Cablevision Systems Corporation Reports Second Quarter 2005 Results
Tuesday August 9, 8:19 am ET
Continued Customer Growth Drives Double Digit Increases in Cable Television Revenue and AOCF
BETHPAGE, N.Y.--(BUSINESS WIRE)--Aug. 9, 2005--Cablevision Systems Corporation (NYSE:CVC - News) today reported financial results for the second quarter ended June 30, 2005. Consolidated net revenue grew 6% to over $1.2 billion compared to the year-earlier period, reflecting strong revenue growth in Telecommunications Services, offset in part by lower revenue in Rainbow's Other Programming businesses. Operating income decreased 46% to $107.6 million and adjusted operating cash flow ("AOCF")* decreased 14% to $401.0 million. The decreases in operating income and AOCF are primarily related to certain payments and credits totaling approximately $106.1 million that favorably impacted Madison Square Garden in 2004. Excluding these items, second quarter revenue, operating income and AOCF would have increased 7%, 17% and 12%, respectively.
Highlights for the second quarter include:
More than 20,000 basic subscribers added; fifth consecutive quarter of basic subscriber gains
Revenue Generating Unit (RGU) growth of more than 332,000 new units, resulting from continued customer growth in video, high-speed data and voice
More than 1.3 million RGUs added across Cable Television's services since Q2'04
Cable Television net revenue growth of 16% and AOCF growth of 13% since Q2'04
Cablevision President and CEO James L. Dolan commented: "For the second quarter, ongoing consumer demand for Cablevision's products continued to drive industry-leading penetration rates across all of our consumer services -- analog and digital video, high-speed data and voice. The company experienced its fifth consecutive quarter of basic subscriber growth, while our digital video service ended the quarter with a noteworthy penetration rate of 58%. In addition, we are extremely pleased with the continued enthusiastic response to our voice product, which added nearly 114,000 customers in just the last three months."
Results from Continuing Operations
The operating results of FSN Ohio, FSN Florida and Rainbow DBS's distribution operations are included in discontinued operations and are not presented in the table below. The VOOM HD Networks are included in the Rainbow segment for all periods presented.
Segment results for the quarters ended June 30, 2005 and June 30, 2004 are as follows:
Revenue Operating AOCF
Income (loss)
----------------------------------------------
$ millions 2005 2004 2005 2004 2005 2004
-------- -------- ------ ------ ------ -------
Telecommunications $895.3 $775.2 $135.3 $109.9 $354.2 $309.3
Rainbow 204.2 244.7 (8.3) 15.7 29.4 46.8
MSG 151.6 165.8 10.5 107.7 29.8 119.9
Other (including
Eliminations) (19.1) (22.1) (29.9) (35.1) (12.4) (12.3)
-------- -------- ------ ------ ------ -------
Total Company $1,232.0 $1,163.6 $107.6 $198.2 $401.0 $463.7
-------- -------- ------ ------ ------ -------
* Adjusted operating cash flow ("AOCF"), a non-GAAP financial
measure, is defined as operating income (loss) before depreciation and
amortization, excluding employee stock plan charges or credits and
restructuring charges or credits. Please refer to page 4 for a
discussion of our use of AOCF as a non-GAAP financial measure and page
6 for a reconciliation of AOCF to operating income and net loss.
Telecommunications Services - Cable Television and Lightpath
Telecommunications Services includes Cable Television - Cablevision's "Optimum" branded video, high-speed data, and voice residential and commercial services offered over its cable infrastructure -- and its "Optimum Lightpath" branded, fiber-delivered commercial data and voice services.
Second quarter Telecommunications Services net revenues rose 16% to $895.3 million, operating income increased 23% to $135.3 million, and AOCF increased 15% to $354.2 million, all as compared to the year-earlier period.
Cable Television
Cable Television second quarter net revenues increased 16% to $855.6 million, operating income increased 19% to $141.3 million and AOCF rose 13% to $337.2 million, each compared to the year-earlier period. The increases in revenue, operating income, and AOCF reflect the addition of more than 1.3 million Revenue Generating Units from the second quarter of 2004 resulting from growth in basic video, digital video, high-speed data, and voice customers.
