Cablevision Systems Corporation Reports Second Quarter 2008 Results

Cablevision Systems Corporation (NYSE:CVC) today reported financial results for the second quarter ended June 30, 2008. Second quarter consolidated net revenue grew 9.2% to $1.712 billion compared to the prior year period, reflecting solid revenue growth in Telecommunications Services, Rainbow and Madison Square Garden. Consolidated adjusted operating cash flow ("AOCF”)1 increased 18.5% to $602.6 million and consolidated operating income grew 43.6% to $299.3 million. Operating highlights for second quarter 2008 include: Cable Television net revenue growth of 9.0% and AOCF growth of 12.9% for the quarter Quarterly addition of 260,000 Revenue Generating Units ("RGU”) including the addition of 7,000 basic video subscribers Average Monthly Revenue per Basic Video Customer ("RPS”) of $132.29 in the second quarter of 2008 Rainbow net revenue growth of 14.6% and AOCF growth of 71.6% for the quarter Optimum Lightpath net revenue growth of 20.2% and AOCF growth of 38.6% for the quarter Cablevision President and CEO James L. Dolan commented: "Cablevision enjoyed an excellent second quarter with solid increases in net revenue and AOCF, driven by continuing growth in all of our key businesses. Subscriber increases across all of our consumer services, including basic video, continued to fuel our success in cable and ensured our industry-leading penetration rates for yet another quarter. Rainbow achieved double-digit revenue and AOCF growth for the quarter due primarily to a significant increase in advertising revenue, while MSG generated strong revenue growth of its own," concluded Mr. Dolan. Results from Continuing Operations2 Segment results for the quarters ended June 30, 2008 and 2007 are as follows:   Revenue, Net   AOCF   Operating Income (Loss) $ millions Q2 2008   Q2 2007 Q2 2008   Q2 2007 Q2 2008   Q2 2007   Telecommunications $ 1,291.4 $ 1,182.8 $ 518.3 $ 455.8 $ 284.7 $ 213.3 Rainbow 239.7 209.1 72.3 42.1 30.4 13.6 MSG 213.8 195.8 31.4 30.4 9.4 10.3 Other (including eliminations)   (32.5 )   (19.7 )   (19.4 )   (19.8 )   (25.2 )   (28.8 ) Total Company $ 1,712.4   $ 1,568.0   $ 602.6   $ 508.5   $ 299.3   $ 208.4     1.   See definition of adjusted operating cash flow ("AOCF") included in the discussion of non-GAAP financial measures on page 4 of this earnings release. 2. Operating results of FSN Bay Area and Rainbow DBS' distribution operations are included in discontinued operations for all periods presented as applicable. Fuse is included in the Madison Square Garden segment for all periods presented. Telecommunications Services – Cable Television and Lightpath Telecommunications Services includes Cable Television – Cablevision’s "Optimum” branded video, high-speed data, and voice residential and commercial services offered over its cable infrastructure -- and its "Optimum Lightpath” branded commercial data and voice services. Telecommunications Services net revenues for second quarter 2008 rose 9.2% to $1.291 billion, AOCF grew 13.7% to $518.3 million and operating income increased 33.4% to $284.7 million, all compared to the prior year period.       Cable Television Cable Television second quarter 2008 net revenues increased 9.0% to $1.242 billion, AOCF rose 12.9% to $497.7 million and operating income increased 30.3% to $284.5 million, each compared to the prior year period. The increases in net revenue, AOCF and operating income were principally driven by the growth in digital video, high-speed data, and voice customers as well as higher rates reflected in second quarter 2008 results.   