UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
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T
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2011
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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For the transition period from ________ to _______
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Commission File
Number
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Registrant; State of Incorporation;
Address and Telephone Number
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IRS Employer-
Identification No.
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1-14764
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Cablevision Systems Corporation
Delaware
1111 Stewart Avenue
Bethpage, NY 11714
(516) 803-2300
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11-3415180
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1-9046
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CSC Holdings, LLC
Delaware
1111 Stewart Avenue
Bethpage, NY 11714
(516) 803-2300
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27-0726696
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
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Name of each Exchange on which Registered:
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Cablevision Systems Corporation
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Cablevision NY Group Class A Common Stock
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New York Stock Exchange
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CSC Holdings, LLC
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None
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Securities registered pursuant to Section 12(g) of the Act:
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Cablevision Systems Corporation
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None
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CSC Holdings, LLC
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None
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Indicate by check mark if the Registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.
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Cablevision Systems Corporation
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Yes
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No
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¨
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CSC Holdings, LLC
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Yes
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¨
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No
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Indicate by check mark if the Registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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Cablevision Systems Corporation
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Yes
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¨
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No
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CSC Holdings, LLC
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Yes
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¨
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No
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Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
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Cablevision Systems Corporation
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Yes
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No
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CSC Holdings, LLC
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Yes
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No
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Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of the Registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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Cablevision Systems Corporation
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CSC Holdings, LLC
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Indicate by check mark whether the Registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files).
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Cablevision Systems Corporation
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Yes
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No
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¨
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CSC Holdings, LLC
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Yes
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No
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Indicate by check mark whether each Registrant is a large accelerated filer, accelerated filer, non-accelerated filer or smaller reporting company. See definition of large accelerated filer and accelerated filer in Exchange Act Rule 12b-2.
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Large accelerated
filer
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Accelerated
filer
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Non-accelerated
filer
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Smaller reporting company
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Cablevision Systems Corporation
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Yes
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No
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Yes
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No
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Yes
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No
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Yes
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No
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CSC Holdings, LLC
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Yes
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¨
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No
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Yes
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No
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Yes
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No
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¨
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Yes
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¨
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No
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¨
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Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).
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Cablevision Systems Corporation
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Yes
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No
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CSC Holdings, LLC
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Yes
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No
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Aggregate market value of the voting and non-voting common equity held by non-affiliates of Cablevision Systems Corporation computed by reference to the price at which the common equity was last sold on the New York Stock Exchange as of June 30, 2011: $8,031,312,425
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Number of shares of common stock outstanding as of February 23, 2012:
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Cablevision NY Group Class A Common Stock - 220,164,656
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Cablevision NY Group Class B Common Stock - 54,137,673
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CSC Holdings, LLC Interests of Member - 14,432,750
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CSC Holdings, LLC meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format applicable to CSC Holdings, LLC.
Documents incorporated by reference - Cablevision Systems Corporation intends to file with the Securities and Exchange Commission, not later than 120 days after the close of its fiscal year, a definitive proxy statement or an amendment to this report filed under cover of Form 10-K/A containing the information required to be disclosed under Part III of Form 10-K.
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Page
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Part I
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1.
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1
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1A.
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19
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1B.
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30
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2.
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30
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3.
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30
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4.
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30
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Part II
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5.
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31
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6.
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35
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7.
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40
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7A.
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89
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8.
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91
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9.
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91
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9A.
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91
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9B.
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92
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Part III
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10.
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Directors and Executive Officers and Corporate Governance
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*
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11.
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Executive Compensation
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*
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12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
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*
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13.
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Certain Relationships and Related Transactions, and Director Independence
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*
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14.
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Principal Accountant Fees and Services
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*
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Part IV
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15.
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93
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Some or all of these items are omitted because Cablevision intends to file with the Securities and Exchange Commission, not later than 120 days after the close of its fiscal year, a definitive proxy statement or an amendment to this report filed under cover of Form 10-K/A containing the information required to be disclosed under Part III of Form 10-K.
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PART I
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Item 1.
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This combined Annual Report on Form 10-K is separately filed by Cablevision Systems Corporation ("Cablevision") and CSC Holdings, LLC, formerly CSC Holdings, Inc. ("CSC Holdings" and collectively with Cablevision, the "Company" or the "Registrants").
Cablevision Systems Corporation
Cablevision is a Delaware corporation which was organized in 1997. Cablevision owns all of the outstanding membership interests in CSC Holdings and its liabilities include approximately $2.2 billion of senior notes which amount does not include approximately $754 million of its senior notes held by Newsday Holdings LLC, its 97.2% owned subsidiary. The $754 million of notes are eliminated in Cablevision's consolidated financial statements and are shown as notes due from Cablevision in total member's deficiency of CSC Holdings. Cablevision has no operations independent of its CSC Holdings subsidiary.
CSC Holdings
CSC Holdings is one of the largest cable operators in the United States based on the number of video subscribers. As of December 31, 2011, we served approximately 3.25 million video customers in and around the New York metropolitan area and in Montana, Wyoming, Colorado and Utah. We believe that our cable television systems in the New York metropolitan area comprise the largest metropolitan cluster of cable television systems under common ownership in the United States (measured by number of video subscribers). We also provide high-speed data and Voice over Internet Protocol ("VoIP") services using our cable television broadband network. Through Cablevision Lightpath, Inc. ("Optimum Lightpath"), our wholly-owned subsidiary, we provide telephone services and high-speed Internet access to the business market. In addition, we own approximately 97.2% of Newsday LLC which operates a newspaper publishing business. We also own regional news and high school sports programming services, a motion picture theatre business and a cable television advertising sales business.
We classify our operations into two reportable segments: Telecommunications Services and Other. Our Telecommunications Services segment includes our cable television business, including our video, high-speed data, and VoIP operations and the operations of the commercial data and voice services provided by Optimum Lightpath. It also includes the operations of our cable television systems in Montana, Wyoming, Colorado and Utah, which were acquired in December 2010. Our Other segment includes the operations of (i) Newsday, which includes the Newsday daily newspaper, amNew York, Star Community Publishing Group, and online websites including newsday.com and exploreLI.com, (ii) our motion picture theatre business ("Clearview Cinemas"), (iii) the News 12 Networks, our regional news programming services, (iv) the MSG Varsity network, our network dedicated entirely to showcasing high school sports and activities, (v) our cable television advertising company, Cablevision Media Sales Corporation ("Cablevision Media Sales"), previously known as Rainbow Advertising Sales Corporation and (vi) certain other businesses and unallocated corporate costs. Refer to Note 19 to our consolidated financial statements included in this Annual Report on Form 10-K for financial information about our segments.
AMC Networks Inc. Distribution
On June 30, 2011, Cablevision distributed to its stockholders all of the outstanding common stock of AMC Networks Inc. ("AMC Networks"), a company which consists principally of national programming networks, including AMC, WE tv, IFC and Sundance Channel, previously owned and operated by the Company's Rainbow segment (the "AMC Networks Distribution"). The AMC Networks Distribution took the form of a distribution by Cablevision of one share of AMC Networks Class A Common Stock for every four shares of Cablevision NY Group ("CNYG") Class A Common Stock and one share of AMC Networks Class B Common Stock for every four shares of CNYG Class B Common Stock. As a result of the AMC Networks Distribution, we no longer consolidate the financial results of AMC Networks for the purpose of our own financial reporting and the historical financial results of AMC Networks have been reflected in our consolidated financial statements as discontinued operations for all periods presented through the AMC Networks Distribution date.
Acquisition of Bresnan Cable
On December 14, 2010, the Company, through two wholly-owned subsidiaries, consummated the acquisition of Bresnan Broadband Holdings, LLC ("Bresnan Cable"). The purchase price was approximately $1.36 billion. The acquisition was financed using an equity contribution to the acquisition subsidiaries by CSC Holdings of $395 million, which CSC Holdings borrowed under its revolving loan facility, and debt incurred by the acquisition subsidiaries consisting of an undrawn $75 million revolving loan facility, a $765 million term loan facility and $250 million 8.0% senior notes due 2018.
MSG Distribution
On February 9, 2010, Cablevision distributed to its stockholders all of the outstanding common stock of The Madison Square Garden Company ("Madison Square Garden"), a company which owns the sports, entertainment and certain media businesses previously owned and operated by the Company's Madison Square Garden segment (the "MSG Distribution"). The MSG Distribution took the form of a distribution by Cablevision of one share of Madison Square Garden Class A Common Stock for every four shares of CNYG Class A Common Stock and one share of Madison Square Garden Class B Common Stock for every four shares of CNYG Class B Common Stock. As a result of the MSG Distribution, we no longer consolidate the financial results of Madison Square Garden for the purpose of our own financial reporting and the historical financial results of Madison Square Garden have been reflected in our consolidated financial statements as discontinued operations for all periods presented through the MSG Distribution date.
Telecommunications Services
General
Cable television is a service that delivers multiple channels of video programming to subscribers who pay a monthly fee for the services they receive. Video signals are received over-the-air, by fiber optic transport or via satellite delivery by antennas, microwave relay stations and satellite earth stations and are modulated, amplified and distributed over a network of coaxial and fiber optic cable to the subscribers' television sets. Cable television systems typically are constructed and operated pursuant to non-exclusive franchises awarded by local and state governmental authorities for specified periods of time.
Our cable television systems offer varying packages of video service. In our New York metropolitan service area, the video service is marketed under the Optimum and iO brand names. Our cable television systems in Montana, Wyoming, Colorado and Utah (the "Optimum West service area") use the Optimum brand name to market our video product offerings. Our video services may include, among other programming, local broadcast network affiliates and independent television stations, certain other news, information and entertainment channels such as CNN, AMC, CNBC, ESPN, MTV, and regional sports networks such as MSG Network, and certain premium services such as HBO, Showtime, The Movie Channel, Starz!/Encore and Cinemax. We also offer digital video service, which enables customers to receive video on demand and subscription video on demand services, as well as additional viewing channels.
Our cable television revenues are derived principally from monthly fees paid by subscribers. In addition to recurring subscriber revenues, we derive revenues from the sales of pay-per-view movies and events, video on demand and subscription video on demand program services, from the sale of advertising time on advertiser supported programming and from installation and equipment charges. Certain services and equipment provided by substantially all of our cable television systems are subject to regulation. See "Regulation - Cable Television."
We also provide high-speed data services using our cable television broadband network. High-speed data services are provided to residential and small business customers through a cable modem device. The high-speed data service is marketed as "Optimum Online".
We offer VoIP technology services exclusively to our residential and small business Optimum Online customers, marketed as "Optimum Voice".
Through Optimum Lightpath, a business broadband service provider, we provide telecommunications services to the business market in the greater New York metropolitan area. Optimum Lightpath provides converged data, Internet and voice solutions to mid-sized and large businesses, hospital systems, municipalities, and school systems. As of December 31, 2011, Optimum Lightpath had over 5,000 buildings connected to its fiber network. Optimum Lightpath has built an advanced fiber optic network extending more than 4,800 route miles, which includes approximately 263,000 miles of fiber, throughout the New York metropolitan area. Optimum Business Services provides similar products in our Optimum West service area.
The following table sets forth certain statistical data regarding our video, high-speed data and VoIP operations, excluding Optimum Lightpath, as of the dates indicated:
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As of December 31,
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New York Metropolitan Service
Area
2011
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Optimum West Service Area
2011(1)
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Total
2011
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New York Metropolitan Service
Area
2010
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Optimum West Service Area
2010(1)
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Total
2010
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Total
2009
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(in thousands, except per subscriber amounts)
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Total customers(2)
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3,255 | 356 | 3,611 | 3,298 | 350 | 3,648 | 3,314 | |||||||||||||||||||||
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Video customers(3)
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2,947 | 303 | 3,250 | 3,008 | 306 | 3,314 | 3,063 | |||||||||||||||||||||
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High-speed data customers
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2,701 | 264 | 2,965 | 2,653 | 239 | 2,892 | 2,568 | |||||||||||||||||||||
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Voice customers
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2,201 | 156 | 2,357 | 2,138 | 131 | 2,269 | 2,052 | |||||||||||||||||||||
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Serviceable passings(4)
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4,922 | 662 | 5,584 | 4,882 | 650 | 5,532 | 4,829 | |||||||||||||||||||||
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Penetration:
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Total customers to serviceable passings
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66.1 | % | 53.7 | % | 64.7 | % | 67.6 | % | 53.8 | % | 65.9 | % | 68.6 | % | ||||||||||||||
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Video customers to serviceable passings
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59.9 | % | 45.7 | % | 58.2 | % | 61.6 | % | 47.1 | % | 59.9 | % | 63.4 | % | ||||||||||||||
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High-speed data customers to serviceable passings
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54.9 | % | 39.9 | % | 53.1 | % | 54.3 | % | 36.8 | % | 52.3 | % | 53.2 | % | ||||||||||||||
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Voice customers to serviceable passings
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44.7 | % | 23.5 | % | 42.2 | % | 43.8 | % | 20.2 | % | 41.0 | % | 42.5 | % | ||||||||||||||
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Average Monthly Revenue per Video Customer ("RPS")(5)
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| $ | 156.09 | $ | 134.60 | $ | 154.10 | $ | 150.68 | (6) | N/A | N/A | $ | 144.03 | (6) | |||||||||||||||
______________
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N/A
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Not meaningful.
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(1)
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Reflects data related to Bresnan Cable, which was acquired by the Company on December 14, 2010.
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(2)
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Represents number of households/businesses that receive at least one of the Company's services.
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(3)
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Video customers represent each customer account (set up and segregated by customer name and address), weighted equally and counted as one customer, regardless of size, revenue generated, or number of boxes, units, or outlets. In calculating the number of customers, we count all customers other than inactive/disconnected customers. Free accounts are included in the customer counts along with all active accounts, but they are limited to a prescribed group such as our current and retired employees. Most of these accounts are also not entirely free, as they typically generate revenue through pay-per-view or other pay services. Free status is not granted to regular customers as a promotion. We count a bulk commercial customer, such as a hotel, as one customer, and do not count individual room units at that hotel. In counting bulk residential customers, such as an apartment building, we count each subscribing family unit within the building as one customer, but do not count the master account for the entire building as a customer.
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(4)
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Represents the estimated number of single residence homes, apartment and condominium units and commercial establishments passed by the cable distribution network in areas serviceable without further extending the transmission lines, including our Optimum Lightpath customers.
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(5)
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RPS is calculated by dividing the average monthly U.S. generally accepted accounting principles ("GAAP") revenues for the Telecommunications Services segment, less the revenue attributable to Optimum Lightpath, for the fourth quarter of each year presented by the average number of video customers served by our cable television systems for the same period. For purposes of this calculation, both revenue and average number of video customers exclude our Optimum Lightpath operations because Optimum Lightpath's third-party revenues are unrelated to our cable television system customers.
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(6)
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Represents data for the New York metropolitan service area.
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Subscriber Rates and Services; Marketing and Sales
Video Services
Our cable television systems offer a government mandated broadcast basic level of service which generally includes local over-the-air broadcast stations, such as network affiliates (e.g., ABC, NBC, CBS, FOX), and public, educational or governmental channels.
All of our cable television systems also offer an expanded basic package of services, generally marketed as "Family Cable", which includes, among other programming, news, information, entertainment, and sports channels such as CNN, CNBC, Discovery, ESPN, AMC, the Disney Channel, and regional sports networks such as MSG Network. For additional charges, our cable television systems provide premium services such as HBO, Showtime, The Movie Channel, Starz!/Encore and Cinemax, which may be purchased either individually or in tiers.