Highlights include:
Basic video customers up 20,757 or 0.7% from March 2005 and 54,195 or 1.8% from June 2004; fifth consecutive quarter of basic subscriber gains
iO: Interactive Optimum digital video customers up 118,531 or 7% from March 2005 and 575,774 or 49% from June 2004
Optimum Online high-speed data customers up 79,285 or 6% from March 2005 and 340,822 or 29% from June 2004
Optimum Voice customers up 113,877 or 31% from March 2005 and 363,309 from June 2004, a three-fold increase
Revenue Generating Units up 332,040 or 5% from March 2005 and 1,332,288 or 25% from June 2004
Advertising revenue up 6% from June 2004
Cable Television RPS of $95.22, up $4.04 or 4% from March 2005 and $11.64 or 14% from June 2004
AOCF margin of 39.4% compared to 38.3% in March 2005 and 40.4% in June 2004
Lightpath
For the second quarter, Lightpath net revenues increased 16% to $47.6 million, operating loss decreased 30% to $6.1 million and AOCF increased 53% to $17.0 million, each as compared to the prior year period. The increase in revenue and AOCF is primarily attributable to revenue growth in Ethernet data services over Lightpath's fiber infrastructure. The improvements in operating loss and AOCF reflect the growth in Ethernet revenue as well as certain expense savings resulting primarily from staff reductions implemented earlier in the year and the timing of advertising spending. Lightpath revenue also includes Optimum Voice call completion activity, which has no impact on AOCF.
Rainbow
Rainbow consists of our AMC, IFC and WE national programming services as well as Other Programming which includes: FSN Chicago, FSN Bay Area, fuse, MagRack, Sportskool, News 12 Networks, IFC Entertainment, VOOM HD Networks, Metro Channels, Rainbow Network Communications, Rainbow Advertising Sales Corp. and other Rainbow developmental ventures.
Second quarter Rainbow net revenues decreased 17% to $204.2 million, operating income decreased $24.0 million to an operating loss of $8.3 million and AOCF decreased 37% to $29.4 million, all compared to the year-earlier period.
AMC/IFC/WE
Second quarter net revenues increased 5% to $135.4 million, operating income decreased 16% to $32.7 million and AOCF decreased 15% to $49.9 million, each compared to the prior year period.
The second quarter results reflect:
Increased programming costs and marketing expense, reflecting the networks' strategy to grow ratings
Higher advertising revenue driven by continued ratings growth, with AMC recording a primetime ratings increase of 7% season-to-date, offset in part by lower affiliate revenue
Viewing subscriber increases of 10% at IFC, 3% at WE and 3% at AMC as compared to June 2004
Other Programming
Second quarter net revenues decreased 36% to $76.7 million, operating loss increased $17.7 million to $41.0 million, and the AOCF deficit increased $8.8 million to $20.5 million, all as compared to the prior year period. The decrease in net revenue is primarily driven by lower affiliate revenue at FSN Chicago resulting from the termination of contracts after losing professional sports content and from payments not being made in accordance with an existing affiliate agreement. To a lesser extent, the net revenue decline also results from lower theatrical and home video revenue at IFC Films. The increases in operating loss and AOCF deficit primarily reflect the net revenue losses, offset in part by expense savings at FSN Chicago and reduced contractual rights expenses at VOOM HD Networks.
Madison Square Garden
Madison Square Garden's businesses include: MSG Network, FSN New York, the New York Knicks, the New York Rangers, the New York Liberty, the MSG Arena complex and Radio City Music Hall.
Madison Square Garden's second quarter net revenue declined 9% to $151.6 million compared to the second quarter of 2004. Operating income decreased to $10.5 million from $107.7 million and AOCF decreased to $29.8 million from $119.9 million in the second quarter, both as compared to the year-earlier period. The 2004 period included $106.1 million of payments and credits relating to the termination of the New York Mets rights agreement and NBA expansion revenue. Excluding these items, net revenue would have declined 3%, operating income would have increased $8.9 million and AOCF would have increased $16.0 million. MSG's second quarter results are primarily impacted by:
The loss of NHL hockey games during the period which resulted in reduced revenues, offset by certain expense savings
Higher affiliate revenue primarily related to retroactive rate adjustments, offset by the lack of Knicks playoff revenue in the 2005 period
Results From Continuing Operations
Consolidated results exclude FSN Ohio, FSN Florida, and Rainbow DBS's distribution operations, which are reflected in discontinued operations for all periods presented.
Consolidated second quarter results compared to the prior year period are as follows:
Net revenues increased 6% to $1.2 billion. This was the result of continued customer growth in Cable Television as well as net revenue growth at AMC, IFC and WE networks, which was partially offset by lower net revenues in Rainbow's Other Programming and at Madison Square Garden. Excluding certain items recorded at Madison Square Garden in 2004, net revenue would have increased 7%.
Operating income totaled $107.6 million compared to $198.2 million and consolidated AOCF decreased 14% to $401.0 million. As discussed above, certain items totaling approximately $106.1 million at Madison Square Garden favorably impacted operating income and AOCF in 2004. Excluding these items, operating income and AOCF would have increased 17% and 12% as a result of continued revenue growth in cable television and expense savings at Madison Square Garden and Lightpath, offset somewhat by lower net revenue and higher expenses at Rainbow.
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