73,232 $ 97,184 $133,060
-------- -------- --------
-------- -------- --------
Noncurrent assets....... $ 47,357 $ 33,815 $126,826
-------- -------- --------
-------- -------- --------
Current liabilities..... $ 60,286 $ 64,000 $ 93,071
-------- -------- --------
-------- -------- --------
Noncurrent liabilities.. $ 16,490 $ 6,257 $123,184
-------- -------- --------
-------- -------- --------
Net revenues............ $240,518 $270,676 $363,727
-------- -------- --------
-------- -------- --------
Net income (loss)....... $ (5,490) $ 3,473 $ 39,423
-------- -------- --------
-------- -------- --------
In 1992 the Company acquired from Mr. Dolan substantially all of the
interests in Cablevision of New York City ("CNYC") that it did not previously
own. Mr. Dolan remains a 1% partner in CNYC and is entitled to certain
preferential payments. Mr. Dolan's preferential rights entitle him to an
annual cash payment (the "Annual Payment") of 14% multiplied by the
outstanding balance of his "Minimum Payment". The Minimum Payment is $40,000
and is to be paid to Mr. Dolan prior to any distributions to partners other
than Mr. Dolan. In addition, Mr. Dolan has the right, exercisable beginning
on December 31, 1997, to require the Company to purchase his interest. Mr.
Dolan would be entitled to receive from the Company the Minimum Payment, any
accrued but unpaid Annual Payments, a guaranteed return on certain of his
investments in CNYC and a Preferred Payment defined as a payment (not
exceeding $150,000) equal to 40% of the Appraised Equity Value (as defined)
of CNYC after making certain deductions. Based upon estimates for accounting
purposes of the Appraised Equity Value of CNYC made by the Company, the
maximum amount of the Preferred Payment was accrued during 1992 through 1994
as an additional obligation to Mr. Dolan relating to the Company's purchase
of CNYC, which has also been charged to par value in excess of capital
contributed. The total amount owed to Mr. Dolan at December 31, 1995 of
approximately $192,945 in respect of the Preferred Payment, the Minimum
Payment and the Annual Payment reflects a reduction of approximately $3,955
at December 31, 1995 representing Mr. Dolan's obligation to reimburse the
Company in connection with certain claims paid or owed by CNYC.
(78)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
During 1995, 1994 and 1993, the Company made advances to or incurred costs on
behalf of other affiliates engaged in providing cable television, cable
television programming, and related services. Amounts due from these
affiliates amounted to $6,325 and $6,591 at December 31, 1995 and 1994,
respectively and are included in advances to affiliates.
Cablevision of Newark, a partnership 25% owned and managed by the Company and
75% owned by an affiliate of Warburg Pincus, owns cable television systems
located in Newark and South Orange, New Jersey. The Company's share of the
net losses of Cablevision of Newark amounted to $2,957, $3,631 and $4,206 in
1995, 1994 and 1993, respectively.
In connection with its 30% interest in A-R Cable Partners (see note 2), the
Company recorded its share of the losses of A-R Cable Partners amounting to
$3,505 for 1995 and $1,886 for the period from acquisition through December
31, 1994.
Also, in connection with its 30% interest in CFHI (see note 2), the Company
recorded its share of the losses of CFHI amounting to $1,535 for 1995 and
$654 from the date of acquisition through December 31, 1994.
The Company manages the operations of Cablevision of Newark, A-R Cable, A-R
Cable Partners and CFHI for a fee equal to 3-1/2% of gross receipts, as
defined, plus reimbursement of certain costs and an allocation of certain
selling, general and administrative expenses. In certain cases, interest is
charged on unpaid amounts. For 1995, 1994 and 1993, such management fees,
expenses and interest amounted to approximately $8,816, $6,576 and $5,677,
respectively, of which $6,918, $5,536 and $4,845, respectively, were reserved
by the Company.
In connection with the V Cable Reorganization (see Note 2), V Cable acquired
for $20,000, a 20% interest in U.S. Cable. The Company manages the
properties of U.S. Cable under management agreements that provide for cost
reimbursement, including an allocation of overhead charges. For 1995, 1994
and 1993, such cost reimbursement amounted to $5,621, $5,803 and $4,894,
respectively, which included an allocation of overhead charges of $2,881,
$2,720 and $2,604, respectively.
(79)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
NOTE 9. BENEFIT PLANS
The Company maintains the CSSC Supplemental Benefit Plan (the "Benefit Plan")
for the benefit of certain officers and employees of the Company. As part of
the Benefit Plan, the Company established a nonqualified defined benefit
pension plan, which provides that, upon attaining normal retirement age, a
participant will receive a benefit equal to a specified percentage of the
participant's average compensation, as defined. All participants are 100%
vested in the Benefit Plan. Net periodic pension cost for the years ended
December 31, 1995, 1994 and 1993 amounted to $(9), $103 and $368,
respectively. At December 31, 1995 and 1994, the fair value of Benefit Plan
assets exceeded the projected benefit obligation by approximately $2,119 and
$1,772, respectively.
In addition, the Company accrues a liability in the amount of 7% of certain
officers' and employees' compensation, as defined. Each year the Company also
accrues for the benefit of these officers and employees interest on such
amounts. The officer or employee will receive such amounts upon termination
of employment. All participants are 100% vested in this plan. The cost
associated with this plan for the years ended December 31, 1995, 1994 and
1993 was approximately $495, $337 and $497, respectively.
The Company maintains a Pension and 401(K) Savings Plan (the "Plan"), to
permit employees of the Company and its affiliates to make contributions to
the Plan on a pre-tax salary reduction basis in accordance with the
provisions of Section 401(K) of the Internal Revenue Code. The Company
contributes 1-1/2% of eligible employees' annual compensation, as defined, to
the defined contribution portion of the Plan (the "Pension Plan") and an
equivalent amount to the Section 401(K) portion of the Plan (the "Savings
Plan"). Employees may voluntarily contribute up to 15% of eligible
compensation, subject to certain restrictions, to the Savings Plan, with an
additional matching contribution by the Company of 1/4 of 1% for each 1%
contributed by the employee, up to a maximum contribution by the Company of
1/2 of 1% of eligible base pay. Employee contributions are fully vested as
are employer base contributions to the Savings Plan. Employer contributions
to the Pension Plan and matching contributions to the Savings Plan become
vested in years three through seven. The cost associated with these plans
was approximately $4,287, $3,125 and $2,905 for the years ended December 31,
1995, 1994 and 1993, respectively.
(80)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
NOTE 10. STOCK BENEFIT PLANS
The Company maintains an Employee Stock Plan (the "Stock Plan") under which
the Company is authorized to issue a maximum of 3,500,000 shares. Pursuant
to its terms, no awards may be granted under the Stock Plan after December 5,
1995. The Company granted under the Stock Plan incentive stock options,
nonqualified stock options, restricted stock, conjunctive stock appreciation
rights, stock grants and stock bonus awards. The exercise price of stock
options could not be less than the fair market value per share of class A
common stock on the date the option is granted and the options expire no
longer than ten years from date of grant. Conjunctive stock appreciation
rights permit the employee to elect to receive payment in cash, either in
lieu of the right to exercise such option or in addition to the stock
received upon the exercise of such option, equal to the difference between
the fair market value of the stock as of the date the right is exercised, and
the exercise price.
Under the Stock Plan, during 1995 the Company issued options to purchase
43,600 shares of Class A common stock, stock appreciation rights related to
43,600 shares under option and stock awards of 7,100 common shares. The
options and related conjunctive stock appreciation rights are exercisable at
$52.125 per share and vest in 33-1/3% annual increments beginning from the
date of grant. The stock awards vest 100% in May 1998.
Under the Stock Plan, during 1994 the Company issued options to purchase
525,400 shares of Class A common stock, stock appreciation rights related to
525,400 shares under option and stock awards of 68,400 common shares. Of the
options and related conjunctive stock appreciation rights, 95,400 are
exercisable at $42.00 per share and vest in 25% annual increments beginning
from the date of grant and 430,000 options and conjunctive rights are
exercisable at $56.50 per share and are currently vested. The stock awards
vest 100% in May 1998.
(81)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
In November 1994, the Company entered into agreements with three employees to
pay the value, as of that date, of options exercised with respect to 405,000
shares of the Company's Class A Common Stock, and to replace those options
with a combination of stock appreciation rights and newly issued options,
with the exercise price set at the market price of such stock on that date.
In accordance with the agreement, one-third of the value of the exercised
options was paid in cash with the remaining portion payable in equal
installments on November 18, 1995 and November 18, 1996. Accordingly, the
Company recorded expense related to the purchase of these options amounting
to $13,215 in 1994, representing the cash payment of approximately $4,673 and
a liability for future payments, included in accounts payable to affiliates
in the accompanying consolidated financial statements, amounting to
approximately $8,542 at December 31, 1994. In November 1995, at the
Company's option, final payments relating to these agreements were made.
