Sandy Slams Cablevision's Q1 Results

AOCF Dips 27% Due to Superstorm, Higher Costs

Cablevision Systems continued to feel the impact of Superstorm Sandy in the first quarter, as repair costs for the October weather event put a dent in the Bethpage, N.Y. operator's results, helping to send adjusted operating cash flow down 27% in the period.

On a conference call with analysts, Cablevision CEO James Dolan said the company warned analysts that the company “expected to experience significant AOCF pressure in the first quarter, which is exactly what occurred.”

Cablevision shares initially plunged on the news – shares dropped as much as 8.5% ($1.31 per share) in early trading Thursday to $14.16 each, but rebounded later in the day. By the afternoon, Cablevision shares had gained 40 cents each (2.6%) to $15.87 per share.

Consolidated revenue declined 1% to $1.5 billion and adjusted operating cash flow plunged 26.9% to $343.4 million. At the cable operations, revenue dipped 0.4% to $1.4 billion and AOCF dropped 21.3% to $413.6 million.

For the period, Cablevision shed about 5,000 basic video customers while high speed Internet and phone subscribers rose by 23,000 each.

The bulk of the declines were due to the impact of Superstorm Sandy, which ripped through Cablevision’s territory in Long Island, N.Y. and New Jersey last October, resulting in about $8 million in repair costs in the period, and unfavorable programming cost comparisons. Programming costs rose 12.8% for the period, in part because of the impact of the NFL Network, which Cablevision added to its lineup last year. Cablevision vice chairman and chief financial officer Gregg Seibert said on a conference call with analysts that the outlook should improve in the second quarter, since there will be no impact from the Superstorm , which should result in a double-digit sequential increase in AOCF.

Seibert added that programming cost increases should have better apples-to-apples comparisons in the third and fourth quarters, which is when NFL Network and some of its bigger programming contracts kicked in last year. But he added the MSO, like its peers, is anticipating double-digit increases for the full year.

“Programming costs are going to continue to be a double-digit increase for us for a period of time, certainly through the balance of this year and into next year,” Seibert said.

In a research note, Morgan Stanley media analyst Ben Swinburne said that results were largely within expectations.

“However, we think it will be difficult to maintain share and drive pricing growth, and with end markets not growing and programming costs ramping in the industry, Cablevision’s leverage creates the greatest downside risk to shares in our coverage group. 1Q cable revenue declines highlight this challenge,” Swinburne wrote.