Cablevision Systems Corporation Reports Second Quarter 2013 Results

Cablevision Systems Corporation Reports Second Quarter 2013 Results

BETHPAGE, N.Y.--(BUSINESS WIRE)-- Cablevision Systems Corporation (NYS: CVC) today reported financial results for the second quarter ended June 30, 2013. Please note that in connection with the recent sales of Bresnan Broadband Holdings, LLC (Bresnan Cable) to Charter Communications Operating, LLC and substantially all of Clearview Cinemas (Clearview) to Bow Tie Cinemas, operating results of Bresnan Cable and Clearview are reflected in the Company's consolidated financial statements as discontinued operations for all periods presented.

Second quarter consolidated net revenues increased 0.8% to $1.570 billion, consolidated adjusted operating cash flow ("AOCF")1 decreased 11.8% to 439.0 million and consolidated operating income decreased 26.3% to $197.8 million, all compared with the prior year period.


Operating highlights for the second quarter 2013 include:

  • Sequential Total Company AOCF and operating income growth of 26.2% and 84.2%, respectively, compared with Q1 2013.
  • Average Monthly Revenue per Basic Video Customer ("RPS") of $162.42, an increase of $5.49 or 3.5%, compared with the prior year period.

Cablevision President and CEO James L. Dolan said, "Cablevision's pricing and operational initiatives helped drive sequential AOCF growth in the second quarter. We also generated solid growth in our RPS, both sequentially and year-over-year. In addition, we have delivered significant product enhancements, including an across-the-board increase in Internet speeds, our new Multi-Room DVR and our industry-leading Wi-Fi initiatives. These types of advancements are providing an increasingly compelling proposition for new and existing customers."

1. See definition of AOCF included in the discussion of non-GAAP financial measures on page 3 of this earnings release.
 

Telecommunications Services - Cable Television and Lightpath

Telecommunications Services includes Cable Television - Cablevision's video, high-speed data, and voice residential and commercial services offered over its cable infrastructure -- and its "Lightpath" branded commercial data and voice services.

Telecommunications Services net revenues for the second quarter 2013 increased 0.9% to $1.480 billion, AOCF decreased 10.3% to $486.6 million and operating income decreased 18.6% to $270.7 million, all compared with the prior year period.

Cable Television

Cable Television second quarter 2013 net revenues increased 0.9% to $1.402 billion principally due to continued growth of data and voice customers and higher data rates partially offset by lower video revenues and a decrease in advertising revenues, compared to the prior year period. AOCF decreased 11.3% to $450.8 million and operating income decreased 20.0% to $257.3 million, all compared with the prior year period. Second quarter 2013 AOCF results reflect higher operating expenses, primarily programming and employee costs.

The following table illustrates the change in the Cable Television customer base in the New York Metro area during the second quarter of 2013:

Customer Data

(rounded to nearest thousand)

      

Total
March 31, 2013

 

Net Gain/(Loss)

 

Total
June 30, 2013

  
Total Customers(a)3,235(11)3,224
 
Video2,888(20)2,868
High-Speed Data2,78612,787
Voice Customers2,28732,290
 
Serviceable Passings4,991 13 5,004
 
(a) Total customers are defined as the number of households/businesses that receive at least one of the Company's services.
 

Lightpath

For second quarter 2013, Lightpath net revenues increased 1.6% to $82.5 million, AOCF increased 3.8% to $35.8 million and operating income increased 22.4% to $13.5 million, each as compared with the prior year period. Second quarter results reflect an increase in revenue from Ethernet services versus the prior year period.

Other

Other primarily consists of Newsday, News 12 Networks, MSG Varsity, Cablevision Media Sales Corporation and certain other businesses and unallocated corporate costs.

Second quarter 2013 net revenues decreased 1.0% to $94.5 million, AOCF deficit increased by 6.2% to a deficit of $47.5 million and operating loss increased 13.2% to a loss of $73.0 million, all compared with the prior year period. Second quarter results primarily reflect a decline of advertising revenues at Newsday partially offset by lower operating costs.