Under the Stock Plan, during 1993 the Company issued options to purchase
15,225 shares of class A common stock, stock appreciation rights related to
15,225 shares under option and stock awards of 10,225 common shares. The
options and related conjunctive stock appreciation rights are exercisable at
various prices ranging from $27.625 to $38.25 per share in 25% and 33% annual
increments beginning from the date of grant. The stock awards vest 100% by
May 1996.
On February 13, 1996 the Company's Board of Directors adopted, subject to the
approval of the Company's stockholders, the 1996 Employee Stock Plan (the
"1996 Plan") under which, the Company would be authorized to issue a maximum
of 2,500,000 shares. Under the 1996 Plan, the Company would be able to grant
incentive stock options, nonqualified stock options, restricted stock,
conjunctive stock appreciation rights, stock grants and stock bonus awards.
The other terms of the 1996 Plan are substantially identical to those of the
Stock Plan except that under the 1996 Plan the Compensation Committee would
have the authority, in its discretion, to add performance criteria as a
condition to any employee's exercise of an award granted under the 1996 Plan.
(82)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
Stock transactions under the Stock Plan are as follows:
Shares Stock
Under Appreciation Stock Available Option
Option Rights Awards For Grant Price Range
-------- ------------ ------- --------- -------------
Balance, December 31, 1992 2,322,126 943,726 358,475 24,669 $14.50-$37.13
Granted 15,225 15,225 10,225 (25,450) $27.63-$38.25
Exercised/issued (478,582) (84,017) (15,000) $14.50-$36.00
Cancelled (124,074) (19,989) (28,050) 152,124 $16.63-$37.13
--------- -------- ------- --------
Balance, December 31, 1993 1,734,695 854,945 325,650 151,343 $14.50-$38.25
Granted 525,400 525,400 68,400 (593,800) $42.00-$56.50
Exercised/issued (358,528) (161,952) (48,430) - $14.50-$36.00
Cancelled (434,390) (59,866) (109,241) 543,631 $16.63-$42.00
--------- --------- ------- --------
Balance, December 31, 1994 1,467,177 1,158,527 236,379 101,174 $14.50-$56.50
Granted 43,600 43,600 7,100 (50,700) $52.13
Exercised/issued (418,102) (55,764) 17,302 - $14.50-$42.00
Cancelled (40,343) (32,026) (115,231) 155,574 $16.63-$42.00
--------- --------- -------- --------
Balance, December 31, 1995 1,052,332 1,114,337 145,550 206,048 $14.50-$56.50
--------- --------- -------- --------
--------- --------- -------- --------
At December 31, 1995, options for approximately 749,000 shares were
exercisable. As a result of the stock awards, bonus awards, stock
appreciation rights and the expensing of the cash payment made for certain
executive stock options, the Company expensed approximately $7,757, $6,814
and $28,234 in 1995, 1994 and 1993, respectively. The 1994 amount reflects a
credit of approximately $6,401 primarily resulting from a decline in the
market price of the Company's Class A Common Stock.
(83)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
NOTE 11. COMMITMENTS AND CONTINGENCIES
The Company, through Rainbow Programming, has entered into several contracts
with professional and other sports teams relating to cable television
programming including rights agreements. Amounts payable under these
contracts during the five years subsequent to December 31, 1995 amount to
$36,767 in 1996, $32,098 in 1997, $33,122 in 1998, $31,568 in 1999 and
$23,790 in 2000.
In addition, Rainbow Programming has guaranteed rights payments to several
professional sports teams relating to certain affiliated sports programming
companies. Amounts guaranteed on behalf of such affiliated sports
programming companies during the five years subsequent to December 31, 1995
amount to $10,126 in 1996, $9,133 in 1997, $3,681 in 1998, $2,578 in 1999 and
$340 in 2000.
The Company and its cable television affiliates have an affiliation agreement
with a program supplier whereby the Company is obligated to make Base Rate
Annual Payments, as defined and subject to certain adjustments pursuant to the
agreement, through 2004. The Company would be contingently liable for its
proportionate share of Base Rate Annual Payments, based on subscriber usage,
of approximately $10,848 in 1996; $11,241 in 1997; $11,646 in 1998; 12,065 in
1999 and for the years 2000 through 2004, such payments would increase by
percentage increases in the Consumer Price Index, or five percent, whichever
is less, over the prior year's Base Rate Annual Payment.
The Company has employment agreements with certain of its executive officers
expiring at various dates through December 31, 1997. The agreements provide
for minimum annual salaries and, in certain cases, additional amounts and
acceleration of certain stock options, stock appreciation rights and stock
awards in the event of a change in control of the Company, as defined in the
agreements. Aggregate minimum payments under the salary portion of these
agreements amount to $1,230 in 1996 and $2,130 in 1997.
The Company does not provide post-retirement benefits to any of its employees.
(84)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
NOTE 12. OTHER MATTERS
The Company is party to various lawsuits, some involving substantial amounts.
Management does not believe that the resolution of these lawsuits will have a
material adverse impact on the financial position of the Company.
The Company recorded a one time charge of $4,306 during 1994 to provide for
severance and related costs, attributable entirely to terminated employees,
resulting from a restructuring of its operations. Substantially all of such
amounts were paid during 1994.
NOTE 13. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL
INSTRUMENTS
CASH AND CASH EQUIVALENTS, TRADE ACCOUNTS RECEIVABLE, NOTES AND OTHER
RECEIVABLES, ACCOUNTS PAYABLE, ACCRUED LIABILITIES, ACCOUNTS PAYABLE TO
AFFILIATES, FEATURE FILM RIGHTS PAYABLE AND OBLIGATION TO RELATED PARTY
The carrying amount approximates fair value due to the short maturity of these
instruments.
BANK DEBT, SENIOR DEBT, SUBORDINATED DEBENTURES, SUBORDINATED NOTES PAYABLE AND
REDEEMABLE EXCHANGEABLE PREFERRED STOCK
The fair values of each of the Company's long-term debt instruments and
redeemable preferred stock are based on quoted market prices for the same or
similar issues or on the current rates offered to the Company for instruments
of the same remaining maturities.
INTEREST RATE SWAP AGREEMENTS
The fair values of interest rate swap agreements are obtained from dealer
quotes. These values represent the estimated amount the Company would receive
or pay to terminate agreements, taking into consideration current interest
rates and the current creditworthiness of the counterparties.
(85)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
The fair value of the Company's financial instruments are summarized as
follows:
December 31, 1995
---------------------------
Carrying Estimated
Amount Fair Value
---------- -----------
Long term debt instruments:
Bank debt $ 992,469 $ 992,469
Senior debt 898,803 898,803
Subordinated debentures 923,608 972,125
Subordinated notes payable 141,268 135,400
Redeemable exchangeable preferred stock 257,751 266,772
---------- ----------
$3,213,899 $3,265,569
---------- ----------
---------- ----------
Interest rate swap and cap agreements:
In a net payable position $ - $ 11,055
---------- ----------
---------- ----------
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
NOTE 14. SUBSEQUENT EVENTS
In February 1996, the Company entered into the GECC Agreement, as amended,
pursuant to which the Company plans to effect a reorganization and
recapitalization relating to V Cable and U.S. Cable (the "V Cable
Transactions"). The terms of the V Cable transactions provide for, among
other things, (i) the payment of all existing indebtedness of V Cable
(amounting to $899,000 at December 31, 1995); (ii) the formation of a new
unrestricted subsidiary ("Cablevision of Ohio") which will enter into a
separate $450,000 credit facility with a group of banks; and (iii) the
outside interests in U.S. Cable which the Company does not already own will be
acquired, facilitated by another separate bank credit facility of $151,000. On
March 18, 1996, approximately $500,000 of V Cable indebtedness and $70,000 of
U.S. Cable indebtedness (which includes accrued interest in both cases) was
paid with funds made available from the proceeds of the Company's issuance of
Series L Preferred Stock, described below. The remaining indebtedness of
V Cable and U.S. Cable will be paid from borrowings under the Credit Agreement
and from funds available under the new credit facilities mentioned above. The
new credit facilities contain certain financial covenants that may limit the
utilization of undrawn funds
(86)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
available thereunder, including requirements to maintain certain financial
ratios and restrictions on permitted uses of borrowed funds. It is expected
that the V Cable Transactions will be consummated during the third quarter of
1996.
Also in February 1996, the Company issued 6,500,000 depositary shares,
representing 65,000 shares of 11-1/8% Series L Redeemable Exchangeable
Preferred Stock (the "Series L Preferred Stock"). The depositary shares are
exchangeable, in whole but not in part, at the option of the Company, on or
after April 1, 1996, for the Company's 11-1/8% Senior Subordinated Debentures
due 2008. The Company is required to redeem the Series L Preferred Stock on
April 1, 2008 at a redemption price equal to the liquidation preference of
$10,000 per share plus accumulated and unpaid dividends. The Series L
Preferred Stock is redeemable at various redemption prices beginning at
105.563% at any time on or after April 1, 2003, at the option of the Company,
with accumulated and unpaid dividends thereon to the date of redemption.
