COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
NOTE 1. BUSINESS
Cablevision Systems Corporation ("Cablevision"), through its wholly-owned subsidiary CSC Holdings, LLC ("CSC Holdings," and collectively with Cablevision, the "Company"), owns and operates cable systems and owns companies that provide regional news, local programming and advertising sales services for the cable television industry, provide Ethernet-based data, Internet, voice and video transport and managed services to the business market, and operate a newspaper publishing business. The Company classifies its operations into
three
reportable segments: (1) Cable, consisting principally of its video, high-speed data, and Voice over Internet Protocol ("VoIP") operations, (2) Lightpath, which provides Ethernet-based data, Internet, voice and video transport and managed services to the business market in the New York metropolitan area; and (3) Other, consisting principally of (i) Newsday, which includes the Newsday daily newspaper, amNew York, Star Community Publishing Group, and online websites, (ii) the News 12 Networks, which provide regional news programming services, (iii) Cablevision Media Sales Corporation ("Cablevision Media Sales"), a cable television advertising company, and (iv) certain other businesses and unallocated corporate costs.
Altice Merger
On September 16, 2015, Cablevision entered into an Agreement and Plan of Merger (the "Merger Agreement"), by and among Altice N.V. (“Altice”), Neptune Merger Sub Corp., a wholly-owned subsidiary of Altice ("Merger Sub"), and Cablevision. Pursuant to the Merger Agreement, Merger Sub will be merged with and into Cablevision (the "Merger"), with Cablevision surviving as a subsidiary of Altice.
In connection with the Merger, each outstanding share of the Cablevision NY Group Class A common stock, par value
$0.01
per share ("CNYG Class A Shares"), and Cablevision NY Group Class B common stock, par value
$0.01
per share ("CNYG Class B Shares", and together with the CNYG Class A Shares, the "Shares") (other than (i) Shares owned by Cablevision, Altice or any of their respective wholly-owned subsidiaries, in each case not held on behalf of third parties in a fiduciary capacity, and (ii) Shares that are owned by stockholders who have perfected and not withdrawn a demand for appraisal rights) will be converted into the right to receive
$34.90
in cash, without interest, less applicable tax withholdings.
Also in connection with the Merger, outstanding equity-based awards granted under Cablevision’s equity plans will be cancelled and converted into a right to receive cash based upon the
$34.90
per Share merger price in accordance with the original terms of the awards. As of March 31, 2016, the Company had
12,434,700
stock options,
3,769,485
restricted shares,
1,724,940
restricted stock units issued to employees and
466,283
restricted stock units issued to non-employee directors outstanding.
On September 16, 2015, the holders of Shares representing a majority of all votes entitled to be cast in the matter executed and delivered to Cablevision and Altice a written consent adopting the Merger Agreement (the "Written Consent"). As a result, the stockholder approval required to consummate the Merger has been obtained and no further action by Cablevision’s stockholders in connection with the Merger is required.
The completion of the Merger is subject to certain customary conditions and approvals set forth in the Merger Agreement, including, among others, (i) the adoption of the Merger Agreement by the holders of Shares representing a majority of all votes entitled to be cast in the matter (which condition has been satisfied as described above), (ii) expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (which condition has been satisfied as of November 4, 2015), (iii) adoption and release of an order by the Federal Communications Commission granting any required consent to the transfer of control of Cablevision’s licenses (which condition has been satisfied as of May 3, 2016), (iv) the conclusion of a review by the Committee on Foreign Investment in the United States pursuant to Section 721 of Title VII of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007 (which condition has been satisfied as of February 17, 2016), (v) the receipt of certain approvals from state public utility commissions and under certain local franchise ordinances and agreements, (vi) the absence of any applicable law or order prohibiting consummation of the Merger, and (vii) other customary closing conditions, including (a) the accuracy of Cablevision’s and Altice’s respective representations and warranties (subject to customary materiality qualifiers) and (b) Cablevision’s and Altice’s compliance with their respective obligations and covenants contained in the Merger Agreement. Assuming timely satisfaction of the necessary closing conditions, the Company currently expects the closing of the Merger to occur in the second quarter of 2016. The Merger is not subject to a financing condition.
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
The Merger Agreement contains certain customary termination rights, including the right for each of Cablevision and Altice to terminate the Merger Agreement if the Merger is not consummated by September 16, 2016 (subject to extension to December 16, 2016 if either Cablevision or Altice determines additional time is necessary to obtain certain government approvals) or in the event of an uncured material breach of any representation, warranty, covenant or agreement such that the conditions to closing would not be satisfied. The Merger Agreement also gives Altice the right to terminate the Merger Agreement in certain circumstances associated with Cablevision’s failure to deliver the Written Consent or Cablevision’s entry into an alternative transaction with respect to an alternative acquisition proposal, among others, and gives Cablevision the right to terminate the Merger Agreement in certain circumstances associated with a failure of Altice’s financing of the Merger, among others. If the Merger Agreement is terminated in certain circumstances associated with Cablevision’s failure to deliver the Written Consent or with respect to an alternative acquisition proposal, among others, Cablevision agreed to pay a termination fee of
$280,000
to Altice. Following execution and delivery of the Written Consent on September 16, 2015, no provisions in the Merger Agreement remain in effect pursuant to which the Merger Agreement can be terminated that would require Cablevision to pay the termination fee. If the Merger Agreement is terminated by Cablevision in connection with Altice’s failure to consummate the Merger due to a failure of Altice’s financing of the Merger, then Altice has agreed to pay to Cablevision a termination fee of
$560,000
.
The Company has expensed
$1,416
in the first quarter of 2016 in connection with the Merger and it expects to incur additional costs prior to and upon consummation of the Merger, including
$32,500
in transaction advisory fees.
