Cablevision Restates Earnings - Multichannel

Cablevision Restates Earnings

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Cablevision Systems filed its long-awaited 10-Q quarterly financial statement with the Securities and Exchange Commission Thursday, restating some financial data for the years 1997 through the first quarter of 2005 as a result of some discrepancies in stock-option dating, but having relatively little impact on the overall bottom line.

Cablevision said that as a result of its internal investigation, it had to lower cumulative net-income results for 1997 through the first quarter of 2005 by a total of $89.2 million. In addition, the company said it received a subpoena for documents related to the stock-option dating from the U.S. Attorney’s Office for the Eastern District of New York, as well as a request for similar documents from the SEC. The company said it intends to fully cooperate with those investigations.

But by issuing the 10-Q, Cablevision removed a big overhang on its stock -- failure to file the report by mid-November could have resulted in the company being in technical default of some of its loans. And the company reported strong second-quarter-2006 results, which further encouraged Wall Street.

Cablevision stock was up 50 cents per share (2.2%) in afternoon trading Thursday to $23.51 each.

Fueling much of that increase were strong second-quarter results: Adjusted operating cash flow rose 17.5% to $469.9 million and revenue for the period was previously reported at $1.4 billion, up 15.6%. Basic subscribers for the period increased by 35,328 -- the MSO’s ninth consecutive quarter of basic-customer growth -- while digital customers rose by 143,499 and high-speed-Internet customers rose by 84,819. Cablevision also added 122,234 telephony customers in the period, ending the quarter with 987,542.

Net income for the quarter declined sharply -- to $14.6 million (5 cents per share), versus $213.8 million (74 cents) in the same period last year -- but that was mainly due to tough comparisons with the year-ago quarter, which was boosted by several one-time gains.

In August, Cablevision said it may have to restate financial data for the past nine years, stemming from a voluntary investigation into the timing of stock-option and stock-appreciation-right awards it had granted some executives. It also said that as a result of the investigation, it would not be able to file its 10-Q quarterly financial statement with the SEC on time.

“The net effect was very small,” Miller Tabak cable analyst David Joyce said. “It’s not a big deal. And the results got restated quicker than expected, which is helping the stock.”

Cablevision had until mid-November to file the financial statements.

Cablevision also said board member Richard Hochman resigned from its compensation committee and audit committee, stemming from the stock-option investigation. Board member Victor Oristano also resigned from Cablevision’s audit committee for the same reasons. Both men remain on Cablevision’s board of directors.

In the SEC filing, Cablevision said both men stated in their resignation letters, “In light of the public attention generated by the company's decision to restate its financial statements as a result of the stock-option review, as well as the numerous shareholder lawsuits filed in the wake of that decision naming them, among others, as defendants, they believe it is in the best interest of the company for them to step down from these positions.”

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