(87)
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(continued)
NOTE 15. INTERIM FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of selected quarterly financial data for the years
ended December 31, 1995 and 1994.
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, TOTAL
------------------ ------------------ ------------------ ------------------- ---------------------
1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
-------- -------- -------- -------- -------- --------- -------- -------- ---------- ---------
Revenues............... $ 245,401 $176,087 $263,734 $192,090 $278,158 $ 223,468 $290,767 $ 245,524 $1,078,060 $ 837,169
Operating expenses..... 231,696 154,934 252,695 166,511 249,603 195,818 264,623 257,213 998,617 774,476
--------- -------- -------- -------- -------- --------- -------- --------- ---------- ---------
Operating profit
(loss)................ $ 13,705 $ 21,153 $ 11,039 $ 25,579 $ 28,555 $ 27,650 $ 26,144 $ (11,689) $ 79,443 $ 62,693
--------- -------- -------- -------- -------- --------- -------- --------- ---------- ---------
--------- -------- -------- -------- -------- --------- -------- --------- ---------- ---------
Net loss applicable to
common shareholders... $(100,973) $(57,348) $(99,384) $(56,557) $(44,033) $ (68,925) $(93,317) $(138,706) $ (337,707) $(321,536)
--------- -------- -------- -------- -------- --------- -------- --------- ---------- ---------
--------- -------- -------- -------- -------- --------- -------- --------- ---------- ---------
Net loss per common
share................. $ (4.27) $ (2.46) $ (4.18) $ (2.42) $ (1.85) $ (2.93) $ (3.88) $ (5.87) $ (14.17) $ (13.72)
--------- -------- -------- -------- -------- --------- -------- --------- ---------- ---------
--------- -------- -------- -------- -------- --------- -------- --------- ---------- ---------
(88)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
The information called for by Item 10, Directors and Executive Officers of the
Registrant, Item 11, Executive Compensation, Item 12, Security Ownership of
Certain Beneficial Owners and Management and Item 13, Certain Relationships and
Related Transactions, is hereby incorporated by reference to the Company's
definitive proxy statement for its Annual Meeting of Shareholders anticipated
to be held in June, 1996 or if such definitive proxy statement is not filed
with the Commission prior to April 30, 1996, to an amendment to this report on
Form 10-K filed under cover of Form 10-K/A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULE, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. The financial statements as indicated in the index is set forth on
page 48.
2. Financial Statement schedule:
Page
No.
-----
Schedule supporting consolidated financial statements:
Schedule II - Valuation and Qualifying Accounts.......... 90
Schedules other than that listed above have been omitted, since they are
either not applicable, not required or the information is included elsewhere
herein.
3. Independent auditors report and accompanying financial statements of
A-R Cable Services, Inc. are filed as part of this report on page 91.
4. The Index to Exhibits is on page 110.
(b) Reports on Form 8-K:
The Company filed reports on Form 8-K during the last quarter of the fiscal
period covered by this report on October 16, 1995 and November 7, 1995.
(89)
CABLEVISION SYSTEMS CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Balance at
Beginning Charged to Costs Charged to Deductions- Balance at
of Period and Expenses Other Accounts Write-Offs End of Period
----------- ---------------- -------------- ----------- -------------
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful
accounts.................... $10,087 $14,551 $ - $(11,960) $12,678
------- ------- ----- --------- -------
------- ------- ----- --------- -------
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful
accounts.................... $ 5,055 $11,849 $ - $ (6,817) $10,087
------- ------- ----- --------- -------
------- ------- ----- --------- -------
YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful
accounts.................... $ 3,232 $ 9,138 $ - $ (7,315) $ 5,055
------- ------- ----- --------- -------
------- ------- ----- --------- -------
(90)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of
Cablevision Systems Corporation)
Consolidated Financial Statements
December 31, 1995 and 1994
(With Independent Auditors' Report Thereon)
(91)
INDEPENDENT AUDITORS' REPORT
The Board of Directors
A-R Cable Services, Inc.
We have audited the accompanying consolidated balance sheets of A-R Cable
Services, Inc. (a wholly-owned subsidiary of Cablevision Systems Corporation)
and subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of operations, stockholder's deficiency and cash
flows for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of A-R Cable Services,
Inc. and subsidiaries at December 31, 1995 and 1994 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Jericho, New York
March 18, 1996
(92)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(in thousands)
1995 1994
-------- --------
ASSETS
Cash and cash equivalents............................... $ 25 $ 41
Accounts receivable trade (less allowance for
doubtful accounts of $376 and $321).................... 2,089 1,345
Notes and other receivables............................. 1,179 1,616
Prepaid expenses........................................ 661 621
Property, plant and equipment, net...................... 113,787 107,004
Subscriber lists, net of accumulated amortization of
$60,800 and $53,760.................................... - 7,040
Franchises, net of accumulated amortization of
$240,200 and $226,707.................................. - 13,493
Excess costs over fair value of net assets acquired,
net of accumulated amortization of $69,290 and $60,683. 103,226 111,833
Deferred financing and other costs, net of accumulated
amortization of $7,563 and $6,295...................... 1,864 3,132
-------- --------
$222,831 $246,125
-------- --------
-------- --------
See accompanying notes to
consolidated financial statements.
(93)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(in thousands)
1995 1994
--------- ---------
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
Accounts payable............................... $ 15,714 $ 14,175
Accrued liabilities:
Interest...................................... 5,316 6,475
Payroll and related benefits.................. 2,167 1,677
Franchise fees................................ 1,607 1,424
Insurance..................................... 1,262 942
Other......................................... 5,338 5,461
Amounts payable to affiliates, net............. 293 238
Due to parent.................................. 17,799 11,325
Senior term loan............................... 410,000 400,575
Capital lease obligations...................... 10 71
Subscriber deposits............................ 705 782
Deferred income taxes.......................... - 6,082
--------- ---------
Total liabilities............................. 460,211 449,227
--------- ---------
Commitments and contingencies
Preferred Stock - Series A..................... 205,051 170,812
--------- ---------
Preferred Stock - Series B..................... 73,319 61,678
--------- ---------
Stockholder's deficiency:
Common stock $.50 par value, 20,000 shares
authorized, 19,000 shares issued and
outstanding................................. 9,500 9,500
Paid-in capital............................... 41,350 41,350
Accumulated deficit........................... (566,600) (486,442)
--------- ---------
Total stockholder's deficiency.............. (515,750) (435,592)
--------- ---------
$ 222,831 $246,125
--------- ---------
--------- ---------
See accompanying notes
to consolidated financial statements.
(94)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in thousands)
1995 1994 1993
-------- -------- --------
Revenues (including affiliate amounts of
$1,268, $1,306 and $1,090)................. $113,292 $107,026 $108,711
-------- -------- --------
Operating expenses:
Technical expenses (including affiliate
amounts of $3,260, $2,246 and $2,787)..... 43,808 38,269 38,316
Selling, general and administrative
expenses (including affiliate amounts
of $7,628, $7,262 and $7,174)............. 26,104 22,592 24,664
Depreciation and amortization.............. 46,100 64,695 63,731
-------- -------- --------
116,012 125,556 126,711
-------- -------- --------
Operating loss........................... (2,720) (18,530) (18,000)
Other income (expense):
Interest expense, net (including affiliate
amounts of $1,110, $659 and $244)......... (41,408) (33,572) (27,894)
Loss on retirement of debt................. - - (390)
Miscellaneous, net......................... (182) (799) (792)
-------- -------- --------
Net loss before income tax benefit.......... (44,310) (52,901) (47,076)
Income tax benefit.......................... 6,082 14,045 14,168
-------- -------- --------
Net loss.................................... (38,228) (38,856) (32,908)
-------- -------- --------
Dividend requirements applicable to:
Series A Preferred Stock................... (34,029) (28,236) (23,512)
Series B Preferred Stock................... (7,901) (6,749) (5,998)
-------- -------- --------
(41,930) (34,985) (29,510)
-------- -------- --------
Net loss applicable to common stockholder... $(80,158) $(73,841) $(62,418)
-------- -------- --------
-------- -------- --------
See accompanying notes
to consolidated financial statements.