In October 2015, Neptune Finco Corp. ("Finco"), a wholly-owned subsidiary of Altice formed to complete the financing described herein and the merger with CSC Holdings, borrowed an aggregate principal amount of
$3,800,000
under a term loan facility (the "Term Loans") and entered into revolving loan commitments in an aggregate principal amount of
$2,000,000
(the "Revolving Credit Facility" and, together with the Term Loans, the "Senior Secured Credit Facilities"). The Term Loans will mature on October 9, 2022. Quarterly amortization payments each equal to
0.25%
of the original principal amount of the Term Loans will be required to be made beginning with the first full fiscal quarter after the Closing Date. The Revolving Credit Facility will mature on October 9, 2020. The Revolving Credit Facility will include a financial maintenance covenant solely for the benefit of the lenders under the Revolving Credit Facility consisting of a maximum consolidated net senior secured leverage ratio of
5.0
to 1.0, which will be tested on the last day of each fiscal quarter (commencing with the last day of the first full fiscal quarter ended after the Closing Date) but only if on such day there are outstanding borrowings under the Revolving Credit Facility (including swingline loans but excluding any cash collateralized letters of credit and undrawn letters of credit not to exceed
$15,000
).
Finco also issued
$1,800,000
aggregate principal amount of
10.125%
senior notes due 2023,
$2,000,000
aggregate principal amount of
10.875%
senior notes due 2025 and
$1,000,000
aggregate principal amount of
6.625%
senior guaranteed notes due 2025 (the "Senior Guaranteed Notes") (collectively the "Notes").
Altice intends to use the proceeds from the Term Loans and the Notes, together with an equity contribution from Altice and its co-investors and existing cash at Cablevision, to (a) finance the Merger, (b) refinance (i) the credit agreement, dated as of April 17, 2013 (the "Existing Credit Facility"), among CSC Holdings, certain subsidiaries of CSC Holdings and the lenders party thereto and (ii) the senior secured credit agreement, dated as of October 12, 2012, among Newsday LLC, CSC Holdings, and the lenders party thereto (the "Existing Newsday Credit Facility"), and (c) pay related fees and expenses.
Prior to the Merger, CSC Holdings is not responsible for the obligations under the Senior Secured Credit Facilities or the Notes. Following the consummation of the Merger of Merger Sub into Cablevision (the "Closing Date"), Finco will be merged with and into CSC Holdings. As the surviving entity in such merger, CSC Holdings will assume all of the rights and obligations of the borrower under the Senior Secured Credit Facilities and the issuer under the Notes. Within two business days following the Closing Date, (a) the Senior Guaranteed Notes will be guaranteed on a senior basis by each restricted subsidiary of CSC Holdings (other than CSC TKR, LLC and its subsidiaries, which own and operate the New Jersey cable television systems, Cablevision Lightpath, Inc. and any subsidiaries of CSC Holdings that are "Excluded Subsidiaries" under the indenture governing the Senior Guaranteed Notes) (such subsidiaries, the "Initial Guarantors") and (b) the obligations under the Senior Secured Credit Facilities will be (i) guaranteed on a senior basis by each Initial Guarantor and (ii) secured on a first priority basis by capital stock held by CSC Holdings and the guarantors in certain subsidiaries of CSC Holdings, subject to certain exclusions and limitations.
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Cablevision and CSC Holdings have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all the information and notes required for complete annual financial statements.
The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2015
.
The financial statements as of
March 31, 2016
and for the
three
months ended
March 31, 2016
and
2015
presented in this Form 10-Q are unaudited; however, in the opinion of management, such financial statements include all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented.
The accompanying condensed consolidated financial statements of Cablevision include the accounts of Cablevision and its majority-owned subsidiaries and the accompanying condensed consolidated financial statements of CSC Holdings include the accounts of CSC Holdings and its majority-owned subsidiaries. Cablevision has no business operations independent of its CSC Holdings subsidiary, whose operating results and financial position are consolidated into Cablevision. The condensed consolidated balance sheets and statements of income of Cablevision are essentially identical to the condensed consolidated balance sheets and statements of income of CSC Holdings, with the following significant exceptions: Cablevision has
$2,771,096
carrying value of senior notes outstanding at
March 31, 2016
(excluding the
$611,455
aggregate principal amount of Cablevision notes held by Newsday Holdings) that were issued to third party investors, cash, deferred financing costs and accrued interest related to its senior notes, deferred taxes and accrued dividends on its balance sheet. In addition, CSC Holdings and its subsidiaries have certain intercompany receivables from and payables to Cablevision. Differences between Cablevision's results of operations and those of CSC Holdings primarily include incremental interest expense, interest income, and income tax expense or benefit. CSC Holdings' results of operations include incremental interest income from the Cablevision senior notes held by Newsday Holdings, which is eliminated in Cablevision's results of operations.
The combined notes to the condensed consolidated financial statements relate to the Company, which, except as noted, are essentially identical for Cablevision and CSC Holdings. All significant intercompany transactions and balances between Cablevision and CSC Holdings and their respective consolidated subsidiaries are eliminated in both sets of condensed consolidated financial statements. Intercompany transactions between Cablevision and CSC Holdings are not eliminated in the CSC Holdings condensed consolidated financial statements, but are eliminated in the Cablevision condensed consolidated financial statements.
The results of operations for the interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending
December 31, 2016
.
The preparation of financial statements in conformity with GAAP 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.
Recently Adopted Accounting Pronouncements
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs from line-of-credit arrangements after adoption of ASU No. 2015-03. ASU No. 2015-15 clarifies that the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU No. 2015-03 was adopted by the Company on January 1, 2016 representing a change in accounting principle and was applied retrospectively to all periods presented. Debt issuance costs, net for Cablevision and CSC Holdings of
$67,119
and
$40,328
, respectively, as
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
of December 31, 2015 were reclassified from deferred financing costs and presented as a reduction to debt in the consolidated balance sheets.
