full press release, Voom number's
BETHPAGE, N.Y.--(BUSINESS WIRE)--May 10, 2004--
Cablevision Systems Corporation (NYSE:CVC)
-- Telecommunications Revenue up 17%, Adjusted Operating Cash
Flow up 13%
-- Rainbow Media Core Networks Revenue up 59%, Adjusted Operating
Cash Flow up 62%
-- Strong Revenue Generating Unit Growth - up 23%
Cablevision Systems Corporation (NYSE:CVC) today reported
financial results for the first quarter 2004. Today's results include
the effect of the restatement of the company's 2003 results to record
the effect of adjustments for amounts improperly recognized in earlier
periods.
Consolidated first quarter net revenues increased 19% to $1.2
billion compared to the prior year period based on continued strong
growth at both the Telecommunications Services and Rainbow Media's
Core Networks divisions. Consolidated operating loss totaled $9.6
million, compared to operating income of $31.6 million in the prior
year period. Consolidated adjusted operating cash flow for the quarter
declined 8% to $267.7 million compared to the year-earlier period. The
operating loss and decline in adjusted operating cash flow were
primarily due to costs associated with the launch of VOOM, the
company's direct broadcast satellite service, and lower revenue and
higher expenses at Madison Square Garden. 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 5 for a discussion of our use of AOCF as a non-GAAP
financial measure and page 6 for a reconciliation of adjusted
operating cash flow to operating income (loss) and net loss.
Telecommunications Services first quarter 2004 net revenues rose
17% to $740.1 million and operating income increased 80% to $84.8
million, both compared to the prior year period. AOCF increased 13% to
$275.0 million compared to the year-earlier period and in 2004
includes $13.5 million of legal and indemnification expenses and
retroactive 2003 programming cost increases related to the agreement
with the YES Network. The increases in revenue, operating income, and
AOCF reflect continued strong customer demand for the company's
high-speed data service, digital video service and Lightpath's
business services.
Rainbow Media's Core Networks (AMC, IFC (The Independent Film
Channel), WE: Women's Entertainment and Consolidated Regional Sports)
first quarter net revenues increased 59% to $222.4 million. Operating
income increased 47% to $65.9 million and AOCF increased 62% to $87.4
million, each compared to the year-earlier quarter. The consolidation
of Fox Sports Chicago and Bay Area and strong increases in advertising
revenue and affiliate fee revenue helped to drive the solid revenue,
operating income and adjusted operating cash flow results.
Cablevision President and CEO James L. Dolan commented: "Our
strong first quarter performance is an impressive start to an
important year for Cablevision as we prepare for the spin off of our
satellite, national programming, and theatre assets. The significant
growth in our cable, Lightpath and high-speed businesses reflects our
network integrity, market momentum and overall success in executing a
digital strategy that is key to Cablevision's future. Our consumer and
business services reported a 17% increase in net revenues, powered by
strong demand for iO: Interactive Optimum and Optimum Online, each of
which now serve more than 1 million customers. Cablevision's Optimum
Voice service posted strong gains in the first quarter as well, more
than doubling its subscriber number to 70,800."
Mr. Dolan continued: "Rainbow Media's national networks also
generated outstanding results for the first quarter. Driven largely by
significant increases in both advertising revenue and affiliate fee
revenue, the core networks reported a 59% increase in net revenues."
"Cablevision has made significant progress in the implementation
of our plans to create two distinct companies. We announced a proposed
corporate structure for the new entity, to be called Rainbow Media
Enterprises, that will ensure the continued growth of the satellite,
national programming and theatre businesses and we made executive
appointments that solidify the management teams of both Cablevision
and Rainbow Media. We are confident that both companies will be
well-positioned to seize the opportunities that lay ahead," concluded
Mr. Dolan.
