CABLEVISION SYSTEMS CORP /NY - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended June 30, 2002

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ___________to ___________

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.

Cablevision Systems Corporation Yes /X/ No / /
CSC Holdings, Inc. Yes /X/ No / /

Number of shares of common stock outstanding as of August 2, 2002:

Cablevision NY Group Class A Common Stock - 133,351,983
Cablevision NY Group Class B Common Stock - 42,145,986
Rainbow Media Group Class A Common Stock - 83,682,540
Rainbow Media Group Class B Common Stock - 21,072,993
CSC Holdings, Inc. Common Stock - 1,000

PART I. FINANCIAL INFORMATION

For information required by Item 1 and Item 2, refer to Index to Financial
Statements on page 7.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risks from changes in certain equity security
prices and interest rates. The Company's exposure to interest rate movements
results from its use of floating and fixed rate debt to fund its working
capital, capital expenditures, and other operational and investment
requirements. To manage interest rate risk, the Company has entered into
interest rate swap contracts to adjust the proportion of total debt that is
subject to variable and fixed interest rates. Such contracts fix the borrowing
rates on floating rate debt to provide an economic hedge against the risk of
rising rates and/or convert fixed rate borrowings to variable rates to provide
an economic hedge against the risk of higher borrowing costs in a declining
interest rate environment. In addition, from time to time the Company may
utilize short-term interest rate lock agreements to hedge the risk that the cost
of a future issuance of fixed rate debt may be adversely affected by changes in
interest rates. The Company does not enter into interest rate swap contracts for
speculative or trading purposes.

The Company's exposure to changes in equity security prices stems primarily from
the AT&T Corp., Charter Communications, Inc., AT&T Wireless Services, Inc., and
Adelphia Communications Corporation common stock held by the Company. The
Company has entered into prepaid forward contracts to hedge its equity price
risk and to monetize the value of these securities. These contracts, at
maturity, are expected to offset negative changes in the fair value of these
securities, while allowing for certain upside appreciation potential. In the
event of an early termination of such contracts, however, the Company would be
obligated to repay the monetization indebtedness less the sum of the fair value
of the underlying stock and the fair value of the equity collar, calculated at
the termination date. (See Liquidity and Financial Resources - Obligations Under
Derivative Contracts for a discussion of the early termination of some of our
Adelphia Communications monetization contracts.) The underlying stock and equity
collars are carried at fair market value on the Company's consolidated balance
sheet and the monetization indebtedness is carried at its accreted value.

FAIR VALUE OF DEBT: Based on the level of interest rates prevailing at June 30,
2002, the carrying value of the Company's fixed rate debt and redeemable
preferred stock of $6,001.2 million exceeded its fair value of $4,575.3 million
by approximately $1,425.9 million. The fair value of these financial instruments
is estimated based on reference to quoted market prices for these or comparable
securities. The Company's floating rate borrowings bear interest at current
market rates and thus approximate fair value. The effect of a hypothetical 100
basis point decrease in interest rates prevailing at June 30, 2002 would
increase the estimated fair value of fixed rate debt and redeemable preferred
stock instruments by approximately $272.4 million. This estimate is based on the
assumption of an immediate and parallel shift in interest rates across all
maturities. Changes in the fair value of these securities are expected to be
offset economically by changes in the fair value of the interest rate swap
contracts to the extent these securities are hedged.

2

INTEREST RATE DERIVATIVE CONTRACTS: As of June 30, 2002, the Company had
outstanding interest rate swap contracts to convert fixed rate debt to floating
rate debt covering a total notional principal amount of $1,055.0 million. As of
June 30, 2002, the fair market value of these interest rate swap contracts was
approximately $19.5 million, a net receivable position, as reflected under
derivative contracts in the Company's consolidated balance sheet. Assuming an
immediate and parallel shift in interest rates across the yield curve, a 100
basis point increase in interest rates from June 30, 2002 prevailing levels
would decrease the fair market value of these contracts by approximately $13.8
million to a net receivable position of $5.7 million.