Cablevision's long-term debt on its consolidated balance sheet as of March 31, 2016 is net of
$16,626
of unamortized debt discounts and
$63,248
of unamortized deferred financing costs. CSC Holdings' long-term debt on its consolidated balance sheet as of March 31, 2016 is net of
$13,626
of unamortized debt discounts and
$38,320
of unamortized deferred financing costs.
Debt issuance costs, net for Cablevision and CSC Holdings of
$7,588
as of December 31, 2015 relating to the Company’s revolving credit facility were not impacted by the adoption of ASU No. 2015-03 and continue to be recorded as long-term assets.
In April 2015, the FASB issued ASU No. 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. ASU No. 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU No. 2015-05 was adopted by the Company on January 1, 2016 and did not have any impact on the Company's condensed consolidated financial statements.
In June 2014, the FASB issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period. ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. ASU No. 2014-12 was adopted by the Company on January 1, 2016 and did not have any impact on the Company’s condensed consolidated financial statements.
Recently Issued But Not Yet Adopted Accounting Pronouncements
In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which provides simplification of income tax accounting for share-based payment awards. The new guidance becomes effective for the Company on January 1, 2017 with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value will be applied using the modified retrospective transition method. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term will be applied prospectively. The Company may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. The Company has not yet completed the evaluation of the effect that ASU No. 2016-09 will have on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases
,
which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019 with early adoption permitted and will be applied using the modified retrospective method. The Company has not yet completed the evaluation of the effect that ASU No. 2016-02 will have on its consolidated financial statements.
I
n November 2015, the FASB issued ASU No. 2015-17 (Topic 740), Balance Sheet Classification of Deferred Taxes. This ASU amends existing guidance to require the presentation of deferred tax liabilities and assets as noncurrent within a classified statement of financial position. ASU No. 2015-17 may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. This new standard would be effective for the Company beginning January 1, 2017 with early adoption permitted.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and allows the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14 that approved deferring the effective date by one year so that ASU No. 2014-09 would become effective for the Company
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
on January 1, 2018. The FASB also approved, in July 2015, permitting the early adoption of ASU No. 2014-09, but not before the original effective date for the Company as of January 1, 2017. The Company has not yet completed the evaluation of the effect that ASU No. 2014-09 will have on its consolidated financial statements.
Reclassification
In connection with the adoption of ASU 2015-03 discussed above, certain reclassifications have been made to the 2015 financial statements to conform to the 2016 presentation.
NOTE 3. DIVIDENDS
During the three months ended
March 31, 2016
, Cablevision paid
$4,066
related to restricted shares that vested during the period in respect of dividends declared and accrued on the CNYG common stock in prior periods. In addition, as of
March 31, 2016
, approximately
$3,773
was payable when, and if, restricted shares and restricted stock units outstanding on that date vest.
Pursuant to the terms of the Merger Agreement, Cablevision is not permitted to declare and pay dividends or repurchase stock, in each case, without the prior written consent of Altice. In accordance with these terms, Cablevision did not declare or pay dividends during the three months ended March 31, 2016.
During the
three
months ended
March 31, 2016
, CSC Holdings made cash equity distribution payments to Cablevision aggregating
$101,878
. These distribution payments were funded from cash on hand. The proceeds were used to fund:
|
|
•
|
Cablevision's payments in respect of dividends declared and accrued in prior periods related to restricted shares that vested;
|
|
|
•
|
Cablevision's interest payments on its senior notes; and
|
|
|
•
|
Cablevision's payments for the acquisition of treasury shares related to statutory minimum tax withholding obligations upon the vesting of certain restricted shares.
|
Cablevision's and CSC Holdings' indentures and CSC Holdings' credit agreement restrict the amount of dividends and distributions in respect of any equity interest that can be made.
NOTE 4. INCOME PER SHARE ATTRIBUTABLE TO STOCKHOLDERS
Cablevision
Basic income per common share attributable to Cablevision stockholders is computed by dividing net income attributable to Cablevision stockholders by the weighted average number of common shares outstanding during the period. Diluted income per common share attributable to Cablevision stockholders reflects the dilutive effects of stock options, restricted stock and restricted stock units. For such awards that are performance based, the diluted effect is reflected upon the achievement of the performance criteria.
The following table presents a reconciliation of weighted average shares used in the calculations of the basic and diluted income per share attributable to Cablevision stockholders for the
three
months ended
March 31, 2016
and
2015
:
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
(in thousands)
|
Basic weighted average shares outstanding
|
271,092
|
|
|
267,919
|
|
Effect of dilution:
|
|
|
|
|
|
Stock options
|
4,396
|
|
|
2,703
|
|
Restricted stock
|
3,525
|
|
|
3,748
|
|
Diluted weighted average shares outstanding
|
279,013
|
|
|
274,370
|
|
Approximately
1,725,000
restricted stock units for the
three
months ended
March 31, 2016
have been excluded from the diluted weighted average shares outstanding as the performance criteria on these awards had not yet been satisfied.
For the
three
months ended
March 31, 2015
, anti-dilutive shares totaling approximately
2,678,000
shares have been excluded from diluted weighted average shares outstanding. Approximately
630,000
restricted shares and
1,817,000
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
restricted stock units for the
three
months ended
March 31, 2015
have also been excluded from the diluted weighted average shares outstanding as the performance criteria on these awards had not yet been satisfied.
CSC Holdings
Net income per membership unit for CSC Holdings is not presented since CSC Holdings is a limited liability company and a wholly-owned subsidiary of Cablevision.