Our digital video programming services currently offered to subscribers, branded iO TV in our New York metropolitan service area and Optimum TV in our Bresnan service area, include:
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Up to 535 standard definition and high definition ("HD") entertainment channels,
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Over 80 premium movie channels including multiplexes of HBO, Showtime, Cinemax, Starz!/Encore and The Movie Channel,
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Access to thousands of on-demand titles each month, including hit movies (most available in HD), classic, independent and international films, subscription on-demand services and free on-demand offerings,
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46 channels of uninterrupted commercial-free digital music from Music Choice,
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Seasonal sports packages from the National Basketball Association, National Hockey League, Major League Baseball, Major League Soccer, college football and basketball, plus sports and entertainment packages with over 30 channels,
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Up to 86 international channels from around the world,
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Up to 134 channels available in HD, including local broadcast affiliates, local sports channels, premium networks such as HBO and various other cable networks,
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A collection of enhanced television applications including News 12 Interactive, Newsday TV, Optimum Autos and Homes, MSG Interactive, iO Games, and MSG Varsity, all in our New York metropolitan service area,
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Digital video recorder ("DVR") service, giving subscribers the ability to record, pause and rewind live television, and
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DVR Plus, a remote-storage DVR available in almost half of our New York metropolitan service area, giving subscribers the ability to record and play television programming from any room in the home.
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In 2011, in our New York metropolitan service area, we began offering a free Optimum App for the iPad, iPod Touch and iPhone, which allows our cable television customers to experience iO TV digital service, including access to hundreds of channels and on demand titles, on their device in the home. The Optimum App delivers the full cable television experience to the devices and allows them to function as a television.
Packaging of our video product includes options with programming to suit the needs of our individual customers. Offers include various levels of programming including premium channels, news, sports, children's, general entertainment, international channels and digital music at various price points.
Since our network serving our existing cable television systems has been upgraded to provide advanced digital video services, our sales and marketing efforts are primarily directed toward retaining our existing customers and increasing our penetration to homes passed for all of our existing services. We market our cable television services through in-person selling, as well as telemarketing, direct mail advertising, promotional campaigns and local media and newspaper advertising.
Optimum Online
Optimum Online is our high-speed Internet access offering, which connects customers to the Internet using the same network that delivers our cable television service.
Our plant is designed for download speeds to a maximum of: (i) 15Mbps (megabits per second) downstream and 2Mbps upstream for our Optimum Online level of service, (ii) 30Mbps downstream and 5Mbps upstream for our Optimum Online Boost level of service in our Optimum West service area, (iii) 50Mbps downstream and 8Mbps upstream for our Optimum Online Boost Plus level of service in our New York metropolitan service area, and (iv) 101Mbps downstream and 15Mbps upstream for our Optimum Online Ultra level of service in our New York metropolitan service area.
Optimum Online is available on an à la carte basis with Optimum Online Boost, Optimum Online Boost Plus or Optimum Online Ultra available for an additional charge per month. Discount and promotional pricing are available when Optimum Online is combined with our other service offerings.
We have deployed a broadband wireless network ("WiFi") in commercial and high traffic locations across our New York metropolitan service area as a free value-added benefit to Optimum Online customers. The WiFi feature, which is delivered via wireless access points mounted on our cable television broadband network, allows Optimum Online customers to access the service while they are away from their home or office. WiFi has been activated across our Long Island, Bronx, Brooklyn, New Jersey, Westchester, and Connecticut service areas.
Optimum Online service includes access to complimentary features such as web and mobile access to DVR for iO TV in our New York metropolitan service area, giving users the ability to remotely schedule and manage recordings as well as internet security software, including anti-virus, anti-spyware, personal firewall, and anti-spam protection. Our Optimum Online Boost Plus and Optimum Online Ultra levels also include web hosting, additional storage, and other features.
Optimum Voice
Optimum Voice is a VoIP service available exclusively to Optimum Online subscribers and offers unlimited local, regional and long-distance calling any time of the day or night within the United States, Puerto Rico, U.S. Virgin Islands and Canada with over 20 calling features at a flat monthly rate per month. Discount and promotional pricing is available when Optimum Voice is combined with other service offerings.
Optimum Voice includes over 20 premium calling features, including enhanced voicemail, call waiting, caller ID, caller ID blocking, call return, three-way calling, call forwarding, anonymous and call blocker, among others. In addition, Optimum Voice has recently introduced a number of new features including Click-to-Call and a directory listing self-care tool. Click-to-Call provides users with the convenience of dialing a call from any Internet connected computer simply by clicking on a phone number displayed in a web page. Also, the directory listing self-care tool enables subscribers to make changes to their 411 directory listings. Lastly, the Optimum Voice Homepage allows customers to manage their calling features and directory listings, view their call history, and receive voicemails via the Internet.
Optimum Voice for Business provides for up to 24 voice lines for small and medium businesses. The service provides 14 important business calling features at no additional charge. Optimum Voice for Business also offers business trunking services with support for legacy telecom interfaces and newer internet protocol interfaces. Optimum Voice for Business has also been approved for use with commercial fire alarms. As an optional add-on service in our New York metropolitan service area, Optimum Voice for Business provides customers with toll free capability.
International service for Optimum Voice includes Optimum Voice World Call and Per Minute plans. Optimum Voice World call is for residential customers and provides 250 minutes per month of calling from their Optimum Voice phone to anywhere in the world, including up to 30 minutes of calling to Cuba, with certain restrictions, for a flat monthly fee. Per Minute plans are available to both residential and business customers.
Bundled Offers
We offer several promotional packages with discounted pricing to existing and new customers who subscribe to one or more of our products as compared to the à la carte prices for each individual product. We also offer other pricing discounts for certain products that are added to existing services. For example, we offer an "Optimum Triple Play" package that is a special promotion for new customers or eligible current customers where our three products, video, high-speed data and voice, are each available for a flat fee per month, generally $29.95, for a year, when purchased together. For a total additional fee of $9.95 per month, the Ultimate Triple Play, available in our New York metropolitan service area, includes Optimum Online Boost Plus and a free router for new customers. We have from time to time also offered promotional and other pricing discounts as part of our competitive strategy.
Subscribers to all three of our service offerings who are not on a promotional pricing plan are eligible for "Optimum Rewards", which provides subscribers with a monthly discount on their bill, exclusive discounts and offers for shopping, dining, movie tickets and other benefits.
System Capacity
Our cable plant network in the New York metropolitan service area uses state of the art technology including fiber optic cable. The network is a minimum of 750 MHz two-way interactive system offering a combination of analog and digital channels, high-speed data and voice services. Our cable plant network in the Optimum West service area is on a state of the art hybrid fiber coaxial platform of which 90% of the plant is two-way with a minimum of 750 MHz capacity.
Programming
Adequate programming is available to the cable television systems from a variety of sources. Program suppliers' compensation is typically a fixed, per subscriber monthly fee (subject to contractual escalations) based, in most cases, either on the total number of video subscribers of the cable television systems, or on the number of subscribers subscribing to the particular service. The programming contracts are generally for a fixed period of time and are subject to negotiated renewal. Cable programming costs have increased in recent years and are expected to continue to increase due to additional programming being provided to most subscribers, increased costs to produce or purchase cable programming and other factors.
Franchises
Our cable television systems are operated in New York, New Jersey, Connecticut, Montana, Wyoming, Colorado and Utah under non-exclusive franchise agreements, where required by the franchising authority, with state and/or municipal or county franchising authorities. Although the terms of franchise agreements differ from jurisdiction to jurisdiction, they typically require payment of franchise fees and contain regulatory provisions addressing, among other things, upgrades, service quality, cable service to schools and other public institutions, insurance and indemnity bonds. The terms and conditions of cable franchises vary from jurisdiction to jurisdiction. Franchise authorities generally charge a franchise fee of not more than 5% of certain of our cable service revenues that are derived from the operation of the system within such locality. We generally pass the franchise fee on to our subscribers.
Franchise agreements are usually for a term of 5 to 15 years from the date of grant; most are 10 years. Franchises usually are terminable only if the cable operator fails to comply with material provisions, and then only after complying with substantive and procedural protections afforded by the franchise and federal and state law. As of December 31, 2011, our ten largest franchise areas comprised approximately 44% of our total video customers and of those, two franchises comprising approximately 110,000 video customers, are expired. We are currently operating in these franchise areas under temporary authority. The Company has never lost a franchise for an area in which it operates. When a franchise agreement reaches expiration, a franchising authority may seek to impose new requirements, including requirements to upgrade facilities, to increase channel capacity and to provide additional support for local public, education and government access programming. Negotiations can be protracted, and franchise agreements sometimes expire before a renewal is negotiated and finalized. New York and New Jersey state laws provide that pre-existing franchise terms continue in force during the renewal negotiations until agreement is reached or one or both parties seek to pursue "formal" franchise remedies under federal law. In Montana, Wyoming, Colorado and Utah, the Company's right to operate following the expiration of a franchise for franchises still in renewal negotiations is protected by federal law and/or the consent of the municipality. In approximately 40 municipalities in Montana, Wyoming, and Colorado, the Company operates its cable television systems without a franchise, pursuant to Section 621(b)(2) of the Federal Cable Act, which provides that no franchise is required in communities where the cable operator or its predecessor lawfully provided service as of July 1, 1984 and the municipality has not requested a franchise. Federal law provides significant substantive and procedural protections for cable operators seeking renewal of their franchises. See "Regulation - Cable Television." Despite the Company's efforts and the protections of federal law, it is possible that one or more of the Company's franchises may be subject to termination or non-renewal or we may be required to make significant additional investments in response to requirements imposed in the course of the franchise renewal process.
Optimum Lightpath holds a franchise from New York City which grants rights of way authority to provide telecommunications services throughout the five boroughs. The franchise expired on December 20, 2008 and renewal discussions with New York City are ongoing. We believe we will be able to obtain renewal of the franchise and have received assurance from New York City that the expiration date of the franchise is being treated as extended until a formal determination on renewal is made. Failure to ultimately obtain renewal of the franchise could negatively affect Optimum Lightpath's revenues.
Other
Newsday
Newsday consists of the Newsday daily newspaper, amNew York, Star Community Publishing Group and online websites, including newsday.com and exploreLI.com. Newsday has also developed and deployed applications for iPhone, iPad and Android devices.
Our publications are distributed through both paid and free distribution in various ways across Long Island and the New York metropolitan service area. Our products include:
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the Newsday daily newspaper, which is primarily distributed on Long Island, New York and in the New York metropolitan area
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amNew York, a free daily newspaper distributed in New York City; and
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Star Community Publishing, a group of weekly shopper publications.
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News 12 Networks
The regional news services provided by the Company include News 12 Long Island, News 12 New Jersey, News 12 Westchester, News 12 Connecticut, News 12 The Bronx, News 12 Brooklyn, News 12 Hudson Valley, and News 12 Interactive, as well as News 12 Traffic and Weather (collectively, the "News 12 Networks"). The News 12 Networks include seven 24-hour local news channels and five traffic and weather services dedicated to covering areas within the New York metropolitan area. News 12 Networks is available to all subscribers throughout our footprint in the New York metropolitan area.
MSG Varsity
MSG Varsity is a network dedicated entirely to showcasing high school sports and activities. This suite-of-services enables students to share their stories through a combination of television and interactive platforms. One of the many compelling components of this programming service is the involvement of high schools throughout our footprint as co-producers of MSG Varsity's content, in addition to content created by our professional productions. We have a licensing arrangement with Madison Square Garden permitting us to use "MSG Varsity" as the name of this programming service. MSG Varsity is available to all subscribers throughout our footprint in the New York metropolitan service area.
Clearview Cinemas
Our chain of tri-state area movie theatres, Clearview Cinemas, features family, art and independent films. Its exhibition facilities include Manhattan's famed Ziegfeld Theatre, a frequent and historic host to film premieres and events.
Clearview operates 47 movie theatres containing 243 screens in New York City, Westchester County, Rockland County, Long Island, Pennsylvania and New Jersey.
Cablevision Media Sales Corporation
Cablevision Media Sales Corporation, previously known as Rainbow Advertising Sales Corporation, is a cable television advertising company that sells local and regional commercial advertising time on cable television networks and offers advertisers the opportunity to target specific geographic and demographic audiences.
Investment in Comcast Corporation ("Comcast") Common Stock
We own 21,477,618 shares of Comcast common stock acquired in connection with the sale of certain cable television systems in prior years. All of these shares have been monetized pursuant to collateralized prepaid forward contracts. See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for a discussion of our monetization contracts.
Competition
Cable Television
Our cable television systems operate in an intensely competitive environment, competing with a variety of other video programming providers and delivery systems, including incumbent telephone companies, satellite-delivered signals, internet-based programming and broadcast television signals available to homes within our market by over-the-air reception.
Incumbent Telephone Companies. We face intense competition in the New York metropolitan service area from two incumbent telephone companies. Verizon Communications, Inc. ("Verizon") and AT&T Inc. ("AT&T"), which offer video programming in addition to their voice and high-speed Internet access services to residential customers in this service area, compete across all of our telecommunications products. Verizon has made and may continue to make promotional offers to customers in our New York metropolitan service area at prices lower than ours. The attractive demographics of our service territory make this region a desirable location for investment in video distribution technologies by these companies. Verizon has constructed fiber to the home network plant that passes a significant number of households in our New York metropolitan service area (while difficult to assess, our estimates indicate that Verizon passes more than 45% of these households, based on currently available information). Verizon has obtained authority to provide video service for a majority of these homes passed, on a statewide basis in New Jersey, in numerous local franchises in New York State, including all of New York City, and in a small portion of Connecticut. AT&T offers video service in competition with us in most of our Connecticut service area. This competition impacts our video revenue in these areas and may continue to do so in the future. See "Regulation" for a discussion of regulatory and legislative issues. Verizon and AT&T also market direct broadcast satellite ("DBS") services in our New York metropolitan service area. Each of these companies has significantly greater financial resources than we do.
DBS. We also face competition from DBS service providers in our New York metropolitan service area and in our Optimum West service area. The two major DBS services, DISH Network and DirecTV, are available to the vast majority of our customers. These services each offer over 300 channels of programming, including programming that is substantially similar to the programming that we offer, at competitive prices. Our ability to compete with these DBS services is affected by the quality and quantity of programming available to us and to them. DirecTV has exclusive arrangements with the National Football League that gives it access to programming that we cannot offer.
Other Competitors and Video Programming Sources. Another source of competition for cable television systems is the delivery of video content over the Internet directly to subscribers. In addition, consumers are able to watch such Internet-delivered content on Internet-ready television sets and mobile devices. Cable television systems also face competition from broadcast television stations, entities that make digital video recorded movies and programs available for home rental or sale, satellite master antenna television ("SMATV") systems, which generally serve large multiple dwelling units under an agreement with the landlord and service providers that utilize the public rights-of-way and operate an "open video system" ("OVS"). RCN Corporation ("RCN") is authorized to operate OVS systems that compete with us in New York City. The FCC also has made radio spectrum available for the provision of multichannel video service.
There can be no assurance that these or other existing, proposed, or as yet undeveloped technologies will not become dominant in the future and render our cable television systems less profitable or even obsolete.
High-Speed Data
Our high-speed data offering in our New York metropolitan service area faces intense competition from other providers of high-speed Internet access, including Verizon and AT&T. Our high-speed data offering in our Optimum West service area, also branded Optimum Online, faces competition from CenturyLink, Inc. ("CenturyLink"). In addition, DBS providers have tested the use of certain spectrum to offer satellite-based high-speed data services. Cellular phone providers are also increasing the speeds of their Internet access offerings, and the FCC has made other radio spectrum available for wireless high-speed Internet access.