(95)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIENCY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in thousands)
Common Stock
-------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ----------- ---------
Balance December 31, 1992......... 19,000 9,500 40,500 (350,183) (300,183)
Preferred dividend requirements.. - - - (29,510) (29,510)
Net loss......................... - - - (32,908) (32,908)
Capital contributions............ - - 850 - 850
------ ------ ------- ----------- ---------
Balance December 31, 1993......... 19,000 9,500 41,350 (412,601) (361,751)
Preferred dividend requirements.. - - - (34,985) (34,985)
Net loss......................... - - - (38,856) (38,856)
------ ------ ------- ----------- ---------
Balance December 31, 1994......... 19,000 9,500 41,350 (486,442) (435,592)
Preferred dividend requirements.. - - - (41,930) (41,930)
Net loss......................... - - - (38,228) (38,228)
------ ------ ------- ----------- ---------
Balance December 31, 1995......... 19,000 $9,500 $41,350 $(566,600) $(515,750)
------ ------ ------- ----------- ---------
------ ------ ------- ----------- ---------
See accompanying notes
to consolidated financial statements.
(96)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in thousands)
1995 1994 1993
-------- -------- --------
Cash flows from operating activities:
Net loss............................................ $(38,228) $(38,856) $(32,908)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Income tax benefit................................ (6,082) (14,045) (14,168)
Depreciation and amortization..................... 46,100 64,695 63,731
Amortization of deferred financing costs.......... 1,268 1,630 1,577
Loss on retirement of debt........................ - - 390
(Gain) loss on sale of equipment.................. (29) 165 (104)
Change in assets and liabilities:
Decrease (increase) in accounts receivable trade.. (744) 24 24
Decrease (increase) in notes and other
receivables...................................... 437 (92) (463)
Decrease (increase) in prepaid expenses........... (40) 26 (32)
Increase (decrease) in accounts payable........... 1,539 (391) 5,298
Increase (decrease) in accrued liabilities........ (289) 3,051 3,800
Increase (decrease) in amounts payable to
affiliates, net.................................. 55 (364) (192)
Increase in due to parent......................... 6,474 4,134 4,292
Decrease in subscriber deposits................... (77) (91) (77)
-------- -------- --------
Total adjustments................................ 48,612 58,742 64,076
-------- -------- --------
Net cash provided by operating activities........ 10,384 19,886 31,168
-------- -------- --------
Cash flows from investing activities:
Capital expenditures................................ (24,635) (24,404) (25,220)
Proceeds from sale of equipment..................... 921 322 242
-------- -------- --------
Net cash used in investing activities.............. $(23,714) $(24,082) $(24,978)
-------- -------- --------
See accompanying notes
to consolidated financial statements.
(97)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in thousands)
(continued)
1995 1994 1993
-------- ------- --------
Cash flows from financing activities:
Proceeds from senior debt......................... $ 23,000 $ 9,500 $ 39,639
Repayments of senior debt......................... (13,575) (6,425) (17,500)
Redemption of subordinated notes payable.......... - - (28,793)
Proceeds from issuance of Series A Preferred
Stock............................................ 210 998 -
Proceeds from issuance of Series B Preferred
Stock............................................ 3,740 427 -
Capital contributions............................. - - 850
Repayment of capital lease obligations............ (61) (161) (299)
Additions to deferred financing and other costs... - (500) (206)
-------- ------- -------
Net cash provided by (used in) financing
activities...................................... 13,314 3,839 (6,309)
-------- ------- -------
Net decrease in cash and cash equivalents.......... (16) (357) (119)
Cash and cash equivalents at beginning of year..... 41 398 517
-------- ------- -------
Cash and cash equivalents at end of year........... $ 25 $ 41 $ 398
-------- ------- -------
-------- ------- -------
See accompanying notes
to consolidated financial statements.
(98)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY AND RELATED MATTERS
A-R Cable Services, Inc. ("A-R Cable" or the "Company"), a wholly-owned
subsidiary of Cablevision Systems Corporation ("CSC") or ("Parent"), was
organized for the purpose of constructing and operating cable television
systems. The Company's revenues are derived principally from its cable
television operations which include recurring monthly fees paid by subscribers.
In May 1992, the Company and CSC consummated a restructuring and refinancing
transaction. In connection with this restructuring, Warburg, Pincus
Investors, L.P. ("Warburg Pincus") purchased a new Series A Preferred Stock
of the Company for a cash investment of $105,000, and CSC purchased a new
Series B Preferred Stock of the Company for a cash investment of $45,000. In
addition, General Electric Capital Corporation ("GECC") provided the Company
with an additional $70,000 under a secured revolving credit line.
In connection with Warburg Pincus' investment in the Company, upon the receipt
of certain franchise approvals, Warburg Pincus will be permitted to elect three
of the six members of the Company's board of directors, will have approval
rights over certain major corporate decisions of the Company and will be
entitled to 60% of the vote on all matters on which holders of capital stock
are entitled to vote (other than the election of directors). CSC (through a
wholly-owned subsidiary) continues to own the common stock, as well as the
Series B Preferred Stock, and CSC continues to manage the Company under a
management agreement that provides for cost reimbursement, an allocation of
overhead charges and a management fee of 3-1/2% of gross receipts, as defined,
with interest on unpaid annual amounts thereon at a rate of 10% per annum. The
3-1/2% fee is payable by the Company only after repayment in full of its senior
debt and certain other obligations. Under certain circumstances, the fee is
subject to reduction to 2-1/2% of gross receipts.
After May 11, 1997, either Warburg Pincus or CSC may irrevocably cause the sale
of the Company, subject to certain conditions. In certain circumstances,
Warburg Pincus may cause the sale of the Company prior to that date. If
Warburg Pincus initiates the sale, CSC will have the right to purchase the
Company through an appraisal procedure. CSC's purchase right may be forfeited
in certain circumstances. Upon the sale of the Company, the net sales
proceeds, after repayment of all outstanding indebtedness and other
liabilities, will be used as follows: first, to repay Warburg Pincus'
investment in
(99)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
the Series A Preferred Stock; second, to repay CSC's investment in the Series B
Preferred Stock; third, to repay the accumulated unpaid dividends on the
Series A Preferred Stock (19% annual rate); fourth, to repay the accumulated
unpaid dividends on the Series B Preferred Stock (12% annual rate); fifth, to
pay CSC for all accrued and unpaid management fees together with accrued but
unpaid interest thereon; sixth, pro rata 60% to the Series A Preferred
Stockholders, 4% to the Series B Preferred Stockholders and 36% to the common
stockholder(s).
During 1995 and 1994, Warburg Pincus purchased additional shares of the new
Series A Preferred Stock for a cash investment of $210 and $998, respectively,
and CSC purchased additional shares of the new Series B Preferred Stock for a
cash investment of $3,740 and $427, respectively. The Series A Preferred Stock
is entitled to a 19% annual dividend. The Series B Preferred Stock is
entitled to a 12% annual dividend. Dividends on the Series A and Series B
Preferred Stock are not payable until the repayment in full of all outstanding
indebtedness to GECC (see Note 3).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
the Company and its subsidiaries, all of which are wholly owned. All
significant intercompany balances and transactions have been eliminated in
consolidation.
REVENUE RECOGNITION
The Company recognizes revenues as cable television services are provided to
subscribers.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including construction materials, are recorded
at cost, which includes all direct costs and certain indirect costs associated
with the construction of cable television transmission and distribution
systems, and the costs of new subscriber installations.
Property, plant and equipment are being depreciated over their estimated useful
lives using the straight-line method. Leasehold improvements are amortized
over the shorter of their useful lives or the term of the related leases.
(100)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
DEFERRED FINANCING COSTS
Costs incurred to obtain debt are deferred and amortized on the straight-line
basis over the life of the related debt.
SUBSCRIBER LISTS, FRANCHISES, AND EXCESS COSTS OVER FAIR VALUE OF NET ASSETS
ACQUIRED
Subscriber lists were amortized on the straight-line basis over varying periods
during which subscribers were expected to remain connected to the system
(averaging approximately 8 years). Franchises are amortized on the
straight-line basis over the original average remaining term of the
franchises (approximately 7 years). Excess costs over fair value of net
assets acquired are being amortized over 20 years on the straight-line basis.
The Company assesses the recoverability of such excess costs based upon
undiscounted anticipated future cash flows of the businesses acquired.
INCOME TAXES
The Company is not a member of the CSC consolidated group for federal tax
purposes and, accordingly, files a separate federal income tax return on
behalf of itself and its consolidated subsidiaries. Income taxes are
provided based upon the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which requires
the liability method of accounting for deferred income taxes and permits the
recognition of deferred tax assets, subject to an ongoing assessment of
realizability.
CASH FLOWS
For purposes of the consolidated statements of cash flows, the Company
considers short-term investments with a maturity at date of purchase of three
months or less to be cash equivalents. The Company paid cash interest expense
of approximately $40,300, $26,672 and $25,030 during the years ended
December 31, 1995, 1994 and 1993, respectively. The Company's noncash
investing and financing activities included preferred stock dividend
requirements of $41,930, $34,985 and $29,510 in 1995, 1994 and 1993,
respectively.
