Cablevision 2012 Annual Report Download - page 34

(28)
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