VoIP
Our VoIP service in our New York metropolitan service area faces intense competition from other providers of voice services, including carriers such as Verizon and AT&T. Our VoIP service in our Optimum West service area, also branded Optimum Voice, faces competition from other carriers, such as CenturyLink. We must also negotiate interconnection agreements with these carriers. Our VoIP services also face competition from other competitive providers of voice services, including wireless voice providers, as well as VoIP providers like Vonage that do not own networks but can provide service to any person with a broadband connection.
Optimum Lightpath and the Bresnan CLECs
Optimum Lightpath operates in the most competitive business telecommunications market in the country and competes against the very largest telecommunications companies - incumbent local exchange carriers ("ILECs"), other competitive local exchange companies ("CLECs") and long distance companies. More specifically, Optimum Lightpath faces substantial competition from Verizon and AT&T, which are the dominant providers of local telephone and broadband services in their respective service areas. We also operate CLECs in each state within the Optimum West service area (the "Bresnan CLECs"), which compete against ILECs and Century Link. ILECs have significant advantages over Optimum Lightpath and the Bresnan CLECs, including greater capital resources, an existing fully operational local network, and long-standing relationships with customers.
While Optimum Lightpath and the Bresnan CLECs compete with the ILECs they also enter into interconnection agreements with ILECs so that their customers can make and receive calls to and from customers served by the ILECs and other telecommunications providers. Federal and state law and regulations require ILECs to enter into such agreements and provide such facilities and services, at prices subject to regulation. The specific price, terms and conditions of each agreement, however, depend on the outcome of negotiations between Optimum Lightpath and the Bresnan CLECs with each ILEC. Agreements are also subject to approval by the state regulatory commissions. Optimum Lightpath has entered into interconnection agreements with Verizon for New York, New Jersey and portions of Connecticut and with AT&T for portions of Connecticut, which have been approved by the respective state commissions. Optimum Lightpath also entered into interconnection agreements with regional carriers in New York and New Jersey. The Bresnan CLECs also have interconnection agreements in their service areas. These agreements, like all interconnection agreements, are for limited terms and are required to be renegotiated, arbitrated and approved subject to the laws in effect at that time.
Optimum Lightpath and the Bresnan CLECs also face competition from one or more competitive access providers and other new entrants in the local telecommunications and data marketplace, and competitive local exchange carriers. In addition to the ILECs and other CLECs, other potential competitors capable of offering voice and broadband services include electric utilities, long distance carriers, microwave carriers, wireless telephone system operators (such as cellular, PCS, and specialized mobile radio), and private networks built by large end users. A continuing trend toward business combinations and alliances in the telecommunications industry may create stronger competition for Optimum Lightpath and the Bresnan CLECs.
Newsday
Newsday operates in a highly competitive market, which may adversely affect advertising and circulation revenues. Newsday faces significant competition for advertising revenue from a variety of media sources. The most direct source of competition is other newspapers that reach a similar audience in the same geographic area. Newsday also faces competition from magazines, shopping guides, yellow pages, websites, mobile-device platforms, broadcast and cable television, radio and direct marketing; particularly if those media sources provide advertising services that could substitute for those provided by Newsday within the same geographic area. Specialized websites for real estate, automobile and help wanted advertising have become increasingly competitive with our newspapers and websites for classified advertising and further development of additional targeted websites is likely.
Newsday and the newspaper industry generally have experienced significant declines in advertising and circulation revenue as circulation and readership levels continue to be adversely affected by competition from new media news formats and less reliance on newspapers by some consumers, particularly younger consumers, as a source of news and classifieds. A prolonged decline in circulation levels would also have a material adverse effect on the rate and volume of advertising revenues.
Clearview Cinemas
Clearview Cinemas, as a smaller regional film exhibitor, competes with a number of large theatre chains and independent theatres with respect to acquiring licenses to films and attracting patrons. The principal competitive factors in obtaining films from distributors include licensing terms, seating capacity, location, prestige of the theatre chain and of the particular theatre, and quality of projection and sound equipment. Most of our competitors are in a stronger competitive position than Clearview Cinemas based upon these factors. We believe that the principal competitive factors in attracting film audiences are the availability of marketable films, the location of theatres, theatre comfort and environment, projection and sound quality, 3D capability, level of service and ticket price. The theatre exhibition industry also faces competition from other motion picture exhibition delivery systems, such as network, syndicated, on-demand and pay television; DVD, and other home video systems; DVD by mail services such as Netflix and Red Box and the availability of films over the Internet.
Regulation
Cable Television
Our cable television systems are subject to extensive federal, state and local regulations. Our systems are regulated under congressionally imposed uniform national guidelines, first set forth in the Cable Communications Policy Act of 1984 and amended by the Cable Television Consumer Protection and Competition Act of 1992 and the Telecommunications Act of 1996 (collectively, the "Federal Cable Act"), as well as under other provisions of the Federal Communications Act of 1934, as amended. The Federal Cable Act, Federal Communications Act, and the regulations and policies of the FCC affect significant aspects of the Company's cable system operations
The following paragraphs describe the existing legal and regulatory requirements that are most significant to our business today.
Franchising. The Federal Cable Act requires cable operators to obtain a franchise in order to provide cable service. Regulatory responsibility for awarding franchises rests with state and local franchising authorities. Federal law prohibits our franchising authorities from granting an exclusive cable franchise to us, and they cannot unreasonably refuse to award an additional franchise to compete with us. In the states in which the Company operates, New York, New Jersey and Connecticut have enacted comprehensive cable regulation statutes that are applicable to cable operators and other providers of video service, such as Verizon and AT&T; however, all of the states in which we operate have consumer protection laws that apply to us. Although the terms of franchise agreements differ from jurisdiction to jurisdiction, they typically require payment of franchise fees and contain regulatory provisions addressing, among other things, upgrades, service quality, cable service to schools and other public institutions, insurance and indemnity bonds. State and local franchising authority, however, must be exercised consistently with the Federal Cable Act, which sets limits on franchising authorities' powers. It restricts franchising authorities from imposing franchise fees greater than 5% of gross revenues from the provision of cable television service, prohibits franchising authorities from requiring us to carry specific programming services, and protects us in seeking franchise renewals by limiting the factors a franchising authority may consider and requiring a due process hearing before denial of renewal.
Pricing and Packaging. The Federal Cable Act and the FCC's rules regulate the rates that cable operators may charge for basic video service, equipment and installation. None of these rules applies to cable systems that the FCC determines are subject to effective competition, or where franchising authorities have chosen not to regulate rates. For our New York metropolitan service area cable television systems, the FCC has made "effective competition" findings in the majority of our communities covering substantially all of our customer base. For our Optimum West service area cable television systems, we have obtained such a ruling covering over 80% of our customer base.
In addition, in areas not subject to effective competition, the Federal Cable Act and the FCC's rules also require us to establish a "basic service" package consisting, at a minimum, of all local broadcast signals that we carry, as well as, if the locality requests, all public, educational and governmental access programming carried by our systems. All subscribers are required to purchase this tier as a condition of gaining access to any other programming that we provide. From time to time, Congress or the FCC consider imposing new pricing or packaging regulations, including proposals requiring cable operators to offer programming services on an unbundled basis rather than as part of a tier or to provide a greater array of tiers to give subscribers the option of purchasing a more limited number of programming services.
Must-Carry/Retransmission Consent. Cable operators are required by the "must carry" provisions of federal law to carry, without compensation, the programming transmitted by most local broadcast stations. Additionally, FCC rules require that we simulcast must-carry stations in analog as long as we carry any programming in analog on our system. Those rules expire on June 12, 2012 unless extended.
Alternatively, local television stations may elect retransmission consent. Stations making such an election give up their must-carry right and negotiate with cable systems the terms on which the cable systems carry their stations. Cable systems generally may not carry a broadcast station that has elected retransmission consent without the station's consent. The terms of retransmission consent agreements frequently include the payment of compensation to the station. A substantial number of local broadcast stations currently carried by our cable television systems have elected to negotiate for retransmission consent. While we currently have retransmission consent agreements with all such broadcast stations, the potential remains for carriage of such stations to be discontinued if any of such agreements is not renewed following its expiration.
In the wake of publicized disputes between several cable operators and broadcasters, several members of Congress have expressed concern that current retransmission consent requirements and practices have had a negative effect on consumers, and stated that it is time for Congress to reexamine those requirements. Other members of Congress have suggested that binding arbitration may be an appropriate means of resolving such disputes. The FCC has initiated a proceeding to consider changes to its rules governing retransmission consent negotiations.
Ownership Limitations. Congress has required the FCC to set a national limit on the number of subscribers a cable company can serve, and a limit on the number of channels on a cable television system that can be occupied by video programming services in which the operator of that system has an attributable interest. The FCC established a national limit of 30% on the number of multichannel video households that a single cable operator can serve, but that limit was invalidated by a federal court in August 2009 and the FCC has not yet established a new limit. The FCC also created a limit of 40% on the number of channels on a cable television system that can be occupied by video programming services in which the operator of that system has an attributable interest, but that rule was invalidated by a federal court in 2001 and the FCC has not yet established a new limit.
Set Top Boxes. The FCC requires cable operators to allow consumers to connect televisions and other consumer electronics equipment with a slot for a security card directly to digital cable television systems to enable receipt of one-way digital programming without need for a set-top box. The FCC also requires cable operators to separate security from non-security functions in new digital set-top boxes deployed on or after July 1, 2007, to permit the manufacture and sale of these devices by third parties. We meet this requirement by providing set top boxes with separable security. Additionally, the FCC has an ongoing proceeding to examine whether it should take further steps to promote a retail market for cable service navigation devices, including requirements to facilitate access to Internet-based video offerings via subscribers' television sets, which may entail further mandates in connection with the support and deployment of set top boxes.
PEG and Leased Access. Localities may require free access to public, educational or governmental ("PEG") channels on our systems. In addition to providing PEG channels, we must make a limited number of commercial leased access channels available to third parties (including parties with potentially competitive video services) at regulated rates. The FCC established a new formula for calculation of the price we can charge for the use of leased access channels that could effectively require us to make at least some leased access channels available at no charge, and established additional leased access customer service standards and procedures for addressing complaints regarding alleged violations of the leased access rules, but these rules were stayed by a federal court and were also rejected by the Office of Management and Budget. The FCC is deciding what action to take with regard to the challenged rules.
Pole Attachments. The FCC has authority to regulate utility company rates for the rental of pole and conduit space used by companies, including cable operators, to provide cable, telecommunications services, and Internet access services, unless states establish their own regulations in this area. With the exception of Wyoming, Montana and Colorado, the states in which we operate have adopted such regulations. Utilities must provide nondiscriminatory access to any pole, conduit or rights-of-way controlled by the utility. The FCC held that the pole attachment rate for commingled services (e.g., cable and Internet access) cannot exceed the rate it has established for telecommunications attachments.
Program Access. In 1992, Congress enacted the "program access" provisions of the Federal Cable Act. These provisions prohibit cable operators from entering into exclusive distribution contracts for satellite-delivered video programming services in which a cable operator holds an attributable interest, such as AMC Networks' services, unless the FCC first approves the exclusive arrangement. This prohibition expires in October 2012, unless extended by the FCC. In 2007, the FCC sought public comment on a proposal to allow a cable operator to petition for repeal of the exclusivity ban prior to 2012 with respect to programming it owns, in markets where the cable operator faces competition from other video distributors. The FCC has taken no action on this proposal. The program access rules also prohibit a cable operator from unduly or improperly influencing the decision of an affiliated satellite-delivered programmer to sell to an unaffiliated distributor and bar the programmer from discriminating in the prices, terms, and conditions of sale of a programming service.
The FCC adopted an order extending the program access rules to terrestrially-delivered programming created by cable operator-affiliated programmers when a showing can be made that the lack of such programming significantly hinders or prevents the distributor from providing satellite cable programming. The new rules authorize the FCC to compel the licensing of such programming in response to a complaint by a multichannel video programming distributor. Applying these rules in response to complaints by AT&T and Verizon brought against us and Madison Square Garden, the FCC in November 2011 ordered Madison Square Garden to license Verizon and AT&T the terrestrially-delivered HD programming of the MSG networks.
Program Carriage. The FCC's program carriage rules govern disputes between cable operators and unaffiliated programming services over the terms of carriage. We may not require an unaffiliated programming service to grant us a financial interest or exclusive carriage rights as a condition of its carriage on our cable television systems, and we may not discriminate against such programming services in the terms and conditions of carriage on the basis of their affiliation or nonaffiliation with us.
In August 2011, the FCC adopted changes to its program carriage rules, which govern disputes between programmers and multichannel video programming distributors ("MVPDs") over carriage terms. The new rules, among other things, clarify what is required for a programmer to establish a prima facie case under the program carriage rules, permit a programmer that is seeking a renewal of a carriage agreement with a MVPD and who brings a complaint under the program carriage rules relating to such renewal to seek a temporary standstill requiring the MVPD to continue carrying the programming network during the pendency of the complaint, and clarify a number of procedural issues. The new rules have been challenged in federal court. In addition, the FCC sought formal comment on proposals for additional changes to its program carriage rules, including a proposal to require programmers and MVPDs to enter into "last best offer" style arbitration when they cannot reach agreement over carriage terms, to expand the scope of the discrimination provision to preclude a vertically-integrated MVPD from discriminating on the basis of a programming vendor's affiliation with another MVPD, and a proposal to allow the FCC to require MVPDs that are found to violate the program carriage rules to pay damages to complainants. On October 12, 2011, Game Show Network ("GSN") filed a program carriage complaint against the Company, alleging that the Company discriminated against it in the terms and conditions of carriage based on GSN's lack of affiliation with the Company. The Company believes GSN's claims are without merit and is defending itself vigorously.
Exclusive Access to Multitenant Buildings. The FCC has prohibited cable operators from entering into or enforcing agreements with owners of multitenant buildings under which the operator is the only MVPD with access to the building. The FCC is considering whether to extend these prohibitions to exclusive marketing and bulk sales arrangements.
Privacy. In the course of providing service, we collect certain information about our subscribers and their use of our services. Our collection and use of personally identifiable information about our subscribers is subject to a variety of Federal and state privacy requirements, including those imposed specifically on cable operators by the Federal Cable Act. The Communications Act sets limits, subject to certain exceptions, on our disclosure of that information to third parties. As cable operators provide interactive and other advanced services, additional privacy considerations may arise. Congress, the Federal Trade Commission, and the U.S. Department of Commerce are all considering whether to adopt regulations that would govern the collection, use, and disclosure of subscriber information in connection with the delivery of advertising to consumers that is customized to their interests. These efforts are currently focused on the privacy implications of online advertising.
Federal Copyright Regulation. We are required to pay copyright royalty fees to receive a statutory compulsory license to carry broadcast television signals. The U.S. Copyright Office has increased our royalty fees from time to time and has, at times, recommended to Congress changes in or elimination of the statutory compulsory licenses for cable television carriage of broadcast signals. Such changes, if made, could adversely affect the ability of our cable television systems to obtain such programming, and could increase the cost of such programming.
Access for Persons with Disabilities. The 21st Century Communications and Video Accessibility Act (the "Accessibility Act") gives the FCC the authority to adopt rules aimed at ensuring that persons with disabilities can more fully access the programming we carry. Pursuant to the Accessibility Act, in August 2011, the FCC reimposed video description requirements on some networks we carry and required cable operators to pass through such video description to subscribers.