Telecommunications Services
Telecommunications Services is comprised of:
-- Consumer Services: analog and digital video, high-speed data
(HSD), residential voice and R&D/Technology, and
-- Business Services: Lightpath's commercial telephone, HSD and
broadband businesses
Consumer Services
First quarter net revenues increased 17% to $697.3 million
compared to the prior year period. Operating income increased 74% to
$88.4 million, and AOCF rose 13% to $258.0 million, each compared to
the year-earlier period.
Highlights include:
-- 5,207,000 Revenue Generating Units, up 262,900 or 5% from
December, and up 989,400 or 23% from the prior year period
-- iO: Interactive Optimum digital video customers now exceed
1,000,000, up 150,200 for the quarter with a penetration rate
of 35.9%
-- Optimum Online HSD customers up 71,900 to 1,129,000 for the
quarter with a penetration rate of 25.6%
-- Optimum Voice (the company's new residential VoIP service)
customers up 42,200 for the quarter, or 3,200 per week, to
70,800
-- Basic video subscribers decreased 820 for the quarter
-- Total consumer revenue per basic video customer up 18% to
$79.02, compared to $67.02 at March 31, 2003
-- VOD/SVOD revenue of $6.13 per digital subscriber per month, up
46% from the prior year period's $4.21
-- A 7% increase in advertising revenue from the prior year
period
-- AOCF margin of 37.0% compared to 37.2% at December 31, 2003
and 38.3% at March 31, 2003. The first quarter 2004 AOCF
margin, excluding $13.5 million of YES related, non-recurring
expenses was 38.9%.
Business Services - Lightpath
First quarter net revenues increased 9% compared to the prior year
period to $47.1 million. The operating loss remained constant at $3.6
million compared to the prior year period. AOCF increased 13% to $17.1
million, compared to the prior year period. The revenue and AOCF
growth was attributable to a 51% increase in the number of Business
Class Optimum Online customers, strong transmission revenue growth and
lower bad debt expense, offset by a mandated 58% reduction in access
revenue.
Rainbow
Rainbow Media Holdings LLC (Rainbow), a wholly-owned subsidiary of
the company, includes the following businesses: AMC, IFC, WE, fuse,
Mag Rack and five local News 12 Networks operating on Long Island, in
New Jersey, Westchester, Connecticut and the Bronx, as well as three
local MetroChannels and Rainbow Advertising Sales Corp. Rainbow,
through its 60% ownership interest in Regional Programming Partners
(40% owned by Fox Sports), also owns interests in Madison Square
Garden, Radio City Entertainment, and five regional Fox Sports Net
channels outside the New York market, and Rainbow owns a 50% interest
in the Fox Sports Net national service.
AMC/IFC/WE
First quarter 2004 net revenues increased 21% to $126.2 million,
operating income increased 16% to $44.3 million and AOCF increased 37%
to $60.7 million, each compared to the year-ago period. This growth
was driven by gains in the number of WE and IFC viewing subscribers of
9% and 19%, respectively, resulting in higher affiliate fee revenue.
In addition, the combined AMC and WE advertising revenue increased 63%
from the year-earlier period. Advertising revenue now comprises 28%
and 42% of AMC's and WE's total revenue, respectively.
Consolidated Regional Sports
Consolidated Regional Sports is comprised of Fox Sports Net
Florida, Fox Sports Net Ohio, Fox Sports Net Chicago and Fox Sports
Net Bay Area (Chicago and Bay Area were consolidated effective
December 12, 2003) and are 60% owned by Rainbow. First quarter 2004
net revenues rose to $96.2 million from $35.5 million in the prior
year period. Operating income increased to $21.7 million from $6.8
million and AOCF increased to $26.7 million from $9.7 million, both
compared to the prior year period. The strong first quarter results
reflect the consolidation of Fox Sports Net Chicago and Fox Sports Net
Bay Area in December 2003, higher affiliate fee revenue and the timing
of certain affiliate settlements. The combined Fox Sports Net Chicago
and Fox Sports Net Bay Area revenue and AOCF in the first quarter of
2003 was $44.4 million and $4.4 million, respectively.