In addition, the Company had outstanding prepaid interest rate swap contracts
with a notional value of $1,115.0 million entered into in connection with its
monetization transactions. As of June 30, 2002, such contracts had a fair market
value of $177.4 million, a net liability position, reflected as liabilities
under derivative contracts in the Company's consolidated balance sheet. Assuming
an immediate and parallel shift in interest rates across the yield curve, a 100
basis point increase in interest rates from June 30, 2002 prevailing levels
would decrease the fair market value of these contracts by approximately $34.5
million to a liability of $211.9 million.

EQUITY PRICE RISK: As of June 30, 2002, the fair market value and the carrying
value of the Company's holdings of AT&T, Charter Communications, AT&T Wireless
and Adelphia Communications common stock aggregated $602.5 million. Assuming a
10% change in price, the potential change in the fair value of these investments
would be approximately $60.3 million. As of June 30, 2002, the net fair value
and the carrying value of the equity collar component of the prepaid forward
contracts entered into to hedge the equity price risk of AT&T, Charter
Communications, AT&T Wireless and Adelphia Communications aggregated $663.6
million, a net receivable position. The maturities of these prepaid forward
contracts, all of which were entered into in 2001, are summarized in the
following table:

3

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

We are party to various lawsuits, some involving substantial amounts. Management
does not believe that the resolution of such lawsuits will have a material
adverse impact on our financial position.

On April 25, 2001, At Home Corporation commenced a lawsuit in the Court of
Chancery of the State of Delaware alleging that Cablevision had breached its
obligations under certain agreements with At Home. The suit seeks a variety of
remedies including: recision of the agreements between At Home and Cablevision
and cancellation of all warrants currently held by Cablevision, damages, and/or
an order prohibiting Cablevision from continuing to offer its Optimum Online
service and requiring it to convert its Optimum Online customers to the
Optimum@Home service and to roll out the Optimum@Home service. Cablevision has
filed an answer to the complaint denying the material allegations and asserting
various affirmative defenses. On September 28, 2001, At Home filed a petition
for reorganization in federal bankruptcy court.

On January 8, 2002, At Home terminated its At Home service to all of
Cablevision's Optimum@Home subscribers. In a letter dated January 9, 2002,
Cablevision advised At Home that such termination of service constituted an
election by At Home to terminate the existing master distribution agreement
entered into by and between Cablevision and At Home and all other related
agreements.

On April 29, 2002, Yankees Entertainment & Sports Network, LLC (the "YES
Network") filed a complaint against the Company in the United States District
Court, Southern District of New York. The complaint arises from the failure of
the YES Network and the Company to reach agreement on the carriage of
programming of the YES Network (primarily New York Yankees baseball games) on
the Company's cable television systems. The complaint alleges a variety of
anticompetitive acts. The complaint seeks declaratory judgments as to violations
of laws, treble damages and injunctive relief, including an injunction requiring
the Company to carry the YES Network on its cable television systems. The
Company believes that the claims set forth in the complaint are without merit
and intends to vigorously contest the lawsuit.

In August 2002, purported class actions naming as defendants the Company and
each of its directors were filed in the Delaware Chancery Court. The actions,
which allege breach of fiduciary duties and breach of contract with respect
to the exchange of the Rainbow Media Group tracking stock for Cablevision NY
Group common stock, were purportedly brought on behalf of all holders of
publicly traded shares of Rainbow Media Group tracking stock. The actions
seek to (i) enjoin the exchange of Rainbow Media Group tracking stock for
Cablevision NY Group common stock, (ii) enjoin any sales of "RMG assets", or,
in the alternative, award rescissory damages, (iii) if the exchange is
completed, rescind it or award rescissory damages, (iv) award compensatory
damages, and (v) award costs and disbursements. The Company believes the
claims are without merit and intends to vigorously contest the lawsuits.

Item 4. Submission of Matters to a Vote of Security Holders

The Company's Annual Meeting of Stockholders was held on June 4, 2002.