Other Regulation. We are subject to various other regulations, including those related to political broadcasting; home wiring; the blackout of certain network, sports and syndicated programming; prohibitions on transmitting obscene programming; limitations on advertising in children's programming; and standards for emergency alerts. The FCC also imposes various technical standards on our operations, including barring cable operators from encrypting service carried on the basic tier, but it is considering amending the ban on encryption to permit encryption in cable systems that have gone all-digital (i.e., those that have eliminated analog service).
High-Speed Data
Regulatory Classification. Broadband Internet access services are classified by the FCC as "information services" for regulatory purposes. The FCC has traditionally subjected information services to a lesser degree of regulation than "telecommunications services," which are offered to the public for a fee on a common carrier basis. Some parties have asked the FCC to reverse this determination and classify broadband Internet access services as "telecommunications services." The FCC thus far has declined to do so. If the FCC changes the classification of these services, our high speed data service could be subject to substantially greater regulation.
Access Obligations and "Net Neutrality." In December 2010, the FCC adopted a net neutrality framework applicable to broadband Internet access service that prohibits wireline broadband providers from blocking lawful content, applications, services, or non-harmful devices, subject to reasonable network management as defined by the rules; bars such providers from unreasonably discriminating in transmitting lawful network traffic over a consumer's broadband Internet access service; and requires them to disclose information about their broadband Internet access service and their network management practices. These rules went into effect in November 2011. The rules have been challenged in federal court. Some parties have advocated that the FCC also require broadband providers to make transmission capacity available to third parties on a resale basis, but the FCC thus far has declined to do so.
Access For Persons With Disabilities. The Accessibility Act expanded requirements for broadband Internet access services by ensuring that persons with disabilities have access to "advanced communications services" ("ACS"), such as electronic messaging and interoperable video conferencing, and extended closed captioning requirements to IP-enabled video services. Pursuant to the Accessibility Act, in October 2011, the FCC adopted regulations governing advanced communications services, and in January 2012, the FCC adopted rules requiring that video programming delivered via Internet Protocol include closed captioning and requiring cable operators distributing such programming to end users to pass through such captions and identify programming that should be captioned under the Accessibility Act.
Other Regulation. Currently, the Federal Cable Act's limitations on our collection and disclosure of cable subscribers' personally identifiable information also apply with respect to broadband Internet access service provided by cable operators. Broadband Internet access service is also subject to other federal and state privacy laws applicable to electronic communications. Additionally, providers of broadband Internet access services must comply with the Communications Assistance for Law Enforcement Act ("CALEA"), which requires providers to make their services and facilities accessible for law enforcement intercept requests. Various other federal and state laws apply to providers of services that are accessible through broadband Internet access service, including copyright laws, prohibitions on obscenity, and a ban on unsolicited commercial e-mail. Online content provided by Cablevision is also subject to these laws.
Other forms of regulation of high-speed Internet access service currently being considered by the FCC, Congress or state legislatures include consumer protection requirements; additional privacy obligations, as noted above; consumer service standards; requirements to contribute to universal service programs; and requirements to protect personally identifiable customer data from theft.
VoIP
The regulatory obligations of VoIP services are the subject of periodic examination and review by FCC, Congress, and state public service commissions. In 2004, for instance, the FCC initiated a generic rulemaking proceeding concerning the legal and regulatory implications of IP-based services, including VoIP services. The FCC has determined that VoIP services with certain characteristics, including cable-provided VoIP services, are interstate services subject to federal rather than state jurisdiction. The FCC's determination was upheld by a federal court of appeals although the court found that the FCC's order did not squarely address the classification of cable-provided VoIP services. Although the FCC has not concluded its generic rulemaking proceeding, it has applied some regulations to VoIP service providers that have certain characteristics (these services are known as "interconnected VoIP services"). Some states have asserted the right to regulate cable VoIP service, including imposing fees to support state universal service programs, on the theory that in-state calls can be accurately distinguished from interstate calls.
Universal Service. Interconnected VoIP services must contribute to the federal fund used to subsidize voice services provided to low income households and rural areas and other communications services provided to schools, libraries, and rural health care providers (the "universal service fund"). The amount of universal service contribution for interconnected VoIP service providers is based on a percentage of revenues earned from end user interstate services. We allocate our end user revenues and remit payments to the universal service fund in accordance with the FCC order. The FCC has ruled that that states may impose state universal service fees on certain types of VoIP providers, which may include cable VoIP providers. In October 2011, the FCC adopted an order that fundamentally revised its federal universal service fund programs to target support to broadband networks and services, as well as voice services provided over broadband.
Local Number Portability. The FCC requires interconnected VoIP service providers and their "numbering partners" to ensure that their customers have the ability to port their telephone numbers when changing providers to or from the interconnected VoIP service. The FCC also has clarified that local exchange carriers and commercial mobile radio service providers have an obligation to port numbers to interconnected VoIP service providers upon a valid port request. Interconnected VoIP service providers are also required to contribute to federal funds to meet the shared costs of local number portability ("LNP") and the costs of North American Numbering Plan Administration.
The FCC is reviewing the implementation of LNP for interconnected VoIP services, including whether all current numbering requirements should be extended to interconnected VoIP services. The FCC has also adopted new rules requiring providers to port telephone numbers for residential customers within 24 hours.
Intercarrier Compensation. In October 2011, the FCC revised the current regime governing payments among providers of voice services for the exchange of calls between and among different networks ("intercarrier compensation") to include interconnected VoIP. The FCC clarified that prospectively, VoIP traffic exchanged with another carrier in time division multiplexing ("TDM") format must be compensated at the interstate rate for toll traffic and at otherwise applicable intercarrier compensation rates for other traffic. Intercarrier compensation for all traffic, including VoIP traffic exchanged in TDM format, will be phased down over several years to a "bill-and-keep" regime, with no compensation between carriers for most traffic exchanged.
Other Regulation. Interconnected VoIP service providers are required to provide enhanced 911 emergency services to their customers; protect customer proprietary network information from unauthorized disclosure to third parties; and comply with disabilities access requirements and service discontinuance obligations. Interconnected VoIP service providers are also required to be compliant with CALEA standards.
Other Services
We may provide other services and features over our cable television system, such as games and interactive advertising, that may be subject to a range of federal, state, and local laws such as privacy and consumer protection regulations. We also maintain various websites that provide information and content regarding our businesses and offer merchandise for sale. The operation of these websites is also subject to a similar range of regulations.
Optimum Lightpath and the Bresnan CLECs
The Telecommunications Act of 1996 was enacted to remove barriers to entry in the local telephone market that continues to be dominated by the Bell Operating Companies ("BOCs") and other ILECs by preempting state and local laws that restrict competition and by requiring ILECs to provide competitors, such as cable operators and long distance companies, with nondiscriminatory access and interconnection to the BOC and ILEC networks and access to certain portions of their communications networks (known as network elements) at cost-based rates. The 1996 Telecommunications Act entitles our Optimum Lightpath and the Bresnan CLEC subsidiaries to certain rights, but as telecommunications carriers, it also subjects them to regulation by the FCC and the states. Their designation as telecommunications carriers also results in other regulations that may affect them and the services they offer.
Interconnection and Intercarrier Compensation. The 1996 Telecommunications Act requires telecommunications carriers to interconnect directly or indirectly with other telecommunications carriers. Under the FCC's intercarrier compensation rules, Optimum Lightpath and the Bresnan CLECs are entitled, in some cases, to compensation from carriers when they terminate their originating calls on their networks and in other cases are required to compensate another carrier for utilizing that carrier's network to terminate traffic. The FCC has adopted limits on the amounts of compensation that may be charged for certain types of traffic. As noted above, the FCC has revised its intercarrier compensation rules to phase intercarrier compensation rates down over several years to eventually establish a "bill-and-keep" intercarrier compensation regime, where most traffic is exchanged between carriers without compensation.
Universal Service. Optimum Lightpath and the Bresnan CLECs are required to contribute to federal and state universal service funds. Currently, the FCC assesses them for payments and other subsidies on the basis of a percentage of interstate revenue they receive from certain customers. The FCC limits the amount carriers may place on universal service line items on their customer bills. Optimum Lightpath is required to contribute to the New York Targeted Accessibility Fund ("TAF"), which includes state support for universal service. State universal service funds have not been established in other states in which Optimum Lightpath operates. The Bresnan CLECs are required to contribute to state universal service funds in Colorado, Utah and Wyoming. No state universal service fund has been established in Montana. As noted above, the FCC has made fundamental changes to its federal universal service fund programs, reorienting universal service support programs to the provision of broadband services through a new Connect America Fund ("CAF").
Other Regulation. Optimum Lightpath and the Bresnan CLECs are also subject to other FCC requirements in connection with the interstate long distance services they provide, including protecting customer proprietary network information from unauthorized disclosure to third parties; meeting certain notice requirements in the event of service termination; compliance with disabilities access requirements; compliance with CALEA standards; and the payment of fees to fund local number portability administration and the North American Numbering Plan. Their communications with their customers are also subject to FCC, Federal Trade Commission, and state regulations on telemarketing and the sending of unsolicited commercial e-mail and fax messages.
State Regulation. Optimum Lightpath and the Bresnan CLECs are also subject to regulation by the state commissions in each state in which they provide service. In order to provide service, they must seek approval from the state regulatory commission or be registered to provide service in each state in which they operate and may at times require local approval to construct facilities. Optimum Lightpath is currently authorized and provides service in New York, Connecticut and New Jersey; the Bresnan CLECs are currently authorized or registered and provide service in Colorado, Montana, Utah, and Wyoming. Regulatory obligations vary from state to state and include some or all of the following requirements: filing tariffs (rates, terms and conditions); filing operational, financial, and customer service reports; seeking approval to transfer the assets or capital stock of the telephone company; seeking approval to issue stocks, bonds and other forms of indebtedness of the telephone company; reporting customer service and quality of service requirements; making contributions to state universal service support programs; geographic build-out; and other matters relating to competition.
Programming and Entertainment
Cable television programming networks, such as the News 12 Networks and MSG Varsity, are regulated by the FCC in certain respects. These regulations include requirements that certain of the Company's networks must provide closed-captioning of programming for the hearing impaired.
Wireless Licenses
Through subsidiaries, the Company holds interests in two sets of wireless licenses. First, an indirect subsidiary of the Company owns a 90% interest in MVDDS licenses in 45 metropolitan areas including New York, Miami, Los Angeles, and Cleveland. These licenses, which permit the use of one-way video and data services, expire in September 2014. We are required to demonstrate that we are providing "substantial service" in order to renew the licenses. We are currently using these licenses to provide service to several hundred customers in Florida. The FCC's rules prohibit us from holding more than a 20% interest in the MVDDS license in the New York market because of common ownership with our cable systems there, but we have obtained a waiver of this restriction through the end of the license term. Second, a wholly-owned subsidiary of Bresnan Cable holds three licenses that permit us to provide wireless broadband services in parts of Montana and Wyoming. In order to fully retain the licenses, we are required to meet specified coverage requirements by June 2013 and at the end of the license term in June 2019. We are not currently using these licenses to provide commercial service.
Employees and Labor Relations
As of December 31, 2011, we had 15,451 full-time, 1,593 part-time and 771 temporary employees of which 580, 583 and 44, respectively, were covered under collective bargaining agreements. We believe that our relations with employees are satisfactory.
On January 26, 2012, a majority of the Company's technician workforce in Brooklyn, New York voted to be represented by the Communication Workers of America. The total unit of employees is comprised of 282 full time workers. We expect to engage in negotiations over a collective bargaining agreement.
Available Information and Website
We make available free of charge, through our investor relations section at our website, http://www.cablevision.com/investor/index.jsp, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K reports and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the U.S. Securities and Exchange Commission ("SEC").
The public may read and copy any materials the Company files with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC 20549. In addition, the public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at its web site http://www.sec.gov.
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Item 1A.
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The financial markets are subject to volatility and disruptions, which have in the past, and may in the future, adversely affect our business, including by affecting the cost of new capital, our ability to refinance our scheduled debt maturities and our ability to meet our other obligations as they come due. The economic downturn has adversely affected our business and may continue to do so.
The capital and credit markets experience volatility and disruption. At times, the markets have exerted extreme downward pressure on stock prices and upward pressure on the cost of new debt capital and have severely restricted credit availability for most issuers.
The market disruptions have been accompanied by a broader economic downturn, which has led to lower demand for our products, such as cable television services and entertainment, as well as lower levels of television and newspaper advertising, and increased incidence of customers' inability to pay for the services we provide. Continuation or worsening of these conditions may further adversely impact our results of operations, cash flows and financial position.
We rely on the capital markets, particularly for offerings of debt securities, as well as the credit markets, to meet our financial commitments and liquidity needs. Disruptions and/or volatility in the capital and credit markets could adversely affect our ability to refinance on satisfactory terms, or at all, our scheduled debt maturities and could adversely affect our ability to draw on our revolving credit facilities.
A continuation or worsening of the economic downturn may impact our ability to comply with the covenants and restrictions in our indentures, credit facilities and agreements governing our other indebtedness and may impact our ability to pay our indebtedness as it comes due. If we do not repay our debt obligations when they become due and do not otherwise comply with the covenants and restrictions in our indentures, credit facilities and agreements governing our other indebtedness, we would be in default under those agreements, and the debt incurred under those agreements could then be declared immediately due and payable. In addition, any default under our indentures, credit facilities or agreements governing our other indebtedness could lead to an acceleration of debt under other debt instruments that contain cross acceleration or cross-default provisions. If the indebtedness under our indentures, credit facilities and our other debt instruments were accelerated, we would not have sufficient assets to repay amounts due thereunder. To avoid a default, we could be required to defer capital expenditures, sell assets, seek strategic investments from third parties or reduce or eliminate dividend payments and stock repurchases or other discretionary uses of cash. However, if such measures were to become necessary, there can be no assurance that we would be able to sell sufficient assets or raise strategic investment capital sufficient to meet our scheduled debt maturities as they come due. In addition, any significant reduction in necessary capital expenditures could adversely affect our ability to retain our existing customer base and obtain new customers, which would adversely affect our future operating results, cash flows and financial position.
Disruptions in the capital and credit markets can also result in higher interest rates on publicly issued debt securities and increased costs under credit facilities. Such disruptions would increase our interest expense, adversely affecting our results of operations and financial position.
Our access to funds under our revolving credit facilities is dependent on the ability of the financial institutions that are parties to those facilities to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our revolving credit facilities are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others.
Longer term, volatility and disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation of financial institutions, reduced alternatives or failures of significant financial institutions could adversely affect our access to the liquidity needed for our businesses. Such disruptions could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged.
We have substantial indebtedness and we are highly leveraged, which reduces our capability to withstand adverse developments or business conditions.
We have incurred substantial amounts of indebtedness to finance operations, to upgrade our cable plant and acquire other cable television systems, programming networks, sources of programming and other businesses. We also have incurred substantial indebtedness in order to offer our new or upgraded services to our current and potential customers and to pursue activities outside our core businesses such as our acquisitions of an electronics retailer, Clearview Cinemas, Newsday and our development of Rainbow DBS. In 2006, CSC Holdings incurred $3.5 billion of debt, approximately $3.0 billion of which was distributed to Cablevision to fund a $10 per share dividend on its common stock and approximately $414 million of which was used to repay existing indebtedness, including interest, fees and expenses. In December 2010, we incurred approximately $1.4 billion of indebtedness to finance our acquisition of Bresnan Cable. We may continue to incur substantial amounts of debt in the future. At December 31, 2011, our total indebtedness aggregated approximately $11.2 billion. Because of our substantial indebtedness, we are highly leveraged and we will continue to be highly leveraged. This means that our payments on our borrowings are significant in relation to our revenues and cash flow. This leverage exposes us to significant risk in the event of downturns in our businesses (whether through competitive pressures or otherwise), in our industries or in the economy generally, because although our cash flows would decrease in this scenario, our required payments in respect of indebtedness would not.