NOTE 5. GROSS VERSUS NET REVENUE RECOGNITION
In the normal course of business, the Company is assessed non-income related taxes by governmental authorities, including franchising authorities (generally under multi-year agreements), and collects such taxes from its customers. The Company's policy is that, in instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities and amounts received from the customers are recorded on a gross basis. That is, amounts paid to the governmental authorities are recorded as technical and operating expenses and amounts received from the customer are recorded as revenues. For the
three
months ended
March 31, 2016
and 2015, the amount of franchise fees and certain other taxes and fees included as a component of net revenue aggregated
$50,422
and
$49,570
, respectively.
NOTE 6. SUPPLEMENTAL CASH FLOW INFORMATION
The Company considers the balance of its investment in funds that substantially hold securities that mature within three months or less from the date the fund purchases these securities to be cash equivalents. The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.
During the
three
months ended
March 31, 2016
and
2015
, the Company's non-cash investing and financing activities and other supplemental data were as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
Non-Cash Investing and Financing Activities of Cablevision and CSC Holdings:
|
|
|
|
Continuing Operations:
|
|
|
|
Property and equipment accrued but unpaid
|
$
|
67,383
|
|
|
$
|
26,785
|
|
Capital lease obligations
|
—
|
|
|
990
|
|
Intangible asset obligations
|
182
|
|
|
302
|
|
Non-Cash Investing and Financing Activities of Cablevision:
|
|
|
|
|
|
Dividends payable on unvested restricted share awards
|
(62
|
)
|
|
1,079
|
|
Supplemental Data:
|
|
|
|
|
|
Continuing Operations - Cablevision:
|
|
|
|
|
|
Cash interest paid
|
147,751
|
|
|
143,446
|
|
Income taxes paid (refunded), net
|
7,082
|
|
|
(382
|
)
|
Continuing Operations - CSC Holdings:
|
|
|
|
|
|
Cash interest paid
|
89,874
|
|
|
85,564
|
|
Income taxes paid (refunded), net
|
7,082
|
|
|
(382
|
)
|
NOTE 7. DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS
The Company has entered into various transactions to limit the exposure against equity price risk on its shares of Comcast Corporation ("Comcast") common stock. The Company has monetized all of its stock holdings in Comcast through the execution of prepaid forward contracts, collateralized by an equivalent amount of the respective underlying stock. At maturity, the contracts provide for the option to deliver cash or shares of Comcast stock with a value determined by reference to the applicable stock price at maturity. These contracts, at maturity, are expected to offset declines in the fair value of these securities below the hedge price per share while allowing the Company to retain upside appreciation from the hedge price per share to the relevant cap price.
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
The following represents the location of the assets and liabilities associated with the Company's derivative instruments within the condensed consolidated balance sheets at
March 31, 2016
and
December 31, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as
Hedging
Instruments
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
|
Balance
Sheet
Location
|
|
Fair Value at March 31,
2016
|
|
Fair Value at December 31, 2015
|
|
Fair Value at March 31,
2016
|
|
Fair Value at December 31, 2015
|
Prepaid forward contracts
|
|
Current derivative contracts
|
|
$
|
7,307
|
|
|
$
|
10,333
|
|
|
$
|
7,078
|
|
|
$
|
2,706
|
|
Prepaid forward contracts
|
|
Long-term derivative contracts
|
|
31,461
|
|
|
72,075
|
|
|
—
|
|
|
—
|
|
Total derivative contracts
|
|
$
|
38,768
|
|
|
$
|
82,408
|
|
|
$
|
7,078
|
|
|
$
|
2,706
|
|
These prepaid forward contracts are not designated as hedging instruments for accounting purposes and the related gain (loss) of
$(48,012)
and
$46,166
, respectively, for the
three
months ended March 31, 2016 and 2015, has been reflected in gain (loss) on equity derivative contracts, net in the accompanying condensed consolidated statements of income.
Settlements of Collateralized Indebtedness
In April 2016, the Company settled collateralized indebtedness relating to
2,732,184
Comcast shares by delivering cash equal to the collateralized loan value obtained from the proceeds of a new monetization contract covering an equivalent number of Comcast shares. Accordingly, the consolidated balance sheets of Cablevision and CSC Holdings as of March 31, 2016 reflect the reclassification of
$166,882
of investment securities pledged as collateral from a current asset to a long-term asset and
$133,691
of collateralized indebtedness from a current liability to a long-term liability.
In the Merger Agreement, Cablevision agreed that it would not share settle any collateralized indebtedness prior to the Merger.
NOTE 8. FAIR VALUE MEASUREMENT
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity's pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:
|
|
•
|
Level I - Quoted prices for identical instruments in active markets.
|
|
|
•
|
Level II - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
|
|
|
•
|
Level III - Instruments whose significant value drivers are unobservable.
|
The following table presents for each of these hierarchy levels, the Company's financial assets and financial liabilities that are measured at fair value on a recurring basis at
March 31, 2016
and
December 31, 2015
:
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2016
|
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
853,138
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
853,138
|
|
Investment securities
|
|
152
|
|
|
—
|
|
|
—
|
|
|
152
|
|
Investment securities pledged as collateral
|
|
1,311,853
|
|
|
—
|
|
|
—
|
|
|
1,311,853
|
|
Prepaid forward contracts
|
|
—
|
|
|
38,768
|
|
|
—
|
|
|
38,768
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid forward contracts
|
|
—
|
|
|
7,078
|
|
|
—
|
|
|
7,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2015
|
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
922,765
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
922,765
|
|
Investment securities
|
|
130
|
|
|
—
|
|
|
—
|
|
|
130
|
|
Investment securities pledged as collateral
|
|
1,211,982
|
|
|
—
|
|
|
—
|
|
|
1,211,982
|
|
Prepaid forward contracts
|
|
—
|
|
|
82,408
|
|
|
—
|
|
|
82,408
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid forward contracts
|
|
—
|
|
|
2,706
|
|
|
—
|
|
|
2,706
|
|
The Company's cash equivalents, investment securities and investment securities pledged as collateral are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.