4

The following matters were voted upon at the Company's Annual Meeting of
Stockholders:

ELECTION OF DIRECTORS:

Class A Directors:
Charles D. Ferris: For: 112,532,957
Votes withheld: 1,983,975
Richard H. Hochman: For: 112,886,543
Votes withheld: 1,630,389
Victor Oristano: For: 112,868,297
Votes withheld: 1,648,635
Vincent Tese: For: 112,732,363
Votes withheld: 1,784,569

Class B Directors:
William J. Bell Thomas C. Dolan For: 526,824,825
Charles F. Dolan Robert S. Lemle Votes withheld: 0
James L. Dolan Sheila A. Mahony
Patrick F. Dolan John Tatta

Each nominee for election by the Class B common stockholders
received the same vote as indicated above.

RATIFICATION AND APPROVAL OF KPMG LLP

Class A Common Stock: For: 136,555,485
Against: 2,495,662
Abstain: 68,712

Class B Common Stock: For: 526,824,825
Against: 0
Abstain: 0

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

None.

(b) Reports on Form 8-K.

Cablevision Systems Corporation filed Current Reports on Form 8-K with the
Commission on May 1, 2002 and June 26, 2002.

CSC Holdings, Inc. filed Current Reports on Form 8-K with the Commission on
May 1, 2002 and June 26, 2002.

5

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.

CABLEVISION SYSTEMS CORPORATION
CSC HOLDINGS, INC

Date: August 14, 2002 By: /s/ William J. Bell
---------------------------------------
William J. Bell as Vice Chairman,
Director and Principal Financial
Officer of Cablevision Systems
Corporation and CSC Holdings, Inc.

Date: August 14, 2002 By: /s/ Andrew B. Rosengard
---------------------------------------
Andrew B.Rosengard as
Executive Vice President, Finance and
Principal Accounting Officer of
Cablevision Systems Corporation and
CSC Holdings, Inc.

6

INDEX TO FINANCIAL STATEMENTS

7

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

See accompanying notes to condensed consolidated financial statements.

I-1

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(continued)

See accompanying notes to condensed consolidated financial statements.

I-2

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

I-3

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2002 and 2001
(Dollars in thousands)
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

I-4

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of
Cablevision Systems Corporation and its majority owned subsidiaries (the
"Company" or "Cablevision") have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted.

NOTE 2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS

The financial statements as of and for the three and six months ended June 30,
2002 and 2001 presented in this Form 10-Q are unaudited; however, in the opinion
of management, such statements include all adjustments, consisting solely of
normal recurring adjustments, necessary for a fair presentation of the results
for the periods presented.

The interim financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
and CSC Holdings, Inc.'s Annual Report on Form 10-K for the year ended December
31, 2001.

The results of operations for the interim periods are not necessarily indicative
of the results that might be expected for future interim periods or for the full
year ending December 31, 2002.

NOTE 3. RECLASSIFICATIONS

Certain reclassifications have been made to the 2001 financial statements to
conform to the 2002 presentation.

NOTE 4. INCOME (LOSS) PER SHARE

Basic and diluted net loss per common share are computed by dividing net loss by
the weighted average number of common shares outstanding. Potential dilutive
common shares are not included in the computation as their effect would be
antidilutive.

Basic net income per share is computed by dividing net income by the weighted
average common stock outstanding during the period. Diluted net income per share
is computed by dividing net income by the weighted average common stock and
common stock equivalents outstanding during the period.

All per share amounts have been adjusted, for all years presented, to reflect
the tracking stock distribution in March 2001 as if it occurred on January 1,
2001. Per share information is presented individually for the Rainbow Media
Group ("RMG") common stock and the Cablevision NY Group ("CNYG") common stock.

I-5

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

Net income (loss) of Cablevision has been attributed to each class of common
stock based on the results of operations of the businesses and interests
attributed to CNYG and RMG excluding the net income or loss attributed to
parties other than Cablevision shareholders.

NOTE 5. CASH FLOWS

For purposes of the consolidated statements of cash flows, the Company considers
short-term investments with a maturity at date of purchase of three months or
less to be cash equivalents.