We have in past periods incurred substantial losses from continuing operations, we have a significant stockholders' deficiency, and we may in the future incur net losses which could be substantial, which may reduce our ability to raise needed capital.
We have in the past reported losses from continuing operations and we may in the future incur significant operating losses. Significant operating losses may limit our ability to raise needed financing, or to do so on favorable terms, as such losses could be taken into account by potential investors, lenders and the organizations that issue investment ratings on our indebtedness.
A lowering or withdrawal of the ratings assigned to our debt securities by ratings agencies may further increase our future borrowing costs and reduce our access to capital.
The debt ratings for our debt securities are below the "investment grade" category, which results in higher borrowing costs as well as a reduced pool of potential purchasers of our debt as some investors will not purchase debt securities that are not rated in an investment grade rating category. In addition, there can be no assurance that any rating assigned will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency, if in that rating agency's judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. A lowering or withdrawal of a rating may further increase our future borrowing costs and reduce our access to capital.
Our ability to meet our obligations under our indebtedness may be restricted by limitations on our subsidiaries' ability to send us funds.
Cablevision's sole subsidiary is CSC Holdings. CSC Holdings' principal subsidiaries include various entities that own cable television systems and other businesses. Cablevision's ability to pay interest on and repay principal of its outstanding indebtedness is dependent upon the operations of CSC Holdings and its subsidiaries and the distributions or other payments of the cash they generate to Cablevision in the form of distributions, loans or advances. Similarly, CSC Holdings' ability to pay interest and principal on its indebtedness is dependent in part on distributions from its subsidiaries. The Company's subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due on the Company's indebtedness or to make any funds available to the Company to do so. Bresnan Cable is a party to a credit agreement and indenture that contain various financial and operating covenants that restrict the payment of dividends or other distributions. In addition, Newsday LLC is a party to a credit agreement that contains various financial and operating covenants that restrict the payment of dividends or other distributions. In addition, our subsidiaries' creditors, including trade creditors, in the event of a liquidation or reorganization of any subsidiary, would be entitled to a claim on the assets of such subsidiaries, including any assets transferred to those subsidiaries, prior to any of our claims as a stockholder and those creditors are likely to be paid in full before any distribution is made to us. To the extent that we are a creditor of a subsidiary, our claims could be subordinated to any security interest in the assets of that subsidiary and/or any indebtedness of that subsidiary senior to that held by us.
Our ability to incur debt and the use of our funds are limited by significant restrictive covenants in financing agreements.
Our credit facilities and debt instruments contain various financial and operating covenants that, among other things, require the maintenance of financial ratios and restrict the relevant borrower's ability to incur debt from other sources and to use funds for various purposes, including investments in some subsidiaries. Violation of these covenants could result in a default that would permit the parties who have lent money under such credit facilities and such other debt instruments to:
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restrict the ability to borrow undrawn funds under such credit facilities, and
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require the immediate repayment of the borrowings thereunder.
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These events would be likely to have a material adverse effect on the value of our debt and equity securities.
We will need to raise significant amounts of funding over the next several years to fund capital expenditures, repay existing obligations and meet other obligations and the failure to do so successfully could adversely affect our business. We may also engage in extraordinary transactions that involve the incurrence of large amounts of debt.
Our business is very capital intensive. Operating and maintaining our cable television plant requires significant amounts of cash payments to third parties. Capital expenditures for our businesses were $814.8 million, $823.2 million and $737.5 million, in 2011, 2010 and 2009, respectively, and primarily include payments for customer premises equipment, such as new digital video cable boxes and modems, as well as infrastructure and capital expenditures related to our cable and Optimum Lightpath telecommunications networks, in addition to the capital requirements of our other businesses. Historically, we have made substantial investments in the development of new and innovative programming options and other service offerings for our customers as a way of differentiating ourselves from our competitors. We currently anticipate a significant increase in our level of capital expenditures to enhance our service offerings. We have substantial future capital commitments in the form of long-term contracts that require substantial payments over a long period of time. We will not be able to generate sufficient cash internally to fund anticipated capital expenditures, meet these obligations and repay our indebtedness at maturity. Accordingly, we will have to do one or more of the following:
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refinance existing obligations to extend maturities,
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raise additional capital, through debt or equity issuances or both,
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cancel or scale back current and future spending programs, or
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sell assets or interests in one or more of our businesses.
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However, you should not assume that we will be able to refinance existing obligations or raise any required additional capital or to do so on favorable terms. Borrowing costs related to future capital raising activities may be significantly higher than our current borrowing costs and we may not be able to raise additional capital on favorable terms, or at all, if unsettled conditions in financial markets continue to exist. If we are unable to pursue our current and future spending programs, we may be forced to cancel or scale back those programs. Our choice of which spending programs to cancel or reduce may be limited. Failure to successfully pursue our capital expenditure and other spending plans could materially and adversely affect our ability to compete effectively. It is possible that in the future we may also engage in extraordinary transactions and such transactions could result in the incurrence of substantial additional indebtedness.
Our financial performance may be harmed by the significant and credible risks of competition in our Telecommunications Services segment.
Competition could adversely affect our business and financial results and our ability to service our debt. This risk is heightened by the rapid technological change inherent in our business and the need to acquire, develop and adopt new technology to differentiate our products and services from our competitors. We may need to anticipate far in advance which technology we should use for the development of new products and services or the enhancement of existing products and services. In addition, changes in the regulatory and legislative environments may result in changes to the competitive landscape.
In our New York metropolitan service area, we face intense competition from two incumbent telephone companies, Verizon and AT&T, which offer video programming in addition to their voice and high-speed Internet access services, and compete across all of our telecommunications products. Verizon has constructed fiber to the home network plant that passes a significant number of households in our New York metropolitan service area (while difficult to assess, our estimates indicate that Verizon passes more than 45% of the households, based on currently available information). Verizon has obtained authority to provide video service for a majority of these homes passed, on a statewide basis in New Jersey, in numerous local franchises in New York State, including all of New York City, and in a small portion of Connecticut. AT&T offers video service in competition with us in most of our Connecticut service area. Each of these companies has significantly greater financial resources than we do. The attractive demographics of our New York metropolitan service territory make this region a desirable location for investment in video distribution technologies by these companies. Verizon has made and may continue to make promotional offers to customers in our New York metropolitan service area at prices lower than ours. This intense competition affects our ability to add or retain customers and creates pressure upon our pricing of telecommunications services and our ability to expand services purchased by our customers. Verizon and AT&T have their own wireless phone facilities, and may expand their product offerings to include wireless phone services. Because we do not have wireless phone facilities, our inability to provide a competitive product offering could adversely affect our competitive position. We also compete in our service areas with the two major providers of DBS service in the United States, DISH Network and DirecTV, each with significantly higher numbers of subscribers than we have. Another source of competition for cable television systems is the delivery of video content over the Internet directly to subscribers. In addition, consumers are able to watch such Internet-delivered content on Internet-ready television sets and mobile devices. Some of these services charge a nominal or no fee for access to their content. The availability of these services could adversely affect customer demand for our video services, including premium and on-demand services. Cable television systems also face competition from broadcast television stations, entities that make digital video recorded movies and programs available for home rental or sale, SMATV systems, which generally serve large multiple dwelling units under an agreement with the landlord and service providers that utilize the public rights-of-way and operate an OVS system. RCN is authorized to operate OVS systems that compete with us in New York City. The FCC also has made radio spectrum available for the provision of multichannel video service.
Our high-speed data offering to consumers faces intense competition from other providers of high-speed Internet access including services offered by local telephone providers such as Verizon, AT&T in our New York metropolitan service area and CenturyLink in our Optimum West service area. In addition, DBS providers have tested the use of certain spectrum to offer satellite-based high-speed data services. Cellular phone providers are also increasing the speeds of their Internet access offerings, and the FCC has made other radio spectrum available for wireless high-speed Internet access.
Our voice service offerings to consumers face intense competition from other providers of voice services, including carriers such as Verizon, AT&T and CenturyLink and other competitive providers of voice services, as well as VoIP providers like Vonage.
Optimum Lightpath also competes with Verizon, AT&T and other competitive local exchange carriers and long distance companies. We also operate CLECs in each state within the Optimum West service area (the "Bresnan CLECs"), which compete against ILECs and Century Link. ILECs have significant advantages over Optimum Lightpath and the Bresnan CLECs, including greater capital resources, an existing fully operational local network, and long-standing relationships with customers. To the extent these competitors decide to reduce their prices, future success of our Optimum Lightpath business and our Bresnan CLECs may be negatively impacted. The trend in business communications has been shifting from a wired voice medium to a wireless data medium. This trend could also negatively impact the future growth of Optimum Lightpath if it were to accelerate.
We face significant risks as a result of rapid changes in technology and consumer expectations and behavior
The Telecommunications services industry has undergone significant technological development over time and these changes continue to affect our business. Such changes have had, and will continue to have, a profound impact on consumer expectations and behavior. Our video business faces technological change risks as a result of the continuing development of new and changing methods for delivery of programming content such as Internet based delivery of movies, shows and other content which can be viewed on televisions, wireless devices and other developing mobile devices. A proliferation of delivery systems for video content can adversely affect our ability to attract and retain subscribers and the demand for our services and it can also decrease advertising demand on our delivery systems. Our high-speed data business faces technological challenges from rapidly evolving wireless Internet solutions. Our voice offerings face technological developments in the proliferation of voice delivery systems including those based on Internet and wireless delivery. If we do not develop or acquire and successfully implement new technologies, we will limit our ability to compete effectively for subscribers, content and advertising. In addition, we may be required to make material capital and other investments to anticipate and to keep up with technological change. These challenges could adversely affect our business.
Our Newsday business has suffered operating losses historically and such losses are expected to continue in the future.
Newsday suffered operating losses of $31.7 million for the year ended December 31, 2011 and $12.6 million for each of the years ended December 31, 2010 and 2009, which included impairments of indefinite-lived intangible assets, and certain long-lived intangible assets of $11.0 million, $7.8 million, and $2.0 million in 2011, 2010 and 2009, respectively. Operating losses are expected to continue in the future. In connection with the formation of a company through which we have an approximate 97.2% interest in Newsday, its subsidiary, Newsday LLC incurred $650.0 million of indebtedness under a senior secured loan facility and $630.0 million of the proceeds of these borrowings were paid to Newsday's former owner, Tribune Company. These borrowings are guaranteed by CSC Holdings. In addition, at December 31, 2011, Newsday Holdings LLC held $753.7 million aggregate principal amount of senior notes issued by Cablevision. Newsday LLC has agreed that it will hold Cablevision or CSC Holdings senior notes or cash balances in excess of the amount of borrowings outstanding under its senior secured credit facility until it matures.
Demand for advertising, increased competition and declines in circulation affect Newsday.
A majority of the revenues of our Newsday business are from advertising. Expenditures by advertisers generally reflect economic conditions and declines in national and local economic conditions affect demand for advertising and the levels of advertising revenue for Newsday.
Newsday operates in a highly competitive market which may adversely affect advertising and circulation revenues. Newsday faces significant competition for advertising revenue from a variety of media sources. The most direct source of competition is other newspapers that reach a similar audience in the same geographic area. Newsday also faces competition from magazines, shopping guides, yellow pages, websites, mobile-device platforms, broadcast and cable television, radio and direct marketing; particularly if those media sources provide advertising services that could substitute for those provided by Newsday within the same geographic area. Specialized websites for real estate, automobile and help wanted advertising have become increasingly competitive with our newspapers and websites for classified advertising and further development of additional targeted websites is likely.
Newsday and the newspaper industry generally have also experienced significant declines in advertising and circulation revenue as circulation and readership levels continue to be adversely affected by competition from new media news formats and less reliance on newspapers by some consumers as a source of news, particularly younger consumers. A prolonged decline in circulation would have a material adverse effect on the rate and volume of advertising revenues.
A significant amount of our book value consists of intangible assets that may not generate cash in the event of a voluntary or involuntary sale.
At December 31, 2011, we reported approximately $7.1 billion of consolidated total assets, of which $2.0 billion were intangible. Intangible assets include franchises from city and county governments to operate cable television systems and goodwill. While we believe that the carrying values of our intangible assets are recoverable, you should not assume that we would receive any cash from the voluntary or involuntary sale of these intangible assets, particularly if we were not continuing as an operating business. We urge you to read carefully our consolidated financial statements contained herein, which provide more detailed information about these intangible assets.
Programming costs of our cable television systems are increasing and we may not have the ability to pass these increases on to our subscribers. Disputes with programmers can adversely affect our relationship with subscribers and lead to subscriber losses.
Programming costs paid by our cable television systems are one of our largest categories of expenses. These costs have increased rapidly and are expected to continue to increase, particularly with respect to costs for sports programming and broadcast networks. We may not be able to pass programming cost increases on to our subscribers due to the increasingly competitive environment. If we are unable to pass these increased programming costs on to our subscribers, our operating results would be adversely affected.
We attempt to control our programming costs and, therefore, the cost of our video services to our customers by negotiating favorable terms for the renewal of our affiliation agreements with programmers. On certain occasions in the past, such negotiations have led to disputes with programmers that have resulted in temporary periods where we were not carrying a particular programming service or services. Such disputes may inconvenience some of our subscribers and can lead to customer dissatisfaction and, in certain cases, the loss of customers.
Our business is subject to extensive government regulation and changes in current or future laws or regulations could restrict our ability to operate our business as we currently do.
Our cable television and other telecommunications businesses are heavily regulated and operate pursuant to detailed statutory and regulatory requirements at the federal, state and local level. See "Item 1. Business - Regulation". In certain of our service areas, state or local franchising authorities extensively regulate the basic rates we may charge our customers for certain of our video services in accordance with FCC rules. The FCC and state and local governments also regulate us in other ways that affect the daily conduct of our video delivery and video programming businesses, our voice business and our high-speed Internet access business. In addition, our businesses are dependent upon governmental authorizations to carry on their operations. See discussion under "Item 1. Business -Regulation".
Legislative enactments, court actions and federal, state, and local regulatory proceedings frequently modify the terms under which we offer our services and operate. The results of these legislative, judicial and administrative actions may materially adversely affect our business or results of operations. New requirements giving third parties access to our network or other assets, for example, could materially affect our ability to compete. Changes to regulations from which we benefit and on which we depend to run our businesses also could materially affect our operations. Any action with respect to these or other matters by the courts, Congress, the FCC, the states of New York, New Jersey, Connecticut, Utah, Colorado, Wyoming or Montana, or concerted action by local regulators, the likelihood or extent of which we cannot predict, could have a material adverse effect on us.
Our current franchises are non-exclusive and our franchisors need not renew our franchises.
Our cable television systems are operated primarily under non-exclusive franchise agreements with state or municipal government franchising authorities, with the latter in some states also subject to approval of state regulatory authorities. Consequently, our business is dependent on our ability to obtain and renew our franchises. Although we have never lost a franchise as a result of a failure to obtain a renewal, our franchises are subject to non renewal or termination under some circumstances. In some cases in New York and New Jersey, franchise agreements have not been renewed by the expiration date, and we operate under temporary authority routinely granted from the state while negotiating renewal terms with the franchise authorities. As of December 31, 2011, our ten largest franchise areas comprised approximately 44% of our total video customers and of those, two franchises, Newark and Yonkers, comprising approximately 110,000 video customers, are expired. We are currently operating in these franchise areas under temporary authority. On December 15, 2011, the City of Yonkers and the Company executed a 10-year renewal agreement, which will become effective when approved by the New York State Public Service Commission; such approval is expected in the first half of 2012. In Montana, Wyoming, Colorado and Utah, franchises must be renewed prior to their expiration date, subject to the protections of federal law. Neither the Company nor its predecessor in those states, Bresnan Communications, has ever lost a franchise.