Developing Programming/Other
Developing Programming/Other consists of Mag Rack, fuse, Rainbow
Network Communications, News 12 Networks, MetroChannels, Rainbow
Advertising Sales Corp., IFC Entertainment and other Rainbow start-up
ventures. First quarter net revenues increased 17% to $50.2 million,
and the operating loss for the quarter declined to $24.4 million
compared to an operating loss of $33.0 million for the year-earlier
period. The AOCF deficit for the quarter totaled $11.2 million
compared to an AOCF deficit of $19.3 million for the prior year
period. The higher revenue and lower AOCF deficit were attributable
to: an increase in fuse affiliate revenue resulting from an 18%
increase in the number of fuse viewing subscribers, which now surpass
30 million; revenue growth at IFC Films resulting from theatrical
releases and home video sales; and, lower expense levels at several of
the programming services resulting from reductions in certain
operating expenses implemented in 2003.
Rainbow DBS - VOOM
Rainbow DBS launched its VOOM service on October 15, 2003. As of
April 30, 2004, this business had approximately 8,000 activated
customers. For the first quarter of 2004, the satellite services
division reported net revenues of $1.0 million consisting primarily of
sales of satellite receivers and related equipment. No revenues were
recorded for the same period in 2003, as the service had not yet
launched. The operating loss for the first quarter totaled $54.8
million compared to an operating loss of $1.7 million in the
year-earlier period. The AOCF deficit for the quarter was $45.0
million compared to $1.7 million in the year-earlier period. The
operating loss and AOCF deficit were primarily attributable to costs
to develop content for the VOOM high definition channels, marketing
and subscriber acquisition costs and general and administrative
expenses.
Madison Square Garden
Madison Square Garden's businesses include MSG Network, Fox Sports
Net 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 first quarter revenue declined 2% to $204.5 million
due to fewer live event bookings compared to the prior year period.
The operating loss for the first quarter totaled $34.8 million
compared to an operating loss of $1.8 million in the prior year
period. The first quarter AOCF deficit was $19.8 million compared to
AOCF of $14.2 million in the prior year period. The higher operating
loss and AOCF deficit were primarily due to higher player compensation
related expenses and lower live event revenue.
Theatres
For the three month period ended March 31, 2004 net revenue for
Clearview Cinemas totaled $17.5 million, a 6% decline compared to
$18.6 million in the year-earlier period. The operating loss was $2.0
million compared to an operating loss of $0.7 million in the prior
year period. The AOCF deficit for the first quarter was $0.1 million
compared to AOCF of $1.1 million in the prior year period.
Other
The Other AOCF deficit totaled $18.6 million for the first quarter
compared to an AOCF deficit of $0.4 million in the prior year period.
The first quarter's AOCF deficit was primarily due to certain one-time
senior management retirement costs and management bonuses. The company
expects to record an Other AOCF deficit of approximately $40 million
for the full year 2004.
Recent Developments
Redemption of Debt and Preferred Stock
In April 2004, Cablevision Systems Corporation issued $1.0 billion
aggregate principal amount of 8.0% senior notes due 2012 and $500
million aggregate principal amount of its senior floating rate notes
due 2009. In addition, CSC Holdings, Inc., issued $500 million
aggregate principal amount of 6.75% senior notes due 2012.
In May 2004, CSC Holdings used the proceeds from these offerings
to redeem all of the following securities: its 11-3/4% Series H
Redeemable Exchangeable Preferred Stock; its 11-1/8% Series M
Redeemable Exchangeable Preferred Stock; its 9-7/8% Senior
Subordinated Debentures due 2013; and its 9-7/8% Senior Subordinated
Debentures due 2023.
2004 Outlook
The company affirms the previously issued 2004 guidance outlined
below:
Telecommunications
Basic video subscriber growth of approximately 0.5%
New revenue generating unit (RGU) net additions between 850,000
and 900,000
Total revenue to increase between 12% and 14%
Adjusted operating cash flow to increase between 13% and 15%
Capital expenditures for Telecommunications and corporate of
approximately $600 million
Free cash flow positive in the fourth quarter of 2004 and modestly
negative for the full year
Rainbow Media
National Networks (AMC/IFC/WE)
Total revenue to increase between 10% and 12%
Adjusted operating cash flow to increase between 14% and 16%
Consolidated Regional Sports
2004 guidance for revenue and adjusted operating cash flow treats
the acquisition of Fox Sports Net Chicago and Fox Sports Net Bay
Area as though both were consolidated on January 1, 2003.