During the six months ended June 30, 2002 and 2001, the Company's non-cash
investing and financing activities and other supplemental data were as follows:

CNYG's non-cash investing and financing activities and other supplemental data
are presented below:

I-6

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

RMG's non-cash investing and financing activities and other supplemental data
are presented below:

NOTE 6. TRANSACTIONS

In March 2002, Rainbow Media Holdings, Inc., a subsidiary of the Company,
acquired Loral Space and Communications, Ltd.'s 50% interest in R/L DBS Company,
LLC for a purchase price of up to a present value of $33,000 payable only from a
percentage of revenues of R/L DBS' business, if any, or from any future sale of
all or part of the interests in or assets of R/L DBS. This purchase increased
Rainbow Media Holdings' ownership of R/L DBS to 100%. R/L DBS's results are
consolidated with those of the Company as of the date of acquisition.

In 2002, NBC-Rainbow Holding, Inc. exchanged a 5.0% interest in Rainbow Media
Holdings equity securities for 9,968,988 shares of Rainbow Media Group Class A
common stock of Cablevision (valued at $98,514). The acquisition of the 5.0% and
the 3.1% minority interest in 2002 and 2001, respectively, was accounted for as
a purchase. The excess of the purchase price over the net book value of assets
acquired of approximately $118,911 was allocated to the specific assets
acquired, in 2002, based upon an independent appraisal as follows:

I-7

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

NOTE 7. RECENTLY ADOPTED ACCOUNTING STANDARDS

Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets. Statement 142 requires
that goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of Statement 142. Statement 142 requires that intangible
assets with definite useful lives be amortized over their respective estimated
useful lives to their estimated residual values, and reviewed for impairment. In
connection with the adoption of Statement 142, the Company ceased the
amortization of goodwill and intangible assets that were determined to have an
indefinite useful life and that had been acquired in a purchase business
combination. The Company did not record any impairment charges in connection
with the implementation of Statement 142.

Summarized below is pro forma net income and basic and diluted earnings per
share for the three and six months ended June 30, 2001 for each of CNYG and RMG
as adjusted for amortization expense that is no longer recorded in accordance
with Statement 142.

I-8

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

Effective January 1, 2002, the Company adopted Statement No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, which supersedes both Statement
121 and the accounting and reporting provisions of APB Opinion No. 30, Reporting
the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions (Opinion 30), for the disposal of a segment of a business (as
previously defined in that Opinion). Statement 144 retains the fundamental
provisions in Statement 121 for recognizing and measuring impairment losses on
long-lived assets held for use and long-lived assets to be disposed of by sale,
while also resolving significant implementation issues associated with Statement
121. Statement 144 retains the basic provisions of Opinion 30 on how to present
discontinued operations in the income statement but broadens that presentation
to include a component of an entity (rather than a segment of a business). The
adoption of Statement 144 did not have a material impact on the Company's
financial statements because the impairment assessment under Statement 144 is
largely unchanged from Statement 121. The provisions of Statement 144 generally
are required to be applied prospectively after the adoption date to newly
initiated disposal activities.

Effective January 1, 2002, the Company adopted the provisions of the FASB's
Emerging Issues Task Force, EITF No. 01-09, "Accounting for the Consideration
Given by a Vendor to a Customer or a Reseller of the Vendors' Products." EITF
No. 01-09 stipulates the criteria to be met in determining the financial
statement classification of customer incentives (which includes deferred
carriage fees) as either a reduction of revenue or an operating expense. Upon
adoption,

I-9

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

the Company reclassified the amortization of its deferred carriage
fees as a reduction to revenues, net. This reclassification has been made for
the comparable 2001 period. The amortization of deferred carriage fees shown on
the balance sheet was previously included in operating expenses, which were
correspondingly reduced.

NOTE 8. INTANGIBLE ASSETS

The following table summarizes information relating to the Company's acquired
intangible assets at June 30, 2002.