The second quarter 2008 results reflect: Basic video customers up 7,000 from March 2008 and down 7,000 or 0.2% from June 2007 Customer Relationships up 11,000 or 0.3% from March 2008 and 19,000 or 0.6% from June 2007 iO: Interactive Optimum digital video customers up 120,000 or 4.5% from March 2008 and 239,000 or 9.4% from June 2007 Optimum Online high-speed data customers up 52,000 or 2.2% from March 2008 and 227,000 or 10.5% from June 2007 Optimum Voice customers up 81,000 or 4.8% from March 2008 and 367,000 or 26.2% from June 2007 Revenue Generating Units up 260,000 or 2.6% from March 2008 and 826,000 or 8.9% from June 2007 Cable Television RPS of $132.29, up $2.73 or 2.1% from the first quarter of 2008 and up $11.28 or 9.3% from the second quarter of 2007   Optimum Lightpath For second quarter 2008, Lightpath net revenues rose 20.2% to $61.4 million, AOCF increased 38.6% to $20.6 million and operating income improved $5.1 million, each as compared to the prior year period. The increase in net revenue was attributable primarily to the continued growth in Ethernet services, partially offset by the effect of the transition from traditional data service. The improvements in AOCF and operating income were due principally to the continued expansion of the more efficient, higher margin Ethernet business. Rainbow Rainbow consists of the Rainbow National Services ("RNS”) – AMC, WE tv and IFC – as well as Other Programming which includes: News 12 Networks, VOOM HD, Sundance (effective June 16, 2008), Lifeskool, sportskool, IFC Entertainment, Rainbow Network Communications, Rainbow Advertising Sales Corp. and other Rainbow ventures. Rainbow net revenues for the second quarter of 2008 increased 14.6% to $239.7 million, AOCF rose 71.6% to $72.3 million, and operating income grew 123.5% to $30.4 million, all compared to the prior year period.       AMC/WE tv/IFC Second quarter 2008 net revenues grew 11.9% to $186.6 million, AOCF increased 22.4% to $90.8 million and operating income grew 30.8% to $73.3 million, each compared to the prior year period.   The second quarter 2008 AOCF results reflect: A 22.4% increase in advertising revenue, as compared to the prior year period, driven principally by higher CPMs and higher units sold at AMC and WE tv Viewing subscriber increases of 12.9% at IFC, 6.8% at WE tv and 1.9% at AMC, all compared to June 2007 A 5.6% increase in affiliate revenue compared to the prior year period Slightly higher operating costs compared to the prior year period.   Other Programming Second quarter 2008 net revenues rose 23.9% to $58.7 million, AOCF deficit improved 42.2% to $18.6 million and operating loss increased 1.1% to $42.9 million, all as compared to the prior year period. The increase in net revenue was driven primarily by VOOM’s higher affiliate revenue (impacted by Cablevision’s carriage beginning July 1, 2007 offset by Echostar’s cessation of the service in May 2008) as well as the addition of Sundance (effective June 16, 2008) in the 2008 quarterly results. The increase in AOCF was primarily driven by cost savings at IFC Entertainment and at our VOD services (Lifeskool and sportskool), compared to the prior year period. Madison Square Garden Madison Square Garden’s primary businesses include: regional and national programming networks (MSG, MSG Plus, and Fuse), professional sports franchises (the New York Knicks, the New York Rangers, and the New York Liberty), and MSG Entertainment. Its operations also include the MSG Arena, the WaMu Theater at Madison Square Garden, Radio City Music Hall, Beacon Theatre and The Chicago Theatre. Madison Square Garden's second quarter 2008 net revenue grew 9.2% to $213.8 million, AOCF increased 3.4% to $31.4 million and operating income decreased 8.6% to $9.4 million all compared to second quarter 2007. MSG’s second quarter 2008 results, as compared with second quarter 2007, were primarily impacted by: The networks, including a $10.6 million increase in affiliate fee revenue which more than offset a $1.2 million decrease in other revenues and $5.7 million of higher operating costs The entertainment business, including a revenue increase of $8.9 million from entertainment events, offset in part by a $3.0 million increase in costs related to those events The professional teams, including $6.4 million of higher team operating expenses