A Friday rally in Cablevision Systems (CVC) points out the limits of requiring CEOs to affirm the accuracy of their financial statements.

On the one hand, the downtrodden company managed to ward off more damage to its stock Friday by reaffirming its cash-flow guidance and saying it stands behind its financial statements. On the other hand, merely saying it doesn't expect to restate numbers leaves the operator of New York metropolitan area cable systems a long way from regaining the investor confidence it has lost over the past few months.

Notably, the company will have to address Wall Street's multiple concerns about its finances -- chief among them the expectation that Cablevision will run out of cash next year unless it can come up with a new source of financing.

But Cablevision's management must also contend with an unresolved programming spat that has kept baseball's New York Yankees off its cable systems this season, a bumpy launch of advanced video services, and an industrywide malaise that hits Cablevision hard because of its resemblance in certain respects to battered cable operator

Adelphia Communications



Shares in Cablevision, which fell from $9.17 to as low as $5.25 over the first four days of the week, rose as high as $7 Friday. The stock, which has fallen nearly 90% from its 52-week high, was trading Friday afternoon at $6.30, up 50 cents for the day.

Financial Forecasts

In a premarket announcement Friday morning, Cablevision said it would address its capital spending plans for 2002 and 2003, as well as next year's funding plans, when it meets with analysts Aug. 8 to discuss second-quarter financial results. The company also said that CEO James Dolan and principal financial officer Bill Bell would sign off on the financial statement certification newly required by the

Securities and Exchange Commission

, and the company anticipated no restatements from prior periods.

Among the financial forecasts for 2002 that Cablevision reiterated, the company said its New York cable systems' cash flow would grow 25% over the full year, cash flow for its Madison Square Garden operation would hit between $90 million and $95 million, and its "core networks" cash flow for its

Rainbow Media Group

(RMG) - Get Report

would grow 13% to 15%. However, as the company disclosed a month ago, Adelphia's debt to Rainbow amounts to $9.7 million, net of reserves that Rainbow has already taken.

Cablevision also said that it has lost 17,000 subscribers to basic cable service over the first half of the year, despite an increase of 2,200 subscribers in June, in what's typically a weak second quarter for cable operators. Cablevision, which now has 3 million basic subscribers, has forecast basic cable subscriber growth of 0.5% to 1% for the year. But analysts including Deutsche Bank's Karim Zia are now predicting Cablevision will post a slight basic subscriber loss for the year.

Eroding Base

That would make Cablevision one of several cable operators who could see

basic subscriber losses this year in an industry that has enjoyed basic growth for decades. The retreat, which appears to be occuring a few years earlier than industry-watchers had expected, puts additional pressure on operators to generate cash from more advanced services.

That's a particularly thorny issue for Cablevision, since its advanced digital video service, which

endured a difficult launch last fall, has rolled out slower than expected and will require further capital expenditures crunching Cablevision's cash.

While Cablevision has lost fewer subscribers than some feared the company would because of the dispute that has made the hometown Yankees unavailable to Cablevision customers, the continuing blackout can only serve to increase competition from companies such as

Hughes Electronics'



Meanwhile, though Cablevision hasn't been accused of any criminal wrongdoing, it bears an unfortunate similarity, given investors' jangled nerves, to Adelphia Communications, which is operating under bankruptcy protection. Like Adelphia, Cablevision is one of the more highly leveraged cable operators. And like Adelphia when it was under the control of the family of John Rigas,

arrested earlier this week, Cablevision is a family operation. CEO James Dolan is the son of chairman and founder Charles Dolan, and the Dolan family holds a controlling stake in the company.

Given the financial scandals of the last year, saying you believe in your numbers is clearly good. But whether it's good enough is a matter Cablevision shareholders will have plenty of time to determine in coming weeks.