Cablevision Operations Offset Wider Q1 Loss
Cable-System Operator, Media Company Posts Wider Q1 Loss Due to Derivative Contracts
By Robert Marich -- Broadcasting & Cable, 5/8/2008 7:19:00 AM
Cablevision Systems posted a wider first-quarter loss Thursday from derivative contracts, higher capital expenditures and a bigger operating loss at its Madison Square Garden unit, although otherwise, operations improved sharply. In particular, its basic-cable-subscriber count held despite intense competition from telephone-company video.
Based in suburban New York, Cablevision is shifting to a growth mode with costly acquisitions after aborting an attempt to take it private in October that would have required asset sales resulting in a downsizing.
Cablevision announced a deal Wednesday to buy Sundance Channel for $496 million through its Rainbow Media Holdings unit in a transaction that doesn’t impact its first quarter, which ended March 31. The company also bid $650 million for Newsday, a local daily newspaper in its suburban New York region.
In a conference call, Cablevision declined to make any comment on the reported Newsday bid, to which stock analysts seemed to react skeptically. Company brass did confirm that Cablevision is in a growth mode and will make acquisitions on an “opportunistic” basis -- which means jumping on good deals that arise, which the company thinks will add value -- rather than a systematic approach targeting only specific sectors.
Cablevision’s net loss widened to $31.6 million, or red ink of 11 cents per share, from a loss of $26.3 million (9 cents). The derivative-contracts loss amounted to $104.9 million, offsetting gains from core operations.
Revenue at the cable-TV media conglomerate rose a healthy 10.1% to $1.72 billion. Its consolidated adjusted operating cash flow advanced 8.9% to $515.9 million, indicating an improvement in core profitability. Operating income soared 44.2% to $245.5 million.
“For the first quarter, we added customers across all of our consumer services, including basic video, and became the first cable company to achieve a 50% penetration rate for high-speed Internet,” Cablevision president and CEO James Dolan said in a statement.
“These results extended Cablevision's industry-leading penetration rates for yet another quarter, while Rainbow (cable networks) and MSG (Madison Square Garden) generated strong revenue growth of their own,” he added.
Rainbow operates The Independent Film Channel, AMC and WE tv.
For its closely watched cable-subscriber count, Cablevision said its basic headcount of 3.125 million subscribers was down 14,000 from March 2007 but up 2,000 from December 2007. Last week, Time Warner Cable and Comcast reported surprisingly good cable-subscriber results despite Verizon Communications and AT&T rolling out video services.
In another example of big gains from core operations, Cablevision’s revenue per subscriber rose a healthy 11% to $129.56 in the first quarter, keeping it at the top of the cable industry in this closely watched per-capita metric.
In its large cable-system segment, the company posted a 10.5% hike in revenue to $1.21 billion. Its Rainbow programming arm did better with a 15.8% revenue gain to $225.2 million. Operating income in the cable-TV segment soared 35.5% to $258.7 million, and this profit metric more than doubled at Rainbow to $27.7 million from $13.6 million a year earlier.
In the conference call, company executives also outlined plans for increased investment in core operations, which reflects Cablevision’s growth and acquisition mode.
Capital expenditures rose to $193.5 million in the quarter from $156.3 million. That comes from installing more digital-video-recorder set-tops in cable homes and building out a wireless-network mesh overlay for its cable subscribers over the next two years in its cable footprint. Further, the company is planning a major renovation of its MSG arena in New York from 2009-12, which will add roughly 45 additional private suites and increase restaurants to four from two.
Cablevision chief operating officer Tom Rutledge said its cable-TV operation continues to beat back telco rivals Verizon and AT&T, which are “still single-digit [penetration] even after two years of head-to-head competition.”
