Cablevision Loses Subs, to Restate Results

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Cablevision Systems Corp. reported a basic-subscriber loss of 8,900 in the third quarter and said it would restate its first- and second-quarter results to reflect $15 million in additional improper expense accruals stemming from the ongoing investigation of its Rainbow Media Holdings Inc. programming subsidiary.

Cablevision said it will make restatements to its first- and second-quarter results totaling about $15 million: $1.7 million from Rainbow entities that it failed to reverse in June; $3.4 million in improper accruals at its AMC and WE: Women’s Entertainment that it identified in August; $3.8 million in improperly accelerated expenses at AMC and WE discovered in November; $5 million in accelerated expenses at other Rainbow units, also discovered in November; and $1.3 million in accelerated expenses at non-Rainbow entities.

This marks the first time Cablevision has reported improper accruals outside of the Rainbow division.

Cablevision did not reveal which entities were included in the non-Rainbow businesses, although it said the investigation is continuing and covers all significant operating units within Rainbow, as well as the company’s telecommunications, Madison Square Garden, and corporate segments.

The MSO added that an independent investigation by Wilmer, Cutler & Pickering was "substantially completed," but it gave no time frame as to when the probe would be finished.

Cablevision said basic subscribers were down in the period mainly because the upgrade of its New York properties was not completed in the third quarter, as expected. On a conference call with analysts, cable-division president Tom Rutledge said the failure to complete the upgrade was largely due to bureaucratic issues and the upgrades should be completed in the fourth quarter.

Cablevision added 158,000 digital subscribers in the period, down from the 196,000 digital additions the MSO reported in the second quarter. High-speed-data additions were 63,700 in the quarter compared with 68,000 in the second quarter.

Companywide, revenue rose 12% to $976 million and adjusted operating cash flow was up 4% to $315.6 million.

In its telecommunications division, which includes the company’s cable operations, revenue was up 15% and adjusted operating cash flow was up 9%.

Cablevision revised its full-year-2003 guidance downward, mainly reflecting the slower-than-expected basic-subscriber growth. Revenue is now expected to rise 9%-11% for the year instead of 10%-12%. Adjusted operating cash flow will increase between 14%-15% instead of between 17%-19%.

In its telecommunications unit, revenue is expected to rise between 11.5%-12.5% (instead of between 12%-14%) and adjusted-operating-cash-flow growth is expected to be about 12% (instead of between 14%-16%).

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