partly offset by a $2.6 million reduction in net provisions for certain team personnel transactions Higher marketing costs of $3.1 million (primarily related to the repositioning of Fuse) and higher legal and other professional fees of $2.8 million. Other Matters On July 29, 2008, Cablevision Systems Corporation announced that it had acquired 97% of Newsday Media Group ("Newsday”) through the formation of a new partnership with Tribune Company. Non-GAAP Financial Measures We define adjusted operating cash flow ("AOCF”), which is a non-GAAP financial measure, as operating income (loss) before depreciation and amortization (including impairments), excluding share-based compensation expense or benefit and restructuring charges or credits. Because it is based upon operating income (loss), AOCF also excludes interest expense (including cash interest expense) and other non-operating income and expense items. We believe that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of our business without regard to the distortive effects of fluctuating stock prices in the case of stock appreciation rights and, in the case of restricted shares and stock options, the settlement of an obligation that is not expected to be made in cash. We present AOCF as a measure of our ability to service our debt and make continuing investments, including in our capital infrastructure. We believe AOCF is an appropriate measure for evaluating the operating performance of our business segments and the company on a consolidated basis. AOCF and similar measures with similar titles are common performance measures used by investors, analysts and peers to compare performance in our industry. Internally, we use net revenue and AOCF measures as the most important indicators of our business performance, and evaluate management’s effectiveness with specific reference to these indicators. AOCF should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with U.S. generally accepted accounting principles ("GAAP"). Since AOCF is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. For a reconciliation of AOCF to operating income (loss), please see page 5 of this release. We define Consolidated Free Cash Flow from Continuing Operations, ("Free Cash Flow”), which is a non-GAAP financial measure, as net cash from operating activities (continuing operations) less capital expenditures (continuing operations), both of which are reported in our Consolidated Statement of Cash Flows. Net cash from operating activities excludes net cash from operating activities of our discontinued operations. We believe the most comparable GAAP financial measure of our liquidity is net cash from operating activities. We believe that Free Cash Flow is useful as an indicator of our overall liquidity, as the amount of Free Cash Flow generated in any period is representative of cash that is available for debt repayment and other discretionary and non-discretionary cash uses. It is also one of several indicators of our ability to make investments and/or return capital to our shareholders. We also believe that Free Cash Flow is one of several benchmarks used by analysts and investors who follow our industry for comparison of our liquidity with other companies in our industry, although our measure of Free Cash Flow may not be directly comparable to similar measures reported by other companies. COMPANY DESCRIPTION Cablevision Systems Corporation is one of the nation's leading media and entertainment companies. Its cable television operations serve more than 3 million households in the New York metropolitan area. The company's advanced telecommunications offerings include its iO: Interactive Optimum digital television, Optimum Online high-speed Internet, Optimum Voice digital voice-over-cable, and its Optimum Lightpath integrated business communications services. Cablevision operates several successful programming businesses, including AMC, IFC, Sundance Channel and WE tv, through Rainbow Media Holdings