The changes in the carrying amount of excess costs over the fair value of net
assets acquired for the six months ended June 30, 2002 are as follows:

I-10

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

NOTE 9. DEBT

In March 2002, Rainbow Media Group, LLC, a wholly owned subsidiary of Rainbow
Media Holdings, entered into a $400,000 revolving credit facility with a group
of banks which matures on December 31, 2006 (in certain limited circumstances
the maturity date may be accelerated to November 1, 2005). The facility requires
commitment reductions beginning in the third quarter of 2004. This revolving
credit facility contains certain financial covenants that may limit Rainbow
Media Group's ability to utilize all of the undrawn funds available thereunder,
including covenants requiring the maintenance of certain financial ratios and
restricting the permitted uses of borrowed funds.

In March 2002, American Movie Classics Company and Bravo Company, subsidiaries
of Rainbow Media Holdings attributed to the Rainbow Media Group, entered into a
$200,000 revolving credit facility with a group of banks. The facility matures
on December 31, 2006 (in certain limited circumstances the maturity date may be
accelerated to November 1, 2005) and requires commitment reductions beginning in
the third quarter of 2004. The facility amended and restated the previously
existing American Movie Classics $200,000 revolving credit facility. The
American Movie Classics/Bravo revolving credit facility contains certain
financial covenants that may limit the ability of American Movie Classics/Bravo
to utilize all of the undrawn funds available thereunder, including covenants
requiring the maintenance of certain financial ratios and restricting the
permitted uses of borrowed funds.

NOTE 10. COLLATERALIZED INDEBTEDNESS AND DERIVATIVE CONTRACTS

In May 2002, due to certain events relating to Adelphia Communications
Corporation, the Company received early termination notices from its bank
counterparties pursuant to certain monetization contracts covering 9.79 million
shares of Adelphia Communications common stock. As a result, the Company was
required to repay the related collateralized indebtedness prior to maturity, net
of the benefit of the related prepaid equity forward contracts in a significant
gain position. The Company made cash payments aggregating $54,813, representing
the difference between the redemption value of the collateralized indebtedness
and the fair market value of the prepaid equity forward contracts as of the
early termination date, and 9.79 million shares of Adelphia Communications
common stock that were held as collateral were returned to the Company. In
connection with the early termination, the Company recognized a loss of $17,237,
representing the difference between the carrying value and the redemption value
of the

I-11

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

collateralized indebtedness, which is reflected as a loss on the early
extinguishment of debt in the accompanying consolidated statement of operations.

NOTE 11. INCOME TAXES

Prior to June 29, 2002, the operations of the businesses attributed to CNYG were
included in two consolidated federal income tax returns; one consolidated return
included the telecommunications and retail operations, and the second
consolidated return included all companies owned by Rainbow Media Holdings. The
operations of the businesses attributed to RMG were included in the consolidated
federal income tax return filed by Rainbow Media Holdings.

In connection with the exchange of equity securities by NBC described in Note 6,
the Company recorded a deferred tax liability of approximately $42,000 in
accordance with the purchase method of accounting. Pursuant to such exchange,
the Company will begin to file one consolidated federal income tax return
effective June 29, 2002. As a result of the consolidation of Rainbow Media
Holdings for federal tax purposes, the valuation allowance and excess costs over
fair value of net assets acquired were reduced by approximately $91,000.

Tax rules impose restrictions on the ability of the companies to utilize each
others' tax attributes. Management evaluates the realizability of the deferred
tax assets and the need for additional valuation allowances quarterly.

CNYG
The income tax benefit for the six months ended June 30, 2002 of $73,984 differs
from the income tax benefit derived from applying the statutory rate principally
due to an increase in the valuation allowance of approximately $74,850 taken
against deferred tax assets attributable to Cablevision's telecommunications and
retail operations. CNYG considers the ability to have a portion of its future
deductible temporary differences offset against future taxable temporary
differences of RMG as positive evidence of the realizability of the deferred tax
assets.

RMG
Income tax expense of $18,922 for the six months ended June 30, 2002 was a
direct result of pre-tax income, partially offset by the realization of a tax
attribute made possible by a recent federal law change.