The Company's prepaid forward contracts reflected as derivative contracts and liabilities under derivative contracts in the Company's balance sheets are valued using market-based inputs to valuation models. These valuation models require a variety of inputs, including contractual terms, market prices, yield curves, and measures of volatility. When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit risk considerations. Such adjustments are generally based on available market evidence. Since model inputs can generally be verified and do not involve significant management judgment, the Company has concluded that these instruments should be classified within Level II of the fair value hierarchy.
The Company considers the impact of credit risk when measuring the fair value of its derivative asset and/or liability positions, as applicable.
The Company's assets measured at fair value on a nonrecurring basis include long-lived assets, indefinite-lived cable television franchises, trademarks, other indefinite-lived intangible assets and goodwill. During the quarter ended March 31, 2016, the Company performed its annual impairment test of goodwill, indefinite-lived cable television franchises, trademarks and other indefinite-lived intangible assets and there were
no
impairment charges recorded.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate fair value of each class of financial instruments for which it is practicable to estimate:
Credit Facility Debt, Collateralized Indebtedness, Senior Notes and Debentures and Notes Payable
The fair values of each of the Company's 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. The fair value of notes payable is based primarily on the present value of the remaining payments discounted at the borrowing cost.
The carrying values, estimated fair values, and classification under the fair value hierarchy of the Company's financial instruments, excluding those that are carried at fair value in the accompanying condensed consolidated balance sheets, are summarized as follows:
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
Fair Value Hierarchy
|
|
Carrying
Amount (c)
|
|
Estimated
Fair Value
|
CSC Holdings notes receivable:
|
|
|
|
|
|
|
Cablevision senior notes held by Newsday Holdings LLC (a)
|
|
Level II
|
|
$
|
611,455
|
|
|
$
|
616,020
|
|
Debt instruments:
|
|
|
|
|
|
|
|
|
Credit facility debt (b)
|
|
Level II
|
|
$
|
2,500,453
|
|
|
$
|
2,510,701
|
|
Collateralized indebtedness
|
|
Level II
|
|
1,191,324
|
|
|
1,175,291
|
|
Senior notes and debentures
|
|
Level II
|
|
3,034,301
|
|
|
2,996,440
|
|
Notes payable
|
|
Level II
|
|
10,170
|
|
|
10,130
|
|
CSC Holdings total debt instruments
|
|
|
|
6,736,248
|
|
|
6,692,562
|
|
Cablevision senior notes
|
|
Level II
|
|
2,771,096
|
|
|
2,760,168
|
|
Cablevision total debt instruments
|
|
|
|
$
|
9,507,344
|
|
|
$
|
9,452,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
Fair Value Hierarchy
|
|
Carrying
Amount (c)
|
|
Estimated
Fair Value
|
CSC Holdings notes receivable:
|
|
|
|
|
|
|
Cablevision senior notes held by Newsday Holdings LLC (a)
|
|
Level II
|
|
$
|
611,455
|
|
|
$
|
616,020
|
|
Debt instruments:
|
|
|
|
|
|
|
|
|
Credit facility debt (b)
|
|
Level II
|
|
$
|
2,514,454
|
|
|
$
|
2,525,654
|
|
Collateralized indebtedness
|
|
Level II
|
|
1,191,324
|
|
|
1,176,396
|
|
Senior notes and debentures
|
|
Level II
|
|
3,032,252
|
|
|
2,996,440
|
|
Notes payable
|
|
Level II
|
|
14,544
|
|
|
14,483
|
|
CSC Holdings total debt instruments
|
|
|
|
6,752,574
|
|
|
6,712,973
|
|
Cablevision senior notes
|
|
Level II
|
|
2,768,759
|
|
|
2,760,168
|
|
Cablevision total debt instruments
|
|
|
|
$
|
9,521,333
|
|
|
$
|
9,473,141
|
|
|
|
(a)
|
These notes are eliminated at the consolidated Cablevision level.
|
|
|
(b)
|
The principal amount of the Company's credit facility debt, which bears interest at variable rates, approximates its fair value.
|
|
|
(c)
|
Amounts are net of unamortized deferred financing costs and discounts.
|
Fair value estimates related to the Company's debt instruments and senior notes receivable presented above 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 judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
NOTE 9. DISCONTINUED OPERATIONS
For the three months ended March 31, 2015, the Company recorded an expense of
$9,400
plus statutory interest of
$8,400
(an aggregate of
$10,502
, net of income taxes) with respect to the decision in a case relating to Rainbow Media Holdings LLC, a business whose operations were previously discontinued (see Note 12).
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
NOTE 10. INCOME TAXES
Cablevision
Cablevision recorded income tax expense of
$62,786
for the
three
months ended
March 31, 2016
, reflecting an effective tax rate of
40%
. During the three months ended March 31, 2016, Cablevision recorded tax benefit of
$1,172
relating to an increase in tax credits. Absent this item, the effective tax rate for the three months ended
March 31, 2016
would have been
41%
. Cablevision recorded income tax expense of
$37,940
for the
three
months ended
March 31, 2015
, reflecting an effective tax rate of
41%
.
As of
March 31, 2016
, Cablevision's federal net operating loss and tax credit carryforwards were approximately
$511,000
and
$61,000
, respectively. Subsequent to the full utilization of such carryforwards, payments for income taxes are expected to increase significantly.