A portion of our workforce is represented by labor unions. Collective bargaining agreements can increase our expenses. Labor disruptions could adversely affect our operations.
As of December 31, 2011, approximately 580 of our full-time employees were covered by collective bargaining agreements. On January 26, 2012, a majority of the Company's technician workforce in Brooklyn, New York voted to be represented by the Communication Workers of America. The total unit of employees is comprised of 282 full time workers. These employees are not yet covered by a collective bargaining agreement. Collective bargaining agreements with the Communication Workers of America covering this group of employees or agreements with other unionized employees may increase our expenses. In addition, any disruptions to our operations due to labor related problems could have an adverse effect on our business. We cannot predict whether labor unions may be successful in organizing other portions of our workforce or what additional costs we could incur as a result.
We rely on network and information systems for our operations, and a disruption or failure of those systems may disrupt our operations.
We have in place layered and multi-threaded security systems designed to protect against intentional or unintentional disruption, failure, misappropriation or corruption of our network and information systems. A problem of this type might be caused by events such as computer hacking, computer viruses, worms and other destructive or disruptive software, "cyber attacks" and other malicious activity, as well as natural disasters, power outages, terrorist attacks and similar events. Such events could have an adverse impact on us and our customers, including degradation of service, service disruption, excessive call volume to call centers and damage to our plant, equipment and data. In addition, our future results could be adversely affected due to the theft, destruction, loss, misappropriation or release of confidential customer data or intellectual property. Operational or business delays may result from the disruption of network or information systems and the subsequent remediation activities. Moreover, these events may create negative publicity resulting in reputation or brand damage with customers.
We have expended, and expect to continue to spend in the future, significant amounts to protect our network and information systems; however, there can be no assurance that these efforts will prevent any of the problems identified above.
The MSG Distribution and the AMC Network Distribution could result in significant tax liability.
We have received private letter rulings from the IRS to the effect that, among other things, the MSG Distribution and the AMC Networks Distribution and certain related transactions, will qualify for tax-free treatment under the Internal Revenue Code of 1986, as amended (the "Code").
Although a private letter ruling from the IRS generally is binding on the IRS, if the factual representations or assumptions made in the letter ruling request are untrue or incomplete in any material respect, we will not be able to rely on the ruling. Furthermore, the IRS will not rule on whether a distribution satisfies certain requirements necessary to obtain tax-free treatment under the Code. Rather, the ruling is based upon our representations that these conditions have been satisfied, and any inaccuracy in such representations could invalidate the ruling.
If the MSG Distribution or the AMC Networks Distribution does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, we would be subject to tax as if we had sold the Madison Square Garden common stock or AMC Networks common stock, as the case may be, in a taxable sale for its fair value. Cablevision stockholders would be subject to tax as if they had received a distribution equal to the fair value of Madison Square Garden common stock or AMC Networks common stock, as the case may be, that was distributed to them, which generally would be treated as a taxable dividend. It is expected that the amount of any such taxes to Cablevision's stockholders and us would be substantial.
The tax rules applicable to the AMC Networks Distribution may restrict us from engaging in certain corporate transactions or from raising equity capital beyond certain thresholds for a period of time after the AMC Networks Distribution, as applicable.
To preserve the tax-free treatment of the AMC Networks Distribution to AMC Network's and Cablevision's stockholders, under a tax disaffiliation agreement between Cablevision and AMC Networks, for the two-year period following the AMC Networks Distribution, we will be subject to restrictions with respect to our activities, including restrictions relating to certain issuances or repurchases of Cablevision's common stock, asset sales, mergers and liquidations.
These restrictions may limit Cablevision's ability during that two-year period to pursue strategic transactions of a certain magnitude that involve the issuance or acquisition of Cablevision's stock or engage in new businesses or other transactions that might increase the value of our business. These restrictions may also limit our ability to raise significant amounts of cash through the issuance of stock, especially if Cablevision's stock price were to suffer substantial declines, or through the sale of certain of our assets.
We may not enjoy all of the benefits of scale that we achieved prior to the MSG Distribution and the AMC Networks Distribution.
Prior to the MSG Distribution and the AMC Networks Distribution, we shared benefits of scope and scale in costs and expenses resulting from various factors including financial reporting, costs associated with complying with federal securities laws (including compliance with the Sarbanes-Oxley Act of 2002), tax administration, legal and human resources related functions. While we entered into agreements with Madison Square Garden and AMC Networks that govern a number of our commercial and other relationships after the MSG Distribution and AMC Networks Distribution, those arrangements do not fully capture the benefits we enjoyed as a result of common ownership prior thereto. In addition, in connection with the AMC Networks Distribution, we terminated an agreement pursuant to which we received a management fee that was based upon revenues of the AMC and WE tv networks. This fee, which amounted to approximately $14.0 million for the six months ended June 30, 2011, was previously included in the operating income of our Telecommunications Services segment and has been reclassified to discontinued operations. As a result of the MSG Distribution and the AMC Networks Distribution, we now carry a relatively larger share of our administrative and other overhead expenses. The loss of these benefits as a consequence of the MSG Distribution and AMC Networks Distribution could have an adverse effect on our results of operations and financial condition.
In connection with the MSG Distribution and AMC Networks Distribution, we will rely on Madison Square Garden's and AMC Networks' performance under various agreements
In connection with the MSG Distribution and the AMC Networks Distribution, we entered into various agreements with Madison Square Garden and AMC Networks, respectively, including a distribution agreement, a tax disaffiliation agreement, a transition services agreement, an employee matters agreement and certain related party arrangements. These agreements govern our relationship with those entities subsequent to the distributions and provide for the allocation of employee benefits, taxes and certain other liabilities and obligations attributable to periods prior to the distributions. These agreements also include arrangements with respect to transition services and a number of on-going commercial relationships. The distribution agreements include agreements that we and those entities agree to provide each other with indemnities with respect to liabilities arising out of the businesses we transferred to those entities. We are also party to other arrangements with Madison Square Garden and AMC Networks, such as affiliation agreements covering the MSG networks and Fuse, AMC, WE tv, IFC and Sundance Channel. We and these entities will rely on the other to perform its obligations under these agreements. If Madison Square Garden or AMC Networks were to breach or to be unable to satisfy its material obligations under these agreements, including a failure to satisfy its indemnification obligations, we could suffer operational difficulties or significant losses.
We share certain key executives and directors with Madison Square Garden and AMC Networks, which means those executives will not devote their full time and attention to our affairs.
As a result of the AMC Networks Distribution, our Chairman, Charles F. Dolan, serves as Executive Chairman of AMC Networks. As a result of the MSG Distribution, our President and Chief Executive Officer, James L. Dolan, also serves as the Executive Chairman of Madison Square Garden and our Vice Chairman, Hank J. Ratner, serves as President and Chief Executive Officer of Madison Square Garden. This arrangement is similar to the historical situation whereby Messrs. Dolan and Ratner have served as senior officers of Madison Square Garden and Charles F. Dolan provided senior leadership to our Rainbow segment. As a result, since the MSG Distribution and AMC Networks Distribution, three senior officers of the Company are not devoting their full time and attention to the Company's affairs. In addition, eight members of our Board of Directors are also directors of Madison Square Garden and eight members of our Board of Directors are also directors of AMC Networks.
Our overlapping directors and executive officers may result in the diversion of corporate opportunities and other potential conflicts.
Our Board of Directors has adopted a policy that acknowledges that directors and officers of the Company may also be serving as directors, officers, employees or agents of Madison Square Garden or AMC Networks and their respective subsidiaries and that the Company may engage in material business transactions with such entities. The Company renounced its rights to certain business opportunities and the new policy provides that no director or officer of the Company who is also serving as a director, officer, employee or agent of Madison Square Garden or AMC Networks and their respective subsidiaries will be liable to the Company or its stockholders for breach of any fiduciary duty that would otherwise exist by reason of the fact that any such individual directs a corporate opportunity (other than certain limited types of opportunities set forth in the policy) to Madison Square Garden or AMC Networks or any of their respective subsidiaries instead of the Company, or does not refer or communicate information regarding such corporate opportunities to the Company. The policy expressly validates certain contracts, agreements, assignments and transactions (and amendments, modifications or terminations thereof) between the Company and Madison Square Garden or AMC Networks and/or any of their respective subsidiaries and, to the fullest extent permitted by law, provides that the actions of the overlapping directors or officers in connection therewith are not breaches of fiduciary duties owed to the Company, any of its subsidiaries or their respective stockholders.
We are controlled by the Dolan family. As a result of their control of us, the Dolan family has the ability to prevent or cause a change in control or approve, prevent or influence certain actions by us.
Cablevision has two classes of common stock:
|
|
·
|
Class B common stock, which is generally entitled to ten votes per share and is entitled collectively to elect 75% of the Cablevision Board of Directors, and
|
|
|
·
|
Class A common stock, which is entitled to one vote per share and is entitled collectively to elect the remaining 25% of the Cablevision Board of Directors.
|
As of February 14, 2012, the Dolan family, including trusts for the benefit of members of the Dolan family, collectively beneficially owned all of Cablevision's Class B common stock, less than 2% of Cablevision's outstanding Class A common stock and approximately 72% of the total voting power of all the outstanding Cablevision common stock. Of this amount, our Chairman, Charles F. Dolan, beneficially owned approximately 59% of Cablevision's outstanding Class B common stock, less than 1% of Cablevision's outstanding Class A common stock and approximately 42% of the total voting power of all the outstanding Cablevision common stock. The members of the Dolan family holding Class B common stock have executed a voting agreement that has the effect of causing the voting power of the Class B stockholders to be cast as a block with respect to the election of the directors elected by the Class B stockholders and any change of control transaction. The Dolan family is able to prevent a change in control of Cablevision and no person interested in acquiring Cablevision will be able to do so without obtaining the consent of the Dolan family. In the past, the Dolan family has made proposals to take Cablevision private, including a 2007 transaction that was submitted to a vote of Cablevision's stockholders but that did not receive shareholder approval. In each such case, the Dolan family stated that they were only interested in pursuing their proposed transaction and would not sell their stake in Cablevision. There can be no assurances that the Dolan family will not propose, undertake or consummate a similar transaction in the future.
As a result of the Dolan family's ownership of all of the Class B common stock, the Dolan family has the power to elect all the directors of Cablevision subject to election by holders of Class B common stock. Those directors constitute a majority of Cablevision's Board of Directors. In addition, Dolan family members may control stockholder decisions on matters in which holders of all classes of Cablevision common stock vote together as a single class. These matters could include the amendment of some provisions of Cablevision's certificate of incorporation and the approval of fundamental corporate transactions. In addition, the affirmative vote or consent of the holders of at least 66-2⁄3% of the outstanding shares of the Class B common stock, voting separately as a class, is required to approve the authorization or issuance of any additional shares of Class B common stock. Furthermore, the Dolan family members also have the power to prevent any amendment, alteration or repeal of any of the provisions of Cablevision's certificate of incorporation that adversely affects the powers, preferences or rights of the Class B common stock.
One purpose of the voting agreement referred to above is to consolidate Dolan family control of Cablevision. The Dolan family requested Cablevision's Board of Directors to exercise Cablevision's right, as a "controlled company", to opt-out of the New York Stock Exchange listing standards that, among other things, require listed companies to have a majority of independent directors on their board and to have an independent corporate governance and nominating committee. Cablevision's Board of Directors and the directors elected by holders of Class A common stock each approved this request on March 8, 2004.
|
Item 1B.
|
None.
|
Item 2.
|
We own our headquarters building located in Bethpage, New York with approximately 558,000 square feet of space, and certain other real estate where our earth stations, headend equipment and microwave receiving antennae are located primarily in New York, New Jersey and Connecticut, aggregating approximately 653,500 square feet of space.
We lease real estate where certain of our business offices, earth stations, transponders, microwave towers, warehouses, headend equipment, hub sites, access studios and microwave receiving antennae are located, aggregating approximately 1,934,000 square feet of space primarily in New York, New Jersey and Connecticut. We also own approximately 171,000 square feet and lease approximately 208,000 square feet of certain other real estate where certain of our offices, earth stations, headend equipment and microwave receiving antennae are located throughout our Optimum West service area.
We lease several business offices in Woodbury, New York with an aggregate of approximately 120,000 square feet of space and business offices in Jericho, New York with approximately 621,000 square feet of space. Of those amounts, we currently sublease approximately 288,000 square feet of space to third party tenants and approximately 33,000 square feet of space is currently vacant. We also lease an office in Purchase, New York with approximately 31,000 square feet of space. In addition, Newsday leases properties aggregating approximately 757,000 square feet of space which includes approximately 527,000 square feet relating to its administrative and printing facility in Melville, New York.
We generally own all assets (other than real property) related to our cable television operations, including our program production equipment, headend equipment (towers, antennae, electronic equipment and satellite earth stations), cable television system plant (distribution equipment, amplifiers, subscriber drops and hardware), converters, test equipment, tools and maintenance equipment. We also generally own our service and other vehicles.
Clearview Cinemas leases 38 theatres (22 in New Jersey, 14 in New York and two in Pennsylvania) with approximately 33,000 seats and owns an additional nine theatres (five in New York and four in New Jersey) with approximately 5,700 seats.
We believe our properties are adequate for our use.
|
Item 3.
|
Refer to Note 18 to our consolidated financial statements included in this Annual Report on Form 10-K for a discussion of our legal proceedings.
|
Item 4.
|
Mine Safety Disclosures
|
Not applicable.
PART II
CNYG Class A common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "CVC."
Price Range of Cablevision NY Group Class A Common Stock
The following tables set forth for the periods indicated the intra-day high and low sales prices per share of the CNYG Class A common stock as reported on the NYSE:
|
High
|
Low
|
|||||||
|
Year Ended December 31, 2011:
|
||||||||
|
First Quarter(1)
|
$ | 38.08 | $ | 33.26 | ||||
|
Second Quarter(1)
|
36.86 | 32.80 | ||||||
|
Third Quarter
|
27.60 | 15.40 | ||||||
|
Fourth Quarter
|
18.25 | 11.57 | ||||||
|
High
|
Low
|
|||||||
|
Year Ended December 31, 2010:
|
||||||||
|
January 1 through February 9, 2010(2)
|
$ | 27.73 | $ | 24.73 | ||||
|
February 10, 2010 through March 31, 2010
|
24.74 | 21.53 | ||||||
|
Second Quarter
|
27.79 | 21.67 | ||||||
|
Third Quarter
|
28.04 | 23.53 | ||||||
|
Fourth Quarter
|
36.10 | 25.87 | ||||||
______________
|
(1)
|
Share prices through June 30, 2011 do not reflect the impact of the AMC Networks Distribution.
|
|
(2)
|
Share prices through February 9, 2010 do not reflect the impact of the MSG Distribution.
|
As of February 23, 2012, there were 1,098 holders of record of CNYG Class A common stock.
There is no public trading market for the CNYG Class B common stock, par value $.01 per share. As of February 23, 2012, there were 26 holders of record of CNYG Class B common stock.
All membership interests in CSC Holdings are held by Cablevision.
Stockholder Dividends and Distributions
Cablevision
On June 30, 2011, Cablevision distributed to its stockholders all of the outstanding common stock of AMC Networks, a company which consists principally of national programming networks, including AMC, WE tv, IFC and Sundance Channel, previously owned and operated by the Company's Rainbow segment. The AMC Networks Distribution took the form of a distribution by Cablevision of one share of AMC Networks Class A Common Stock for every four shares of CNYG Class A Common Stock held of record on June 16, 2011 and one share of AMC Networks Class B Common Stock for every four shares of CNYG Class B Common Stock held of record on June 16, 2011.