Total revenue to increase between 4% and 6% (2% - 3% after giving
effect to the timing of certain affiliate settlements)
Adjusted operating cash flow to increase between 18% and 20% (10 -
12% after giving effect to the timing of certain affiliate
settlements)
Rainbow Developing
Adjusted operating cash flow deficit of approximately $70 million
Other
Other adjusted operating cash flow deficit of approximately $40
million
Non-GAAP Financial Measures
We define adjusted operating cash flow ("AOCF"), which is a
non-GAAP financial measure, as operating income (loss) before
depreciation and amortization, excluding charges or credits related to
our employee stock plan, including those related to the vesting of
restricted shares, variable stock options and stock appreciation
rights, and restructuring charges or credits. We believe that the
exclusion of such amounts allows investors to better track the
performance of the various operating units of our business without
regard to the distortive effects of a fluctuating stock price (in the
case of variable stock options and stock appreciation rights expense)
or, in the case of restricted shares, the settlement of an obligation
that will not be made in cash.
We present AOCF as a measure of our ability to service our debt
and make continuing investments, including in our capital
infrastructure. The company believes adjusted operating cash flow is
an appropriate measure for evaluating the operating performance of its
business segments and the company on a consolidated basis. Adjusted
operating cash flow and similar measures with other titles are common
performance measures used by investors, analysts and peers to compare
performance in our industry. Internally, we use revenue and adjusted
operating cash flow measures as the most important indicators of our
business performance, and evaluate management's effectiveness with
specific reference to these indicators. Adjusted operating cash flow
should be viewed as a supplement to and not a substitute for operating
income (loss), net income (loss), cash flows from operating
activities, and other measures of performance presented in accordance
with generally accepted accounting principles ("GAAP"). Since adjusted
operating cash flow is not a measure of performance calculated in
accordance with GAAP, this measure may not be comparable to similar
measures with other titles used by other companies. For a
reconciliation of adjusted operating cash flow to operating income,
please see page 6 of this release.
COMPANY DESCRIPTION
Cablevision Systems Corporation is one of the nation's leading
entertainment and telecommunications companies. Its cable television
operations serve more than 3 million households in the New York
metropolitan area. The company's advanced telecommunications offerings
include its iO: Interactive Optimum digital television offering,
Optimum Online high-speed Internet service, Optimum Voice digital
voice-over-cable service, and its Lightpath integrated business
communications services. Cablevision's Rainbow Media Holdings LLC
operates several successful programming businesses, including AMC,
IFC, WE and other national and regional networks. Rainbow also is a 50
percent partner in Fox Sports Net. In 2003, Cablevision's Rainbow DBS
launched its VOOM satellite service, the first service to offer a
comprehensive array of high-definition (HD) television programming. In
addition to its telecommunications and programming businesses,
Cablevision is the controlling owner of Madison Square Garden and its
sports teams, the New York Knicks, Rangers and Liberty. The company
also operates New York's famed Radio City Music Hall, and owns and
operates Clearview Cinemas. Additional information about Cablevision
Systems Corporation is available on the Web at
www.cablevision.com.
This earnings release contains statements that constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that
any such forward-looking statements are not guarantees of future
performance or results and involve risks and uncertainties, and that
actual results or developments may differ materially from those in the
forward-looking statements as a result of various factors, including
financial community and rating agency perceptions of the company and
its business, operations, financial condition and the industry in
which it operates and the factors described in the company's filings
with the Securities and Exchange Commission, including the sections
entitled "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained therein. The
company disclaims any obligation to update the forward-looking
statements contained herein.
