Cablevision Systems Corp. posted a hefty fourth-quarter loss on Thursday after writing down the value of its Long Island-based newspaper Newsday by nearly two-thirds. While Cablevision's core cable TV operations remain solid, some of company's other businesses are feeling the pain of the economic downturn.
Cablevision took a $402.4 million hit to reduce the value of Newsday on its books, resulting in a net loss of $321.4 million, or $1.11 per share, in the fourth quarter. The company also recorded a charge of $41 million for its discontinued high-definition network Voom.
Cablevision bought Newsday last July for $650 million. Analysts said Cablevision could have paid a lower price for the paper at the time, if it weren't for a bidding war involving News Corp. and Mort Zuckerman, owner of New York Daily News. And valuations have collapsed since then.
Excluding the charges, adjusted operating cash flow fell 1 percent to $604.7 million, as revenue climbed 11 percent to $2.05 billion.
In the same quarter of 2007, the cable operator earned $6.6 million, or 2 cents per share.
Analysts polled by Thomson Reuters expected a profit of 33 cents per share on revenue of $2.06 billion for the recently completed quarter. Analyst estimates typically exclude one-time items.
"Cablevision reported solid economic results despite the economic downturn," said Chief Executive Jim Dolan in a conference call with analysts. "Our cable business remained largely resilient."
The question going forward is how much Cablevision's other units will suffer during the recession. In the latest quarter, operating income at the company's Madison Square Garden group fell by 86 percent to $8.8 million while revenue slid 2 percent to $405.8 million.
Cablevision said earnings were hurt by weaker ticket sales at its winter-themed productions and higher costs related to its touring production of Radio City Music Hall's Christmas Spectacular. The Madison Square Garden group, which includes NBA's New York Knicks, comprised 19 percent of total revenue in the quarter.
Newsday's revenue came to $107.1 million, but the newspaper recorded an operating loss was $407.6 million including the writedown. Without the charge, adjusted operating cash flow was $10.3 million.
Cablevision's plan in acquiring Newsday was for the paper and its Web sites to complement the cable business, with opportunities to cross-sell ads across print, online and television.
But Ken Doctor, a media analyst at research firm Outsell Inc. in Burlingame, Calif., said Tribune Co. had the same idea with its stable of newspapers and TV stations. Earlier this year, Tribune filed for bankruptcy protection as print advertising revenue plunged.
"There are execution difficulties with synergy," said Doctor, noting that there were different ad buyers for each media and they might not want to be grouped together.
However, the good news for Cablevision is it only owns one paper, not a host of them, and as such the damage can be limited.
"The amount of fixing that needs to go on will be lower at a single paper," said Mike Simonton, media and entertainment analyst at Fitch Ratings. "They have such a stable cash flow source from the cable side," which gives them some breathing room.
In the quarter, Cablevision's cable TV, high-speed Internet and phone businesses saw a 7 percent increase in revenue to $1.26 billion. Operating income rose by 10 percent to $293.5 million while adjusted operating cash flow was up 4 percent to $498.1 million.
The number of basic video subscribers fell by 14,900 from a year ago but digital cable added 208,500 new customers, Internet subscribers rose by 173,200 and phone added 286,600 subscribers.
Cablevision's cable programming unit, Rainbow, had a 14 percent increase in revenue to $263.9 million. But it recorded an operating loss of $9.2 million _ compared with a profit of $34.7 million a year ago _ after accounting for the Voom impairment charge.
Without the charge, adjusted operating cash flow rose 15 percent to $66.3 million. Rainbow includes the cable networks AMF, IFC and Sundance.
For the full year, Cablevision said its loss came to $227.6 million, or 78 cents per share, compared with a profit of $218.5 million, or 74 cents per share, in 2007.
Revenue rose 11 percent to $7.23 billion from $6.48 billion.
Shares of Cablevision slid 12 cents to $13.25 in afternoon trading.