On February 9, 2010, Cablevision distributed to its stockholders all of the outstanding common stock of Madison Square Garden, a company which owns the sports, entertainment and media businesses previously owned and operated by the Company's Madison Square Garden segment. The MSG Distribution took the form of a distribution by Cablevision of one share of Madison Square Garden Class A Common Stock for every four shares of CNYG Class A Common Stock held of record on January 25, 2010 and one share of Madison Square Garden Class B Common Stock for every four shares of CNYG Class B Common Stock held of record on January 25, 2010.
The Board of Directors of Cablevision declared the following cash dividends to stockholders of record on both its CNYG Class A common stock and CNYG Class B common stock:
|
Declaration Date
|
Dividend per Share
|
Record Date
|
Payment Date
|
|||
|
October 27, 2011
|
$0.15
|
November 11, 2011
|
December 2, 2011
|
|||
|
August 5, 2011
|
$0.15
|
August 19, 2011
|
September 9, 2011
|
|||
|
May 4, 2011
|
$0.15
|
May 16, 2011
|
June 6, 2011
|
|||
|
February 15, 2011
|
$0.125
|
February 28, 2011
|
March 21, 2011
|
|||
|
November 3, 2010
|
$0.125
|
November 15, 2010
|
December 6, 2010
|
|||
|
August 4, 2010
|
$0.125
|
August 16, 2010
|
September 7, 2010
|
|||
|
May 5, 2010
|
$0.125
|
May 17, 2010
|
June 7, 2010
|
|||
|
February 24, 2010
|
$0.10
|
March 8, 2010
|
March 29, 2010
|
The dividend payments on all outstanding shares of Cablevision common stock and certain common stock equivalents aggregated approximately $162.0 million and $140.7 million in 2011 and 2010, respectively. In addition, as of December 31, 2011, up to approximately $8.6 million will be paid when, and if, restrictions lapse on restricted shares outstanding.
Cablevision may pay dividends on its capital stock only from net profits and surplus as determined under Delaware law. If dividends are paid on the CNYG common stock, holders of the CNYG Class A common stock and CNYG Class B common stock are entitled to receive dividends, and other distributions in cash, stock or property, equally on a per share basis, except that stock dividends with respect to CNYG Class A common stock may be paid only with shares of CNYG Class A common stock and stock dividends with respect to CNYG Class B common stock may be paid only with shares of CNYG Class B common stock.
Cablevision's and CSC Holdings' indentures governing debt and CSC Holdings credit agreement restrict the amount of dividends and distributions in respect of any equity interest that can be made.
CSC Holdings
During the years ended December 31, 2011 and 2010, CSC Holdings made cash equity distributions to Cablevision, its sole member, aggregating approximately $929.9 million and $556.3 million, respectively. The proceeds were used to fund:
|
|
·
|
Cablevision's dividends paid;
|
|
|
·
|
Cablevision's interest payments on its senior notes;
|
|
|
·
|
Cablevision's payments for the acquisition of treasury shares related to statutory minimum tax withholding obligations upon the vesting of certain restricted shares; and
|
|
|
·
|
the repurchase of CNYG Class A common stock under Cablevision's share repurchase program.
|
Additionally on June 30, 2011, CSC Holdings distributed to Cablevision all of the outstanding common stock of AMC Networks and on February 9, 2010, CSC Holdings distributed to Cablevision all of the outstanding common stock of Madison Square Garden.
CSC Holdings may make distributions on its membership interests only if sufficient funds exist as determined under Delaware law.
Cablevision's and CSC Holdings' senior notes and debentures restrict the amount of dividends and distributions in respect of any shares of capital stock that can be made.
Recent Sales and Use of Proceeds
The table below sets forth information regarding purchases made by the Company of its CNYG Class A Common Stock during the quarter ended December 31, 2011:
|
Total Number of Shares
(or Units) Purchased
|
Average Price Paid per
Share
(or Unit)
|
Total Number of Shares (or Units) Purchased as Part
of Publicly Announced Plans
or Programs(1)(2)
|
Maximum Number (or Approximate Dollar Value) of Shares (or Units)
that May Yet Be Purchased Under
the Plans or Programs(1)(3)
|
|||||||||||||
|
November 1-30, 2011
|
2,200,000 | 14.64 | 29,261,000 | $ | 179,143,510 | |||||||||||
|
December 1-31, 2011
|
2,425,000 | 14.52 | 31,686,000 | $ | 143,922,047 | |||||||||||
|
Total
|
4,625,000 | 14.58 | ||||||||||||||
______________
|
(1)
|
On June 14, 2010, Cablevision's Board of Directors authorized the repurchase of up to $500 million of CNYG Class A common stock. On February 15, 2011, Cablevision's Board of Directors authorized the repurchase of up to an additional $500 million of CNYG Class A common stock. Under the repurchase program, shares of CNYG Class A common stock may be purchased from time to time in the open market. The program does not have an expiration date and may be suspended at any time at the discretion of the Board of Directors.
|
|
(2)
|
This column reflects the cumulative number of shares acquired pursuant to the repurchase program at the end of the respective period.
|
|
(3)
|
Includes brokerage commissions paid by Cablevision.
|
The table above does not include any shares received in connection with participant forfeitures of awards pursuant to the Company's employee stock plan.
In addition to the information provided in the table above, for the three months ended December 31, 2011, approximately 370,100 restricted shares of CNYG Class A common stock issued to employees of the Company, AMC Networks and Madison Square Garden vested. To fulfill the employees' statutory minimum tax withholding obligations for the applicable income and other employment taxes, approximately 178,700 of these shares, with an aggregate value of $2.6 million, were surrendered to Cablevision. These acquired shares have been classified as treasury stock.
CNYG Stock Performance Graph
The chart below compares the performance of the Company's CNYG Class A common stock with the performance of the S&P 500 Index and a Peer Group Index by measuring the changes in CNYG Class A common stock prices from December 31, 2006 through December 31, 2011. As required by the SEC, the values shown assume the reinvestment of all dividends and also reflect the effect of the AMC Distribution and MSG Distribution. Because no published index of comparable media companies currently reports values on a dividends-reinvested basis, the Company has created a Peer Group Index for purposes of this graph in accordance with the requirements of the SEC. The Peer Group Index is made up of companies that engage in cable television operations as a significant element of their business, although not all of the companies included in the Peer Group Index participate in all of the lines of business in which the Company is engaged and some of the companies included in the Peer Group Index also engage in lines of business in which the Company does not participate. Additionally, the market capitalizations of many of the companies included in the Peer Group are quite different from that of the Company. The common stocks of the following companies have been included in the Peer Group Index for 2011: Comcast Corporation, Mediacom Communications Corporation (until March 4, 2011 when Mediacom stock ceased trading), Time Warner Cable Inc. (from January 5, 2007, when Time Warner Cable stock began trading), and Charter Communications (from December 2, 2009, when Charter emerged from bankruptcy). The chart assumes $100 was invested on December 31, 2006 in each of the Company's CNYG Class A common stock, the S&P 500 Index and in a Peer Group Index and reflects reinvestment of dividends on a quarterly basis and market capitalization weighting.
|
|
Dec 2006
|
Dec 2007
|
Dec 2008
|
Dec 2009
|
Dec 2010
|
Dec 2011
|
||||||||||||
|
CNYG CLASS A
|
100 | 86 | 60 | 94 | 152 | 90 | ||||||||||||
|
S&P 500 INDEX
|
100 | 105 | 66 | 84 | 97 | 99 | ||||||||||||
|
PEER GROUP
|
100 | 65 | 62 | 74 | 112 | 117 |
|
Item 6.
|
The operating and balance sheet data included in the following selected financial data have been derived from the consolidated financial statements of Cablevision and CSC Holdings. The selected financial data presented below should be read in conjunction with the audited consolidated financial statements of Cablevision and CSC Holdings and the notes thereto included in Item 8 of this Report.
|
Operating Data:
|
||||||||||||||||||||
|
Cablevision Systems Corporation
|
||||||||||||||||||||
|
Years Ended December 31,
|
||||||||||||||||||||
|
2011
|
2010(1)
|
2009
|
2008
|
2007
|
||||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||
|
Revenues, net
|
$ | 6,700,848 | $ | 6,177,575 | $ | 5,900,074 | $ | 5,480,799 | $ | 4,863,199 | ||||||||||
|
Operating expenses:
|
||||||||||||||||||||
|
Technical and operating (excluding depreciation, amortization and impairments shown below)
|
2,968,540 | 2,663,748 | 2,532,844 | 2,391,392 | 2,109,275 | |||||||||||||||
|
Selling, general and administrative
|
1,482,344 | 1,440,731 | 1,389,525 | 1,253,863 | 1,139,715 | |||||||||||||||
|
Restructuring expense (credits)
|
6,311 | (58 | ) | 5,583 | 3,049 | 1,692 | ||||||||||||||
|
Depreciation and amortization (including impairments)
|
1,014,974 | 887,092 | 916,408 | 1,333,101 | 974,146 | |||||||||||||||
|
Operating income
|
1,228,679 | 1,186,062 | 1,055,714 | 499,394 | 638,371 | |||||||||||||||
|
Other income (expense):
|
||||||||||||||||||||
|
Interest expense, net
|
(745,706 | ) | (710,751 | ) | (669,814 | ) | (687,725 | ) | (798,457 | ) | ||||||||||
|
Equity in net income of affiliates
|
- | - | - | - | 4,467 | |||||||||||||||
|
Gain on sale of affiliate interests
|
683 | 2,051 | - | - | 183,286 | |||||||||||||||
|
Gain (loss) on investments, net
|
37,384 | 109,813 | (977 | ) | (33,176 | ) | (211,535 | ) | ||||||||||||
|
Gain (loss) on equity derivative contracts, net
|
1,454 | (72,044 | ) | 631 | 51,772 | 190,529 | ||||||||||||||
|
Loss on interest rate swap contracts, net
|
(7,973 | ) | (85,013 | ) | (75,631 | ) | (202,840 | ) | (76,568 | ) | ||||||||||
|
Loss on extinguishment of debt and write-off of deferred financing costs
|
(92,692 | ) | (110,049 | ) | (73,457 | ) | - | - | ||||||||||||
|
Miscellaneous, net
|
1,265 | 1,447 | 543 | 885 | (504 | ) | ||||||||||||||
|
Income (loss) from continuing operations before income taxes
|
423,094 | 321,516 | 237,009 | (371,690 | ) | (70,411 | ) | |||||||||||||
|
Income tax benefit (expense)
|
(184,436 | ) | (113,767 | ) | (113,177 | ) | 113,918 | (5,686 | ) | |||||||||||
|
Income (loss) from continuing operations
|
238,658 | 207,749 | 123,832 | (257,772 | ) | (76,097 | ) | |||||||||||||
|
Income from discontinued operations, net of income taxes
|
53,623 | 153,848 | 161,467 | 21,600 | 294,372 | |||||||||||||||
|
Income (loss) before cumulative effect of a change in accounting principle
|
292,281 | 361,597 | 285,299 | (236,172 | ) | 218,275 | ||||||||||||||
|
Cumulative effect of a change in accounting principle, net of income taxes
|
- | - | - | - | (443 | ) | ||||||||||||||
|
Net income (loss)
|
292,281 | 361,597 | 285,299 | (236,172 | ) | 217,832 | ||||||||||||||
|
Net loss (income) attributable to noncontrolling interests
|
(424 | ) | (649 | ) | 273 | 8,108 | 321 | |||||||||||||
|
Net income (loss) attributable to Cablevision Systems Corporation stockholders
|
$ | 291,857 | $ | 360,948 | $ | 285,572 | $ | (228,064 | ) | $ | 218,153 | |||||||||
______________
|
(1)
|
Amounts include the operating results of Bresnan Cable from the date of acquisition on December 14, 2010.
|
|
Cablevision Systems Corporation
|
||||||||||||||||||||
|
Years Ended December 31,
|
||||||||||||||||||||
|
2011
|
2010(1)
|
2009
|
2008
|
2007
|
||||||||||||||||
|
(Dollars in thousands, except per subscriber, per unit and per share data)
|
||||||||||||||||||||
|
INCOME (LOSS) PER SHARE:
|
||||||||||||||||||||
|
Basic net income (loss) per share attributable to Cablevision Systems Corporation stockholders:
|
||||||||||||||||||||
|
Income (loss) from continuing operations
|
$ | 0.86 | $ | 0.71 | $ | 0.43 | $ | (0.86 | ) | $ | (0.26 | ) | ||||||||
|
Income (loss) from discontinued operations
|
$ | 0.19 | $ | 0.52 | $ | 0.55 | $ | 0.07 | $ | 1.02 | ||||||||||
|
Cumulative effect of a change in accounting principle
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
|
Net income (loss)
|
$ | 1.06 | $ | 1.23 | $ | 0.98 | $ | (0.79 | ) | $ | 0.76 | |||||||||
|
Basic weighted average common shares (in thousands)
|
276,369 | 293,165 | 291,759 | 290,286 | 288,271 | |||||||||||||||
|
Diluted net income (loss) per share attributable to Cablevision Systems Corporation stockholders:
|
||||||||||||||||||||
|
Income (loss) from continuing operations
|
$ | 0.84 | $ | 0.69 | $ | 0.42 | $ | (0.86 | ) | $ | (0.26 | ) | ||||||||
|
Income (loss) from discontinued operations
|
$ | 0.19 | $ | 0.51 | $ | 0.54 | $ | 0.07 | $ | 1.02 | ||||||||||
|
Cumulative effect of a change in accounting principle
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
|
Net income (loss)
|
$ | 1.02 | $ | 1.20 | $ | 0.96 | $ | (0.79 | ) | $ | 0.76 | |||||||||
|
Diluted weighted average common shares (in thousands)
|
284,904 | 301,880 | 298,444 | 290,286 | 288,271 | |||||||||||||||
|
Cash dividends declared and paid per common share
|
$ | 0.575 | $ | 0.475 | $ | 0.40 | $ | 0.20 | $ | - | ||||||||||
|
Amounts attributable to Cablevision Systems Corporation stockholders:
|
||||||||||||||||||||
|
Income (loss) from continuing operations, net of income taxes
|
$ | 238,234 | $ | 207,100 | $ | 124,105 | $ | (249,664 | ) | $ | (75,776 | ) | ||||||||
|
Income from discontinued operations, net of income taxes
|
53,623 | 153,848 | 161,467 | 21,600 | 294,372 | |||||||||||||||
|
Cumulative effect of a change in accounting principle, net of income taxes
|
- | - | - | - | (443 | ) | ||||||||||||||
|
Net income (loss)
|
$ | 291,857 | $ | 360,948 | $ | 285,572 | $ | (228,064 | ) | $ | 218,153 | |||||||||
______________
|
(1)
|
Amounts include the operating results of Bresnan Cable from the date of acquisition on December 14, 2010.