Other Matters

On July 30, 2013, the Board of Directors of Cablevision declared a quarterly dividend of $0.15 per share on each outstanding share of both its Cablevision NY Group Class A Stock and its Cablevision NY Group Class B Stock. This quarterly dividend is payable on September 5, 2013 to shareholders of record at the close of business on August 15, 2013.

There were no repurchases of stock during the second quarter of 2013. As of June 30, 2013, the Company had approximately $455 million available under its stock repurchase authorizations.

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 (including impairments), excluding share-based compensation expense or benefit and restructuring charges or credits.Because it is based upon operating income (loss), AOCF also excludes interest expense (including cash interest expense) and other non-operating income and expense items.We believe that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of our business without regard to the distortive effects of fluctuating stock prices in the case of stock appreciation rights and, in the case of restricted shares, restricted stock units and stock options, the expense associated with an award that is not expected to 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.We believe AOCF is an appropriate measure for evaluating the operating performance of our business segments and the company on a consolidated basis.AOCF and similar measures with similar titles are common performance measures used by investors, analysts and peers to compare performance in our industry.Internally, we use net revenues and AOCF measures as the most important indicators of our business performance, and evaluate management's effectiveness with specific reference to these indicators.AOCF 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 and/or liquidity presented in accordance with U.S. generally accepted accounting principles ("GAAP").Since AOCF is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies.For a reconciliation of AOCF to operating income (loss), please see page 5 of this release.

We define Consolidated Free Cash Flow from Continuing Operations ("Free Cash Flow"), which is a non-GAAP financial measure, as net cash from operating activities (continuing operations) less capital expenditures (continuing operations), both of which are reported in our Consolidated Statement of Cash Flows.Net cash from operating activities excludes net cash from operating activities of our discontinued operations.We believe the most comparable GAAP financial measure of our liquidity is net cash from operating activities.We believe that Free Cash Flow is useful as an indicator of our overall liquidity, as the amount of Free Cash Flow generated in any period is representative of cash that is available for debt repayment and other discretionary and non-discretionary cash uses.It is also one of several indicators of our ability to make investments and/or return capital to our shareholders. We also believe that Free Cash Flow is one of several benchmarks used by analysts and investors who follow our industry for comparison of our liquidity with other companies in our industry, although our measure of Free Cash Flow may not be directly comparable to similar measures reported by other companies.

COMPANY DESCRIPTION

Cablevision Systems Corporation (NYS: CVC) is one of the nation's leading media and telecommunications companies, delivering its Optimum-branded television, Internet, and voice offerings throughout the New York area. Cablevision's local media properties include News 12 Networks, MSG Varsity and Newsday Media Group. Additional information about Cablevision is available on the Web at www.cablevision.com.

This earnings release may contain 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 industries 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 any forward-looking statements contained herein.

Cablevision's Website:www.cablevision.com

The conference call will be webcast live today at 10:00 a.m. ET

Conference call dial-in number is (888) 694-4641/ Conference ID Number 11261034/ Conference call replay number (855) 859-2056/ Conference ID Number 11261034 until August 9, 2013

 

CABLEVISION SYSTEMS CORPORATION

CONDENSED CONSOLIDATED OPERATIONS DATA AND RECONCILIATION

(Dollars in thousands, except per share data)


(Unaudited)

  
Three Months Ended

June 30,

Six Months Ended

June 30,

2013(a)

 

2012(a)

2013(a)

 

2012(a)

 

Revenues, net$1,569,619 $1,556,618 $3,080,847 $3,077,048 
 
Adjusted operating cash flow

439,035

497,948

787,002

971,351
Share-based compensation expense(12,276)(13,492)(28,292)(23,740)
Restructuring credit 273  93  638  391 
Operating income before depreciation and amortization

427,032

484,549

759,348

948,002
Depreciation and amortization (including impairments) 229,269  216,361  454,198  427,536 
Operating income