(101)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following items which are
depreciated over the estimated useful lives shown below:
December 31,
------------------ Estimated
1995 1994 Useful Lives
-------- -------- -------------
Distribution systems.............. $220,728 $199,702 5-15 years
Machinery and equipment........... 6,654 6,038 5-7 years
Furniture and fixtures............ 1,472 1,327 7 years
Vehicles.......................... 7,816 7,256 4 years
Buildings......................... 2,137 2,047 25 years
Leasehold improvements............ 1,326 1,273 Life of lease
Land.............................. 920 920 -
-------- --------
241,053 218,563
Less accumulated depreciation
and amortization................. 127,266 111,559
-------- --------
$113,787 $107,004
-------- --------
-------- --------
NOTE 3. SENIOR TERM LOAN
The Company's outstanding borrowings under its senior term loan and revolving
lines of credit (the "Senior Term Loan") with GECC amounted to $410,000 and
$400,575 at December 31, 1995 and 1994, respectively. The facility consists of
a $285,000 senior term loan, $95,000 in special funding advances and a $45,000
revolving line of credit. The senior term loan and revolving line of credit
are non-amortizing and mature on December 30, 1997. The special funding
advances require amortization, amounting to $3,750 per quarter, commencing
January 1, 1997, with the balance due on December 31, 1997. Aggregate undrawn
funds available under the revolving line of credit at December 31, 1995
amounted to approximately $15,000 of which $200 was restricted for certain
letters of credit issued on behalf of the Company.
(102)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
Interest rates on $410,000 of the Senior Term Loan are at floating rates based
on either GECC's LIBOR (as defined in the agreement) or Index Rate plus
applicable percentages, which vary depending upon certain prescribed financial
ratios. The weighted average interest rate approximated 9.2% at
December 31, 1995.
Substantially all of the assets of the Company have been pledged to secure the
borrowings under the Senior Term Loan agreement.
The Senior Term Loan agreement contains various restrictive covenants, among
which are the maintenance of certain financial ratios, limitations regarding
certain transactions by the Company, prohibitions against the transfer of funds
to the parent company (except for reimbursement of certain expenses) and
limitations on levels of permitted capital expenditures. The Company was in
compliance with all of the covenants of its Senior Term Loan agreement at
December 31, 1995.
NOTE 4. INCOME TAXES
The Company's tax returns for the years 1984 to 1989 have been examined by the
Internal Revenue Service and certain issues related to the amortization of
intangible assets are being appealed by the Company. Management believes that
any settlement arising out of this examination will not have a material adverse
effect on the financial position of the Company.
At December 31, 1995, the Company had a net operating loss carry forward of
approximately $231,087, which expires in varying amounts from 2003 to 2010.
Due to the 1992 transaction (Note 1), the Company underwent an ownership
change within the meaning of Internal Revenue Code Section 382 which limits
the amount of net operating loss carry forward from the period prior to the
transaction that can be utilized to offset any taxable income in periods
subsequent to the transaction. Therefore, of the $231,087 of net operating
loss carry forwards for tax purposes, $201,588 is restricted and $29,499 is
currently available.
Usage of the $201,588 net operating loss carry forward is limited to a fixed
annual amount, calculated using the Federal long-term tax-exempt rate times
the value of the Company prior to the ownership change. This amount is
increased in any year in which the Company recognizes any built in gain from
the sale of assets owned prior to the ownership change. Based on this formula,
none of the $201,588 restricted net operating loss carry forward would
currently be available to the Company.
(103)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
The tax effects of temporary differences which give rise to significant
portions of deferred tax assets or liabilities and the corresponding
valuation allowance at December 31, 1995 and 1994 are as follows:
Deferred Asset (Liability) 1995 1994
- -------------------------- -------- --------
Depreciation and amortization........... $(15,534) $(23,760)
Benefit plans........................... 340 674
Allowance for doubtful accounts......... 169 148
Benefits of tax loss carry forwards..... 87,813 82,705
Other................................... (338) (701)
-------- --------
Net deferred tax assets............... 72,450 59,066
Valuation allowance..................... (72,450) (65,148)
-------- --------
Net deferred tax liabilities.......... $ - $ (6,082)
-------- --------
-------- --------
The Company has provided a valuation allowance of $72,450 for deferred tax
assets since realization of these assets was not assured due to the Company's
history of operating losses. Also, in connection with the acquisition of the
Company by CSC in January 1988, the Company recorded certain fair value
adjustments net of their tax effects. In accordance with SFAS 109, these
assets have been adjusted to their remaining pre tax amounts at January 1,
1993, the date the Company adopted SFAS 109. Amortization of these amounts in
1995, 1994 and 1993 resulted in the recognition of income tax benefits of
$6,082, $14,045 and $14,168, respectively.
NOTE 5. AFFILIATE TRANSACTIONS
The Company has an agreement with CSC whereby the Company is managed by CSC in
exchange for a management fee of 3-1/2% of gross receipts, as defined. Interest
on unpaid amounts accumulates at a rate of 10% per annum. Such management fees
amounted to $3,963, $3,738 and $3,801 in 1995, 1994 and 1993, respectively, and
interest thereon amounted to $1,110, $659 and $244 in 1995, 1994 and 1993,
respectively.
The Company is also charged for cost reimbursement and an allocation of certain
selling, general and administrative expenses by CSC. For the years ended
December 31, 1995, 1994 and 1993 these cost reimbursements and expense
allocations approximated $3,665, $3,524 and $3,373, respectively. In
accordance with certain restrictive covenants contained in its Senior Term
Loan agreement, the Company may not pay in excess of
(104)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
specified amounts, subject to certain escalation provisions, of allocated
corporate overhead expenses charged by CSC in any fiscal year. In addition,
CSC also provided certain programming services to the Company during 1995.
At December 31, 1995 and 1994, the total balance due CSC for management fees,
interest, cost reimbursement, allocated expenses and certain programming
services amounted to $17,799 and $11,325, respectively.
CSC has interests in several companies engaged in providing cable television
services and programming services to the cable television industry, including
the Company. During 1995, 1994 and 1993, the Company was charged approximately
$3,260, $2,246 and $2,787, respectively, by these companies for these services
and the total amount due these companies as of December 31, 1995 and 1994 was
$293 and $238, respectively.
NOTE 6. BENEFIT PLANS
CSC maintains a Pension and 401(K) Savings Plan (the "Plan"), to permit
employees of CSC and its affiliates to make contributions to the Plan on a
pre-tax salary reduction basis in accordance with the provisions of
Section 401(K) of the Internal Revenue Code. The Company contributes 1-1/2%
of eligible employees' annual compensation, as defined, to the defined
contribution portion of the Plan (the "Pension Plan") and an equivalent amount
to the section 401(K) portion of the Plan (the "Savings Plan"). Employees may
voluntarily contribute up to 15% of eligible compensation, subject to certain
restrictions, to the Savings Plan, with an additional matching contribution by
the Company of 1/4 of 1% for each 1% contributed by the employee, up to a
maximum contribution by the Company of 1/2 of 1%. Employee contributions are
fully vested as are employer base contributions to the Savings Plan. Employer
contributions to the Pension Plan and matching contributions to the Savings
Plan become vested in years three through seven. Total expense related to
these plans for the years ended December 31, 1995, 1994 and 1993 was
approximately $375, $334 and $339, respectively.
The Company does not provide any postretirement benefits to its employees.
(105)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
NOTE 7. OPERATING LEASES
The Company leases certain office, production, satellite transponder, and
transmission facilities under terms of operating leases expiring at various
dates. The leases generally provide for fixed annual rentals plus certain
real estate taxes and other costs. Rent expense for the years ended
December 31, 1995, 1994 and 1993 was approximately $1,110, $1,240 and $842,
respectively.
In addition, the Company rents space on utility poles for its operations. The
Company's pole rental agreements are for varying terms, and management
anticipates renewals as they expire. Pole rental expense for the years ended
December 31, 1995, 1994 and 1993 was approximately $2,311, $1,745 and $1,507,
respectively.
The minimum future annual rentals for all operating leases, including pole
rentals, from January 1, 1996 through December 31, 2000 at rates now in force
are approximately: 1996, $3,124; 1997, $2,694; 1998, $2,448; 1999, $2,322;
2000, $2,320.
NOTE 8. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
CASH AND CASH EQUIVALENTS, TRADE ACCOUNTS RECEIVABLE, NOTES AND OTHER
RECEIVABLES, ACCOUNTS PAYABLE, ACCRUED LIABILITIES, ACCOUNTS PAYABLE TO
AFFILIATES AND DUE TO PARENT
The carrying amount approximates fair value because of the short maturity of
these instruments.
SENIOR TERM LOAN
The fair values of the Company's long-term debt instruments are based on
quoted market prices for the same or similar issues or on the current rates
offered to the Company for instruments of the same remaining maturities.