NOTE 12. RESTRUCTURING

In December 2001, the Company recorded restructuring charges of $56,442 which
included expenses of approximately $21,018 associated with the elimination of
approximately 600 positions (primarily in corporate, administrative and
infrastructure functions across various business units of the Company) and
estimated expenses of approximately $35,424 associated

I-12

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

with facility realignment and other related costs. The following table
summarizes the accrued restructuring liability at June 30, 2002.

NOTE 13. SEGMENT INFORMATION

The Company's reportable segments are strategic business units that are managed
separately. The Company evaluates segment performance based on several factors,
of which the primary financial measure is business segment adjusted operating
cash flow (defined as operating income or loss before depreciation and
amortization, stock plan income or expense, long-term incentive plan income or
expense and restructuring charges).

I-13

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

A reconciliation of reportable segment amounts to the Company's consolidated
balances is as follows:

Substantially all revenues and assets of the Company's reportable segments are
attributed to or located in the United States.

The Company does not have a single external customer which represents 10 percent
or more of its consolidated revenues.

NOTE 14. LEGAL MATTERS

On April 29, 2002, Yankees Entertainment & Sports Network, LLC (the "YES
Network") filed a complaint against the Company in the United States District
Court, Southern District of New York. The complaint arises from the failure of
the YES Network and the Company to reach agreement on the carriage of
programming of the YES Network (primarily New York Yankees baseball games) on
the Company's cable television systems. The complaint alleges a variety of
anticompetitive acts. The complaint seeks declaratory judgments as to violations
of laws, treble

I-14

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

damages and injunctive relief, including an injunction requiring the Company to
carry the YES Network on its cable television systems. The Company believes that
the claims set forth in the complaint are without merit and intends to
vigorously contest the lawsuit.

In August 2002, purported class actions naming as defendants the Company and
each of its directors were filed in the Delaware Chancery Court. The actions,
which allege breach of fiduciary duties and breach of contract with respect
to the exchange of the Rainbow Media Group tracking stock for Cablevision NY
Group common stock, were purportedly brought on behalf of all holders of
publicly traded shares of Rainbow Media Group tracking stock. The actions
seek to (i) enjoin the exchange of Rainbow Media Group tracking stock for
Cablevision NY Group common stock, (ii) enjoin any sales of "RMG assets", or,
in the alternative, award rescissory damages, (iii) if the exchange is
completed, rescind it or award rescissory damages, (iv) award compensatory
damages, and (v) award costs and disbursements. The Company believes the
claims are without merit and intends to vigorously contest the lawsuits.

NOTE 15. COMBINING FINANCIAL INFORMATION

Presented below are combining financial information schedules for Cablevision.
The combined financial data for each of RMG and CNYG is intended to reflect the
assets, liabilities, revenues and expenses that Cablevision has attributed to
each of those groups, as well as certain allocations deemed reasonable by
management, to present the combined financial position and results of operations
of RMG and CNYG as if each were a separate entity for all periods presented.
However, primarily as a result of allocations and inter-group related party
transactions, the financial information included herein may not necessarily
reflect the combined financial position and results of operations of RMG or CNYG
had it operated as a separate stand-alone entity during the periods presented.

RMG represents a combination of certain assets, liabilities and businesses owned
by Cablevision, consisting of: (i) interests in five nationally-distributed
entertainment programming networks, (ii) interests in five regional Fox Sports
Net networks outside of the New York metropolitan area, (iii) an interest in
National Sports Partners, which owns and distributes Fox Sports Net, (iv) an
interest in National Advertising Partners, which provides advertising
representation services to all of the Fox Sports Net networks, (v) Rainbow
Network Communications, a full service network programming origination and
distribution company and (vi) certain developmental activities of Cablevision's
Rainbow Media Holdings subsidiary, including Sterling Digital.

The combined financial statements of RMG include the accounts of the following
consolidated subsidiaries of Cablevision:

American Movie Classics Company
AMC includes the American Movie Classics and WE: Women's Entertainment
programming services;
Bravo Company
Bravo includes the Bravo and Independent Film Channel programming
services;
MuchMusic USA Venture;
SportsChannel Ohio Associates (also known as Fox Sports Net Ohio);

I-15

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

SportsChannel Florida Associates (also known as Fox Sports Net Florida);
Rainbow Network Communications; and
Sterling Digital LLC (also known as Mag Rack).

