Cablevision

(CVC)

disappointed Wall Street Tuesday morning with a decidedly mixed second-quarter earnings report.

The company reported higher-than-expected demand for its services, but lower-than-expected cash flow from its cable system operations. Its stock tumbled 6%.

The New York-area operator, which also cut cable cash flow targets for the year, said its bottom line was hurt by higher programming costs, primarily those stemming from the YES Network -- the regional sports service with which Cablevision has been locked in a dispute over pricing and distribution.

Cablevision, a family-controlled company that's one of the more highly leveraged cable operators, is struggling with a number of issues in an ongoing effort to gain Wall Street's trust. The company fired several executives recently over accounting practices at its AMC movie channel subsidiary. Cablevision has also alarmed investors with its foray into launching a direct broadcast satellite service -- a project which faces an uncertain road to profitability -- but the company has said it is capping its investment in satellite, and will spin off the DBS company.

Shares in Cablevision, which have risen from a $4.67 low a year ago to as high as $24.01, fell $1.33 Tuesday to $19.67.

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Over the Rainbow

For the second quarter ended June 30, Cablevision reported revenue of $973.3 million, short of the Thomson First Call estimate of $992 million. Cable revenue -- which excludes the company's business telecommunications services, Rainbow programming subsidiary and Madison Square Garden sports operations -- rose 10% to $624 million. Cable-adjusted operating cash flow -- which excludes restructuring charges and noncash compensation -- grew 5.6% to $239 million. Analysts, according to

TheStreet.com's

informal survey, expected adjusted operating cash flow in the neighborhood of $245 million to $280 million.

The cable-adjusted OCF was hurt by $8.4 million in legal fees and other expenses related to Cablevision's temporary agreement to carry YES, according to Cablevision. Other drags to OCF were various costs related to channel lineup realignments, system security projects and new channel launches.

Cablevision lowered its OCF guidance for the year for Telecommunications -- which includes consumer and business cable-related services -- from a growth rate in the range of 16% to 18% to a range of 14% to 16%.

On the bright side, Cablevision reported unexpectedly good subscriber growth in several areas. The company added 12,200 basic cable subscribers in the quarter, while analysts had forecast gains between 2,000 and 9,000. Advanced digital video subscribers were up 196,200 -- besting analysts' estimates by more than 30,000. Net high-speed data additions were 68,300, at the high end of Wall Street's expectations.

Following up on the previously disclosed Rainbow accounting problems, which involved improperly accelerating promotional expenses, Cablevision said Tuesday that the law firm hired by its audit committee to investigate the matter had found additional improper accounting at Rainbow: inappropriately accelerated expenses at the original production units of AMC and WE: Women's Entertainment.

Cablevision says its auditor, KPMG, has said it can't complete its review of Cablevision's second-quarter financials because of the ongoing audit committee investigation.