(106)
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
The fair value of the Company's financial instruments are summarized as follows:
December 31, 1995
--------------------
Carrying Estimated
Amount Fair Value
-------- ----------
Long term debt instruments:
Senior term loans.................... $410,000 $410,000
-------- --------
-------- --------
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
NOTE 9. COMMITMENTS AND CONTINGENCIES
CSC and its cable television affiliates, including the Company, have an
affiliation agreement with a program supplier whereby CSC and its cable
television affiliates are obligated to make Base Rate Annual Payments, as
defined and subject to certain adjustments pursuant to the agreement, through
2004. The Company would be contingently liable for its proportionate share of
Base Rate Annual Payments, based on subscriber usage, of approximately $1,059
in 1996; $1,097 in 1997; $1,137 in 1998; $1,178 in 1999 and for the years 2000
through 2004, such payments would increase by percentage increases in the
Consumer Price Index, or five percent, whichever is less, over the prior
year's Base Annual Payment.
The Company is party to various lawsuits, some involving substantial amounts.
Management does not believe that the resolution of these lawsuits will have a
material adverse impact on the financial position of the Company.
(107)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on the
19th day of March, 1996.
Cablevision Systems Corporation
By: /s/ William J. Bell
-----------------------
Name: William J. Bell
Title: Vice Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Francis F. Randolph, Jr., Marc A. Lustgarten and
Robert S. Lemle, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him in his
name, place and stead, in any and all capacities, to sign this report, and file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons in the
capacities and on the dates indicated.
Name Title Date
---- ----- -----
/s/ James L. Dolan Chief Executive Officer and Director March 19, 1996
- --------------------- (Principal Executive Officer)
James L. Dolan
/s/ Barry J. O'Leary Senior Vice President-Finance and March 19, 1996
- --------------------- Treasurer (Principal Financial
Barry J. O'Leary Officer)
/s/ William J. Bell Vice Chairman and Director March 19, 1996
- --------------------- (Principal Accounting Officer)
William J. Bell
(108)
SIGNATURES
(continued)
/s/ Charles F. Dolan Chairman of the Board of Directors March 19, 1996
- -----------------------------
Charles F. Dolan
/s/ Marc A. Lustgarten Vice Chairman and Director March 19, 1996
- -----------------------------
Marc A. Lustgarten
/s/ Robert S. Lemle Executive Vice President, General March 19, 1996
- ----------------------------- Counsel, Secretary and Director
Robert S. Lemle
/s/ Sheila A. Mahony Senior Vice President and Director March 19, 1996
- -----------------------------
Sheila A. Mahony
/s/ John Tatta Director and Chairman of the March 19, 1996
- ----------------------------- Executive Committee
John Tatta
/s/ Patrick F. Dolan Director March 19, 1996
- -----------------------------
Patrick F. Dolan
/s/ Francis F. Randolph, Jr. Director March 19, 1996
- -----------------------------
Francis F. Randolph, Jr.
/s/ Daniel T. Sweeney Director March 19, 1996
- -----------------------------
Daniel T. Sweeney
/s/ Charles D. Ferris Director March 19, 1996
- -----------------------------
Charles D. Ferris
/s/ Richard H. Hochman Director March 19, 1996
- -----------------------------
Richard H. Hochman
/s/ Victor Oristano Director March 19, 1996
- -----------------------------
Victor Oristano
(109)
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- -----
3.1 --Certificate of Incorporation of the Registrant (incorporated
herein by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 dated January 17, 1986,
File No. 33-1936 (the "S-1")).
3.1A --Amendment to Certificate of Incorporation and complete copy
of amended and restated Certificate of Incorporation
(incorporated herein by reference to Exhibits 3.1A(i) and
3.1A(ii) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (the "1989 10-K")).
3.1B --Certificate of Designations for the Series E Redeemable
Exchangeable Convertible Preferred Stock (incorporated herein
by reference to the Company's Report on form 10-K/A for the
year ended December 31, 1993, filed on April 13, 1994).
3.1C --Certificate of Designations for the Series F Redeemable
Preferred Stock (incorporated herein by reference to the
Company's Report on Form 10-K/A for the year ended December 31,
1993, filed on April 13, 1994).
3.1D --Certificate of Designations for the Series G Redeemable
Exchangeable Preferred Stock (incorporated herein by reference
to Exhibit 3.1D to the Company's Registration Statement on
Form S-4, File No. 33-62717).
3.1E Certificate of Designations for the Series H Redeemable
Exchangeable Preferred Stock (incorporated by reference to
Exhibit 4.1E to the Company's Registration Statement on
Form S-4, File No. 33-63691).
3.1F --Certificate of Designations for the Series I Cumulative
Convertible Exchangeable Preferred Stock (incorporated by
reference to Exhibit 99.3 to the Company's Current Report on
Form 8-K filed November 7, 1995).
3.1G --Certificate of Designations for the Series L Redeemable
Exchangeable Preferred Stock.
3.2 --By-laws of the Registrant (incorporated herein by reference
to Exhibit 3.2 to the S-1).
(110)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- -----
3.2A --Amendment to By-laws and complete copy of amended and
restated By-laws (incorporated herein by reference to
Exhibit 3.2 to the 1989 10-K).
3.2B --Amendment to By-laws and complete copy of amended and
restated By-laws (incorporated herein by reference to
Exhibit 3.2B to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (the "1992 10-K").
3.2C --Amendment to By-laws and complete copy of amended and
restated By-laws (incorporated herein by reference to
Exhibit 3.2C to the Company's Annual Report on Form 10-K405
for the fiscal year ended December 31, 1994).
3.2D --Amendment to By-laws of the Registrant and complete copy of
amended and restated By-laws (incorporated herein by reference
to Exhibit 3.2D to the Company's Registration Statement on
Form S-4, File No. 33-62717).
4.1 --Indenture dated as of April 1, 1992 relating to the
Registrant's $275,000,000 10 3/4% Senior Subordinated
Debentures due April 1, 2004 (incorporated herein by
reference to Exhibit 4.2 to the 1992 10-K).
4.2 --Indenture dated as of February 15, 1993 relating to the
Registrant's $200,000,000 9 7/8% Senior Subordinated
Debentures due February 15, 2013 (incorporated herein by
reference to Exhibit 4.3 to the 1992 10-K).
4.3 --Indenture dated as of April 1, 1993 relating to the
Registrant's $150,000,000 9 7/8% Senior Subordinated
Debentures due 2023 (incorporated by reference to the
Conpany's Registration Statement on Form S-4, File No.
33-61814).
4.4 --Supplemental indenture dated as of November 1, 1995 between
the Company and the Bank of New York, Trustee, to the indenture
dated November 1, 1995 (incorporated by reference to
Exhibit 99.6 to the Company's Current Report on Form 8-K filed
November 1, 1995).
(111)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- -----
4.5 --Registration Rights Agreement, dated September 26, 1995,
between the Registrant and Bear, Stearns & Co., Inc., Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, and Morgan Stanley & Co., Incorporated
(incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-4, Registration No. 33-63691).
4.6 --Registration Rights Agreement, dated February 15, 1996
between the Registrant and Bear, Stearns & Co., Inc., Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
and Morgan Stanley & Co., Incorporated
10.1 --Registration Rights Agreement between Cablevision Systems
Company and the Registrant (incorporated herein by reference
to Exhibit 10.1 of the S-1).
10.2 --Registration Rights Agreement between CSC Holdings Company
and the Registrant (incorporated herein by reference to
Exhibit 10.2 to the S-1).
10.3 --Form of Right of First Refusal Agreement between Dolan and
the Registrant (incorporated herein by reference to
Exhibit 10.4 to the S-1).
10.4 --Supplemental Benefit Plan of the Registrant (incorporated
herein by reference to Exhibit 10.7 to the S-1)
10.5 --Cablevision Money Purchase Pension Plan, and Trust Agreement
dated as of December 1, 1983 between Cablevision Systems
Development Company and Dolan and Tatta, as Trustees
(incorporated herein by reference to Exhibit 10.8 to the S-1)
10.6 --Amendment to the Cablevision Money Purchase Pension Plan
adopted November 6, 1992 (incorporated herein by reference to
Exhibit 10.6A to the 1992 10-K).
(112)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10.7 --Employment Agreement between Charles F. Dolan and the
Registrant dated January 27, 1986 (incorporated herein by
reference to Exhibit 10.9 to the S-1)
10.8 --Amended and Restated Agreement dated as of June 1, 1983
between SportsChannel Associates and Cablevision Systems
Holdings Company (incorporated herein by reference to
Exhibit 10.11 to the S-1)
10.9 --Lease Agreement dated as of October 9, 1978 between
Cablevision Systems Development Company and Industrial and
Research Associates Co. and amendment dated June 21, 1985
between Industrial and Research Associates Co. and Cablevision
Company (incorporated herein by reference to Exhibit 10.18 to
the S-1)
10.10 --Lease Agreement dated May 1, 1982 between Industrial and
Research Associates Co. and Cablevision Systems Development
Company (incorporated herein by reference to Exhibit 10.19 to
the S-1)
10.11 --Agreement of Sublease dated as of July 9, 1982 between
Cablevision Systems Development Company and Ontel
Corporation (incorporated herein by reference to Exhibit 10.20
to the S-1)
(113)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- -----
10.12 --Agreement of Sublease dated as of June 21, 1985 between
Grumman Data Systems Corporation and Cablevision Company
(incorporated herein by reference to Exhibit 10.21 to
the S-1)
10.13 --Agreement dated as of June 21, 1985 between Industrial and
Research Associates Co., Grumman Data Systems Corporation and
Cablevision Company (incorporated herein by reference to
Exhibit 10.22 to the S-1)
10.14 --Lease Agreement dated as of June 21, 1985 between Industrial
and Research Associates Co. and Cablevision Company
(incorporated herein by reference to Exhibit 10.23 to the S-1)
10.15 --Lease Agreement dated as of February 1, 1985 between
Cablevision Company and County of Nassau (incorporated herein
by reference to Exhibit 10.24 to the S-1)
10.16 --Lease Agreement dated as of January 1, 1981 between
Cablevision Systems Development Company and Precision Dynamics
Corporation and amendment dated January 15, 1985 between
Cablevision Company and Nineteen New York Properties Limited
Partnership (incorporated herein by reference to Exhibit 10.25
to the S-1)
10.17 --Option Certificate for 840,000 Shares Issued Pursuant to the
1986 Nonqualified Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10.29 to the S-1)
10.18 --New Ventures Agreement, dated as of April 20, 1989, among the
Registrant and certain of its subsidiaries, and National
Broadcasting Company, Inc. and certain of its subsidiaries
(incorporated herein by reference to Exhibit 2.3 to the
April 1989 8-K)
10.19 --Purchase and Reorganization Agreement dated as of December 20,
1991 between the Registrant and Charles F. Dolan (incorporated
herein by reference to Exhibit 2(c) to the January 1992 8-K).
(114)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10.20 --Amendment No. 1 dated as of March 28, 1992 to Purchase and
Reorganization Agreement dated as of December 20, 1991
between the Registrant and Charles F. Dolan (incorporated
herein by reference to Exhibit 2(g) to the March 1992 Form 8).
10.21 --Letter Agreement dated February 12, 1992, among the
Registrant, A-R Cable Services, Inc. and Warburg Pincus
Investors, L.P. (incorporated herein by reference to
Exhibit 28(a) to the Registrant's Current Report on Form 8-K
under the Securities Exchange Act of 1934 dated February 21,
1992 (the "February 1992 8-K")).
10.22 --Letter Agreement dated February 12, 1992 among the Registrant,
A-R Cable Services, Inc. and General Electric Capital
Corporation (incorporated herein by reference to Exhibit 28(b)
to the February 1992 8-K).
10.23 --Letter Agreement dated February 12, 1992 among the Registrant
and A-R Cable Services, Inc. (incorporated herein by reference
to Exhibit 28(b) to the February 1992 8-K).
10.24 --Non-Competition Agreement, dated as of December 31, 1992,
among V Cable, Inc., VC Holding, Inc. and the Registrant, for
the benefit of V Cable, Inc., VC Holding, Inc. and General
Electric Capital Corporation (incorporated herein by reference
to Exhibit 10.37 to the 1992 10-K).
10.25 --Non-Competition Agreement, dated as of December 31, 1992,
between U.S. Cable Television Group, L.P. and the Registrant,
for the benefit of U.S. Cable Television Group, L.P. and
General Electric Capital Corporation (incorporated herein by
reference to Exhibit 10.38 to the 1992 10-K).
10.26 --CSC Nonrecourse Guaranty and Pledge Agreement, dated as of
December 31, 1992, between the Registrant and General Electric
Capital Corporation, as Agent for the Lenders (incorporated
herein by reference to Exhibit 10.39 to the 1992 10-K).
(115)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10.27 --U.S. Cable Investment Agreement, dated as of June 30, 1992,
among V Cable, Inc., V Cable GP, Inc., U.S. Cable Television
Group, L.P. and U.S. Cable Partners (incorporated herein by
reference to Exhibit 10.40 to the 1992 10-K).
10.28 --Newco Investment Agreement, dated as of December 31, 1992,
among VC Holding, Inc., V Cable, Inc. and U.S. Cable Television
Group (incorporated herein by reference to Exhibit 10.41 to the
1992 10-K).
10.29 --Senior Loan Agreement, dated as of December 31, 1992, among
V Cable, Inc., the Lenders named therein and General Electric
Capital Corporation, as Agent for the Lenders and as Lender
(incorporated herein by reference to Exhibit 10.42 to the
1992 10-K).
10.30 --Cablevision Systems Corporation Amended and Restated Employee
Stock Plan (incorporated herein by reference to Exhibit 10.46
to the 1992 10-K).
10.31 --Cablevision Systems Corporation 401(K) Savings Plan
(incorporated herein by reference to Exhibit 10.47 to the 1992
10-K).
10.32 --Fourth Amended and Restated Credit Agreement, dated as of
June 18, 1993, among Cablevision of New York City - Phase I
L.P., Cablevision Systems New York City Corporation,
Cablevision of New York City- Master L.P., each of the Banks
signatory thereto, The Chase Manhattan Bank (National
Association) as Agent and The First National Bank of Chicago and
CIBC, Inc. each as Co-Agent (incorporated herein by reference
to Exhibit 10.49 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1993).
(116)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10.33 --Asset Purchase Agreement, dated as of July 23, 1993, by and
between Cablevision of Cleveland, L.P. and North Coast Cable
Limited Partnership (incorporated herein by reference to
Exhibit 10.50 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1993).
10.34 --Master Agreement, dated as of October 26, 1993, between
Cablevision MFR, Inc., Monmouth Cablevision Associates,
Framingham Cablevision Associates and Riverview Cablevision
Associates, L.P. (incorporated herein by reference to
Exhibit 10.51 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1993 (the "September
1993 10-Q").
10.35 --Asset Purchase Agreement, dated as of October 26, 1993,
between Monmouth Cablevision Associates and Cablevision MFR,
Inc. (incorporated herein by reference to Exhibit 10.52 to the
September 1993 10-Q).
10.36 --Asset Purchase Agreement, dated as of October 26, 1993,
between Framingham Cablevision Associates, Limited Partnership
and Cablevision MFR, Inc. (incorporated herein by reference to
Exhibit 10.53 to the September 1993 10-Q).
10.37 --Asset Purchase Agreement, dated as of October 26, 1993 between
Riverview Cablevision Associates, L.P. and Cablevision MFR, Inc.
(incorporated herein by reference to Exhibit 10.54 to the
September 1993 10-Q).
10.38 --Asset Purchase Agreement among A-R Cable Partners, Nashoba
Communications Limited Partnership, Nashoba Communications
Limited Partnership No. 7 and Nashoba Communications of
Belmont Limited Partnership dated as of November 5, 1993
(incorporated herein by reference to Exhibit 10.55 to the
September 1993 10-Q).
10.39 --Loan Agreement, dated as of June 30, 1994 among Rainbow
Programming Holdings, Inc., the Guarantors as defined therein,
Toronto-Dominion Bank, the other banks party thereto and
Toronto-Dominion (Texas), Inc., as Agent (incorporated herein
by reference to Exhibit 10.58 to the Company's June 30,
1994 10-Q).
(117)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10.40 --Acquisition Agreement and Plan of Merger and Reorganization,
dated as of June 14, 1994, among Cablevision of Boston Limited
Partnership, Cablevision of Boston, Inc., Charles F. Dolan,
Cablevision Systems Boston Corporation, Cablevision Systems
Corporation, COB, Inc., Cablevision Systems Services Corporation
and Cablevision Finance Limited Partnership (incorporated herein
by reference to Exhibit 10.59 to the Company's June 30,
1994 10-Q).
10.41 --Credit Agreement, dated as of June 15, 1994, among Cablevision
of Framingham, Inc., the several lenders parties thereto, The
Chase Manhattan Bank, N.A., as Agent and CIBC Inc., as Co-Agent
(incorporated herein by reference to Exhibit 10.60 to the
Company's June 30, 1994 10-Q).
10.42 --Amendment No. 1, dated as of August 8, 1994, to the Credit
Agreement, dated as of June 15, 1994, among Cablevision of
Framingham, Inc., the several lenders parties thereto, the
Chase Manhattan Bank, N.A., as Agent and CIBC, Inc., as
Co-Agent (incorporated herein by reference to Exhibit 10.61 to
the Company's June 30, 1994 10-Q).
10.43 --Asset Purchase Agreement, dated as of October 26, 1993,
between Monmouth Cablevision Associates and Cablevision MFR,
Inc. as amended by Amendment No. 1 thereto, dated as of
April 6, 1994 and Amendment No. 2 thereto, dated as of June 3,
1994 (restated) (incorporated herein by reference to
Exhibit 10.62 to the Company's June 30, 1994 10-Q).