CSC Holdings
CSC Holdings recorded income tax expense of
$92,156
for the
three
months ended
March 31, 2016
, reflecting an effective tax rate of
41%
. CSC Holdings recorded income tax expense of
$67,542
for the
three
months ended
March 31, 2015
, reflecting an effective tax rate of
42%
.
NOTE 11. EQUITY PLANS
Cablevision's Equity Plans
The following table summarizes activity relating to Company employees who held Cablevision stock options for the
three
months ended
March 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Under Option
|
|
Weighted Average
Exercise
Price Per Share
|
|
Weighted Average Remaining
Contractual Term
(in years)
|
|
|
|
Time
Vesting Options
|
|
Performance
Based Vesting Options
|
|
|
|
Aggregate Intrinsic
Value (a)
|
Balance, December 31, 2015
|
6,744,000
|
|
|
6,609,217
|
|
|
$
|
15.28
|
|
|
6.80
|
|
$
|
221,900
|
|
Granted
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Exercised
|
(200,000
|
)
|
|
(718,517
|
)
|
|
14.86
|
|
|
|
|
|
|
Balance, March 31, 2016
|
6,544,000
|
|
|
5,890,700
|
|
|
$
|
15.31
|
|
|
6.65
|
|
$
|
219,925
|
|
Options exercisable at March 31, 2016
|
3,210,666
|
|
|
5,890,700
|
|
|
$
|
14.24
|
|
|
6.03
|
|
$
|
170,765
|
|
Options expected to vest in the future
|
3,333,334
|
|
|
—
|
|
|
$
|
18.25
|
|
|
8.33
|
|
$
|
49,160
|
|
|
|
(a)
|
The aggregate intrinsic value is calculated as the difference between (i) the exercise price of the underlying award and (ii) the quoted price of CNYG Class A common stock on
March 31, 2016
or
December 31, 2015
, as indicated, and
March 31, 2016
in the case of options exercisable and options expected to vest in the future.
|
Restricted Stock Award Activity
The following table summarizes activity relating to Company employees who held Cablevision restricted shares and restricted stock units for the
three
months ended
March 31, 2016
:
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted Shares
|
|
Number of Performance Restricted Shares
|
|
Number of Performance Based Restricted Stock Units ("PSU") (a)
|
|
Weighted Average Fair Value Per Share at Date of Grant
|
Unvested award balance, December 31, 2015
|
4,967,748
|
|
|
1,880,100
|
|
|
1,772,430
|
|
|
$
|
17.53
|
|
Granted
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Vested
|
(2,239,167
|
)
|
|
(753,296
|
)
|
|
—
|
|
|
15.35
|
|
Awards forfeited
|
(85,900
|
)
|
|
—
|
|
|
(47,490
|
)
|
|
18.38
|
|
Unvested award balance, March 31, 2016
|
2,642,681
|
|
|
1,126,804
|
|
|
1,724,940
|
|
|
18.69
|
|
|
|
(a)
|
The PSUs entitle the employee to shares of CNYG common stock up to
150%
of the number of PSUs granted depending on the level of achievement of the specified performance criteria. If the minimum performance threshold is not met, no shares will be issued. Accrued dividends are paid to the extent that a PSU vests and the related stock is issued.
|
During the
three
months ended
March 31, 2016
,
2,992,463
Cablevision restricted shares issued to employees of the Company vested. To fulfill the employees' statutory minimum tax withholding obligations for the applicable income and other employment taxes,
1,248,875
of these shares, with an aggregate value of
$41,469
, were surrendered to the Company. These acquired shares have been classified as treasury stock.
NOTE 12. COMMITMENTS AND CONTINGENCIES
Legal Matters
Cable Operations Litigation
Marchese, et al. v. Cablevision Systems Corporation and CSC Holdings, LLC:
The Company is a defendant in a lawsuit filed in the U.S. District Court for the District of New Jersey by several present and former Cablevision subscribers, purportedly on behalf of a class of iO video subscribers in New Jersey, Connecticut and New York. After
three
versions of the complaint were dismissed without prejudice by the District Court, plaintiffs filed their third amended complaint on August 22, 2011, alleging that the Company violated Section 1 of the Sherman Antitrust Act by allegedly tying the sale of interactive services offered as part of iO television packages to the rental and use of set-top boxes distributed by Cablevision, and violated Section 2 of the Sherman Antitrust Act by allegedly seeking to monopolize the distribution of Cablevision compatible set-top boxes. Plaintiffs seek unspecified treble monetary damages, attorney's fees, as well as injunctive and declaratory relief. On September 23, 2011, the Company filed a motion to dismiss the third amended complaint. On January 10, 2012, the District Court issued a decision dismissing with prejudice the Section 2 monopolization claim, but allowing the Section 1 tying claim and related state common law claims to proceed. Cablevision's answer to the third amended complaint was filed on February 13, 2012. On December 7, 2015, the parties entered into a settlement agreement, which is subject to approval by the Court. On December 11, 2015, plaintiffs filed a motion for preliminary approval of the settlement, conditional certification of the settlement class, and approval of a class notice distribution plan. On March 10, 2016 the Court granted preliminary approval of the settlement and approved the class notice distribution plan. Distribution of class notice is proceeding. The final approval hearing on the settlement is scheduled for September 12, 2016. In the quarter ended September 30, 2015, the Company recorded estimated charges associated with the settlement totaling
$12,800
, of which
$9,500
is reflected in selling, general and administrative expense, and
$3,300
, representing the cost of benefits to class members that are reasonably expected to be provided, is reflected as a reduction to revenue, net. It is possible that the amount ultimately paid in connection with the settlement could exceed the amount recorded.
