Cablevision Systems Corporation (CVC)

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Cablevision Systems Corporation (CVC)

Q1 2009 Earnings Call

May 7, 2009 10:00 am ET


Patricia Armstrong – Senior Vice President, Investor Relations

James L. Dolan – President and Chief Executive Officer

Thomas M. Rutledge – Chief Operating Officer

Josh Sapan – President and CEO, Rainbow Media Holdings

Hank Ratner – Vice Chairman

Gregg Seibert – Executive Vice President


Douglas Mitchelson – Deutsche Bank Securities

Jessica ReifCohen – Merrill Lynch

Craig Moffett – Sanford C. Bernstein

Jason Bazinet – Citi

Ingrid Chung – Goldman Sachs

Benjamin Swinburne – Morgan Stanley

John Hodulik – UBS

James Ratcliffe – Barclays Capital

Tom Eagan – Collins Stewart

Matthew Harrigan – Wunderlich Securities



Good morning. I would like to welcome everyone to the Cablevision conference call. (Operator Instructions) I will now turn the call over to Pat Armstrong, Senior Vice President of Investor Relations. Please go ahead.

Patricia Armstrong

Thank you. Good morning and welcome to Cablevision's first quarter 2009 earnings conference call. Joining us this morning are members of the Cablevision executive team, including Jim Dolan, our President and CEO; Hank Ratner, Vice Chairman; Tom Rutledge, Chief Operating Officer; Mike Huseby, Chief Financial Officer; Josh Sapan, President and CEO of Rainbow Media; John Bickham, President of Cable and Communications; and Greg Seibert, Executive Vice President.

Following a discussion of the company's first quarter 2009 results, we will open the call for questions. If you don't have a copy of today's earnings release, it is available on our website at

Please take note of the following. Today's discussion may contain statements that constitute forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forwardlooking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ.

Please refer to the company's filings with the Securities and Exchange Commission for a discussion of risks and uncertainties. The company disclaims any obligation to update the forwardlooking statements that may be discussed during this call. Let me point out that on page 5 of today's earnings release, we provide consolidated operations data and a reconciliation of adjusted operating cash flow, or AOCF, to operating income.

I would now like to introduce Jim Dolan, President and CEO of Cablevision.

James Dolan

Thank you, Pat, and good morning. Cablevision had a solid first quarter in what continues to be a challenging economic environment. The company's consolidated revenue grew 11% to $1.9 billion. This increase was driven by continued growth in our telecommunications business plus the addition of Sundance and Newsday, which were both acquired at the first quarter of last year.

Meanwhile, Cablevision's AOCF increased by 14% in the quarter to $590 million. Even without the impact of our two acquisitions, strong AOCF growth across our cable, Rainbow, and MSG businesses helped to drive a 13% yearoveryear increase in AOCF.

Another first quarter highlight is that Cablevision generated $170 million in free cash flow, which is more than double what we generated in the first quarter of 2008. This ramp up in free cash flow is a testament to our efficient capital spending over the past few years. We focused on creating a great platform for growth and free cash flow is the result of that investment. We remain pleased with our cable operations, which reported solid results for the quarter.

Tom is going to talk next about some of the new products we are rolling out that will create even greater value for our customers. Meanwhile, Rainbow had another good quarter, which Josh will address. And Hank will give us an update on Garden renovation.

While we are off to a good start for the year, we remain cautious given the current economic conditions. As always, we will continue to focus on building our business for the long term.

Separately, we announced today that our board of directors has authorized the company's management to explore the spin off of its Madison Square Garden business. I am sure you will understand that we will be unable to discuss any details at this time.

Finally, our board of directors has approved another $0.10 per share dividend payable in June. I would now like to turn the call over to our Chief Operating Officer, Tom Rutledge.

Tom Rutledge

Thank you, Jim, and good morning. The cable television company generated revenue growth of 5% and AOCF growth of 7% in the first quarter of 2009 when compared to last year's first quarter. The company gained 84,000 RGUs in the quarter; and average monthly revenue per subscriber was $136 and 55, a sequential increase of $1.70. The yearoveryear increase in RPS was $6.99 or 5.4%.

RGU growth was 84,000 for the quarter. Total customer relationships were unchanged and basic subscribers declined by 6,000.

Our digital customer base increased by 9,000 and penetration reached 92%. We gained 30,000 high-speed data customers this quarter, which was slightly larger than the growth of last quarter. And we added 51,000 voice customers, and we surpassed 40% penetration to homes passed voice penetration.

Our high definition video customers continue to grow as well. At the end of the first quarter, Cablevision had almost 1.6 million high definition customers, up 38% in the last year. At this time last year, we offered 45 HD services. We now have 100 plus high definition channels.

Cable capital spending totaled $148 million for the first quarter. Consumer premises equipment accounted for 68% of capital expenditures as we continue to support our RGU growth and deployed more and more DVRs and HD boxes. Cable capital spending was 11.6% as a percentage of revenue for the first quarter, compared with our 2008 full year spending ratio of 14.3%.

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