LLC, and serves the New York area as publisher of Newsday and other niche publications through Newsday LLC. In addition to these businesses, Cablevision owns Madison Square Garden and its sports teams, the New York Knicks, Rangers and Liberty. The company also operates New York's famed Radio City Music Hall, the Beacon Theatre, and The Chicago Theatre, and owns and operates Clearview Cinemas. Additional information about Cablevision Systems Corporation is available on the Web at www.cablevision.com. This earnings release may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any 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 those in the forward-looking statements as a result of various factors, including financial community and rating agency perceptions of the company and its business, operations, financial condition and the industries in which it operates and the factors described in the company’s filings with the Securities and Exchange Commission, including the sections entitled "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" contained therein. The company disclaims any obligation to update any forward-looking statements contained herein. Cablevision's Web site: www.cablevision.com The conference call will be Webcast live today at 10:00 a.m. EST Conference call dial-in number is (888) 694-4641/ Conference ID Number 52368807 Conference call replay number (706) 645-9291/ Conference ID Number 52368807 until August 7, 2008 CABLEVISION SYSTEMS CORPORATION CONDENSED CONSOLIDATED OPERATIONS DATA AND RECONCILIATION (Dollars in thousands, except per share data) (Unaudited)     Three Months Ended June 30, Six Months Ended June 30, 2008 (a)   2007 (a) 2008 (a)   2007 (a)   Revenues, net $ 1,712,421   $ 1,567,984   $ 3,433,113   $ 3,130,617     Adjusted operating cash flow $ 602,634 $ 508,505 $ 1,118,580 $ 982,237 Share-based compensation expense (17,719 ) (21,140 ) (26,742 ) (38,777 ) Restructuring credits (charges)   2,003     (126 )   1,613     (1,455 ) Operating income before depreciation and amortization 586,918 487,239 1,093,451 942,005 Depreciation and amortization (including impairments)   287,622     278,850     548,614     563,298   Operating income 299,296 208,389 544,837 378,707 Other income (expense): Interest expense, net (181,976 ) (231,677 ) (388,980 ) (461,886 ) Equity in net income of affiliates - 2,601 - 4,377 Gain on sale of affiliate interests (b) - 183,888 - 183,888 Gain (loss) on investments, net (110,751 ) 87,616 (89,135 ) 14,631 Gain (loss) on equity derivative contracts, net 65,801 (66,498 ) 67,221 8,588 Gain on interest rate swap contracts, net 114,240 37,281 7,910 27,314 Loss on extinguishment of debt (2,424 ) - (2,424 ) - Minority interests 2,396 501 (509 ) 1,215 Miscellaneous, net   (6 )   792     1,160     1,451   Income from continuing operations before income taxes 186,576 222,893 140,080 158,285 Income tax expense   (87,734 )   (95,479 )   (72,371 )   (64,301 ) Income from continuing operations 98,842 127,414 67,709 93,984 Income (loss) from discontinued operations, net of taxes   (503 )   190,018     (976 )   197,615   Income before cumulative effect of a change in accounting principle 98,339 317,432 66,733 291,599 Cumulative effect of a change in accounting principle, net of taxes   -     -     -     (443 ) Net income $ 98,339   $ 317,432   $ 66,733   $ 291,156     Basic net income per share:   Income from continuing operations $ 0.34   $ 0.44   $ 0.23   $ 0.33     Income from discontinued operations $ -   $ 0.66   $ -   $ 0.69     Cumulative effect of a change in accounting principle, net of taxes $ -   $ -   $ -   $ -     Net income $ 0.34   $ 1.10   $ 0.23   $ 1.02     Basic weighted average common shares (in thousands)   290,132     288,286     290,041     286,638   Diluted net income per share:   Income from continuing operations $ 0.34   $ 0.43   $ 0.23   $ 0.32     Income from discontinued operations $ -   $ 0.65   $ -   $ 0.67     Cumulative effect of a change in accounting