197,763

268,188

305,150

520,466
Other income (expense):
Interest expense, net(159,303)(166,468)(312,587)(333,430)
Gain (loss) on investments, net(2,789)42,11396,669177,438
Gain (loss) on equity derivative contracts, net19,206(16,137)(52,510)(127,331)
Loss on interest rate swap contracts, net-(183)-(1,828)
Write-off of deferred financing costs(6,637)-(6,637)-
Miscellaneous, net 489  260  868  804 
Income from continuing operations before income taxes

48,729

127,773

30,953

236,119
Income tax expense 

(20,507

) (50,534) 

(9,864

) (91,639)
Income from continuing operations

28,222

77,239

21,089

144,480
Income (loss) from discontinued operations, net of income taxes 107,495  (13,450) 98,230  (23,587)
Net income

135,717

63,789

119,319

120,893
Net income attributable to noncontrolling interests (358) (260) (101) (117)
Net income attributable to Cablevision Systems Corporation stockholders$

135,359

 $63,529 $

119,218

 $120,776 
 
Basic net income (loss) per share attributable to Cablevision Systems Corporation stockholders:
Income from continuing operations$

0.11

 $0.29 $

0.08

 $0.54 
Income (loss) from discontinued operations$0.41 $(0.05)$0.38 $(0.09)
Net income$

0.52

 $0.24 $

0.46

 $0.46 
Basic weighted average common shares (in thousands) 260,614  263,428  260,060  265,423 
 
Diluted net income (loss) per share attributable to Cablevision Systems Corporation stockholders:
Income from continuing operations$

0.11

 $0.29 $

0.08

 $0.53 
Income (loss) from discontinued operations$0.41 $(0.05)$0.37 $(0.09)
Net income$

0.51

 $0.24 $

0.45

 $0.45 
Diluted weighted average common shares (in thousands) 264,828  267,482  264,434  270,760 
 
Amounts attributable to Cablevision Systems Corporation stockholders:
Income from continuing operations, net of income taxes$

27,864

$76,979$

20,988

$144,363
Income (loss) from discontinued operations, net of income taxes 107,495  (13,450) 98,230  (23,587)
Net income$

135,359

 $63,529 $

119,218

 $120,776 
 
(a) Operating results of Bresnan Cable and Clearview have been reflected in discontinued operations for all periods presented.
 

CABLEVISION SYSTEMS CORPORATION

CONDENSED CONSOLIDATED OPERATIONS DATA AND RECONCILIATION (Cont'd)

(Dollars in thousands, except per share data)

(Unaudited)

 

ADJUSTMENTS TO RECONCILE ADJUSTED OPERATING CASH FLOW TO
OPERATING INCOME (LOSS)

 

The following is a description of the adjustments to operating income (loss) in arriving at adjusted operating cash flow included in this earnings release:

  • Depreciation and amortization (including impairments). This adjustment eliminates depreciation and amortization and impairments of long-lived assets in all periods.
  • Restructuring credit (expense). This adjustment eliminates the expense or credit associated with restructuring activities related to the elimination of positions, facility realignment, asset impairments and other related activities in all periods.
  • Share-based compensation benefit (expense). This adjustment eliminates the compensation benefit (expense) relating to stock options, stock appreciation rights, restricted stock, and restricted stock units granted under our employee stock plans and non-employee director plans in all periods.
 

CONSOLIDATED FREE CASH FLOW FROM CONTINUING OPERATIONS(a)

 
Six Months Ended June 30,

2013(b)

 

2012(b)

 
 
Net cash provided by operating activities(c)$501,566$547,173
Less: capital expenditures(d) (495,850) (464,423)
Consolidated free cash flow from continuing operations$5,716 $82,750 
 
(a) See Non-GAAP Financial Measures on page 3 of this release for a definition and discussion of Free Cash Flow from Continuing Operations.
(b)Operating results of Bresnan Cable and Clearview have been reflected in discontinued operations for all periods presented.
(c)The level of net cash provided by operating activities will continue to depend on a number of variables in addition to our operating performance, including the amount and timing of our interest payments and other working capital items.
(d)See page 11 of this release for additional details relating to capital expenditures.
 

CABLEVISION SYSTEMS CORPORATION

CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS

(Dollars in thousands)


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