In re Cablevision Consumer Litigation:
Following expiration of the affiliation agreements for carriage of certain Fox broadcast stations and cable networks on October 16, 2010, News Corporation terminated delivery of the programming feeds to the Company, and as a result, those stations and networks were unavailable on the Company's cable television systems. On October 30, 2010, the Company and Fox reached an agreement on new affiliation agreements for these stations and networks, and carriage was restored. Several purported class action lawsuits were subsequently filed on behalf of the Company's customers seeking recovery for the lack of Fox programming. Those lawsuits were consolidated
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
in an action before the U. S. District Court for the Eastern District of New York, and a consolidated complaint was filed in that court on February 22, 2011. Plaintiffs asserted claims for breach of contract, unjust enrichment, and consumer fraud, seeking unspecified compensatory damages, punitive damages and attorneys' fees. On March 28, 2012, the Court ruled on the Company's motion to dismiss, denying the motion with regard to plaintiffs' breach of contract claim, but granting it with regard to the remaining claims, which were dismissed. On April 16, 2012, plaintiffs filed a second consolidated amended complaint, which asserts a claim only for breach of contract. The Company's answer was filed on May 2, 2012. On October 10, 2012, plaintiffs filed a motion for class certification and on December 13, 2012, a motion for partial summary judgment. On March 31, 2014, the Court granted plaintiffs' motion for class certification, and denied without prejudice plaintiffs' motion for summary judgment. On May 30, 2014, the Court approved the form of class notice, and on October 7, 2014, approved the class notice distribution plan. The class notice distribution has been completed, and the opt-out period expired on February 27, 2015. Expert discovery commenced on May 5, 2014, and concluded on December 8 and 28, 2015, when the Court ruled on the pending expert discovery motions. On January 26, 2016, the Court approved a schedule for filing of summary judgment motions. Pursuant to the Court’s order, plaintiffs filed a motion for summary judgment on March 31, 2016, and the Company sought leave of Court to file its own summary judgment motion. The Company believes that this claim is without merit and intends to defend these lawsuits vigorously, but is unable to predict the outcome of these lawsuits or reasonably estimate a range of possible loss.
Patent Litigation
Cablevision is named as a defendant in certain lawsuits claiming infringement of various patents relating to various aspects of the Company's businesses. In certain of these cases other industry participants are also defendants. In certain of these cases the Company expects that any potential liability would be the responsibility of the Company's equipment vendors pursuant to applicable contractual indemnification provisions. The Company believes that the claims are without merit and intends to defend the actions vigorously, but is unable to predict the outcome of these lawsuits or reasonably estimate a range of possible loss.
Other Litigation
In April 2011, Thomas C. Dolan, a director and Executive Vice President, Strategy and Development, in the Office of the Chairman at Cablevision, filed a lawsuit against Cablevision and Rainbow Media Holdings LLC (which was subsequently dismissed as a party) in New York State Supreme Court. The lawsuit raises compensation-related claims related to events largely from 2005 to 2008. The matter was handled under the direction of an independent committee of the Board of Directors of Cablevision. In April 2015, the Court granted summary judgment in favor of the plaintiff on liability, with damages to be determined. On June 18, 2015, the Company filed a notice of appeal. As previously disclosed, on February 8, 2016, Cablevision and Thomas C. Dolan entered into a settlement pursuant to which the Company agreed to pay plaintiff
$21,000
and plaintiff released all claims. A stipulation of dismissal with prejudice was approved and entered by the Court on February 8, 2016, and payment was made the same day. The appeal has also been withdrawn. As previously disclosed, in connection with the settlement, Charles F. Dolan and James L. Dolan have entered into an agreement to pay the Company, in the aggregate,
$6,000
in partial reimbursement of the Company's settlement payment to Thomas C. Dolan if the Company's pending merger with Altice is not consummated.
In addition to the matters discussed above, the Company is party to various lawsuits, some involving claims for substantial damages. Although the outcome of these other matters cannot be predicted and the impact of the final resolution of these other matters on the Company's results of operations in a particular subsequent reporting period is not known, management does not believe that the resolution of these other lawsuits will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due.
NOTE 13. SEGMENT INFORMATION
The Company classifies its operations into
three
reportable segments: (1) Cable, (2) Lightpath, and (3) Other, consisting principally of (i) Newsday, (ii) the News 12 Networks, (iii) Cablevision Media Sales, and (iv) certain other businesses and unallocated corporate costs.
The Company's reportable segments are strategic business units that are managed separately. The Company evaluates segment performance based on several factors, of which the primary financial measure is business segment adjusted operating cash flow ("AOCF") (defined as operating income (loss) excluding depreciation and amortization (including impairments), share-based compensation expense or benefit and restructuring expense or credits), a non-GAAP measure. The Company has presented the components that reconcile AOCF to operating income (loss), an accepted GAAP measure.