10.44 --Asset Purchase Agreement, dated as of October 26, 1993,
between Riverview Cablevision Associates, Limited Partnership,
and Cablevision MFR, Inc., as amended by Amendment No. 1
thereto, dated as of April 6, 1994 and Amendment No. 2 thereto,
dated as of June 3, 1994 (restated) (incorporated herein by
reference to Exhibit 10.63 to the Company's June 30, 1994 10-Q).
(118)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10.45 --Asset Purchase Agreement, dated as of October 26, 1993,
between Framingham Cablevision Associates, Limited
Partnership, and Cablevision MFR, Inc., as amended and
assigned to Cablevision Framingham Holdings, Inc. by
Amendment No. 1 thereto, dated as of April 6, 1994, and as
further amended by Amendment No. 2 thereto, dated as of
June 3, 1994 (restated) (incorporated herein by reference to
Exhibit 10.64 to the Company's June 30, 1994 10-Q).
10.46 --Credit Agreement, dated as of June 15, 1994 (the "Credit
Agreement"), by and among Cablevision MFR, Inc., Cablevision
of Riverview, Inc. and Cablevision of Monmouth, Inc., the
Lenders from time to time party thereto and NationsBank of
Texas, N.A., as Administrative Lender (incorporated herein by
reference to Exhibit 10.65 to the Company's June 30, 1994 10-Q).
10.47 --Agreement, dated as of August 15, 1994 among ITT Corporation,
the Registrant and Rainbow Programming Holdings, Inc.
(incorporated herein by reference to Exhibit 10.65 of the
Registrants report on Form 8-K dated September 21, 1994).
10.48 --Amendment Agreement, dated as of September 12, 1994 among ITT
Corporation, the Registrant and Rainbow Programming Holdings,
Inc. (incorporated herein by reference to Exhibit 10.66 of the
Registrants report on Form 8-K dated September 21, 1994).
10.49 --Agreement and Plan of Merger, (the "MSG Merger Agreement")
dated as of August 27, 1994 among Viacom Inc., Paramount
Communications Realty Corporation, ITT Corporation, Rainbow
Garden Corporation and MSG Holdings, Inc. (incorporated herein
by reference to Exhibit 10.67 of the Registrants report on
Form 8-K dated September 21, 1994).
(119)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10.50 --Fourth Amended and Restated Credit Agreement, dated as of
October 14, 1994 (the "Credit Agreement"), among Cablevision
Systems Corporation, the Restricted Subsidiaries (as defined
therein) banks party thereto, Toronto Dominion (Texas), Inc.,
as Agent, and Bank of Montreal, Chicago Branch, The Bank of
New York, The Bank of Nova Scotia, The Canadian Imperial Bank
of Commerce and NationsBank of Texas, N.A., as Co-Agents
(incorporated herein by reference to Exhibit 10.68 to the
Company's September 30, 1994 10-Q).
10.51 --First Amended and Restated Credit Agreement, dated as of
October 14, 1994, among Cablevision of New Jersey, Inc.,
Cablevision Systems Corporation, the banks party thereto,
Toronto Dominion (Texas), Inc., as Agent and Bank of Montreal,
Chicago Branch, The Bank of New York, The Bank of Nova Scotia,
The Canadian Imperial Bank of Commerce and NationsBank of Texas,
N.A., as Co-Agents (incorporated herein by reference to
Exhibit 10.69 to the Company's September 30, 1994 10-Q).
10.52 --Amendment No. 1 to the Credit Agreement (incorporated herein
by reference to Exhibit 10.61 to the Company's Annual Report
on Form 10-K405 for the fiscal year ended December 31, 1994).
10.53 --Amendment No. 1 to First Amended and Restated Credit
Agreement, dated as of October 14, 1994, among Cablevision of
New Jersey, Inc., Cablevision Systems Corporation, the banks
party thereto, Toronto Dominion (Texas), Inc., as Agent and
Bank of Montreal, Chicago Branch, The Bank of New York, The Bank
of Nova Scotia, The Canadian Imperial Bank of Commerce and
NationsBank of Texas, N.A., as Co-Agents (incorporated herein
by reference to Exhibit 10.62 to the Company's Annual Report
on Form 10-K405 for the fiscal year ended December 31, 1994).
(120)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10.54 --Amended and Restated Loan Agreement, dated as of January 27,
1995 among Rainbow Programming Holdings, Inc., the guarantors
(as defined therein), Toronto Dominion (Texas) Inc. and
Canadian Imperial Bank of Commerce, as co-agents and Toronto
Dominion (Texas), Inc., as administrative agent (incorporated
herein by reference to Exhibit 10.63 to the Company's Annual
Report on Form 10-K405 for the fiscal year ended December 31,
1994).
10.55 --Amendment No. 1 dated as of March 10, 1995 to the MSG Merger
Agreement (incorporated herein by reference to Exhibit 10.64 to
the Company's Annual Report on Form 10-K405 for the fiscal year
ended December 31, 1994).
10.56 --Amendment No. 2 dated as of March 10, 1995 to the MSG Merger
Agreement (incorporated herein by reference to Exhibit 10.65 to
the Company's Annual Report on Form 10-K405 for the fiscal year
ended December 31, 1994).
10.57 --Agreement and undertaking, dated as of March 10, 1995 from MSG
Holdings, LP, MSG Eden Corporation, the Registrant, Rainbow
Programming Holdings, Inc., Rainbow Garden Corporation, Garden
L.P. Holdings Corp., ITT Corporation, ITT Eden Corp. in favor of
the National Basketball Association (the "NBA"), the member
terms of the NBA, NBA Properties, Inc., the NBA Market Extension
Partnership and Planet Insurance, Ltd. (incorporated herein by
reference to Exhibit 10.66 to the Company's Annual Report on
Form 10-K405 for the fiscal year ended December 31, 1994).
10.58 --Consent Agreement, dated as of March 10, 1995 by and among the
National Hockey League, MSG Holdings, L.P., MSG Eden
Corporation, ITT Eden Corporation, ITT MSG Inc., ITT
Corporation, Garden L.P. Holdings Corp., Rainbow Garden
Corporation, Rainbow Programming Holdings Inc. and the
Registrant (incorporated herein by reference to Exhibit 10.67
to the Company's Annual Report on Form 10-K405 for the fiscal
year ended December 31, 1994).
(121)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- -----
10.59 --Amendment to consulting agreement dated as of November 28,
1994 between the Company and John Tatta (incorporated herein
by reference to Exhibit 10.68 to the Company's Annual Report
on Form 10-K405 for the fiscal year ended December 31, 1994).
10.60 --Employment Agreement, dated as of November 30, 1994, between
the Registrant and William J. Bell (incorporated herein by
reference to Exhibit 10.69 to the Company's Annual Report on
Form 10-K405 for the fiscal year ended December 31, 1994).
10.61 --Employment Agreement, dated as of November 30, 1994, between
the Registrant and Marc A. Lustgarten (incorporated herein by
reference to Exhibit 10.70 to the Company's Annual Report on
Form 10-K405 for the fiscal year ended December 31, 1994).
10.62 --Employment Agreement, dated as of November 30, 1994, between
the Registrant and Robert S. Lemle (incorporated herein by
reference to Exhibit 10.71 to the Company's Annual Report on
Form 10-K405 for the fiscal year ended December 31, 1994).
10.63 --Amendment No. 2 and Waiver, dated as of September 28, 1995 to
the Credit Agreement.
10.64 --Amendment No. 3 and Waiver, dated as of November 7, 1995, to
the Credit Agreement.
10.65 --Amendment No. 4 and Waiver, dated as of March 4, 1996, to the
Credit Agreement.
10.66 --Amended and Restated Senior Loan Agreement, dated as of
March 15, 1996, among U.S. Cable Television Group, L.P., the
Lenders named therein and General Electric Capital Corporation,
as Agent and Lender.
(122)
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10.67 --Amended and Restated Loan Agreement, dated as of March 15,
1996, among VC Holding, Inc., the Lenders named therein and
General Electric Capital Corporation, as Agent and Lender.
10.68 Partnership interests Redemption Agreement, dated as of
March 15, 1996, among U.S. Cable Television Group, L.P., U.S.
Cable Partners, Pompadur Trust No. 1, The Rule Trust, dated
June 11, 1987, Elliot H. Stein, I. Martin Pompadur and General
Electric Capital Corporation.
10.69 Second Amended and Restated Agreement of Limited Partnership of
U.S. Cable Television Group, L.P., dated as of March 15, 1996.
10.70 --Cablevision Systems Corporation 1996 Employee Stock Plan.
22 --Subsidiaries of the Registrant
23.1 --Consent of Independent Auditors
27 --Financial Data Schedule
28.1 --Form of Guarantee and Indemnification Agreement among Dolan,
the Registrant and directors and officers of the Registrant
(incorporated herein by reference to Exhibit 28 to the S-1)
(123)