principle, net of taxes $ -   $ -   $ -   $ -     Net income $ 0.33   $ 1.08   $ 0.23   $ 0.99     Diluted weighted average common shares (in thousands)   294,949     294,394     294,604     293,901   (a)   Operating results of FSN Bay Area and Rainbow DBS' distribution operations are included in discontinued operations for all periods presented as applicable. (b) Represents gain on the sale of our 50% interest in FSN New England in June 2007. CABLEVISION SYSTEMS CORPORATION CONDENSED CONSOLIDATED OPERATIONS DATA AND RECONCILIATION (Cont’d) (Dollars in thousands, except per share data) (Unaudited)   ADJUSTMENTS TO RECONCILE ADJUSTED OPERATING CASH FLOW TO OPERATING INCOME (LOSS)   The following is a description of the adjustments to operating income (loss) in arriving at adjusted operating cash flow included in this earnings release: Depreciation and amortization (including impairments). This adjustment eliminates depreciation and amortization and impairments of long-lived assets in all periods. Restructuring credits (charges). This adjustment eliminates the charges or credits associated with restructuring activities related to the elimination of positions, facility realignment, and other related activities in all periods. Share-based compensation benefit (expense). This adjustment eliminates the compensation benefit (expense) relating to stock options, stock appreciation rights, restricted stock and restricted stock units granted under our employee stock plans and non-employee director plans in all periods.   Six Months Ended June 30, 2008 (a)   2007 (a) CONSOLIDATED FREE CASH FLOW FROM CONTINUING OPERATIONS (b)   Net cash provided by operating activities (c) $ 701,165 $ 427,646 Less: capital expenditures (d)   (383,661 )   (333,165 ) Consolidated free cash flow from continuing operations $ 317,504   $ 94,481   (a)   Excludes the net operating results of FSN Bay Area and Rainbow DBS' distribution operations which are reported in discontinued operations. Discontinued operations provided a total of $0.5 million and $356.1 million in cash for the six months ended June 30, 2008 and 2007, respectively. The 2007 amount includes proceeds of $372.7 million received from the sale of the Company's interest in FSN Bay Area. (b) See non-GAAP financial measures on page 4 of this release for a definition and discussion of Free Cash Flow from continuing operations. (c) The level of net cash provided by operating activities will continue to depend on a number of variables in addition to our operating performance, including the amount and timing of our interest payments and other working capital items. (d) See page 11 of this release for additional details relating to capital expenditures. CABLEVISION SYSTEMS CORPORATION CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS (Dollars in thousands) (Unaudited)       REVENUES, NET   Three Months Ended June 30, 2008 (a)     2007 (a) % Change   Cable Television $ 1,241,578 $ 1,139,489 9.0 % Optimum Lightpath 61,435 51,090 20.2 % Eliminations (b)   (11,602 )   (7,758 ) (49.5 )% Total Telecommunications   1,291,411     1,182,821   9.2 % AMC/WE tv/IFC 186,605 166,763 11.9 % Other Programming (c) (d) 58,657 47,357 23.9 % Eliminations (b)   (5,566 )   (4,981 ) (11.7 )% Total Rainbow   239,696     209,139   14.6 % MSG(d) 213,832 195,798 9.2 % Other (e) 17,707 18,139 (2.4 )% Eliminations (f)   (50,225 )   (37,913 ) (32.5 )% Total Cablevision $ 1,712,421   $ 1,567,984   9.2 % Six Months Ended June 30,   2008 (a)   2007 (a) % Change   Cable Television $ 2,455,956 $ 2,238,770 9.7 % Optimum Lightpath 120,880 104,057 16.2 % Eliminations (b)   (23,545 )   (18,700 ) (25.9 )% Total Telecommunications   2,553,291     2,324,127   9.9 % AMC/WE tv/IFC 365,135 325,070 12.3 % Other Programming (c) (d) 111,576 88,287 26.4 % Eliminations (b)   (11,865 )   (9,713 ) (22.2 )% Total Rainbow   464,846     403,644   15.2 % MSG(d) 478,911 443,622 8.0 % Other (e) 34,716 34,636 0.2 % Eliminations (f)   (98,651 )   (75,412 ) (30.8 )% Total Cablevision $ 3,433,113   $ 3,130,617   9.7 % (a)   Operating results of FSN Bay Area and Rainbow DBS' distribution operations are included in discontinued operations for all periods presented as applicable. (b) Represents intra-segment revenues. (c) Includes News 12 Networks, VOOM HD Networks, Sundance (effective June 16, 2008), Lifeskool, sportskool, IFC Entertainment, Rainbow Network Communications, Rainbow Advertising Sales Corp. and other Rainbow businesses. (d) Fuse has been included in the MSG segment for all periods presented. (e) Represents net revenues of Clearview Cinemas and PVI Virtual Media. (f) Represents inter-segment revenues. CABLEVISION SYSTEMS CORPORATION CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS (Dollars in thousands) (Unaudited)           ADJUSTED OPERATING CASH FLOW AND OPERATING INCOME (LOSS)     Adjusted Operating Cash Flow Operating Income (Loss) Three Months Ended June 30, % Three Months Ended June 30, % 2008 (a)   2007 (a) Change 2008 (a)   2007 (a) Change   Cable Television $ 497,732 $ 440,915 12.9 % $ 284,531 $ 218,308 30.3 % Optimum Lightpath   20,558     14,835   38.6 %   128     (4,972 ) 102.6 % Total Telecommunications   518,290     455,750   13.7 %   284,659     213,336   33.4 % AMC/WE tv/IFC 90,836 74,204 22.4 % 73,286 56,019 30.8 % Other Programming (b) (c)   (18,571 )   (32,103 ) 42.2 %   (42,879 )   (42,416 ) (1.1 %) Total Rainbow   72,265     42,101   71.6 %   30,407     13,603   123.5 % MSG (c) 31,397 30,368 3.4 % 9,425 10,317 (8.6 %) Other (d)   (19,318 )   (19,714 ) 2.0 %   (25,195 )   (28,867 ) 12.7 % Total Cablevision $ 602,634   $ 508,505   18.5 % $ 299,296   $ 208,389   43.6 %   Adjusted Operating Cash Flow     Operating Income (Loss)   Six Months Ended June 30, % Six Months Ended June 30, % 2008 (a)   2007 (a) Change 2008 (a)   2007 (a) Change   Cable Television $ 965,455 $ 854,980 12.9 % $ 543,206 $ 409,254 32.7 % Optimum Lightpath   38,761     29,367   32.0 %   (1,297 )   (10,429 ) 87.6 % Total Telecommunications   1,004,216     884,347   13.6 %   541,909     398,825   35.9 % AMC/WE tv/IFC 165,048 149,911 10.1 % 131,139 113,659 15.4 % Other Programming (b) (c)   (42,074 )   (64,678 ) 34.9 %   (73,036 )   (86,444 ) 15.5 % Total Rainbow   122,974     85,233   44.3 %   58,103     27,215   113.5 % MSG (c) 28,871 45,927 (37.1 )% (10,308 ) 5,751 - Other (d)   (37,481 )   (33,270 ) (12.7 )%   (44,867 )   (53,084 ) 15.5 % Total Cablevision $ 1,118,580   $ 982,237   13.9 % $ 544,837   $ 378,707   43.9 % (a)   Operating results of FSN Bay Area and Rainbow DBS' distribution operations are included in discontinued operations for all periods presented as applicable. (b) Includes News 12 Networks, VOOM HD Networks, Sundance (effective June 16, 2008), Lifeskool, sportskool, IFC Entertainment, Rainbow Network Communications, Rainbow Advertising Sales Corp. and other Rainbow businesses. (c) Fuse has been included in the MSG segment for all periods presented. (d) Includes unallocated corporate general and administrative costs, operating results of Clearview Cinemas, PVI Virtual Media, and certain other items. CABLEVISION SYSTEMS CORPORATION SUMMARY OF OPERATING STATISTICS (Unaudited)       CABLE TELEVISION June 30, 2008 March 31, 2008 June 30, 2007   Revenue Generating Units (in thousands) Basic Video Customers 3,132 3,125 3,139 iO Digital Video Customers 2,789 2,669 2,550 Optimum Online High-Speed Data Customers 2,395 2,343 2,168 Optimum Voice Customers   1,766     1,685     1,399   Total Revenue Generating Units   10,082     9,822     9,256     Customer Relationships (in thousands) (a) 3,338 3,327 3,319                 Homes Passed (in thousands) 4,697 4,687 4,618   Penetration Basic Video to Homes Passed 66.7 % 66.7 % 68.0 % iO Digital to Basic Penetration 89.1 % 85.4 % 81.3 % Optimum Online to Homes Passed 51.0 % 50.0 % 46.9 % Optimum Voice to Homes Passed 37.6 % 36.0 % 30.3 %                 Revenue for the three months ended (dollars in millions)   Video (b) $ 741 $ 735 $ 701 High-Speed Data 275 270 252 Voice 169 160 128 Advertising 31 24 31 Other (c)   26     25     27   Total Cable Television Revenue $ 1,242   $ 1,214   $ 1,139     Average Monthly Revenue per Basic Video Customer ("RPS”) (d) $ 132.29 $ 129.56 $ 121.01                 (a) Number of customers who receive at least one of the company’s services, including business modem only customers. (b) Includes analog, digital, PPV, VOD and DVR revenue. (c) Includes installation revenue, NY Interconnect, home shopping and other product offerings. (d) RPS is calculated by dividing average monthly cable television GAAP revenue for the quarter by the average number of basic video subscribers for the quarter.                 Rainbow June 30, 2008 March 31, 2008 June 30, 2007 Viewing Subscribers (in thousands) AMC 85,400 84,600 83,800 WE tv 58,900 56,900 55,100 IFC 47,300 45,500 41,900 Sundance* 29,600 na na   *    The Sundance channel was acquired by Rainbow on June 16, 2008. CABLEVISION SYSTEMS CORPORATION CAPITALIZATION AND LEVERAGE (Dollars in thousands) (Unaudited)     CAPITALIZATION June 30, 2008   Cash and cash equivalents $ 805,274   Bank debt $ 5,043,750 Senior notes and debentures 5,995,719 Senior subordinated notes and debentures 323,437 Collateralized indebtedness 446,126 Capital lease obligations and notes payable   62,297 Debt $ 11,871,329   LEVERAGE   Debt $ 11,871,329 Less: Collateralized indebtedness of unrestricted subsidiaries (a) 446,126 Cash and cash equivalents   805,274 Net debt $ 10,619,929   Leverage Ratios Consolidated net debt to AOCF leverage ratio (a) (b) 4.4 Restricted Group leverage ratio (Bank Test) (c) 4.2 CSC Holdings notes and debentures leverage ratio (c) 4.2 Cablevision senior notes leverage ratio (d) 4.9 Rainbow National Services notes leverage ratio (e) 3.8 (a)   Collateralized indebtedness is excluded from the leverage calculation because it is viewed as a forward sale of the stock of unaffiliated companies and the company's only obligation at maturity is to deliver, at its option, the stock or its cash equivalent. (b) AOCF is annualized based on the second quarter 2008 results, as reported, except with respect to Madison Square Garden, which is based on a trailing 12 months due to its seasonal nature. (c) Reflects the debt to cash flow ratios applicable under CSC Holdings' bank credit agreement and senior notes indentures, (which exclude Cablevision's $1.5 billion of senior notes and the debt and cash flows related to CSC Holdings' unrestricted subsidiaries, including Rainbow and MSG). The annualized AOCF (as defined) used in the ratios is $2.0 billion. (d) Adjusts the debt to cash flow ratio as calculated under the CSC Holdings notes and debentures leverage ratio to include Cablevision's $1.5 billion of senior notes. (e) Reflects the debt to cash flow ratio under the Rainbow National Services notes indentures. The annualized AOCF (as defined) used in the notes ratio is $352.6 million. CABLEVISION SYSTEMS CORPORATION CAPITAL EXPENDITURES (Dollars in thousands) (Unaudited)   Three Months Ended June 30, 2008   2007 CAPITAL EXPENDITURES   Consumer premise equipment $ 78,158 $ 89,626 Scalable infrastructure 39,297 22,733 Line extensions 6,456 9,432 Upgrade/rebuild 1,202 813 Support   29,452   21,407 Total Cable Television 154,565 144,011 Optimum Lightpath   19,796   16,452 Total Telecommunications 174,361 160,463 Rainbow 4,045 3,316 MSG 5,979 5,856 Other (Corporate, Theatres and PVI)   5,816   7,236 Total Cablevision $ 190,201 $ 176,871   Six Months Ended June 30, 2008 2007 CAPITAL EXPENDITURES Consumer premise equipment $ 190,730 $ 196,919 Scalable infrastructure 65,515 41,111 Line extensions 14,101 17,089 Upgrade/rebuild 2,521 1,453 Support   40,176   27,171 Total Cable Televison 313,043 283,743 Optimum Lightpath   36,894   28,642 Total Telecommunications 349,937 312,385 Rainbow 9,474 5,308 MSG 14,261 6,713 Other (Corporate, Theatres and PVI) 9,989 8,759 Total Cablevision $ 383,661 $ 333,165