|
|
CSC Holdings, LLC
|
||||||||||||||||||||
|
Years Ended December 31,
|
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2011
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2010(1)
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2009
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2008
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2007
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(Dollars in thousands)
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Revenues, net
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$ | 6,700,848 | $ | 6,177,575 | $ | 5,900,074 | $ | 5,480,799 | $ | 4,863,199 | ||||||||||
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Operating expenses:
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Technical and operating (excluding depreciation, amortization and impairments shown below)
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2,968,540 | 2,663,748 | 2,532,844 | 2,391,392 | 2,109,275 | |||||||||||||||
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Selling, general and administrative
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1,482,344 | 1,440,731 | 1,389,525 | 1,253,863 | 1,139,715 | |||||||||||||||
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Restructuring expense (credits)
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6,311 | (58 | ) | 5,583 | 3,049 | 1,692 | ||||||||||||||
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Depreciation and amortization (including impairments)
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1,014,974 | 887,092 | 916,408 | 1,333,101 | 974,146 | |||||||||||||||
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Operating income
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1,228,679 | 1,186,062 | 1,055,714 | 499,394 | 638,371 | |||||||||||||||
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Other income (expense):
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Interest expense, net
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(503,124 | ) | (470,338 | ) | (493,672 | ) | (536,287 | ) | (667,464 | ) | ||||||||||
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Equity in net income of affiliates
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- | - | - | - | 4,467 | |||||||||||||||
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Gain on sale of affiliate interests
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683 | 2,051 | - | - | 183,286 | |||||||||||||||
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Gain (loss) on investments, net
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37,384 | 109,813 | (977 | ) | (33,176 | ) | (211,535 | ) | ||||||||||||
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Gain (loss) on equity derivative contracts, net
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1,454 | (72,044 | ) | 631 | 51,772 | 190,529 | ||||||||||||||
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Loss on interest rate swap contracts, net
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(7,973 | ) | (85,013 | ) | (75,631 | ) | (202,840 | ) | (76,568 | ) | ||||||||||
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Loss on extinguishment of debt and write-off of deferred financing costs
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(92,692 | ) | - | (72,870 | ) | - | - | |||||||||||||
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Miscellaneous, net
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1,265 | 1,433 | 543 | 881 | (504 | ) | ||||||||||||||
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Income (loss) from continuing operations before income taxes
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665,676 | 671,964 | 413,738 | (220,256 | ) | 60,582 | ||||||||||||||
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Income tax benefit (expense)
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(292,598 | ) | (250,886 | ) | (184,255 | ) | 54,273 | (61,134 | ) | |||||||||||
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Income (loss) from continuing operations
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373,078 | 421,078 | 229,483 | (165,983 | ) | (552 | ) | |||||||||||||
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Income from discontinued operations, net of income taxes
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53,623 | 153,848 | 161,467 | 21,600 | 294,372 | |||||||||||||||
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Income (loss) before cumulative effect of a change in accounting principle
|
426,701 | 574,926 | 390,950 | (144,383 | ) | 293,820 | ||||||||||||||
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Cumulative effect of a change in accounting principle, net of income taxes
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- | - | - | - | (443 | ) | ||||||||||||||
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Net income (loss)
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426,701 | 574,926 | 390,950 | (144,383 | ) | 293,377 | ||||||||||||||
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Net loss (income) attributable to noncontrolling interests
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(424 | ) | (649 | ) | 273 | 8,108 | 321 | |||||||||||||
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Net income (loss) attributable to CSC Holdings, LLC's sole member
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$ | 426,277 | $ | 574,277 | $ | 391,223 | $ | (136,275 | ) | $ | 293,698 | |||||||||
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Amounts attributable to CSC Holdings, LLC's sole member:
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Income (loss) from continuing operations, net of income taxes
|
$ | 372,654 | $ | 420,429 | $ | 229,756 | $ | (157,875 | ) | $ | (231 | ) | ||||||||
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Income from discontinued operations, net of income taxes
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53,623 | 153,848 | 161,467 | 21,600 | 294,372 | |||||||||||||||
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Cumulative effect of a change in accounting principle, net of income taxes
|
- | - | - | - | (443 | ) | ||||||||||||||
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Net income (loss)
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$ | 426,277 | $ | 574,277 | $ | 391,223 | $ | (136,275 | ) | $ | 293,698 | |||||||||
______________
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(1)
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Amounts include the operating results of Bresnan Cable from the date of acquisition on December 14, 2010.
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Balance Sheet Data:
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Cablevision Systems Corporation
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December 31,
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2011
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2010
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2009
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2008
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2007
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(Dollars in thousands)
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Total assets
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$ | 7,143,325 | $ | 8,867,092 | $ | 9,676,772 | $ | 9,971,684 | $ | 9,852,407 | ||||||||||
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Credit facility debt
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5,184,194 | 5,756,510 | 4,718,750 | 4,953,750 | 4,388,750 | |||||||||||||||
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Collateralized indebtedness
|
455,938 | 352,606 | 375,832 | 448,738 | 444,189 | |||||||||||||||
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Senior notes and debentures
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5,446,660 | 5,568,193 | 5,022,600 | 5,197,278 | 5,196,403 | |||||||||||||||
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Notes payable
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29,227 | - | - | 6,230 | 1,017 | |||||||||||||||
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Capital lease obligations
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42,763 | 31,237 | 31,930 | 33,286 | 33,201 | |||||||||||||||
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Total debt
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11,158,782 | 11,708,546 | 10,149,112 | 10,639,282 | 10,063,560 | |||||||||||||||
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Redeemable noncontrolling interests
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13,761 | 14,698 | 12,175 | 12,012 | 18,712 | |||||||||||||||
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Stockholders' deficiency
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(5,575,855 | ) | (6,296,918 | ) | (5,155,955 | ) | (5,367,991 | ) | (5,117,570 | ) | ||||||||||
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Noncontrolling interest
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1,791 | 1,485 | 521 | 333 | 571 | |||||||||||||||
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Total deficiency
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(5,574,064 | ) | (6,295,433 | ) | (5,155,434 | ) | (5,367,658 | ) | (5,116,999 | ) | ||||||||||
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CSC Holdings, LLC
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December 31,
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2011
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2010
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2009
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2008
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2007
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(Dollars in thousands)
|
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Total assets
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$ | 7,601,785 | $ | 9,172,292 | $ | 9,872,523 | $ | 10,225,595 | $ | 10,042,028 | ||||||||||
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Credit facility debt
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5,184,194 | 5,756,510 | 4,718,750 | 4,953,750 | 4,388,750 | |||||||||||||||
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Collateralized indebtedness
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455,938 | 352,606 | 375,832 | 448,738 | 444,189 | |||||||||||||||
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Senior notes and debentures
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3,279,694 | 3,402,505 | 3,134,909 | 3,697,278 | 3,696,403 | |||||||||||||||
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Notes payable
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29,227 | - | - | 6,230 | 1,017 | |||||||||||||||
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Capital lease obligations
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42,763 | 31,237 | 31,930 | 33,286 | 33,201 | |||||||||||||||
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Total debt
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8,991,816 | 9,542,858 | 8,261,421 | 9,139,282 | 8,563,560 | |||||||||||||||
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Redeemable noncontrolling interests
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13,761 | 14,698 | 12,175 | 12,012 | 18,712 | |||||||||||||||
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Stockholder's deficiency
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- | - | - | (3,603,782 | ) | (3,451,037 | ) | |||||||||||||
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Member's deficiency
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(3,414,943 | ) | (4,150,245 | ) | (3,090,152 | ) | - | - | ||||||||||||
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Noncontrolling interest
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1,791 | 1,485 | 521 | 333 | 571 | |||||||||||||||
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Total deficiency
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(3,413,152 | ) | (4,148,760 | ) | (3,089,631 | ) | (3,603,449 | ) | (3,450,466 | ) | ||||||||||
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Statistical Data (Unaudited):
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Cablevision Systems Corporation and CSC Holdings, LLC
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As of December 31,
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New York Metropolitan Service
Area
2011
|
Optimum West
Service
Area
2011(1)
|
Total
2011
|
New York Metropolitan Service
Area
2010
|
Optimum West Service Area
2010(1)
|
Total
2010
|
Total
2009
|
Total
2008
|
Total
2007
|
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(in thousands, except per subscriber amounts)
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Total customers(2)
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3,255 | 356 | 3,611 | 3,298 | 350 | 3,648 | 3,314 | 3,325 | 3,317 | |||||||||||||||||||||||||||
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Video customers(3)
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2,947 | 303 | 3,250 | 3,008 | 306 | 3,314 | 3,063 | 3,108 | 3,123 | |||||||||||||||||||||||||||
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High-speed data customers
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2,701 | 264 | 2,965 | 2,653 | 239 | 2,892 | 2,568 | 2,455 | 2,282 | |||||||||||||||||||||||||||
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Voice customers
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2,201 | 156 | 2,357 | 2,138 | 131 | 2,269 | 2,052 | 1,878 | 1,592 | |||||||||||||||||||||||||||
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Serviceable passings(4)
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4,922 | 662 | 5,584 | 4,882 | 650 | 5,532 | 4,829 | 4,732 | 4,679 | |||||||||||||||||||||||||||
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Penetration:
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Total customers to serviceable passings
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66.1 | % | 53.7 | % | 64.7 | % | 67.6 | % | 53.8 | % | 65.9 | % | 68.6 | % | 70.3 | % | 70.9 | % | ||||||||||||||||||
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Video customers to serviceable passings
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59.9 | % | 45.7 | % | 58.2 | % | 61.6 | % | 47.1 | % | 59.9 | % | 63.4 | % | 65.7 | % | 66.8 | % | ||||||||||||||||||
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High-speed data customers to serviceable passings
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54.9 | % | 39.9 | % | 53.1 | % | 54.3 | % | 36.8 | % | 52.3 | % | 53.2 | % | 51.9 | % | 48.8 | % | ||||||||||||||||||
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Voice customers to serviceable passings
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44.7 | % | 23.5 | % | 42.2 | % | 43.8 | % | 20.2 | % | 41.0 | % | 42.5 | % | 39.7 | % | 34.0 | % | ||||||||||||||||||
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Average Monthly Revenue per Video Customer ("RPS")(5)
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| $ | 156.09 | $ | 134.60 | $ | 154.10 | $ | 150.68 | (6) | N/A | N/A | $ | 144.03 | (6) | $ | 134.85 | (6) | $ | 125.10 | (6) | |||||||||||||||||
______________
The above table sets forth certain statistical data regarding our video, high-speed data and VoIP operations, excluding Optimum Lightpath, as of the dates indicated:
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N/A
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Not meaningful.
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(1)
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Reflects data related to Bresnan Cable which was acquired by the Company on December 14, 2010.
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(2)
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Represents number of households/businesses that receive at least one of the Company's services.
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(3)
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Video customers represent each customer account (set up and segregated by customer name and address), weighted equally and counted as one customer, regardless of size, revenue generated, or number of boxes, units, or outlets. In calculating the number of customers, we count all customers other than inactive/disconnected customers. Free accounts are included in the customer counts along with all active accounts, but they are limited to a prescribed group such as our current and retired employees. Most of these accounts are also not entirely free, as they typically generate revenue through pay-per-view or other pay services. Free status is not granted to regular customers as a promotion. We count a bulk commercial customer, such as a hotel, as one customer, and do not count individual room units at that hotel. In counting bulk residential customers such as an apartment building, we count each subscribing family unit within the building as one customer, but do not count the master account for the entire building as a customer.
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(4)
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Represents the estimated number of single residence homes, apartment and condominium units and commercial establishments passed by the cable distribution network in areas serviceable without further extending the transmission lines, including our Optimum Lightpath customers.
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(5)
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RPS is calculated by dividing the average monthly GAAP revenues for the Telecommunications Services segment, less the revenue attributable to Optimum Lightpath, for the fourth quarter of each year presented by the average number of video customers served by our cable television systems for the same period. For purposes of this calculation, both revenue and average number of video customers exclude our Optimum Lightpath operations because Optimum Lightpath's third-party revenues are unrelated to our cable television system customers.
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(6)
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Represents data for the New York metropolitan service area.
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This Form 10-K contains statements that constitute forward looking information within the meaning of the Private Securities Litigation Reform Act of 1995. In this Form 10-K there are statements concerning our future operating results and future financial performance. Words such as "expects", "anticipates", "believes", "estimates", "may", "will", "should", "could", "potential", "continue", "intends", "plans" and similar words and terms used in the discussion of future operating results and future financial performance identify forward-looking statements. Investors are cautioned that such forward looking statements are not guarantees of future performance or results and involve risks and uncertainties and that actual results or developments may differ materially from the forward looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to:
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·
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the level of our revenues;
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·
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competition for subscribers from existing competitors (such as telephone companies and direct broadcast satellite ("DBS") distributors) and new competitors (such as high-speed wireless providers) entering our franchise areas;
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·
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demand for our video, high-speed data and voice services, which are impacted by competition from other services and the other factors discussed herein;
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·
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the cost of programming and industry conditions;
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·
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changes in the laws or regulations under which we operate;
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·
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the outcome of litigation and other proceedings, including the matters described under Item 3. Legal Proceedings;
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·
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general economic conditions in the areas in which we operate;
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·
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the state of the market for debt securities and bank loans;
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·
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demand for advertising in our newspapers along with subscriber and single copy outlet sales demand for our newspapers;
|
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·
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the level of our capital expenditures;
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·
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the level of our expenses;
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·
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future acquisitions and dispositions of assets;
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·
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market demand for new services;
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·
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demand for advertising inventory;
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·
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the tax-free treatment of the MSG Distribution and the AMC Networks Distribution (each as defined herein);
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·
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whether pending uncompleted transactions, if any, are completed on the terms and at the times set forth (if at all);
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·
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other risks and uncertainties inherent in the cable television, newspaper publishing businesses, and our other businesses;
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·
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financial community and rating agency perceptions of our business, operations, financial condition and the industries in which we operate; and
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·
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the factors described in our filings with the Securities and Exchange Commission, including under the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein.
|
We disclaim any obligation to update or revise the forward looking statements contained herein, except as otherwise required by applicable federal securities laws.
CABLEVISION SYSTEMS CORPORATION
All dollar amounts, except per subscriber, per unit, per share data, and tender prices per note, included in the following discussion under this Item 7, are presented in thousands.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Summary
Our future performance is dependent, to a large extent, on general economic conditions including capital and credit market conditions, the impact of direct competition, our ability to manage our businesses effectively, and our relative strength and leverage in the marketplace, both with suppliers and customers.
Additional capital and credit market disruptions could cause broader economic downturns, which may lead to lower demand for our products, such as cable television services, as well as lower levels of television and newspaper advertising, and increased incidence of customer's inability to pay for the services we provide. We have experienced some of the effects of this economic downturn. Continuation of events such as these may adversely impact our results of operations, cash flows and financial position.
On February 9, 2010, Cablevision distributed to its stockholders all of the outstanding common stock of Madison Square Garden, a company which owns the sports, entertainment and media businesses previously owned and operated by the Company's Madison Square Garden segment.
On June 30, 2011, Cablevision distributed to its stockholders all of the outstanding common stock of AMC Networks Inc., a company which consists principally of national programming networks, including AMC, WE tv, IFC and Sundance Channel, previously owned and operated by the Company's Rainbow segment.
As a result of the AMC Networks Distribution and the MSG Distribution, the Company no longer consolidates the financial results of AMC Networks or Madison Square Garden for the purpose of its own financial reporting and the historical financial results of AMC Networks and Madison Square Garden have been reflected in the Company's consolidated financial statements as discontinued operations for all periods presented through the AMC Networks Distribution date and the MSG Distribution date.
Telecommunications Services
Our Telecommunications Services segment, which accounted for 94% of our consolidated revenues, net of inter-segment eliminations, for the year ended December 31, 2011, derives revenues principally through monthly charges to subscribers of our video, high-speed data and VoIP services and commercial data and voice services operations. These monthly charges include fees for cable television programming, high-speed data and voice services, as well as equipment rental, DVR, video-on-demand, pay-per-view, installation and home shopping commissions. Revenue increases are derived from rate increases, increases in the n