Cablevision Systems Corporation (CVC)

CVC 
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Cablevision Systems Corporation. (CVC)

Q2 2009 Earnings Call

July 30, 2009 10:00 am ET

Executives

Pat Armstrong - Senior Vice President of Investor Relations

Jim Dolan - President and CEO

Tom Rutledge - Chief Operating Officer

Josh Sapan - President and CEO of Rainbow Media

Hank Ratner - Vice Chairman

Gregg Siebert - Executive Vice President

Mike Huseby - Chief Financial Officer

Analysts

Douglas Mitchelson - Deutsche Bank

Jessica Reif-Cohen - Bank of America/Merrill Lynch

Richard Greenfield - Pali Capital

John Hodulik - UBS

James Ratcliffe - Barclays Capital

Benjamin Swinburne - Morgan Stanley

Craig Moffett - Sanford C. Bernstein

Marci Ryvicker - Wells Fargo Securities

Presentation

Operator

Welcome to the second quarter 2009 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) I will now turn the conference over to Ms. Pat Armstrong, Senior Vice President of Investor Relations. Please go ahead, ma'am.

Pat Armstrong

Thank you. Good morning, and welcome to Cablevision's second quarter 2009 earnings conference call. Joining us this morning are members of the Cablevision executive team, including Jim Dolan, 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 Gregg Siebert, Executive Vice President.

Following a discussion of the company's second 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 cablevision.com. Please take note of the following. Today's discussion 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 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 forward-looking statements that may be discussed during this call. Let me point out that on page five 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.

Jim Dolan

Thank you, Pat, and good morning. For the second quarter, Cablevision's consolidated revenue increased 10% to $1.9 billion, while AOCF grew 7% to $636 million. These operating results were fueled by solid revenue growth in both our Cable and Rainbow Media businesses, plus the addition of Sundance and Newsday.

For the six months ended June 30th, total company free cash flow was $403 million, a 24% increase over the prior year period. In this economic environment, I think we are fortunate to be able to deliver this kind of growth and believe it is due in large part to our continued focus on improving results and enhancing our potential for future growth. These efforts are being recognized by others. For instance, Rainbow recently received Emmy nominations for its original programming, while at Cable, we are recognized in the industry for our outstanding small and medium business customer satisfaction.

Moving onto other matters. Our Board of Directors has approved a 10% share dividend payable on September 1st and last quarter, we announced that Cablevision's board had authorized management to explore the possibility of spinning off the Madison Square Garden business to shareholders. Since then, we have concluded that a tax-free spin-off would provide greater flexibility for both Cablevision and the new MSG and would allow investors to more clearly evaluate each of the separate companies' unique assets and future potential.

In short, we believe that this transaction would increase shareholder value. We plan to move forward expeditiously with pursuing the spin-off and are aiming to complete this transaction by yearend, assuming all closing conditions are met. Once the spin-off is complete, I will become the Chairman of the new public Madison Square Garden and will continue as President and CEO of Cablevision.

Hank Ratner will become President and CEO of the new MSG and will continue in his role as Cablevision's Vice Chairman. In a few minutes, both Hank and Gregg will provide additional details on the spin-off. Before I hand things off to Tom, I would like to reiterate what we said in May. Cablevision is not considering the sale of MSG, any of MSG's business or other Cablevision businesses at this time.

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 6% in the second quarter of 2009 when compared to last year's second quarter. The company gained 103,000 RGUs in the quarter and average monthly revenue per subscriber for the quarter is nearly $140 per customer.

Currently at $139.69, this represents a sequential increase in (technical difficulty) expense for the quarter and year-over-year increases in RPS of $7.40, or 5.6%. Basic subscribers declined by 8700 in the second quarter. Our digital customer base, however, increased by 56,000 and penetration 94%.

During the quarter, we eliminated the duplicate analog feeds of 14 channels and this helped to fuel some of the digital subscriber growth. We now offer over 100 HD channels, 45 channels of analog service which is 45 more than any of our competitors. We gained 18,000 high-speed data customers in the quarter and we added 38,000 voice customers. Almost 80% of our high-speed data customers subscribe to our voice service, a testament to the success of our bundling initiatives over the last few years.

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