All significant intra-group transactions and balances have been eliminated in
combination.

CNYG represents a combination of assets, liabilities and businesses owned by
Cablevision which have not been attributed to RMG. These assets, liabilities and
businesses include: (i) cable television businesses, including Cablevision's
residential telephone and high-speed data businesses, (ii) commercial telephone
and high-speed data operation businesses, (iii) retail electronics businesses,
(iv) interests in New York metropolitan area sports and entertainment businesses
including Madison Square Garden, Radio City Music Hall, MSG Network, Fox Sports
Net New York and professional sports teams, (v) motion picture theater
businesses, (vi) advertising sales representation businesses, (vii) certain
direct broadcast satellite assets, (viii) equity interest in a wireless personal
communications business, and (vix) certain marketable equity securities.

The combined financial statements of CNYG include the accounts of all
consolidated subsidiaries of Cablevision that have not been attributed to RMG.
All significant intra-group transactions and balances have been eliminated in
combination. Cablevision's interests in less than majority-owned entities are
carried on the equity method.

Even though Cablevision has attributed certain assets, liabilities, revenue and
cash flows to each of RMG and CNYG, that attribution does not change the legal
title to any assets or responsibility for any liabilities and does not affect
the rights of any creditors. Further, financial results of one group that affect
Cablevision's consolidated financial condition could affect the financial
position or results of operations of the other group. Any dividends or
distributions on, or repurchases of, Cablevision stock will reduce the assets of
Cablevision legally available for dividends on RMG and CNYG stock. Accordingly,
holders of CNYG common stock and RMG tracking stock will continue to be subject
to risks associated with an investment in a single corporation and in all of
Cablevision's businesses, assets and liabilities.

Amounts in the combined financial statements of CNYG and RMG presented below
reflect Cablevision's basis in the net assets of the combined businesses.
However, minority interests in the net assets and in the results of operations
of these businesses are not reflected. Such minority interests are recorded in
the consolidated financial statements of Cablevision. However, the combined
statements of operations of CNYG and RMG presented below include the amount of
net income or loss attributable to parties other than Cablevision shareholders.
Such amounts represent the allocation of minority interests which are presented
in Cablevision's consolidated financial statements, in the net income or loss of
CNYG and RMG.

The combined financial data of RMG and CNYG reflects the application of certain
allocation and cash management policies of Cablevision. Cablevision's board of
directors may modify or rescind any of these allocation policies without the
approval of the stockholders. Any such changes adopted by the board of directors
would be made based upon its good faith business

I-16

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

judgment of Cablevision's best interests, taking into consideration the best
interests of all Cablevision shareholders. Management believes that these
allocations have been made on a reasonable basis. However, it is not practicable
to determine whether the allocated amounts represent amounts that might have
been incurred on a stand-alone basis, as there are no company-specific or
comparable industry benchmarks with which to make such estimates.

In August 2002, Cablevision's board of directors approved the exchange of
Rainbow Media Group common stock for shares of Cablevision NY Group common stock
pursuant to the terms of Cablevision's certificate of incorporation. Each share
of Rainbow Media Group common stock will be exchanged for 1.19093 shares of
Cablevision NY Group common stock on August 20, 2002.

I-17

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

COMBINING CONDENSED BALANCE SHEET DATA
June 30, 2002

I-18

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

COMBINING CONDENSED BALANCE SHEET DATA (Cont'd)
June 30, 2002

I-19

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

COMBINING CONDENSED BALANCE SHEET DATA
December 31, 2001

I-20

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

COMBINING CONDENSED BALANCE SHEET DATA (Cont'd)
December 31, 2001

I-21

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

COMBINING RESULTS OF OPERATIONS DATA

I-22

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(continued)

COMBINING RESULTS OF OPERATIONS DATA