By Liana B. Baker
Feb 28 Cablevision Systems Corp on
Thursday put costs related to Superstorm Sandy at $100 million
and hinted its cash flow may decrease this year as programming
costs rise, news that sent its shares down 10 percent.
Analysts had hoped the company was set for a better
financial performance this year, coming off what Cablevision
considered an investment year when it kept prices steady and put
money toward faster Internet service. The New York-area cable
provider has also been grappling with increased competition from
rival Verizon FiOs.
Cablevision shares closed $1.48 lower, down 10 percent
at$13.99 per share.
Cablevision executives said they expected programming costs
to rise about 12 percent this year. Chief Financial Officer
Gregg Seibert told analysts on a conference call he expects
pressure on operating cash flow in the first quarter, but
sequential cash flow may improve in the second quarter.
Capital expenditures will remain "at elevated levels" this
year, though they have been budgeted below the 2012 level, he
Cablevision is still dealing with fallout from Superstorm
Sandy, which hit the U.S. Northeast, Cablevision's main
operating region, at the end of the third quarter. The storm
caused widespread flooding and power outages, disrupting cable
and telephone services and delaying some initiatives.
Cablevision had promised to give customers a rebate for
disrupted cable service. The company said on Thursday it paid
out $33.2 million in credits and that its consolidated adjusted
operating cash flow decreased about $110 million because of
ISI analyst Vijay Jayant said that while the storm had a
major impact on Cablevision, the stock was selling off on the
company's comments about its financial health in 2013.
"While Sandy impacted the quarter, the stock is reflecting
some of the commentary about operating fundamentals. They
suggested longer-term growth rates of free cash flow had maybe
been reduced," Jayant said.
Jayant noted that Cablevision also did not repurchase shares
in the fourth quarter and did not plan to buy back any stock in
the first quarter, decisions that could weigh on the share
In early February, Cablevision said it was selling its
Optimum West business, formerly known as Bresnan, to Charter
Communications for $1.625 billion. The deal is expected
to close in the third quarter and Seibert said the net proceeds
would reduce Cablevision's overall leverage.
CEO Jim Dolan made pointed comments on Thursday related to a
lawsuit Cablevision filed on Tuesday against Viacom. Cablevision
has accused Viacom Inc in an antitrust lawsuit of
forcing it to pay for more than a dozen low-rated cable networks
in order to get access to Viacom's more popular channels such as
Nickelodeon, MTV and Comedy Central.
"Viacom's practice of forcing distributors to carry more
than a dozen lesser watched channels ... in order to carry its
must-have networks is an abuse of its market power and a
violation of federal antitrust laws," Dolan said, adding that
the practice "causes our customers' cable prices to rise, and we
believe it needs to be stopped."
Viacom did not immediately respond to a request for a
comment on Dolan's views.
The case represents the latest flare-up in the contentious
relationships between distributors and program makers.
Industry observers will watch to see if the lawsuit could
disrupt the model of selling bundles of cable channels to
operators, a common practice employed by Viacom and its media
company peers in the $97.6 billion cable industry.
Cablevision said it lost 50,000 net video subscribers in the
quarter, much higher than a loss of 12,000 that Wall Street
analysts were expecting, said Brean Capital analyst Todd
The cable provider still posted higher quarterly net income,
due to a $200 million payment from Dish Network Corp it
received as part of a legal settlement. In October, Dish, the
second-largest U.S. satellite operator, settled a 4-year-old
breach-of-contract lawsuit with Cablevision and AMC Networks
over a joint HD channel venture called "Voom HD." Dish agreed to
pay $700 million in cash to the two New York-based companies,
which are both controlled by the Dolan family.
Cablevision posted net income for the fourth quarter of $116
million, or 45 cents per share, compared with net income of $60
million, or 22 cents per share, in the fourth quarter a year
Revenue fell to $1.66 billion from $1.69 billion a year
earlier, just missing Wall Street expectations of $1.68 billion,
according to Thomson Reuters I/B/E/S.