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
Revenues, net from continuing operations
|
|
|
|
Cable
|
$
|
1,480,119
|
|
|
$
|
1,451,538
|
|
Lightpath
|
91,804
|
|
|
91,124
|
|
Other
|
78,097
|
|
|
81,780
|
|
Inter-segment eliminations (a)
|
(9,263
|
)
|
|
(9,671
|
)
|
|
$
|
1,640,757
|
|
|
$
|
1,614,771
|
|
|
|
|
|
|
|
|
|
|
Inter-segment revenues
|
|
|
|
|
|
Cable
|
$
|
(131
|
)
|
|
$
|
(280
|
)
|
Lightpath
|
(4,555
|
)
|
|
(4,745
|
)
|
Other
|
(4,577
|
)
|
|
(4,646
|
)
|
|
$
|
(9,263
|
)
|
|
$
|
(9,671
|
)
|
|
|
|
|
|
|
|
|
|
Adjusted operating cash flow (deficit) from continuing operations
|
|
|
|
|
|
Cable
|
$
|
472,199
|
|
|
$
|
446,555
|
|
Lightpath
|
43,387
|
|
|
43,395
|
|
Other
|
(36,144
|
)
|
|
(35,920
|
)
|
|
$
|
479,442
|
|
|
$
|
454,030
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization included in continuing operations
|
|
|
|
|
|
Cable (b)
|
$
|
(180,694
|
)
|
|
$
|
(186,245
|
)
|
Lightpath (b)
|
(21,524
|
)
|
|
(22,738
|
)
|
Other
|
(10,235
|
)
|
|
(9,917
|
)
|
|
$
|
(212,453
|
)
|
|
$
|
(218,900
|
)
|
|
|
|
|
Share-based compensation expense included in continuing operations
|
|
|
|
Cable
|
$
|
(10,083
|
)
|
|
$
|
(8,211
|
)
|
Lightpath
|
(1,629
|
)
|
|
(1,382
|
)
|
Other
|
(2,985
|
)
|
|
(2,318
|
)
|
|
$
|
(14,697
|
)
|
|
$
|
(11,911
|
)
|
|
|
|
|
|
|
|
|
|
Restructuring credits (expense) included in continuing operations
|
|
|
|
|
|
Cable
|
$
|
—
|
|
|
$
|
—
|
|
Lightpath
|
—
|
|
|
—
|
|
Other
|
(1,037
|
)
|
|
532
|
|
|
$
|
(1,037
|
)
|
|
$
|
532
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) from continuing operations
|
|
|
|
|
|
Cable
|
$
|
281,422
|
|
|
$
|
252,099
|
|
Lightpath
|
20,234
|
|
|
19,275
|
|
Other
|
(50,401
|
)
|
|
(47,623
|
)
|
|
$
|
251,255
|
|
|
$
|
223,751
|
|
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
|
|
(a)
|
Inter-segment eliminations relate primarily to revenues recognized from the sale of local programming and voice services to the Company's Cable segment.
|
|
|
(b)
|
The Cable and Lightpath segments share portions of each other's network infrastructure. Depreciation charges are recorded by the segment that acquired the respective asset.
|
For the
three
months ended
March 31, 2016
and
2015
, Cable segment revenue was derived from the following sources:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
Video (including equipment rental, DVR, franchise fees, video-on-demand and pay-per-view)
|
$
|
785,255
|
|
|
$
|
800,968
|
|
High-speed data
|
401,536
|
|
|
362,872
|
|
Voice
|
223,710
|
|
|
231,593
|
|
Advertising
|
30,189
|
|
|
30,777
|
|
Other (including installation, advertising sales commissions, home shopping, and other products)
|
39,429
|
|
|
25,328
|
|
|
$
|
1,480,119
|
|
|
$
|
1,451,538
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of reportable segment amounts to Cablevision's and CSC Holdings' consolidated balances is as follows:
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
|
|
|
Operating income for reportable segments
|
$
|
251,255
|
|
|
$
|
223,751
|
|
Items excluded from operating income:
|
|
|
|
|
|
CSC Holdings interest expense
|
(93,560
|
)
|
|
(89,552
|
)
|
CSC Holdings interest income
|
874
|
|
|
164
|
|
CSC Holdings intercompany interest income
|
12,013
|
|
|
12,013
|
|
Gain (loss) on investments, net
|
100,365
|
|
|
(33,071
|
)
|
Gain (loss) on equity derivative contracts, net
|
(48,012
|
)
|
|
46,166
|
|
Miscellaneous, net
|
1,971
|
|
|
1,007
|
|
CSC Holdings income from continuing operations before income taxes
|
224,906
|
|
|
160,478
|
|
Cablevision interest expense
|
(55,807
|
)
|
|
(55,629
|
)
|
Intercompany interest expense
|
(12,013
|
)
|
|
(12,013
|
)
|
Cablevision interest income
|
11
|
|
|
5
|
|
Cablevision income from continuing operations before income taxes
|
$
|
157,097
|
|
|
$
|
92,841
|
|
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(Dollars in thousands, except per share amounts)
(Unaudited)
The following table summarizes the Company's capital expenditures by reportable segment for the
three
months ended
March 31, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
Capital expenditures
|
|
|
|
Cable
|
$
|
119,591
|
|
|
$
|
133,571
|
|
Lightpath
|
21,157
|
|
|
23,732
|
|
Other
|
7,904
|
|
|
9,328
|
|
|
$
|
148,652
|
|
|
$
|
166,631
|
|
All revenues and assets of the Company's reportable segments are attributed to or located in the United States primarily concentrated in the New York metropolitan area.
NOTE 14. RELATED PARTY TRANSACTIONS
The following table summarizes the revenue and charges related to services provided to or received from AMC Networks Inc., The Madison Square Garden Company and MSG Networks Inc. not discussed elsewhere in the accompanying combined notes to the condensed consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
|
|
|
Revenues, net
|
$
|
1,139
|
|
|
$
|
1,191
|
|
Operating expenses:
|
|
|
|
|
|
Technical expenses (a)
|
$
|
44,892
|
|
|
$
|
44,937
|
|
Selling, general and administrative expenses, net
|
1,942
|
|
|
1,928
|
|
Operating expenses, net
|
46,834
|
|
|
46,865
|
|
Net charges
|
$
|
45,695
|
|
|
$
|
45,674
|
|
|
|
(a)
|
Technical expenses include primarily costs incurred by the Company for the carriage of the MSG networks, as well as for AMC, WE tv, IFC, Sundance Channel and BBC America on the Company's cable systems. The Company also purchases certain programming signal transmission and production services from AMC Networks.
|
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES