UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
| For the fiscal year ended | |||||||||||
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
| For the transition period from | to | ||||||||||||||||
| Commission File Number | Registrant; State of Incorporation; Address and Telephone Number | IRS Employer Identification No. | ||||||||||||||||||
 | ||||||||||||||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | ☒ | No | ☐ | ||||||||||||||||||||
| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | Yes | ☐ | ☒ | ||||||||||||||||||||
Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | |||||||||||||||||||||||
| ☒ | No | ☐ | |||||||||||||||||||||
| Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). | |||||||||||||||||||||||
| ☒ | No | ☐ | |||||||||||||||||||||
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. | ||||||||||||||
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ | |||||||||||||||||
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. | |||||
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. | |||||
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). | ☐ | ||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | Yes | No | ☒ | |||||||||||
Aggregate market value of the voting and non-voting common equity held by non-affiliates of Altice USA, Inc. computed by reference to the price at which the common equity was last sold on the New York Stock Exchange as of June 30, 2023: | $ | ||||
| Number of shares of common stock outstanding as of July 26, 2024 | |||||
Documents incorporated by reference
None.
EXPLANATORY NOTE
Altice USA, Inc. (the “Company”) filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 with the U.S. Securities and Exchange Commission (“SEC”) on February 15, 2024 (the “Original Form 10-K”). This Amendment No. 1 on Form 10-K (this “Amendment” or “Form 10-K/A”) is solely to amend the Report of Independent Registered Public Accounting Firm of KPMG LLP (“KPMG”) on the consolidated financial statements of our wholly-owned subsidiary, CSC Holdings, LLC (“CSCH”), included in Part II, Item 8 of the Original Form 10-K (the “Original CSCH Report”). The Original CSCH Report, as filed, inadvertently excluded the phrase “and in accordance with auditing standards generally accepted in the United States of America” at the end of the first sentence of the second paragraph under the Basis for Opinion section included in the signed report. The CSCH consolidated financial statements themselves are not affected, and this Amendment does not alter in any way KPMG’s opinion on CSCH’s consolidated financial statements.
As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, because the Original CSCH Report was included within Item 8 of the Original Form 10-K, this Form 10-K/A sets forth the complete text of Item 8; however, except for the corrections made to the Original CSCH Report noted above, no revisions or modifications have been made to the financial statements or any other information contained within Item 8 or Item 9A of the Original Form 10-K. In addition, the information contained in this Amendment does not reflect events occurring after the Original Form 10-K. This Amendment should be read in conjunction with the Company’s other filings with the SEC, including the Original Form 10-K.
Additionally, in accordance with Rule 12b-15, the Company is including with this Amendment currently dated certifications from its Chief Executive Officer and Chief Financial Officer. These certifications are filed or furnished, as applicable, as Exhibits 31.1, 31.2 and 32. This Amendment consists solely of the preceding cover page, this explanatory note, Item 8, Item 9A, the list of exhibits filed with this Amendment, the signature page, and the certifications.
TABLE OF CONTENTS
| Page | |||||||||||
| Part II | |||||||||||
| 8. | |||||||||||
| 9A. | |||||||||||
| Part IV | |||||||||||
| 15. | |||||||||||
1
PART II
Item 8. Financial Statements and Supplementary Data
For information required by Item 8, refer to the Index to Financial Statements on page F-1.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of Altice USA's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined under SEC rules). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of December 31, 2023.
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance to our management and Board of Directors regarding the reliability of financial reporting and the preparation of our external financial statements, including estimates and judgments, in accordance with accounting principles generally accepted in the United States of America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those internal controls determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline.
Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 framework). Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2023.
Audit Report of the Independent Registered Public Accounting Firm
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their audit report on our internal control over financial reporting appearing on page F-2.
Changes in Internal Control
During the year ended December 31, 2023, there were no changes in our internal control over financial reporting that materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)The following documents are filed as part of this report:
i.The financial statements as indicated in the index set forth on page F-1.
ii.Financial statement schedules have been omitted, since they are either not applicable, not required or the information is included elsewhere herein.
2
EXHIBIT INDEX
The following additional Exhibits 31.1, 31.2, 101 and 104 are filed with this Form 10-K/A. The following additional Exhibit 32 is furnished with this Form 10-K/A.
| Exhibit No. | Exhibit Description | |||||||
| 101 | The following financial statements of Altice USA, Inc. included in this Form 10-K/A for the year ended December 31, 2023, filed with the Securities and Exchange Commission on August 1, 2024, formatted in iXBRL (inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Stockholders' Deficiency; (v) the Consolidated Statements of Cash Flows; and (vi) the Combined Notes to Consolidated Financial Statements. | |||||||
| 104 | The cover page from this Form 10-K/A formatted in Inline XBRL. | |||||||
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Amendment No. 1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 to be signed on its behalf by the undersigned, thereunto duly authorized on the 1st day of August, 2024.
| Altice USA, Inc. | |||||
| By: | /s/ Marc Sirota | ||||
| Name: | Marc Sirota | ||||
| Title: | Chief Financial Officer | ||||
4
INDEX TO FINANCIAL STATEMENTS
| Page | ||||||||
Auditor Name: | ||||||||
Auditor Location: | ||||||||
Auditor Firm ID: | ||||||||
| ALTICE USA, INC. AND SUBSIDIARIES | ||||||||
| Consolidated Financial Statements | ||||||||
| Supplemental Financial Statements Furnished: | ||||||||
| CSC HOLDINGS, LLC AND SUBSIDIARIES | ||||||||
| Consolidated Financial Statements | ||||||||
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Altice USA, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Altice USA, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders’(deficiency), and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 14, 2024 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
New York, New York
February 14, 2024
F-2
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Altice USA, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Altice USA, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders’ (deficiency), and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 14, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of Goodwill for Impairment
As discussed in Note 10 to the consolidated financial statements, the Company’s goodwill balance as of December 31, 2023, was $8,045 million. The Company assesses recoverability of goodwill at the reporting unit level annually, or more frequently whenever events or changes in circumstances indicate that the carrying amount of a reporting unit more likely than not exceeds its fair value. The Company recognized an impairment charge of $163.1 million for the year ended December 31, 2023, relating to its News and Advertising reporting unit, as its carrying value exceeded its fair value. There was no impairment recognized related to the Telecommunications reporting unit.
We identified the evaluation of goodwill for impairment for the News and Advertising and Telecommunications reporting units as a critical audit matter. Challenging auditor judgment and involvement of valuation professionals with specialized skills and knowledge were required to evaluate certain assumptions used to estimate the fair value of these reporting units, such as revenue growth rates, long-term growth rates, and discount rates. Changes in these assumptions could have had a significant impact on the Company’s assessment of each reporting unit’s carrying value of goodwill.
F-3
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the annual goodwill impairment testing. This included controls related to the Company’s development of revenue growth rates, long-term growth rates, and discount rates. We performed sensitivity analyses over the revenue growth rate, long-term growth rate, and discount rate assumptions used in the Company’s estimates of the fair values of the News and Advertising and Telecommunications reporting units. We evaluated the Company’s revenue growth rate assumptions for each reporting unit by comparing them to each reporting unit’s historical revenue growth rates. We compared the Company’s historical revenue forecasts to actual results to assess the Company’s ability to accurately forecast. We involved valuation professionals with specialized skills and knowledge, who assisted in:
•evaluating the long-term growth rates by independently developing long-term growth rate ranges using publicly available market data and comparing them to the Company’s long-term growth rates
•evaluating the discount rates by independently developing discount rate ranges using publicly available market data for comparable entities and comparing them to the Company’s discount rate for each reporting unit
•developing an estimated range of fair value for each reporting unit using the Company’s cash flow projections and the independently developed discount rate ranges and long-term growth rates and compared the results to the Company’s fair value estimates.
/s/ KPMG LLP
We have served as the Company’s auditor since 2016.
New York, New York
February 14, 2024
F-4
Report of Independent Registered Public Accounting Firm
To the Member and Board of Directors
CSC Holdings, LLC:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of CSC Holdings, LLC and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, changes in total member’s equity (deficiency), and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of Goodwill for Impairment
As discussed in Note 10 to the consolidated financial statements, the Company’s goodwill balance as of December 31, 2023, was $8,045 million. The Company assesses recoverability of goodwill at the reporting unit level annually, or more frequently whenever events or changes in circumstances indicate that the carrying amount of a reporting unit more likely than not exceeds its fair value. The Company recognized an impairment charge of $163.1 million for the year ended December 31, 2023, relating to its News and Advertising reporting unit, as its carrying value exceeded its fair value. There was no impairment recognized related to the Telecommunications reporting unit.
We identified the evaluation of goodwill for impairment for the News and Advertising and Telecommunications reporting units as a critical audit matter. Challenging auditor judgment and involvement of valuation professionals with specialized skills and knowledge were required to evaluate certain assumptions used to estimate the fair value of these reporting units, such as revenue growth rates, long-term growth rates, and discount rates. Changes in these assumptions could have had a significant impact on the Company’s assessment of each reporting unit’s carrying value of goodwill.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the annual goodwill impairment testing. This included controls related to the Company’s development of revenue growth rates, long-term growth
F-5
rates, and discount rates. We performed sensitivity analyses over the revenue growth rate, long-term growth rate, and discount rate assumptions used in the Company’s estimates of the fair values of the News and Advertising and Telecommunications reporting units. We evaluated the Company’s revenue growth rate assumptions for each reporting unit by comparing them to each reporting unit’s historical revenue growth rates. We compared the Company’s historical revenue forecasts to actual results to assess the Company’s ability to accurately forecast. We involved valuation professionals with specialized skills and knowledge, who assisted in:
•evaluating the long-term growth rates by independently developing long-term growth rate ranges using publicly available market data and comparing them to the Company’s long-term growth rates
•evaluating the discount rates by independently developing discount rate ranges using publicly available market data for comparable entities and comparing them to the Company’s discount rate for each reporting unit
•developing an estimated range of fair value for each reporting unit using the Company’s cash flow projections and the independently developed discount rate ranges and long-term growth rates and compared the results to the Company’s fair value estimates.
/s/ KPMG LLP
We have served as the Company’s auditor since 2016.
New York, New York
February 14, 2024
F-6
ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
Accounts receivable, trade (less allowance for doubtful accounts of $ | |||||||||||
Prepaid expenses and other current assets ($ | |||||||||||
| Derivative contracts | |||||||||||
| Investment securities pledged as collateral | |||||||||||
| Total current assets | |||||||||||
Property, plant and equipment, net of accumulated depreciation of $ | |||||||||||
| Right-of-use operating lease assets | |||||||||||
| Other assets | |||||||||||
Amortizable intangibles, net of accumulated amortization of $ | |||||||||||
| Indefinite-lived cable franchise rights | |||||||||||
| Goodwill | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Interest payable | |||||||||||
| Accrued employee related costs | |||||||||||
| Deferred revenue | |||||||||||
| Debt | |||||||||||
Other current liabilities ($ | |||||||||||
| Total current liabilities | |||||||||||
| Other liabilities | |||||||||||
| Deferred tax liability | |||||||||||
| Right-of-use operating lease liability | |||||||||||
| Long-term debt, net of current maturities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 17) | |||||||||||
| Stockholders' Deficiency: | |||||||||||
Preferred stock, $ outstanding | |||||||||||
Class A common stock: $ | |||||||||||
Class B common stock: $ | |||||||||||
Class C common stock: $ issued and outstanding | |||||||||||
| Paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| ( | ( | ||||||||||
Treasury stock, at cost ( | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total Altice USA stockholders' deficiency | ( | ( | |||||||||
| Noncontrolling interests | ( | ( | |||||||||
| Total stockholders' deficiency | ( | ( | |||||||||
| Total liabilities and stockholders' deficiency | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
F-7
ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2023, 2022 and 2021
(In thousands, except per share amounts)
| 2023 | 2022 | 2021 | |||||||||||||||
Revenue (including revenue from affiliates of $ | $ | $ | $ | ||||||||||||||
| Operating expenses: | |||||||||||||||||
Programming and other direct costs (including charges from affiliates of $ | |||||||||||||||||
Other operating expenses (including charges from affiliates of $ | |||||||||||||||||
| Restructuring, impairments and other operating items (See Note 7) | |||||||||||||||||
| Depreciation and amortization (including impairments) | |||||||||||||||||
| Operating income | |||||||||||||||||
| Other income (expense): | |||||||||||||||||
| Interest expense, net | ( | ( | ( | ||||||||||||||
| Gain (loss) on investments and sale of affiliate interests, net | ( | ( | |||||||||||||||
| Gain (loss) on derivative contracts, net | ( | ||||||||||||||||
| Gain on interest rate swap contracts, net | |||||||||||||||||
| Gain (loss) on extinguishment of debt and write-off of deferred financing costs | ( | ( | |||||||||||||||
| Other income, net | |||||||||||||||||
| ( | ( | ( | |||||||||||||||
| Income before income taxes | |||||||||||||||||
| Income tax expense | ( | ( | ( | ||||||||||||||
| Net income | |||||||||||||||||
Net income attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||
Net income attributable to Altice USA, Inc. stockholders | $ | $ | $ | ||||||||||||||
Income per share: | |||||||||||||||||
Basic income per share | $ | $ | $ | ||||||||||||||
| Basic weighted average common shares (in thousands) | |||||||||||||||||
| Diluted income per share | $ | $ | $ | ||||||||||||||
| Diluted weighted average common shares (in thousands) | |||||||||||||||||
Cash dividends declared per common share | $ | $ | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
F-8
ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2023, 2022 and 2021
(In thousands)
| 2023 | 2022 | 2021 | |||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Defined benefit pension plans | ( | ( | |||||||||||||||
| Applicable income taxes | ( | ||||||||||||||||
| Defined benefit pension plans, net of income taxes | ( | ( | |||||||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||
| Comprehensive income | |||||||||||||||||
| Comprehensive income attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||
| Comprehensive income attributable to Altice USA, Inc. stockholders | $ | $ | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
F-9
| ALTICE USA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY Years ended December 31, 2023, 2022 and 2021 (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | Paid-in Capital | Retained Earnings (Accumulated Deficit) | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Altice USA Stockholders' Equity (Deficiency) | Non-controlling Interests | Total Equity (Deficiency) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
| Net income attributable to Altice USA stockholders | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to noncontrolling interests | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Pension liability adjustments, net of income taxes | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense (equity classified) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable equity vested | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Change in redeemable equity | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Class A shares acquired through share repurchase program and retired | ( | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B to Class A shares | ( | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Retirement of treasury stock and issuance of common shares pursuant to employee LTIP | ( | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
F-10
| ALTICE USA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (continued) Years ended December 31, 2023, 2022 and 2021 (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | Paid-in Capital | Retained Earnings (Accumulated Deficit) | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Altice USA Stockholders' Equity (Deficiency) | Non-controlling Interests | Total Equity (Deficiency) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||
| Net income attributable to Altice USA stockholders | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Pension liability adjustments, net of income taxes | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense (equity classified) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares pursuant to employee long term incentive plan | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
F-11
| ALTICE USA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (continued) Years ended December 31, 2023, 2022 and 2021 (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | Paid-in Capital | Retained Earnings (Accumulated Deficit) | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Altice USA Stockholders' Equity (Deficiency) | Non-controlling Interests | Total Equity (Deficiency) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
| Net income attributable to Altice USA stockholders | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Pension liability adjustments, net of income taxes | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense (equity classified) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Change in noncontrolling interest | — | — | ( | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Other | ( | ( | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | (434,418) | |||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
F-12
ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2023, 2022 and 2021
(In thousands)
| 2023 | 2022 | 2021 | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Depreciation and amortization (including impairments) | |||||||||||||||||
| Loss (gain) on investments and sale of affiliate interests, net | ( | ||||||||||||||||
| Loss (gain) on derivative contracts, net | ( | ( | |||||||||||||||
| Loss (gain) on extinguishment of debt and write-off of deferred financing costs | ( | ||||||||||||||||
| Amortization of deferred financing costs and discounts (premiums) on indebtedness | |||||||||||||||||
| Share-based compensation expense | |||||||||||||||||
| Deferred income taxes | ( | ||||||||||||||||
| Decrease in right-of-use assets | |||||||||||||||||
| Provision for doubtful accounts | |||||||||||||||||
| Goodwill impairment | |||||||||||||||||
| Other | |||||||||||||||||
| Change in assets and liabilities, net of effects of acquisitions and dispositions: | |||||||||||||||||
| Accounts receivable, trade | ( | ( | ( | ||||||||||||||
| Prepaid expenses and other assets | ( | ||||||||||||||||
| Amounts due from and due to affiliates | ( | ||||||||||||||||
| Accounts payable and accrued liabilities | ( | ( | |||||||||||||||
| Deferred revenue | ( | ( | |||||||||||||||
| Interest rate swap contracts | ( | ( | |||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Capital expenditures | ( | ( | ( | ||||||||||||||
| Payments for acquisitions, net of cash acquired | ( | ( | |||||||||||||||
| Other, net | ( | ( | ( | ||||||||||||||
| Net cash used in investing activities | ( | ( | ( | ||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Proceeds from long-term debt | |||||||||||||||||
| Repayment of debt | ( | ( | ( | ||||||||||||||
| Proceeds from collateralized indebtedness and related derivative contracts, net | |||||||||||||||||
| Repayment of collateralized indebtedness and related derivative contracts, net | ( | ||||||||||||||||
| Principal payments on finance lease obligations | ( | ( | ( | ||||||||||||||
| Purchase of shares of Altice USA, Inc. Class A common stock, pursuant to a share repurchase program | ( | ||||||||||||||||
| Payments to acquire noncontrolling interest | ( | ||||||||||||||||
| Other, net | ( | ( | ( | ||||||||||||||
| Net cash used in financing activities | ( | ( | ( | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ( | |||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ( | |||||||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ( | |||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of year | |||||||||||||||||
| Cash, cash equivalents and restricted cash at end of year | $ | $ | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
F-13
| CSC HOLDINGS, LLC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) | |||||||||||
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
Accounts receivable, trade (less allowance for doubtful accounts of $ | |||||||||||
Prepaid expenses and other current assets ($ | |||||||||||
| Derivative contracts | |||||||||||
| Investment securities pledged as collateral | |||||||||||
| Total current assets | |||||||||||
Property, plant and equipment, net of accumulated depreciation of $ | |||||||||||
| Right-of-use operating lease assets | |||||||||||
| Other assets | |||||||||||
Amortizable intangibles, net of accumulated amortization of $ | |||||||||||
| Indefinite-lived cable franchise rights | |||||||||||
| Goodwill | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND MEMBER'S DEFICIENCY | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Interest payable | |||||||||||
| Accrued employee related costs | |||||||||||
| Deferred revenue | |||||||||||
| Debt | |||||||||||
Other current liabilities ($ | |||||||||||
| Total current liabilities | |||||||||||
| Other liabilities | |||||||||||
| Deferred tax liability | |||||||||||
| Right-of-use operating lease liability | |||||||||||
| Long-term debt, net of current maturities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 17) | |||||||||||
Member's deficiency ( | ( | ( | |||||||||
| Accumulated other comprehensive income | ( | ( | |||||||||
| Total member's deficiency | ( | ( | |||||||||
| Noncontrolling interests | ( | ( | |||||||||
| Total deficiency | ( | ( | |||||||||
| Total liabilities and member's deficiency | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
F-14
CSC HOLDINGS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2023, 2022 and 2021
(In thousands)
| 2023 | 2022 | 2021 | |||||||||||||||
Revenue (including revenue from affiliates of $ | $ | $ | $ | ||||||||||||||
| Operating expenses: | |||||||||||||||||
Programming and other direct costs (including charges from affiliates of $ | |||||||||||||||||
Other operating expenses (including charges from affiliates of $ | |||||||||||||||||
| Restructuring, impairments and other operating items (See Note 7) | |||||||||||||||||
| Depreciation and amortization (including impairments) | |||||||||||||||||
| Operating income | |||||||||||||||||
| Other income (expense): | |||||||||||||||||
| Interest expense, net | ( | ( | ( | ||||||||||||||
| Gain (loss) on investments and sale of affiliate interests, net | ( | ( | |||||||||||||||
| Gain (loss) on derivative contracts, net | ( | ||||||||||||||||
| Gain on interest rate swap contracts, net | |||||||||||||||||
| Gain (loss) on extinguishment of debt and write-off of deferred financing costs | ( | ( | |||||||||||||||
| Other income, net | |||||||||||||||||
| ( | ( | ( | |||||||||||||||
| Income before income taxes | |||||||||||||||||
| Income tax expense | ( | ( | ( | ||||||||||||||
| Net income | |||||||||||||||||
| Net income attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||
| Net income attributable to CSC Holdings, LLC sole member | $ | $ | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
F-15
CSC HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2023, 2022 and 2021
(In thousands)
| 2023 | 2022 | 2021 | |||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Defined benefit pension plans | ( | ( | |||||||||||||||
| Applicable income taxes | ( | ||||||||||||||||
| Defined benefit pension plans, net of income taxes | ( | ( | |||||||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||
| Comprehensive income | |||||||||||||||||
| Comprehensive income attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||
| Comprehensive income attributable to CSC Holdings, LLC's sole member | $ | $ | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
F-16
CSC HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL MEMBER'S DEFICIENCY
Years ended December 31, 2023, 2022 and 2021
(In thousands)
| Member's Equity (Deficiency) | Accumulated Other Comprehensive Income (Loss) | Total Member's Equity (Deficiency) | Noncontrolling Interests | Total Equity (Deficiency) | |||||||||||||||||||||||||
| Balance at January 1, 2021 | $ | ( | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
| Net income attributable to CSC Holdings' sole member | — | — | |||||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | — | — | — | ||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | ( | ( | ||||||||||||||||||||||||
| Pension liability adjustments, net of income taxes | — | — | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ( | — | ( | ||||||||||||||||||||||||
| Share-based compensation expense (equity classified) | — | — | |||||||||||||||||||||||||||
| Redeemable equity vested | — | — | |||||||||||||||||||||||||||
| Change in redeemable equity | — | — | |||||||||||||||||||||||||||
| Cash distributions to parent | ( | — | ( | — | ( | ||||||||||||||||||||||||
| Non-cash distributions to parent | ( | — | ( | — | ( | ||||||||||||||||||||||||
| Other | ( | — | ( | ||||||||||||||||||||||||||
| Balance at December 31, 2021 | ( | ( | ( | ( | |||||||||||||||||||||||||
| Net income attributable to CSC Holdings' sole member | — | — | |||||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | — | — | — | ||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | ( | ( | ||||||||||||||||||||||||
| Pension liability adjustments, net of income taxes | — | ( | ( | — | ( | ||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | |||||||||||||||||||||||||||
| Share-based compensation expense (equity classified) | — | — | |||||||||||||||||||||||||||
| Cash distributions to parent, net | ( | — | ( | — | ( | ||||||||||||||||||||||||
| Non-cash contributions from parent | — | — | |||||||||||||||||||||||||||
| Balance at December 31, 2022 | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Net income attributable to CSC Holdings' sole member | — | 50,149 | — | 50,149 | |||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | — | — | — | ||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | ( | ( | ||||||||||||||||||||||||
| Pension liability adjustments, net of income taxes | — | ( | ( | — | ( | ||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ( | ( | ( | ||||||||||||||||||||||||
| Share-based compensation expense (equity classified) | — | — | |||||||||||||||||||||||||||
| Cash distributions to parent, net | ( | — | ( | — | ( | ||||||||||||||||||||||||
| Change in noncontrolling interest | ( | — | ( | ( | ( | ||||||||||||||||||||||||
| Non-cash contributions from parent | — | — | |||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
See accompanying notes to consolidated financial statements.
F-17
CSC HOLDINGS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2023, 2022 and 2021
| 2023 | 2022 | 2021 | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Depreciation and amortization (including impairments) | |||||||||||||||||
| Loss (gain) on investments and sale of affiliate interests, net | ( | ||||||||||||||||
| Loss (gain) on derivative contracts, net | ( | ( | |||||||||||||||
| Loss (gain) on extinguishment of debt and write-off of deferred financing costs | ( | ||||||||||||||||
| Amortization of deferred financing costs and discounts (premiums) on indebtedness | |||||||||||||||||
| Share-based compensation expense | |||||||||||||||||
| Deferred income taxes | ( | ||||||||||||||||
| Decrease in right-of-use assets | |||||||||||||||||
| Provision for doubtful accounts | |||||||||||||||||
| Goodwill impairment | |||||||||||||||||
| Other | |||||||||||||||||
Change in assets and liabilities, net of effects of acquisitions and dispositions: | |||||||||||||||||
| Accounts receivable, trade | ( | ( | ( | ||||||||||||||
| Prepaid expenses and other assets | ( | ||||||||||||||||
| Amounts due from and due to affiliates | ( | ||||||||||||||||
| Accounts payable and accrued liabilities | ( | ( | |||||||||||||||
| Deferred revenue | ( | ( | |||||||||||||||
| Interest rate swap contracts | ( | ( | |||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Capital expenditures | ( | ( | ( | ||||||||||||||
| Payment for acquisitions, net of cash acquired | ( | ( | |||||||||||||||
| Other, net | ( | ( | ( | ||||||||||||||
| Net cash used in investing activities | ( | ( | ( | ||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Proceeds from long-term debt | |||||||||||||||||
| Repayment of debt | ( | ( | ( | ||||||||||||||
| Proceeds from collateralized indebtedness and related derivative contracts, net | |||||||||||||||||
| Repayment of collateralized indebtedness and related derivative contracts, net | ( | ||||||||||||||||
| Distributions to parent | ( | ( | ( | ||||||||||||||
| Principal payments on finance lease obligations | ( | ( | ( | ||||||||||||||
| Payments to acquire noncontrolling interest | ( | ||||||||||||||||
| Other, net | ( | ( | ( | ||||||||||||||
| Net cash used in financing activities | ( | ( | ( | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ( | |||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ( | |||||||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ( | |||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of year | |||||||||||||||||
| Cash, cash equivalents and restricted cash at end of year | $ | $ | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
F-18
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
NOTE 1. DESCRIPTION OF BUSINESS AND RELATED MATTERS
The Company and Related Matters
Altice USA, Inc. ("Altice USA") was incorporated in Delaware on September 14, 2015. Altice USA is majority-owned by Patrick Drahi through Next Alt. S.à.r.l. ("Next Alt"). Patrick Drahi also controls Altice Group Lux S.à.r.l, formerly Altice Europe N.V. ("Altice Europe") and its subsidiaries and other entities. Altice USA is a holding company that does not conduct any business operations of its own. Altice Europe, through a subsidiary, acquired Cequel Corporation ("Cequel") on December 21, 2015 (the "Cequel Acquisition") and Cequel was contributed to Altice USA on June 9, 2016. Altice USA acquired Cablevision Systems Corporation ("Cablevision") on June 21, 2016 (the "Cablevision Acquisition").
Altice USA, through CSC Holdings, LLC (a wholly-owned subsidiary of Cablevision) and its consolidated subsidiaries ("CSC Holdings," and collectively with Altice USA, the "Company", "we", "us" and "our"), principally delivers broadband, video, and telephony services to residential and business customers, as well as proprietary content and advertising services in the United States. We market our residential services under the Optimum brand and provide enterprise services under the Lightpath and Optimum Business brands. In addition, we offer a full service mobile offering to consumers across our footprint. As these businesses are managed on a consolidated basis, we classify our operations in one segment.
The accompanying consolidated financial statements ("consolidated financial statements") of Altice USA include the accounts of Altice USA and its majority-owned subsidiaries and the accompanying consolidated financial statements of CSC Holdings include the accounts of CSC Holdings and its majority-owned subsidiaries. The consolidated balance sheets and statements of operations of Altice USA are essentially identical to the consolidated balance sheets and statements of operations of CSC Holdings, with the following exceptions: Altice USA has additional cash and CSC Holdings has a higher deferred tax liability on their respective consolidated balance sheets. Additionally, income tax expense differs between Altice USA and CSC Holdings and CSC Holdings and its subsidiaries have certain intercompany receivables from and payables to Altice USA.
The combined notes to the consolidated financial statements relate to the Company, which, except as noted, are essentially identical for Altice USA and CSC Holdings. All significant intercompany transactions and balances between Altice USA and CSC Holdings and their respective consolidated subsidiaries are eliminated in both sets of consolidated financial statements. Intercompany transactions between Altice USA and CSC Holdings are not eliminated in the CSC Holdings consolidated financial statements, but are eliminated in the Altice USA consolidated financial statements.
The financial statements of CSC Holdings are included herein as supplemental information as CSC Holdings is not a SEC registrant.
Share Repurchase Plan
In June 2018, the Board of Directors of Altice USA authorized a share repurchase program of $2,000,000 , and on July 30, 2019, the Board of Directors authorized a new incremental three-year share repurchase program of $5,000,000 that took effect following the completion in August 2019 of the $2,000,000 repurchase program. In November 2020, the Board of Directors authorized an additional $2,000,000 of share repurchases, bringing the total amount of cumulative share repurchases authorized to $9,000,000 . Under these repurchase programs, shares of Altice USA Class A common stock were purchased from time to time in the open market and included trading plans entered into with one or more brokerage firms in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. Size and timing of these purchases were determined based on market conditions and other factors.
For the years ended December 31, 2023 and 2022, Altice USA did not repurchase any shares. For the years ended December 31, 2021, Altice USA repurchased an aggregate of 23,593,728 shares for a total purchase price of approximately $804,928 . These acquired shares were retired and the cost of these shares was recorded in stockholders' equity (deficiency) in the consolidated balance sheet of Altice USA. From inception through December 31, 2023, Altice USA repurchased an aggregate of 285,507,773 shares for a total purchase price of approximately $7,808,698 . The share repurchase program expired in November 2023.
F-19
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Summary of Significant Accounting Policies
Revenue Recognition
Residential Services
We derive revenue through monthly charges to residential customers of our broadband, video, and telephony services, including installation services. In addition, we derive revenue from digital video recorder ("DVR"), video-on-demand ("VOD"), pay-per-view, and home shopping commissions which are reflected in "Residential video" revenues. We recognize broadband, video, and telephony revenues as the services are provided to a customer on a monthly basis. Each service is accounted for as a distinct performance obligation. Revenue from the sale of bundled services at a discounted rate is allocated to each product based on the standalone selling price of each performance obligation within the bundled offer. The standalone selling price requires judgment and is typically determined based on the current prices at which the separate services are sold by us. Installation revenue for our residential services is deferred and recognized over the benefit period, which is generally less than one year. The estimated benefit period takes into account both quantitative and qualitative factors including the significance of average installation fees to total recurring revenue per customer.
Also, we have mobile services providing data, talk and text to consumers in or near our service areas. Customers are billed monthly for access to and usage of our mobile services. We recognize mobile service revenue ratably over the monthly service period as the services are provided to the customers.
We are assessed non-income related taxes by governmental authorities, including franchising authorities (generally under multi-year agreements), and collects such taxes from its customers. In instances where the tax is being assessed directly on us, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customers are recorded as revenue. For the years ended December 31, 2023, 2022 and 2021, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $219,988 , $232,795 and $257,364 , respectively.
Business and Wholesale Revenue
We derive revenue from the sale of products and services to both large enterprise and small and medium-sized business ("SMB") customers, including broadband, telephony, networking, and video services reflected in "Business services and wholesale" revenues. Our business services also include Ethernet, data transport, and IP-based virtual private networks. We provide managed services to businesses, including hosted telephony services (cloud based SIP-based private branch exchange), managed WiFi, managed desktop and server backup and managed collaboration services including audio and web conferencing. We also offer fiber-to-the-tower services to wireless carriers for cell tower backhaul, which enables wireline communications service providers to connect to customers that their own networks do not reach. We recognize revenues for these services as the services are provided to a customer on a monthly basis.
Substantially all of our SMB customers are billed monthly and large enterprise customers are billed in accordance with the terms of their contracts which is typically on a monthly basis. Contracts with large enterprise customers typically range from to five years . In certain instances, upon expiration of a contract and prior to its renewal, we continue to provide services on a month to month basis. Installation revenue related to our large enterprise customers is deferred and recognized over the average contract term. Installation revenue related to SMB customers is deferred and recognized over the benefit period, which is less than one year. The estimated benefit period for SMB customers takes into account both quantitative and qualitative factors including the significance of average installation fees to total recurring revenue per customer.
News and Advertising Revenue
News and advertising revenue is primarily derived from the sale of (i) advertising inventory available on the programming carried on our cable television systems, as well as other systems (linear revenue), (ii) digital advertising, (iii) data analytics, and (iv) affiliation fees for news programming.
As part of the agreements under which we acquire video programming, we typically receive an allocation of scheduled advertising time during such programming into which our cable systems can insert commercials. In several
F-20
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
of the markets in which we operate, we have entered into agreements commonly referred to as interconnects with other cable operators to jointly sell local advertising. In some of these markets, we represent the advertising sales efforts of other cable operators; in other markets, other cable operators represent us.
We also offer customers the opportunity to advertise on digital platforms. Advertising revenues are recognized when the advertising is distributed. For arrangements in which we control the sale of advertising and act as the principal to the transaction, we recognize revenue earned from the advertising customer on a gross basis and the amount remitted to the distributor as an operating expense. For arrangements in which we do not control the sale of advertising and act as an agent to the transaction, we recognize revenue net of any fee remitted to the distributor.
Revenue earned from the data-driven, audience-based advertising solutions using advanced analytics tools is recognized when services are provided.
Affiliation fee revenue derived by our news business is recognized as the programming services are provided.
Other Revenue
Other revenue includes revenue derived from the sale of mobile devices which is recognized upon delivery and acceptance of the equipment by the customer. Revenues derived from other sources are recognized when services are provided or events occur.
Customer Contract Costs
Incremental costs incurred in obtaining a contract with a customer are deferred and recorded as an asset if the period of benefit is expected to be greater than one year. Sales commissions for enterprise customers are deferred and amortized over the average contract term. As the amortization period for sales commission expenses related to residential and SMB customers is less than one year, we utilize the practical expedient and are recognizing the costs when incurred. The costs of fulfilling a contract with a customer are deferred and recorded as an asset if they generate or enhance resources for us that will be used in satisfying future performance obligations and are expected to be recovered. Installation costs related to residential and SMB customers that are not capitalized as part of the initial deployment of new customer premise equipment are expensed as incurred pursuant to industry-specific guidance.
Deferred enterprise sales commission costs are included in other current and noncurrent assets in the consolidated balance sheet and totaled $18,109 and $17,511 as of December 31, 2023 and 2022, respectively.
A significant portion of our revenue is derived from residential and SMB customer contracts which are month-to month. As such, the amount of revenue related to unsatisfied performance obligations is not necessarily indicative of the future revenue to be recognized from our existing customer base. Contracts with enterprise customers generally range from three years to five years , and services may only be terminated in accordance with the contractual terms.
F-21
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
The following table presents the composition of revenue:
| Years Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
Residential: | |||||||||||||||||
Broadband | $ | $ | $ | ||||||||||||||
Video | |||||||||||||||||
Telephony | |||||||||||||||||
| Mobile (a) | |||||||||||||||||
| Residential revenue | |||||||||||||||||
| Business services and wholesale (a) | |||||||||||||||||
| News and advertising | |||||||||||||||||
| Other | |||||||||||||||||
| Total revenue | $ | $ | $ | ||||||||||||||
(a)Beginning in the second quarter of 2023, mobile service revenue previously included in mobile revenue is now separately reported in residential revenue and business services revenue. In addition, mobile equipment revenue previously included in mobile revenue is now included in other revenue. Prior period amounts have been revised to conform with this presentation.
Multiple-Element Transactions
In the normal course of business, we may enter into multiple-element transactions where we are simultaneously both a customer and a vendor with the same counterparty or in which we purchase multiple products and/or services, or settle outstanding items contemporaneously with the purchase of a product or service, from a single counterparty. Our policy for accounting for each transaction negotiated contemporaneously is to record each deliverable of the transaction based on our best estimate of selling price in a manner consistent with that used to determine the price to sell each deliverable on a standalone basis. In determining the value of the respective deliverable, we utilize historical transactions, quoted market prices (as available), or comparable transactions.
Programming and Other Direct Costs
Costs of revenue related to delivery of services and goods are classified as "programming and other direct costs" in the accompanying consolidated statements of operations.
Programming Costs
Programming expenses related to our video service represent fees paid to programming distributors to license the programming distributed to video customers. This programming is acquired generally under multi-year distribution agreements, with rates usually based on the number of customers that receive the programming. If there are periods when an existing distribution agreement has expired and the parties have not finalized negotiations of either a renewal of that agreement or a new agreement for certain periods of time, we continue to carry and pay for these services until execution of definitive replacement agreements or renewals. The amount of programming expense recorded during the interim period is based on our estimate of the ultimate contractual agreement expected to be reached, which is based on several factors, including previous contractual rates, customary rate increases and the current status of negotiations. Such estimates are adjusted as negotiations progress until new programming terms are finalized.
In addition, we receive, or may receive, incentives from programming distributors for carriage of the distributors' programming. We generally recognize these incentives as a reduction of programming costs and are recorded in "programming and other direct costs", generally over the term of the distribution agreement.
F-22
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
Advertising Expenses
Advertising costs are charged to expense when incurred and are reflected in "other operating expenses" in the accompanying consolidated statements of operations. Advertising costs amounted to $253,777 , $299,590 and $274,639 for the years ended December 31, 2023, 2022 and 2021, respectively.
Share-Based Compensation
Share-based compensation expense which primarily relates to awards of stock options, restricted shares, and performance stock units, is based on the fair value of share-based payment awards at the date of grant. We recognize share-based compensation expense over the requisite service period or when it is probable any related performance condition will be met. For awards with graded vesting, compensation cost is recognized on an accelerated method under the graded vesting method over the requisite service period. Share-based compensation expense related to awards that vest entirely at the end of the vesting period are expensed on a straight-line basis. We account for forfeitures as they occur.
Income Taxes
Cash and Cash Equivalents
Our cash investments are placed with money market funds and financial institutions that are investment grade as rated by S&P Global Ratings and Moody's Investors Service. We select money market funds that predominantly invest in marketable, direct obligations issued or guaranteed by the United States government or its agencies, commercial paper, fully collateralized repurchase agreements, certificates of deposit, and time deposits.
We consider the balance of our investment in funds that substantially hold securities that mature within three months or less from the date the fund purchases these securities to be cash equivalents. The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.
Accounts Receivable
Investment Securities
Long-Lived Assets and Amortizable Intangible Assets
We capitalize certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized over the estimated useful life of the software and reported in depreciation and amortization.
Customer relationships, trade names and other intangibles established in connection with acquisitions that are finite-lived are amortized in a manner that reflects the pattern in which the projected net cash inflows are expected to occur, such as the sum of the years' digits method, or when such pattern does not exist, using the straight-line method over their respective estimated useful lives.
F-23
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
We review our long-lived assets (property, plant and equipment, and intangible assets subject to amortization) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and the value of indefinite-lived cable franchises acquired in business combinations are not amortized. Rather, such assets are tested for impairment annually or whenever events or changes in circumstances indicate that it is more likely than not that the assets may be impaired.
The assessment of recoverability may first consider qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit or the indefinite-lived cable franchise right is less than its carrying amount. These qualitative factors include macroeconomic conditions such as changes in interest rates, industry and market considerations, recent and projected financial performance of the reporting units, as well as other factors. A quantitative test is performed if we conclude that it is more likely than not that the fair value of a reporting unit or an indefinite-lived cable franchise right is less than its carrying amount or if a qualitative assessment is not performed. In 2023, we performed a quantitative assessment for our goodwill recoverability test and a qualitative assessment for our indefinite-lived cable franchise rights recoverability test. See Note 10 for a discussion of the results of our annual impairment tests.
Goodwill
Goodwill resulted from business combinations and represents the excess amount of the consideration paid over the identifiable assets and liabilities recorded in the acquisition. We test goodwill for impairment at the reporting unit level: (i) Telecommunications and (ii) News and Advertising.
The quantitative test for goodwill identifies potential impairment by comparing the fair value of the reporting unit with its carrying amount. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
We estimate the fair value of our reporting units by considering both (i) a discounted cash flow method, which is based on the present value of projected cash flows over a discrete projection period and a terminal value, which is based on the expected normalized cash flows of the reporting units following the discrete projection period, and (ii) a market approach, which includes the use of multiples of publicly-traded companies whose services are comparable to ours. Significant judgments in estimating the fair value of our reporting units include cash flow projections and the selection of the discount rate.
The estimates and assumptions utilized in estimating the fair value of our reporting units could have a significant impact on whether an impairment charge is recognized and also the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. These estimates are subjective in nature and involve uncertainties and matters of significant judgments. Changes in assumptions could significantly affect the estimates.
Indefinite-lived Cable Franchise Rights
Our indefinite-lived cable franchise rights reflect the value of agreements we have with state and local governments that allow us to construct and operate a cable business within a specified geographic area and allow us to solicit and service potential customers in the service areas defined by the franchise rights currently held by us. We have concluded that our cable franchise rights have an indefinite useful life since there are no legal, regulatory, contractual, competitive, economic or other factors that limit the period over which these rights will contribute to our cash flows. For impairment testing purposes, we have concluded that our cable franchise rights are a single unit of account.
F-24
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
Deferred Financing Costs
Deferred financing costs, which are presented as a reduction of debt, are amortized to interest expense using the effective interest method over the terms of the related debt.
Derivative Financial Instruments
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when we believe it is probable that a liability has been incurred and the amount of the contingency can be reasonably estimated.
Foreign Currency
Common Stock of Altice USA
Each holder of our Class A common stock has one vote per share while holders of our Class B common stock have twenty-five votes per share. Class B shares can be converted to Class A common stock at anytime with a conversion ratio of one Class A common share for one Class B common share.
The following table provides details of Altice USA's shares of common stock outstanding:
| Shares of Common Stock Outstanding | |||||||||||
| Class A Common Stock | Class B Common Stock | ||||||||||
| Balance at December 31, 2021 | |||||||||||
| Conversion of Class B common stock to Class A common stock | ( | ||||||||||
| Issuance of common shares in connection with the vesting of restricted stock units | |||||||||||
| Treasury shares reissued | |||||||||||
| Balance at December 31, 2022 | |||||||||||
| Conversion of Class B common stock to Class A common stock | ( | ||||||||||
| Issuance of common shares in connection with the vesting of restricted stock units | |||||||||||
| Retirement of Class A common shares due to forfeiture | ( | ||||||||||
| Treasury shares reissued | |||||||||||
| Balance at December 31, 2023 | |||||||||||
CSC Holdings Membership Interests
As of December 31, 2023 and 2022, CSC Holdings had 100 membership units issued and outstanding, which are all indirectly owned by Altice USA.
F-25
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
Dividends and Distributions
Altice USA
Altice USA may pay dividends on its capital stock only from net profits and surplus as determined under Delaware law. If dividends are paid on the Altice USA common stock, holders of the Altice USA Class A common stock and Altice USA Class B common stock are entitled to receive dividends, and other distributions in cash, stock or property, equally on a per share basis, except that stock dividends with respect to Altice USA Class A common stock may be paid only with shares of Altice USA Class A common stock and stock dividends with respect to Altice USA Class B common stock may be paid only with shares of Altice USA Class B common stock.
Our indentures restrict the amount of dividends and distributions in respect of any equity interest that can be made.
During 2023, 2022 and 2021, there were no dividends paid to shareholders by Altice USA.
CSC Holdings
CSC Holdings may make distributions on its membership interests only if sufficient funds exist as determined under Delaware law. See Note 16 for a discussion of equity distributions that CSC Holdings made to its parent.
Concentrations of Credit Risk
Financial instruments that may potentially subject us to a concentration of credit risk consist primarily of cash and cash equivalents and trade account receivables. We monitor the financial institutions and money market funds where it invests its cash and cash equivalents with diversification among counterparties to mitigate exposure to any single financial institution. Our emphasis is primarily on safety of principal and liquidity and secondarily on maximizing the yield on its investments. Management believes that no significant concentration of credit risk exists with respect to its cash and cash equivalents because of its assessment of the creditworthiness and financial viability of the respective financial institutions.
We did not have a single customer that represented 10 10
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. See Note 13 for a discussion of fair value estimates.
Reclassifications
Certain reclassifications have been made to the 2022 and 2021 amounts to conform to the 2023 presentation.
NOTE 3. ACCOUNTING STANDARDS
Accounting Standards Adopted in 2023
ASU No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations
In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, to enhance transparency about an entity’s use of supplier finance programs. ASU 2022-04 requires the buyer in a supplier finance program to disclose (a) information about the key terms of the program, (b) the amount outstanding that remains unpaid by the buyer as of the end of the period, (c) a rollforward of such amounts during each annual period, and (d) a description of where in the financial statements outstanding amounts are being presented. We adopted ASU 2022-04 on January 1, 2023. See Note 11 for further information.
F-26
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
Accounting Standards Adopted in 2022
ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires companies to apply the definition of a performance obligation under ASC Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities relating to contracts with customers that are acquired in a business combination. Under prior GAAP, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 results in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded before the acquisition under ASC Topic 606. We elected to adopt ASU No. 2021-08 on January 1, 2022 and we will provide the required disclosures for any future material transactions.
ASU No. 2021-10, Government Assistance (Topic 832)
In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832), which requires business entities to disclose information about transactions with a government that are accounted for by applying a grant or contribution model by analogy (for example, IFRS guidance in IAS 20 or guidance on contributions for not-for-profit entities in ASC 958-605). For transactions in the scope of the ASU No. 2021-10, business entities will need to provide information about the nature of the transaction, including significant terms and conditions, as well as the amounts and specific financial statement line items affected by the transaction. We adopted the new guidance on January 1, 2022 and it did not have a material impact on our consolidated financial statements. We will provide the required disclosures for any future material transactions.
Recently Issued But Not Yet Adopted Accounting Pronouncements
ASU No. 2023-07 Segment Reporting—Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures, to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities. ASU No. 2023-07 is meant to enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, and provide new segment disclosure requirements for entities with a single reportable segment. ASU No. 2023-07 is effective for us for the year ended December 31, 2024, although early adoption is permitted. We are currently evaluating the impact of adopting ASU 2023-07.
ASU No. 2023-09 Income Taxes—Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes—Improvements to Income Tax Disclosures, which require greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid. ASU No. 2023-09 is effective for us for the year ending December 31, 2025, although early adoption is permitted. We are currently evaluating the impact of adopting ASU No. 2023-09.
F-27
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
NOTE 4. NET INCOME PER SHARE
Basic net income per common share attributable to Altice USA stockholders is computed by dividing net income attributable to Altice USA stockholders by the weighted average number of common shares outstanding during the period. Diluted income per common share attributable to Altice USA stockholders reflects the dilutive effects of stock options, restricted stock, restricted stock units, and deferred cash-denominated awards. For awards that are performance based, the dilutive effect is reflected upon the achievement of the performance criteria.
The following table presents a reconciliation of weighted average shares used in the calculations of the basic and diluted net income per share attributable to Altice USA stockholders:
| Years Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Basic weighted average shares outstanding | |||||||||||||||||
| Effect of dilution: | |||||||||||||||||
| Stock options | |||||||||||||||||
| Restricted stock | |||||||||||||||||
| Restricted stock units | |||||||||||||||||
| Deferred cash-denominated awards (Note 15) | |||||||||||||||||
| Diluted weighted average shares outstanding | |||||||||||||||||
Weighted average shares excluded from diluted weighted average shares outstanding: | |||||||||||||||||
| Anti-dilutive shares | |||||||||||||||||
| Share-based compensation awards whose performance metrics have not been achieved | |||||||||||||||||
Net income per membership unit for CSC Holdings is not presented since CSC Holdings is a limited liability company and a wholly-owned subsidiary of Altice USA.
NOTE 5. ALLOWANCE FOR DOUBTFUL ACCOUNTS
Activity related to our allowance for doubtful accounts is presented below:
| Balance at Beginning of Period | Provision for Bad Debt | Deductions/ Write-Offs and Other Charges | Balance at End of Period | ||||||||||||||||||||
| Year Ended December 31, 2023 | |||||||||||||||||||||||
| Allowance for doubtful accounts | $ | $ | $ | ( | $ | ||||||||||||||||||
| Year Ended December 31, 2022 | |||||||||||||||||||||||
| Allowance for doubtful accounts | $ | $ | $ | ( | $ | ||||||||||||||||||
| Year Ended December 31, 2021 | |||||||||||||||||||||||
| Allowance for doubtful accounts | $ | $ | $ | ( | $ | ||||||||||||||||||
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ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
NOTE 6. SUPPLEMENTAL CASH FLOW INFORMATION
Our non-cash investing and financing activities and other supplemental data were as follows:
| Years Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Non-Cash Investing and Financing Activities: | |||||||||||||||||
| Altice USA and CSC Holdings: | |||||||||||||||||
| Property and equipment accrued but unpaid | $ | $ | $ | ||||||||||||||
| Notes payable for the purchase of equipment and other assets | |||||||||||||||||
| Right-of-use assets acquired in exchange for finance lease obligations | |||||||||||||||||
| Payable relating to acquisition of noncontrolling interest | |||||||||||||||||
| Other non-cash investing and financing transactions | |||||||||||||||||
| CSC Holdings: | |||||||||||||||||
| Contributions from (distributions to) parent, net | ( | ||||||||||||||||
| Supplemental Data: | |||||||||||||||||
| Altice USA: | |||||||||||||||||
| Cash interest paid, net of capitalized interest | |||||||||||||||||
| Income taxes paid, net | |||||||||||||||||
| CSC Holdings: | |||||||||||||||||
| Cash interest paid, net of capitalized interest | |||||||||||||||||
| Income taxes paid, net | |||||||||||||||||
NOTE 7. RESTRUCTURING, IMPAIRMENTS AND OTHER OPERATING ITEMS
Our restructuring, impairments and other operating items are comprised of the following:
| Years Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Contractual payments for terminated employees | $ | $ | $ | ||||||||||||||
| Facility realignment costs | |||||||||||||||||
| Impairment of right-of-use operating lease assets | |||||||||||||||||
| Remeasurement of contingent consideration related to an acquisition | ( | ||||||||||||||||
| Transaction costs related to certain transactions not related to our operations | |||||||||||||||||
| Litigation settlement (a) | |||||||||||||||||
| Goodwill impairment (b) | |||||||||||||||||
| Restructuring, impairments and other operating items | $ | $ | $ | ||||||||||||||
(a)Represents the settlement of litigation in the fourth quarter of 2022, of which $65,000 was paid in 2022 and the balance of $47,500 is payable on or before June 30, 2024.
(b)In connection with our annual recoverability assessment of goodwill, we recorded an impairment charge relating to our News and Advertising reporting unit for the year ended December 31, 2023. See Note 10 for additional information.
NOTE 8. PROPERTY, PLANT AND EQUIPMENT
Costs incurred in the construction of our cable systems, including line extensions to, and upgrade of, our hybrid fiber/coaxial infrastructure and construction of the parallel fiber-to-the-home ("FTTH") infrastructure, are capitalized. This includes headend facilities and initial placement of the feeder cable to connect a customer that had not been previously connected. These costs consist of materials, subcontractor labor, direct consulting fees, and internal labor
F-29
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
and related costs associated with the construction activities (including interest related to FTTH construction). Internal costs that are capitalized consist of salaries and benefits of our employees and a portion of facility costs that supports the construction activities. Such costs are depreciated over the estimated life of our infrastructure and our headend facilities and related equipment (5 to 25 years). Costs of operating the plant and the technical facilities, including repairs and maintenance, are expensed as incurred.
Costs associated with the initial deployment of new customer premise equipment ("CPE") necessary to provide services are also capitalized. These costs include materials, subcontractor labor, internal labor, and other related costs associated with the connection activities. Departmental activities supporting the connection process are capitalized based on time-weighted activity allocations of costs. These installation costs are amortized over the estimated useful lives of the CPE. The portion of departmental costs related to disconnecting services and removing CPE from a customer, costs related to connecting CPE that has been previously connected to the network, and repairs and maintenance are expensed as incurred.
The estimated useful lives assigned to our property, plant and equipment are reviewed on an annual basis or more frequently if circumstances warrant and such lives are revised to the extent necessary due to changing facts and circumstances. Any changes in estimated useful lives are reflected prospectively.
Property, plant and equipment (including equipment under finance leases) consist of the following assets, which are depreciated or amortized on a straight-line basis over the estimated useful lives shown below:
| December 31, | Estimated Useful Lives | ||||||||||||||||
| 2023 | 2022 | ||||||||||||||||
| Customer premise equipment | $ | $ | |||||||||||||||
| Headends and related equipment | |||||||||||||||||
| Infrastructure | |||||||||||||||||
| Equipment and software | |||||||||||||||||
| Construction in progress (including materials and supplies) | |||||||||||||||||
| Furniture and fixtures | |||||||||||||||||
| Transportation equipment | |||||||||||||||||
| Buildings and building improvements | |||||||||||||||||
| Leasehold improvements | Term of lease | ||||||||||||||||
| Land | |||||||||||||||||
| Less accumulated depreciation and amortization | ( | ( | |||||||||||||||
| $ | $ | ||||||||||||||||
For the years ended December 31, 2023, 2022 and 2021, we capitalized certain costs aggregating $147,267 , $138,845 and $145,837 , respectively, related to the acquisition and development of internal use software, which are included in the table above.
Depreciation expense on property, plant and equipment (including finance leases) for the years ended December 31, 2023, 2022 and 2021 amounted to $1,252,919 , $1,218,365 and $1,145,316 , respectively.
NOTE 9. LEASES
Our operating leases are comprised primarily of facility leases and our finance leases are comprised primarily of vehicle and equipment leases. We determine if an arrangement is a lease at inception and lease assets and liabilities are recognized upon commencement of the lease based on the present value of the future minimum lease payments over the lease term. Lease assets and liabilities are not recorded for leases with an initial term of one year or less. We generally use our incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease agreement. The lease term will include options to extend the lease when it is reasonably certain that we will exercise that option.
F-30
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
Balance sheet information related to our leases is presented below:
| Balance Sheet location | December 31, | ||||||||||||||||
| 2023 | 2022 | ||||||||||||||||
| Operating leases: | |||||||||||||||||
| Right-of-use lease assets | Right-of-use operating lease assets | $ | $ | ||||||||||||||
| Right-of-use lease liability, current | |||||||||||||||||
| Right-of-use lease liability, long-term | Right-of-use operating lease liability | ||||||||||||||||
| Finance leases: | |||||||||||||||||
| Right-of-use lease assets | |||||||||||||||||
| Right-of-use lease liability, current | |||||||||||||||||
| Right-of-use lease liability, long-term | |||||||||||||||||
The following provides details of our lease expense:
| Years Ended December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Operating lease expense, net | $ | $ | |||||||||
| Finance lease expense: | |||||||||||
| Amortization of assets | |||||||||||
| Interest on lease liabilities | |||||||||||
| Total finance lease expense | |||||||||||
| $ | $ | ||||||||||
Other information related to our leases is presented below:
| As of December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Right-of-use assets acquired in exchange for operating lease obligations | $ | $ | |||||||||
| Cash Paid For Amounts Included In Measurement of Liabilities: | |||||||||||
| Operating cash flows from finance leases | |||||||||||
| Operating cash flows from operating leases | |||||||||||
| Weighted Average Remaining Lease Term: | |||||||||||
| Operating leases | |||||||||||
| Finance leases | |||||||||||
| Weighted Average Discount Rate: | |||||||||||
| Operating leases | % | % | |||||||||
| Finance leases | % | % | |||||||||
F-31
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:
| Finance leases | Operating leases | ||||||||||
| 2024 | $ | $ | |||||||||
| 2025 | |||||||||||
| 2026 | |||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| Thereafter | |||||||||||
| Total future minimum lease payments, undiscounted | |||||||||||
| Less: Imputed interest | ( | ( | |||||||||
| Present value of future minimum lease payments | $ | $ | |||||||||
NOTE 10. INTANGIBLE ASSETS
Our amortizable intangible assets primarily consist of customer relationships acquired pursuant to business combinations and represent the value of the business relationship with those customers.
The following table summarizes information relating to our acquired amortizable intangible assets:
| As of December 31, 2023 | As of December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Estimated Useful Lives | |||||||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Trade names | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Other amortizable intangibles | ( | ( | |||||||||||||||||||||||||||||||||||||||
| $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
During the third quarter of 2022, we reduced the gross carrying amount and accumulated amortization of our fully amortized Suddenlink trademark by approximately $56,783 , as we rebranded our entire footprint under the Optimum trademark.
Amortization expense for the years ended December 31, 2023, 2022 and 2021 aggregated $391,378 , $555,308 , and $641,836 , respectively.
The following table sets forth the estimated amortization expense on intangible assets for the periods presented:
| Estimated amortization expense | |||||
| Year Ending December 31, 2024 | $ | ||||
| Year Ending December 31, 2025 | |||||
| Year Ending December 31, 2026 | |||||
| Year Ending December 31, 2027 | |||||
| Year Ending December 31, 2028 | |||||
F-32
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
Goodwill and the value of indefinite-lived cable franchises acquired in business combinations are not amortized. Rather, such assets are tested for impairment annually or whenever events or changes in circumstances indicate that it is more likely than not that the assets may be impaired. See Note 2 for additional for additional information. The carrying amount of indefinite-lived cable franchise rights and goodwill is presented below:
| Indefinite-lived Cable Franchise Rights | Goodwill | ||||||||||
| Balance as of December 31, 2021 | $ | $ | |||||||||
| Goodwill recorded in connection with acquisitions | |||||||||||
| Balance as of December 31, 2022 | |||||||||||
| Adjustment related to 2022 acquisition | ( | ||||||||||
| Goodwill impairment | ( | ||||||||||
| Balance as of December 31, 2023 | $ | $ | |||||||||
Goodwill Impairment
In 2023, we performed a quantitative impairment test for our reporting units. Based on this assessment, the estimated fair value of our Telecommunications reporting unit exceeded its carrying value and no impairment was recorded. However, the carrying value of our News and Advertising reporting unit exceeded its fair value resulting in an impairment charge of $163,055. The decrease in the fair value of the News and Advertising reporting unit was primarily due to a decrease in projected cash flows due to the overall decline in the advertising market and an increase in the discount rate used in the discounted cash flow method.
F-33
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
NOTE 11. DEBT
The following table provides details of our outstanding debt:
| Interest Rate at December 31, 2023 | December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||
| Date Issued | Maturity Date | Principal Amount | Carrying Amount (a) | Principal Amount | Carrying Amount (a) | |||||||||||||||||||||||||||||||||
| CSC Holdings Senior Notes: | ||||||||||||||||||||||||||||||||||||||
| May 23, 2014 | June 1, 2024 | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| October 18, 2018 | April 1, 2028 | |||||||||||||||||||||||||||||||||||||
| November 27, 2018 | April 1, 2028 | |||||||||||||||||||||||||||||||||||||
| July 10 and October 7, 2019 | January 15, 2030 | |||||||||||||||||||||||||||||||||||||
| June 16 and August 17. 2020 | December 1, 2030 | |||||||||||||||||||||||||||||||||||||
| May 13, 2021 | November 15, 2031 | |||||||||||||||||||||||||||||||||||||
| CSC Holdings Senior Guaranteed Notes: | ||||||||||||||||||||||||||||||||||||||
| September 23, 2016 | April 15, 2027 | |||||||||||||||||||||||||||||||||||||
| January 29, 2018 | February 1, 2028 | |||||||||||||||||||||||||||||||||||||
| January 24, 2019 | February 1, 2029 | |||||||||||||||||||||||||||||||||||||
| June 16, 2020 | December 1, 2030 | |||||||||||||||||||||||||||||||||||||
| August 17, 2020 | February 15, 2031 | |||||||||||||||||||||||||||||||||||||
| May 13, 2021 | November 15, 2031 | |||||||||||||||||||||||||||||||||||||
| April 25, 2023 | May 15, 2028 | |||||||||||||||||||||||||||||||||||||
| CSC Holdings Restricted Group Credit Facility: | ||||||||||||||||||||||||||||||||||||||
| Revolving Credit Facility | July 13, 2027 | (b) | ||||||||||||||||||||||||||||||||||||
| Term Loan B | July 17, 2025 | (c)(g) | ||||||||||||||||||||||||||||||||||||
| Incremental Term Loan B-3 | January 15, 2026 | (d)(g) | ||||||||||||||||||||||||||||||||||||
| Incremental Term Loan B-5 | April 15, 2027 | (e)(g) | ||||||||||||||||||||||||||||||||||||
| Incremental Term Loan B-6 | January 15, 2028 | (f) | ||||||||||||||||||||||||||||||||||||
| Lightpath Senior Notes: | ||||||||||||||||||||||||||||||||||||||
| September 29, 2020 | September 15, 2028 | |||||||||||||||||||||||||||||||||||||
| Lightpath Senior Secured Notes: | ||||||||||||||||||||||||||||||||||||||
| September 29, 2020 | September 15, 2027 | |||||||||||||||||||||||||||||||||||||
| Lightpath Term Loan | November 30, 2027 | |||||||||||||||||||||||||||||||||||||
| Lightpath Revolving Credit Facility | — | — | ||||||||||||||||||||||||||||||||||||
| Collateralized indebtedness (see Note 12) | ||||||||||||||||||||||||||||||||||||||
| Finance lease obligations (see Note 9) | ||||||||||||||||||||||||||||||||||||||
| Notes payable and supply chain financing | ||||||||||||||||||||||||||||||||||||||
| Less: current portion of credit facility debt | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Less: current portion of collateralized indebtedness (h) | ( | ( | ||||||||||||||||||||||||||||||||||||
| Less: current portion of finance lease obligations | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Less: current portion of notes payable and supply chain financing | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Long-term debt | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
F-34
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(a)The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums and with respect to certain notes, a fair value adjustment resulting from the Cequel and Cablevision acquisitions.
(b)At December 31, 2023, $133,512 of the revolving credit facility was restricted for certain letters of credit issued on our behalf and $1,516,488 of the $2,475,000 facility was undrawn and available, subject to covenant limitations. The revolving credit facility bears interest at a rate of SOFR (plus a Term SOFR credit adjustment spread of 0.10 %) plus 2.25 % per annum.
(c)Term Loan B requires quarterly installments of $3,840 and bears interest at a rate equal to Synthetic USD LIBOR plus 2.25 % per annum.
(d)Incremental Term Loan B-3 requires quarterly installments of $1,318 and bears interest at a rate equal to Synthetic USD LIBOR plus 2.25 % per annum.
(e)Incremental Term Loan B-5 requires quarterly installments of $7,500 and bears interest at a rate equal to Synthetic USD LIBOR plus 2.50 % per annum.
(f)Incremental Term Loan B-6 requires quarterly installments of $5,005 and bears interest at a rate equal to SOFR plus 4.50% per annum. The CSC Holdings' Incremental Term Loan B-6 that is due on the earlier of (i) January 15, 2028 and (ii) April 15, 2027 if, as of such date, any Incremental Term Loan B-5 borrowings are still outstanding, unless the Incremental Term Loan B-5 maturity date has been extended to a date falling after January 15, 2028.
(g)Pursuant to the term loan agreement, the interest rate on outstanding borrowings subsequent to the phase-out of London Interbank Offered Rate ("LIBOR") as of June 30, 2023, is Synthetic USD LIBOR, calculated as Term SOFR plus the spread adjustment for the corresponding LIBOR setting, being 0.11448 % (1 month), 0.26161 % (3 month) and 0.42826 % (6 month), until September 30, 2024.
(h)The indebtedness was collateralized by shares of Comcast common stock. In January 2023, we settled this debt by delivering shares of Comcast common stock and the related equity derivative contracts. See Note 12.
For financing purposes, we have two debt silos: CSC Holdings and Lightpath. The CSC Holdings silo is structured as a restricted group (the "Restricted Group") and an unrestricted group, which includes certain designated subsidiaries and investments (the "Unrestricted Group"). The Restricted Group is comprised of CSC Holdings and substantially all of its wholly-owned operating subsidiaries excluding Lightpath. These Restricted Group subsidiaries are subject to the covenants and restrictions of the credit facility and indentures governing the notes issued by CSC Holdings. The Lightpath silo includes all of its operating subsidiaries which are subject to the covenants and restrictions of the credit facility and indentures governing the notes issued by Lightpath. See discussion below regarding the Lightpath debt financing.
CSC Holdings Credit Facilities
In October 2015, a wholly-owned subsidiary of Altice USA, which merged with and into CSC Holdings on June 21, 2016, entered into a senior secured credit facility, which, as amended, currently provides for U.S. dollar term loans (the "Term Loan B", and the term loans under the Term Loan B, the "CSC Term Loans") and U.S. dollar revolving loan commitments (the "CSC Revolving Credit Facility" and, together with the Term Loan B, the "CSC Credit Facilities"), which are governed by a credit facilities agreement entered into by, inter alios, CSC Holdings, certain lenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent and security agent (as amended, restated, supplemented or otherwise modified from time to time, the "CSC Credit Facilities Agreement"). Amounts outstanding under the CSC Holdings Credit Facilities bear interest, at our election, at Term Secured Overnight Financing Rate ("SOFR"), Synthetic USD LIBOR, or at an alternate base rate, as defined therein, plus an applicable margin.
During the year ended December 31, 2023, CSC Holdings borrowed $1,700,000 under its revolving credit facility and repaid $2,450,000 of amounts outstanding under the revolving credit facility.
The CSC Credit Facilities Agreement requires the prepayment of outstanding CSC Term Loans, subject to certain exceptions and deductions, with (i) 100 % of the net cash proceeds of certain asset sales, subject to reinvestment rights and certain other exceptions; and (ii) on a pari ratable share (based on the outstanding principal amount of the CSC Term Loans divided by the sum of the outstanding principal amount of all pari passu indebtedness and the CSC Term Loans) of 50 % of annual excess cash flow, which will be reduced to 0 % if the consolidated net senior secured leverage ratio of CSC Holdings is less than or equal to 4.5 to 1.
The obligations under the CSC Credit Facilities are guaranteed on a senior basis by each restricted subsidiary of CSC Holdings (other than CSC TKR, LLC and its subsidiaries, Lightpath, and certain excluded subsidiaries) and, subject
F-35
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
to certain limitations, will be guaranteed by each future material wholly-owned restricted subsidiary of CSC Holdings. The obligations under the CSC Credit Facilities (including any guarantees thereof) are secured on a first priority basis, subject to any liens permitted by the CSC Credit Facilities, by capital stock held by CSC Holdings or any guarantor in certain subsidiaries of CSC Holdings, subject to certain exclusions and limitations.
The CSC Credit Facilities Agreement includes certain negative covenants which, among other things and subject to certain significant exceptions and qualifications, limit CSC Holdings' ability and the ability of its restricted subsidiaries to: (i) incur or guarantee additional indebtedness, (ii) make investments, (iii) create liens, (iv) sell assets and subsidiary stock, (v) pay dividends or make other distributions or repurchase or redeem our capital stock or subordinated debt, (vi) engage in certain transactions with affiliates, (vii) enter into agreements that restrict the payment of dividends by subsidiaries or the repayment of intercompany loans and advances; and (viii) engage in mergers or consolidations. In addition, the CSC Revolving Credit Facility includes a financial maintenance covenant solely for the benefit of the lenders under the CSC Revolving Credit Facility consisting of a maximum consolidated net senior secured leverage ratio of CSC Holdings and its restricted subsidiaries of 5.0 to 1.0. The financial covenant is tested on the last day of any fiscal quarter, but only if on such day there are outstanding borrowings, as defined, under the CSC Revolving Credit Facility.
The CSC Credit Facilities Agreement also contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, an event of default upon a change of control). If an event of default occurs, the lenders under the CSC Credit Facilities will be entitled to take various actions, including the acceleration of amounts due under the CSC Credit Facilities and all actions permitted to be taken by a secured creditor.
Issuances of CSC Holdings Senior Guaranteed Notes
In April 2023, CSC Holdings issued $1,000,000 in aggregate principal amount of senior guaranteed notes that bear interest at a rate of 11.250 % and mature on May 15, 2028. The Company used the proceeds to repay outstanding borrowings drawn under the Revolving Credit Facility.
CSC Holdings Senior Guaranteed Notes and Senior Notes
The indentures under which the Senior Guaranteed Notes and Senior Notes were issued contain certain customary covenants and agreements, including limitations on the ability of CSC Holdings and its restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) make investments or other restricted payments, (iii) create liens, (iv) sell assets and subsidiary stock, (v) pay dividends or make other distributions or repurchase or redeem our capital stock or subordinated debt, (vi) engage in certain transactions with affiliates, (vii) enter into agreements that restrict the payment of dividends by subsidiaries or the repayment of intercompany loans and advances, and (viii) engage in mergers or consolidations, in each case subject to certain exceptions. The indentures also contain certain customary events of default. If an event of default occurs, the obligations under the notes may be accelerated.
Subject to customary conditions, we may redeem some or all of the notes at the redemption price set forth in the relevant indenture, plus accrued and unpaid interest, plus a specified "make-whole" premium (in the event the notes are redeemed prior to a certain specified time set forth in the indentures).
Lightpath Credit Facility
On September 29, 2020, Lightpath entered into a credit agreement between, inter alios, certain lenders party thereto and Goldman Sachs Bank USA, as administrative agent, and Deutsche Bank Trust Company Americas, as collateral agent, (the "Lightpath Credit Agreement") which provides for, among other things, (i) a term loan in an aggregate principal amount of $600,000 (the “Lightpath Term Loan Facility”) at a price of 99.50 % of the aggregate principal amount, which was drawn on November 30, 2020, and (ii) revolving loan commitments in an aggregate principal amount of $100,000 (the “Lightpath Revolving Credit Facility").
As of December 31, 2023 and 2022, there were no borrowings outstanding under the Lightpath Revolving Credit Facility. We are required to make scheduled quarterly payments of $1,500 pursuant to the Lightpath Term Loan Facility.
In June 2023, Lightpath entered into an amendment (the "First Amendment") under its existing credit facility agreement to replace LIBOR-based benchmark rates with SOFR-based benchmark rates. The First Amendment provides for interest on borrowings under its term loan and revolving credit facility to be calculated for any (i) SOFR
F-36
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
loan, at a rate per annum equal to the Term SOFR (plus spread adjustments of 0.11448 %, 0.26161 % and 0.42826 % for interest periods of one, three and six months, respectively) or (ii) the alternate base rate loan, at the alternative base rate as applicable, plus the applicable margin in each case, where the applicable margin is 2.25 % per annum with respect to any alternate base rate loan and 3.25 % per annum with respect to any SOFR loan.
Debt issued by Lightpath is subject to certain restrictive covenants. Lightpath is subject to incurrence based covenants, which do not require ongoing compliance with financial ratios, but place certain limitations on the Lightpath's ability to, among other things, incur or guarantee additional debt (including to finance new acquisitions), create liens, pay dividends and other distributions or prepay subordinated indebtedness, make investments, sell assets, engage in affiliate transactions or engage in mergers or consolidations. These covenants are subject to several important exceptions and qualifications.
To be able to incur additional debt under an applicable debt instrument, Lightpath must either meet the ratio test described below (on a pro forma basis for any contemplated transaction giving rise to the debt incurrence) or have available capacity under the general debt basket or meet certain other exceptions to the limitation on indebtedness covenant in such debt instrument. Senior debt of Lightpath will be subject to an incurrence test of 6.75 :1 (Consolidated Net Leverage to L2QA Pro Forma EBITDA (each as defined in the relevant debt instruments)) and senior secured debt of Lightpath will be subject to an incurrence test of 4.75 :1 (Consolidated Net Senior Secured Leverage (as defined in the relevant debt instrument) to L2QA Pro Forma EBITDA).
Debt Compliance
As of December 31, 2023, CSC Holdings and Lightpath were in compliance with applicable financial covenants under their respective credit facilities and with applicable financial covenants under each respective indenture by which the senior guaranteed notes, senior secured notes and senior notes were issued.
Gain (Loss) on Extinguishment of Debt and the Write-off of Deferred Financing Costs
The following table provides a summary of the gain (loss) on extinguishment of debt and the write-off of deferred financing costs recorded by us:
| For the Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Settlement of collateralized debt (see Note 12) | $ | $ | — | $ | — | ||||||||||||
| Refinancing of CSC Holdings Term Loan B and Incremental Term Loan B-3 | — | ( | — | ||||||||||||||
| Repayment of CSC Holdings 5.500% Senior Guaranteed Notes due 2026 | — | — | ( | ||||||||||||||
Supply Chain Financing Arrangement
We have a supply chain financing arrangement with a financial institution with credit availability of $175,000 that is used to finance certain of our property and equipment purchases. This arrangement extends our repayment terms beyond a vendor’s original invoice due dates (for up to one year) and as such are classified as debt on our consolidated balance sheets.
The following is a rollforward of the outstanding balances relating to our supply chain financing arrangement:
| Balance as of December 31, 2022 | $ | ||||
| Invoices financed | |||||
| Repayments | ( | ||||
| Balance as of December 31, 2023 | $ | ||||
Summary of Debt Maturities
The future principal payments under our various debt obligations outstanding as of December 31, 2023, including notes payable and supply chain financing, but excluding finance lease obligations (see Note 9), are as follows:
F-37
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
| Years Ending December 31, | |||||
| 2024 | $ | ||||
| 2025 (a) | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 (b) | |||||
| Thereafter | |||||
(a)Includes $825,000 principal amount related to the CSC Holdings' revolving credit facility. As a result of the debt transaction in January 2024 discussed in Note 18, the revolving credit facility will mature on July 13, 2027.
(b)Includes $1,906,850 principal amount related to the CSC Holdings' Incremental Term Loan B-6 that is due on the earlier of (i) January 15, 2028 and (ii) April 15, 2027 if, as of such date, any Incremental Term Loan B-5 borrowings are still outstanding, unless the Incremental Term Loan B-5 maturity date has been extended to a date falling after January 15, 2028.
The amounts in the table above do not include the effects of the debt transactions discussed in Note 18.
NOTE 12. DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS
Prepaid Forward Contracts
Historically, we had entered into various transactions to limit the exposure against equity price risk on shares of Comcast Corporation ("Comcast") common stock we previously owned. We monetized all of our stock holdings in Comcast through the execution of prepaid forward contracts, collateralized by an equivalent amount of the respective underlying stock.
We received cash proceeds upon execution of the prepaid forward contracts which had been reflected as collateralized indebtedness in the accompanying consolidated balance sheet as of December 31, 2022. In addition, we separately accounted for the equity derivative component of the prepaid forward contracts. These equity derivatives were not designated as hedges for accounting purposes, therefore, the net fair values of the equity derivatives had been reflected in the accompanying consolidated balance sheet as an asset at December 31, 2022, and the net increases or decreases in the fair value of the equity derivative component of the prepaid forward contracts were included in gain (loss) on derivative contracts in the accompanying consolidated statements of operations.
In January 2023, we settled our outstanding collateralized indebtedness by delivering the Comcast shares we held and the related equity derivative contracts which resulted in us receiving net cash of approximately $50,500 (including dividends of $11,598 ) and recorded a gain on the extinguishment of debt of $4,393 .
As of December 31, 2023, we did not hold and have not issued equity derivative instruments for trading or speculative purposes.
Interest Rate Swap Contracts
To manage interest rate risk, we have from time to time entered into interest rate swap contracts to adjust the proportion of total debt that is subject to variable and fixed interest rates. Such contracts effectively fix the borrowing rates on floating rate debt to provide an economic hedge against the risk of rising rates and/or effectively convert fixed rate borrowings to variable rates to permit us to realize lower interest expense in a declining interest rate environment. We monitor the financial institutions that are counterparties to our interest rate swap contracts and we only enter into interest rate swap contracts with financial institutions that are rated investment grade. All such contracts are not designated as hedges for accounting purposes and are carried at their fair market values on our consolidated balance sheets, with changes in fair value reflected in the consolidated statements of operations.
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ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
The following represents the location of the assets associated with our derivative instruments within the consolidated balance sheets:
| Derivatives Not Designated as Hedging Instruments | Balance Sheet Location | Fair Value at December 31, | ||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||
Asset Derivatives: | ||||||||||||||||||||
| Prepaid forward contracts | Derivative contracts | $ | $ | |||||||||||||||||
Interest rate swap contracts | Other assets, long-term | |||||||||||||||||||
| $ | $ | |||||||||||||||||||
The following table presents certain consolidated statement of operations data related to our derivative contracts and the underlying Comcast common stock:
| Years Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Gain (loss) on derivative contracts related to change in the value of equity derivative contracts related to Comcast common stock | $ | ( | $ | $ | |||||||||||||
| Change in fair value of Comcast common stock included in gain (loss) on investments | ( | ( | |||||||||||||||
| Gain on interest rate swap contracts, net | |||||||||||||||||
Interest Rate Swap Contract
In connection with the phase-out of LIBOR as of June 30, 2023, the Company entered into amendments to its existing interest rate swap contracts that transitioned the reference rates from LIBOR to SOFR. These amendments had no impact to our consolidated financial statements as we utilized the expedients set forth in FASB Topic 848, Reference Rate Reform. The following is a summary of the terms of the amended interest rate swap contracts:
| Notional Amount | Prior to Amendments | Subsequent to Amendments | |||||||||||||||||||||||||||||||||
| Maturity Date | Company Pays | Company Receives | Company Pays | Company Receives | |||||||||||||||||||||||||||||||
| CSC Holdings: | |||||||||||||||||||||||||||||||||||
| January 2025 (a) | $ | Fixed rate of | Three-month LIBOR | Fixed rate of | One-month SOFR | ||||||||||||||||||||||||||||||
| January 2025 (a) | Fixed rate of | Three-month LIBOR | Fixed rate of | One-month SOFR | |||||||||||||||||||||||||||||||
| January 2025 (a) | Fixed rate of | Three-month LIBOR | Fixed rate of | One-month SOFR | |||||||||||||||||||||||||||||||
| December 2026 (b) | Fixed rate of | Three-month LIBOR | Fixed rate of | One-month SOFR | |||||||||||||||||||||||||||||||
| December 2026 (b) | Fixed rate of | Three-month LIBOR | Fixed rate of | One-month SOFR | |||||||||||||||||||||||||||||||
| Lightpath: | |||||||||||||||||||||||||||||||||||
| December 2026 (a) | Fixed rate of | One-month LIBOR | Fixed rate of | One-month SOFR | |||||||||||||||||||||||||||||||
(a)Amended rates effective June 15, 2023.
(b)Amended rates effective July 17, 2023.
In April 2023, Lightpath entered into an interest rate swap contract, effective June 2023 on a notional amount of $180,000 , whereby Lightpath pays interest of 3.523 % through December 2026 and receives interest based on one-month SOFR. This swap contract is also not designated as a hedge for accounting purposes. Accordingly, this contract is carried at its fair market value on our consolidated balance sheet, with changes in fair value reflected in the consolidated statements of operations.
NOTE 13. FAIR VALUE MEASUREMENT
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting
F-39
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
entity's pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:
•Level I - Quoted prices for identical instruments in active markets.
•Level II - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
•Level III - Instruments whose significant value drivers are unobservable.
The following table presents our financial assets and financial liabilities that are measured at fair value on a recurring basis and their classification under the fair value hierarchy:
| Fair Value Hierarchy | December 31, | ||||||||||||||||
| 2023 | 2022 | ||||||||||||||||
| Assets: | |||||||||||||||||
Money market funds | Level I | $ | $ | ||||||||||||||
| Investment securities pledged as collateral | Level I | ||||||||||||||||
| Prepaid forward contracts (a) | Level II | ||||||||||||||||
| Interest rate swap contracts | Level II | ||||||||||||||||
| Liabilities: | |||||||||||||||||
| Contingent consideration related to acquisition | Level III | ||||||||||||||||
(a)In January 2023, the Company settled its outstanding collateralized indebtedness by delivering the Comcast shares it held and the related equity derivative contracts.
The Company's money market funds which are classified as cash equivalents and investment securities pledged as collateral are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.
The Company's derivative contracts and liabilities under derivative contracts on the Company's consolidated balance sheets are valued using market-based inputs to valuation models. These valuation models require a variety of inputs, including contractual terms, market prices, yield curves, and measures of volatility. When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit risk considerations. Such adjustments are generally based on available market evidence. Since model inputs can generally be verified and do not involve significant management judgment, the Company has concluded that these instruments should be classified within Level II of the fair value hierarchy.
The fair value of the contingent consideration as of December 31, 2023 and 2022 related to an acquisition in the third quarter of 2022 and were determined using a probability assessment of the contingent payment for the respective periods.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate fair value of each class of financial instruments for which it is practicable to estimate:
Credit Facility Debt, Collateralized Indebtedness, Senior Notes, Senior Guaranteed Notes, Senior Secured Notes, Notes Payable and Supply Chain Financing
The fair values of each of the Company's debt instruments are based on quoted market prices for the same or similar issues or on the current rates offered to the Company for instruments of the same remaining maturities. The fair value of notes payable is based primarily on the present value of the remaining payments discounted at the borrowing cost. The carrying value of outstanding amounts related to supply chain financing agreements approximates the fair value due to their short-term maturity (less than one year).
F-40
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
The carrying values, estimated fair values, and classification under the fair value hierarchy of the Company's financial instruments, excluding those that are carried at fair value in the accompanying consolidated balance sheets, are summarized below:
| December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||
| Fair Value Hierarchy | Carrying Amount (a) | Estimated Fair Value | Carrying Amount (a) | Estimated Fair Value | |||||||||||||||||||||||||
Credit facility debt | Level II | $ | $ | $ | $ | ||||||||||||||||||||||||
| Collateralized indebtedness (b) | Level II | ||||||||||||||||||||||||||||
| Senior guaranteed and senior secured notes | Level II | ||||||||||||||||||||||||||||
Senior notes | Level II | ||||||||||||||||||||||||||||
Notes payable and supply chain financing | Level II | ||||||||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||||||||
(a)Amounts are net of unamortized deferred financing costs and discounts/premiums.
(b)In January 2023, the Company settled its outstanding collateralized indebtedness by delivering the Comcast shares it held and the related equity derivative contracts.
NOTE 14. INCOME TAXES
Altice USA files a federal consolidated and certain state combined income tax returns with its 80 % or more owned subsidiaries. CSC Holdings and its subsidiaries are included in the consolidated federal income tax returns of Altice USA. The income tax provision for CSC Holdings is determined on a stand-alone basis for all periods presented as if CSC Holdings filed separate consolidated income tax returns. In accordance with a tax sharing agreement between CSC Holdings and Altice USA, CSC Holdings has an obligation to Altice USA for its stand-alone current tax liability as if it filed separate income tax returns.
Income tax expense for the years ended December 31, 2023, 2022 and 2021 consist of the following components:
| Altice USA | CSC Holdings | ||||||||||||||||||||||||||||||||||
| Years Ended December 31, | Years Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||
| Current expense (benefit): | |||||||||||||||||||||||||||||||||||
| Federal | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| State | |||||||||||||||||||||||||||||||||||
| Foreign | ( | ( | |||||||||||||||||||||||||||||||||
| Deferred expense (benefit): | |||||||||||||||||||||||||||||||||||
| Federal | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| State | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Foreign | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||||||||||||||
| Tax expense relating to uncertain tax positions | ( | ( | |||||||||||||||||||||||||||||||||
| Income tax expense | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
F-41
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
The income tax expense attributable to operations differs from the amount derived by applying the statutory federal rate to pretax income principally due to the effect of the following items:
| Altice USA | CSC Holdings | ||||||||||||||||||||||||||||||||||
| Years Ended December 31, | Years Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||
| Federal tax expense at statutory rate | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| State income taxes, net of federal impact | |||||||||||||||||||||||||||||||||||
| Minority interest | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Changes in the valuation allowance | |||||||||||||||||||||||||||||||||||
| Change in New York state rate to measure deferred taxes, net of federal impact | |||||||||||||||||||||||||||||||||||
| Other changes in the state rates used to measure deferred taxes, net of federal impact | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Tax expense (benefit) relating to uncertain tax positions | ( | ( | |||||||||||||||||||||||||||||||||
| Tax credits | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Excess tax deficiencies (benefits) related to share-based compensation including non-deductible carried unit plans | ( | ( | |||||||||||||||||||||||||||||||||
| Non-deductible officers compensation | |||||||||||||||||||||||||||||||||||
| Foreign losses of disregarded entities | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Business dispositions | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Goodwill impairment | |||||||||||||||||||||||||||||||||||
| Other permanent differences | — | ( | ( | ||||||||||||||||||||||||||||||||
| Other, net | ( | ( | |||||||||||||||||||||||||||||||||
| Income tax expense | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Due to the sale of our Cheddar News business in December 2023 to an unrelated third party, we recognized a capital loss resulting in an income tax benefit. In addition, our income tax expense was impacted by the non-deductibility of the impairment of goodwill related to our News and Advertising business (see Note 10).
In December 2022, the New York State Division of Tax Appeals, via an Administrative Law Judge determination, published a decision in Charter Communications, Inc. versus New York State, which concluded that each corporation in a combined reporting group would have to separately qualify as a qualified emerging technology company (“QETC”) to use the preferential QETC tax rate. As we had been historically using the QETC rate at the combined reporting group level, we recorded a cumulative income tax expense of $157,300 that included both a revaluation of state deferred taxes and an increase to our uncertain tax positions reserve for tax years 2017 through 2022 based on this published decision.
In 2021, due to internal restructuring of i24NEWS and a permanent reduction in tax relating to the Opportunity Zones commitment (see note below), a permanent tax benefit of $35,256 was recognized.
F-42
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
The tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance are as follows:
| Altice USA | CSC Holdings | ||||||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Noncurrent | |||||||||||||||||||||||
| NOLs, capital loss, and tax credit carry forwards (a) | $ | $ | $ | $ | |||||||||||||||||||
| Compensation and benefit plans | |||||||||||||||||||||||
| Restructuring liability | |||||||||||||||||||||||
| Other liabilities | |||||||||||||||||||||||
| Research and experimental expenditures | |||||||||||||||||||||||
| Derivative contracts | ( | ( | |||||||||||||||||||||
| Interest deferred for tax purposes | |||||||||||||||||||||||
| Operating lease liability | |||||||||||||||||||||||
| Deferred tax assets | |||||||||||||||||||||||
| Less: Valuation allowance | ( | ( | ( | ( | |||||||||||||||||||
| Net deferred tax assets, noncurrent | |||||||||||||||||||||||
| Deferred tax liabilities: | |||||||||||||||||||||||
| Fixed assets and intangibles | ( | ( | ( | ( | |||||||||||||||||||
| Operating lease asset | ( | ( | ( | ( | |||||||||||||||||||
| Investments | ( | ( | |||||||||||||||||||||
| Partnership investments | ( | ( | ( | ( | |||||||||||||||||||
| Prepaid expenses | ( | ( | ( | ( | |||||||||||||||||||
Fair value adjustments related to debt and deferred financing costs | ( | ( | ( | ( | |||||||||||||||||||
| Opportunity Zone tax deferral | ( | ( | ( | ( | |||||||||||||||||||
| Deferred tax liability, noncurrent | ( | ( | ( | ( | |||||||||||||||||||
| Total net deferred tax liabilities | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(a)Includes deferred tax assets of $326 and $354 as of December 31, 2023 and 2022, respectively, that relate to the net operating losses of foreign subsidiaries which are presented under Other assets on the consolidated balance sheets.
Under the Tax Cuts & Jobs Act (“TCJA”) enacted in December 2017, research and experimental expenditures are required to be capitalized and amortized for the tax years beginning after December 31, 2021. As a result, we have capitalized (net of amortization) $33,427 and $22,292 as of December 31, 2023 and 2022, respectively.
As a result of us selling our 1 % interest in Newsday LLC, as well as internal restructuring of i24NEWS in 2021, capital losses of $235,316 and $104,171 , respectively, were recognized for tax purposes. In the fourth quarter of 2022, we carried back the net capital loss against the taxable capital gain generated in connection with the 49.99 % sale of Lightpath in 2020. In addition, we received $48,645 in 2021 relating to a refund request for prior year AMT credits, including $12,161 claimed in 2020 due to the CARES Act acceleration of credits.
Deferred tax assets have resulted primarily from our future deductible temporary differences and NOLs. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. In evaluating the need for a valuation allowance, management takes into account various factors, including the expected level of future taxable income, available tax planning strategies and reversals of existing taxable temporary differences. If such estimates and related assumptions change in the future, we may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in our consolidated statements of operations. Management evaluates the realizability of the deferred tax assets and the need for additional valuation allowances quarterly. Due to the significant deferred tax
F-43
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
liabilities associated with our fixed assets and intangibles, primarily due to the change in the 2017 TCJA, allowing 100% bonus depreciation on most fixed assets (this percentage decreases to 80% for 2023), as well as the continued taxable income adjustments associated with the deferred tax liabilities established under purchase accounting pursuant to the Cablevision and Cequel acquisitions in 2016, the future taxable income that will result from the reversal of existing taxable temporary differences for which deferred tax liabilities are recognized is sufficient to conclude it is more likely than not that we will realize all of its gross deferred tax assets, except those deferred tax assets against which a valuation allowance has been recorded which relate to certain state NOLs and the foreign NOLs in i24NEWS.
In the normal course of business, we engage in transactions in which the income tax consequences may be uncertain. Our income tax returns are filed based on interpretation of tax laws and regulations. Such income tax returns are subject to examination by taxing authorities. For financial statement purposes, we only recognize tax positions that it believes are more likely than not of being sustained. There is considerable judgment involved in determining whether positions taken or expected to be taken on the tax return are more likely than not of being sustained. Changes in the liabilities for uncertain tax positions are recognized in the interim period in which the positions are effectively settled or there is a change in factual circumstances.
The following is the activity relating to our liability for uncertain tax positions:
| Years Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Balance at beginning of year | $ | $ | $ | ||||||||||||||
| Increases (decreases) from prior period positions | ( | ( | |||||||||||||||
| Increases from current period positions | |||||||||||||||||
| Balance at end of year | $ | $ | $ | ||||||||||||||
Interest and penalties related to unrecognized tax benefits (“UTBs”) are included in our provision for income taxes. We recognized a net expense (benefit) for interest and penalties of $1,475 , $9,683 and $6,159 during the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023 and 2022, accrued interest and penalties associated with UTBs were $18,264 and $16,789 , respectively. The increase in interest and penalties for the year ended December 31, 2023 was primarily due to an interest accrual on our QETC reserve position (see discussion above). We are not expecting a material change in this reserve due to expiring statutes, audit activity, or tax payments in the next twelve months. If we were to prevail on all uncertain positions, the net effect would result in an income tax benefit of $40,961 .
The most significant jurisdictions in which we are required to file income tax returns include the states of New York, New Jersey, Connecticut, and the City of New York. The State and City of New York are presently auditing income tax returns for tax years 2015 through 2019. The State of New Jersey is presently auditing income tax returns for tax years 2014 through 2017, and for tax years 2018 through 2020. Management does not believe that the resolution of these ongoing income tax examinations will have a material adverse impact on our financial position.
NOTE 15. SHARE-BASED COMPENSATION
The following table presents share-based compensation expense (benefit) and unrecognized compensation cost:
| Share-Based Compensation | Unrecognized Compensation Cost as of December 31, 2023 | ||||||||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||||||||
| Awards issued pursuant to LTIP: | |||||||||||||||||||||||
| Stock option awards (a) | $ | ( | $ | $ | $ | ||||||||||||||||||
| Performance stock units (a) | ( | ||||||||||||||||||||||
| Restricted share units | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
F-44
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(a)The benefit for the year ended December 31, 2023 includes credits due to the modification of awards to certain former executive officers and other forfeitures.
Long Term Incentive Plan
Pursuant to the Altice USA 2017 Long Term Incentive Plan, as amended (the "2017 LTIP"), we may grant awards of options, restricted shares, restricted share units, stock appreciation rights, performance stock, performance stock units and other awards. The maximum aggregate number of shares that may be issued for all purposes under the Plan is 89,879,291 . Awards may be granted to our officers, employees and consultants or any of our affiliates. The 2017 LTIP is administered by Altice USA's Board of Directors (the "Board"), subject to the provision of the stockholders' agreement. The Board has delegated its authority to our Compensation Committee. The Compensation Committee has the full power and authority to, among other things, select eligible participants, to grant awards in accordance with the 2017 LTIP, to determine the number of shares subject to each award or the cash amount payable in connection with an award and determine the terms and conditions of each award.
Stock Option Awards
Options outstanding under the 2017 LTIP Plan either (i) cliff vest on the third anniversary of the date of grant, (ii) vest over 3 years in annual increments of 33 -1/3%, or (iii) vest over 4 years, where 50 % vest on the second anniversary, 25 % on the third anniversary and 25 % on the fourth anniversary of the date of grant. The option awards generally are subject to continued employment with the Company, and expire 10 years from the date of grant. Performance based option awards vest upon achievement of performance criteria.
The following table summarizes activity related to stock options granted to our employees:
| Shares Under Option | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Term (in years) | |||||||||||||||||||||
| Time Vesting | Aggregate Intrinsic Value (a) | ||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | |||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Forfeited and Cancelled | ( | ||||||||||||||||||||||
| Balance at December 31, 2021 | |||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Forfeited and Cancelled | ( | ||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | |||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Forfeited | ( | ||||||||||||||||||||||
| Exchanged and Canceled (b) | ( | ||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | |||||||||||||||||||||
| Options exercisable at December 31, 2023 | $ | $ | |||||||||||||||||||||
(a)The aggregate intrinsic value is calculated as the difference between the exercise price and the closing price of Altice USA's Class A common stock at the respective date.
(b)Options exchanged and canceled in connection with the Company's stock option exchange program discussed below.
As of December 31, 2023, the total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of approximately 2.65 years.
We calculate the fair value of each option award on the date of grant using the Black-Scholes valuation model. Our computation of expected life was determined based on the simplified method (the average of the vesting period and option term) due to our lack of recent historical data for similar awards. The interest rate for periods within the contractual life of the stock option was based on interest yields for U.S. Treasury instruments in effect at the time of
F-45
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
grant. Our computation of expected volatility was based on historical volatility of the Altice USA common stock and the expected volatility of comparable publicly-traded companies who granted options that had similar expected lives.
The weighted-average fair values of stock option awards granted during the years ended December 31, 2023, 2022 and 2021 were $2.42 , $3.76 and $6.42 , respectively. The following weighted-average assumptions were used to calculate these fair values:
| Years Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Risk-free interest rate | |||||||||||||||||
| Expected life (in years) | |||||||||||||||||
| Dividend yield | |||||||||||||||||
| Volatility | |||||||||||||||||
In January 2023, the Company commenced a stock option exchange program (the "Exchange Offer") pursuant to which eligible employees were provided the opportunity to exchange eligible stock options for a number of restricted stock units (“RSU”) and deferred cash-denominated awards (“DCA”) at the exchange ratio of one RSU and $10 of DCAs for every seven eligible options tendered. In connection with the Exchange Offer, the Company canceled 24,015,508 options and granted 3,430,433 restricted stock units and $34,309 of DCAs awards. The exchange of these options was accounted for as a modification of share-based compensation awards. Accordingly, the Company will recognize the unamortized compensation cost related to the canceled options of approximately $33,475 , as well as the incremental compensation cost associated with the replacement awards of $34,000 over their two year vesting term.
Performance Stock Units
Certain of our employees were granted performance stock units ("PSUs"). Each PSU gives the employee the right to receive one share of Altice USA class A common stock, upon achievement of a specified stock price hurdle. The PSUs will be forfeited if the applicable performance measure is not achieved prior to January 29, 2026 or if the employee does not continue to provide services to the Company through the achievement date of the applicable performance measure.
The following table summarizes activity related to PSUs granted to our employees:
| Number of Units | |||||
| Balance at December 31, 2020 | |||||
| Granted | |||||
| Forfeited | ( | ||||
| Balance at December 31, 2021 | |||||
| Forfeited | ( | ||||
| Balance at December 31, 2022 | |||||
| Forfeited | ( | ||||
| Balance at December 31, 2023 | |||||
The PSUs have a weighted average grant date fair value of $5.52 per unit. The total unrecognized compensation cost related to outstanding PSUs is expected to be recognized over a weighted-average period of approximately 2.1 years.
Restricted Share Units
We granted RSUs to certain employees pursuant to the 2017 LTIP. These awards vest either over over three years in 33 -1/3% annual increments or 4 years, where 50 % vest on the second anniversary, 25 % on the third anniversary and 25 % on the fourth anniversary of the date of grant.
F-46
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
The following table summarizes activity related to RSUs granted to Company employees:
| Number of Units | |||||
| Balance at December 31, 2020 | |||||
| Granted | |||||
| Forfeited | ( | ||||
| Balance at December 31, 2021 | |||||
| Granted | |||||
| Vested | ( | ||||
| Forfeited | ( | ||||
| Balance at December 31, 2022 | |||||
Granted (including | |||||
| Vested | ( | ||||
| Forfeited | ( | ||||
| Balance at December 31, 2023 | |||||
(a)During 2023, the Company granted 16,545,510 RSUs to certain employees and directors pursuant to the 2017 LTIP with an aggregate fair value of $53,510 ($3.23 per share) which are being expensed over the vesting period. Most of these awards vest over three years in 33 -1/3 annual increments.
Lightpath Plan Awards
In the third quarter of 2021, Lightpath Management Incentive Aggregator LLC ("LMIA") established a Management Incentive Plan (the "Lightpath Plan") for the benefit of employees of Lightpath by issuing equity interests in LMIA which holds an equivalent number of equity interests in Lightpath Holdings LLC (“Holdings”), the parent of Lightpath. These equity interests allow employees to participate in the long-term growth of Lightpath. The Lightpath Plan provides for an aggregate of 650,000 Class A-1 management incentive units and 350,000 Class A-2 management incentive units for issuance.
As of December 31, 2023, 536,140 Class A-1 management incentive units and 273,538 Class A-2 management incentive units ("Award Units") granted to certain employees of Lightpath were outstanding. Vested units will be redeemed upon a partial exit, a change in control or the completion of an initial public offering, as defined in the Holdings LLC agreement. The grant date fair value of the Award Units outstanding aggregated $32,687 and will be expensed in the period in which a partial exit or a liquidity event is consummated.
NOTE 16. AFFILIATE AND RELATED PARTY TRANSACTIONS
Affiliate and Related Party Transactions
Altice USA is controlled by Patrick Drahi through Next Alt who also controls Altice Europe and other entities.
As the transactions discussed below were conducted between entities under common control by Mr. Drahi, amounts charged for certain services may not have represented amounts that might have been received or incurred if the transactions were based upon arm's length negotiations.
F-47
ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
The following table summarizes the revenue and expenses related to services provided to or received from affiliates and related parties:
| Years Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Revenue | $ | $ | $ | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Programming and other direct costs | $ | ( | $ | ( | $ | ( | |||||||||||
| Other operating expenses, net | ( | ( | ( | ||||||||||||||
| Operating expenses, net | ( | ( | ( | ||||||||||||||
| Other credits | |||||||||||||||||
| Net charges | $ | ( | $ | ( | $ | ( | |||||||||||
| Capital Expenditures | $ | $ | $ | ||||||||||||||
Revenue
We recognize revenue primarily from the sale of advertising to a subsidiary of Altice Europe and in 2021 we also recognized revenue from a foundation controlled by Mr. Drahi.
Programming and other direct costs
Programming and other direct costs include costs incurred for advertising services provided by Teads S.A., a subsidiary of Altice Europe.
Other operating expenses, net
Other operating expenses primarily include charges for services provided by certain subsidiaries of Altice Europe and other related parties, including costs for customer care services in 2023.
Capital Expenditures
Capital expenditures primarily include costs for equipment purchased and software development services provided by subsidiaries of Altice Europe.
Aggregate amounts that were due from and due to affiliates and related parties are summarized below:
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Due from: | |||||||||||
| Altice Europe | $ | $ | |||||||||
| Other affiliates and related parties | |||||||||||
| $ | $ | ||||||||||
| Due to: | |||||||||||
| Altice Europe | $ | $ | |||||||||
| Other affiliates and related parties | |||||||||||
| $ | $ | ||||||||||
Amounts due from affiliates presented in the table above represent amounts due for services provided to the respective related party. Amounts due to affiliates presented in the table above and included in other current liabilities in the accompanying balance sheets relate to the purchase of equipment, customer care services, and advertising services, as well as reimbursement for payments made on our behalf.
CSC Holdings
CSC Holdings made cash equity distribution payments to and received cash contributions from its parent. CSC Holdings also recorded net non-cash equity contributions (distributions) which represent the non-cash settlement of
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ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
intercompany balances with Altice USA. Non-cash equity contributions (distributions) include the settlement of amounts due to/due from Altice USA pursuant to a tax sharing agreement between the entities. See summary below:
| Years Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Cash distribution payments to Altice USA, net | $ | ( | $ | ( | $ | ( | |||||||||||
| Non-cash equity contributions from (distributions to) Altice USA, net | ( | ||||||||||||||||
NOTE 17. COMMITMENTS AND CONTINGENCIES
Commitments
Future cash payments and commitments required under arrangements pursuant to contracts entered into by us in the normal course of business as of December 31, 2023, are as follows:
| Payments Due by Period | |||||||||||||||||||||||||||||
| Total | Year 1 | Years 2-3 | Years 4-5 | More than 5 years | |||||||||||||||||||||||||
| Off balance sheet arrangements: | |||||||||||||||||||||||||||||
| Purchase obligations (a) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Guarantees (b) | |||||||||||||||||||||||||||||
| Letters of credit (c) | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(a)Purchase obligations primarily include contractual commitments with various programming vendors to provide video services to customers and minimum purchase obligations to purchase goods or services, including contracts to acquire handsets and other equipment. Future fees payable under contracts with programming vendors are based on numerous factors, including the number of customers receiving the programming. Amounts reflected above related to programming agreements are based on the number of customers receiving the programming as of December 31, 2023, multiplied by the per customer rates or the stated annual fee, as applicable, contained in the executed agreements in effect as of December 31, 2023.
(b)Includes franchise and performance surety bonds primarily for our cable television systems.
(c)Represent letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Payments due by period for these arrangements represent the year in which the commitment expires although payments under these arrangements are required only in the event of nonperformance.
The table above does not include obligations for payments required to be made under multi-year franchise agreements based on a percentage of revenues generated from video service per year.
Many of our franchise agreements and utility pole leases require us to remove its cable wires and other equipment upon termination of the respective agreements. We have concluded that the fair value of these asset retirement obligations cannot be reasonably estimated since the range of potential settlement dates is not determinable.
The table above does not include obligations for rent related to utility poles used in our operations. Our pole rental agreements are for varying terms, and management anticipates renewals as they expire. Rent expense incurred for pole rental attachments for the years ended December 31, 2023, 2022 and 2021 was $40,868 , $40,277 , and $37,545 , respectively.
Legal Matters
On December 7, 2023, Warner Records Inc., Sony Music Publishing (US) LLC and a number of other purported copyright holders (collectively, the “Warner Plaintiffs”) filed a complaint in the U.S. District Court for the Eastern District of Texas (the “Warner Matter”), alleging that certain of our Internet subscribers directly infringed over 10,700 of the Warner Plaintiffs’ copyrighted works. The Warner Plaintiffs seek to hold us liable for claims of contributory infringement of copyright and vicarious copyright infringement. The Warner Plaintiffs also claim that our alleged secondary infringement was willful and seek substantial statutory damages.
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ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
The Warner Matter follows a similar complaint filed in December 2022 by BMG Rights Management (US) LLC, UMG Recordings, Inc., Capitol Records, LLC, Concord Music Group, Inc., and Concord Bicycle Assets, LLC (collectively, the “BMG Plaintiffs”) in the U.S. District Court for the Eastern District of Texas (the “BMG Matter”) alleging that certain of our Internet subscribers directly infringed over 8,100 of the BMG Plaintiffs’ copyrighted works. The BMG Plaintiffs seek to hold us liable for claims of contributory infringement of copyright and vicarious copyright infringement. The BMG Plaintiffs claim that our alleged secondary infringement was willful and seek substantial statutory damages. Trial in this matter is scheduled for September 2024.
We intend to and are vigorously defending against the claims in the Warner Matter and the BMG Matter. In addition to contesting the claims of liability, we have an affirmative defense under the Digital Millennium Copyright Act that, if successful, would preclude or limit monetary damages against us in connection with some or all of the Warner Plaintiffs’ and BMG Plaintiffs’ asserted claims. There can be no assurance as to the outcome of these litigations. We may incur significant costs in defending these actions, and if we need to take measures to reduce our exposure to these risks or are required to pay damages in relation to such claims or choose to settle such claims, our business, reputation, financial condition and results of operations could be materially adversely affected.
We also receive notices from third parties, and in some cases we are named as a defendant in lawsuits, claiming infringement of various patents or copyrights relating to various aspects of our businesses. In certain of these cases other industry participants are also defendants, and in certain of these cases we expect that some or all potential liability would be the responsibility of our vendors pursuant to applicable contractual indemnification provisions. In the event that we are found to infringe on any patent or other intellectual property rights, we may be subject to substantial damages or an injunction that could require us or our vendors to modify certain products and services we offer to our subscribers, as well as enter into royalty or license agreements with respect to the patents at issue. We are also party to various other lawsuits, disputes and investigations arising in the ordinary course of our business, some of which may involve claims for substantial damages, fines or penalties.
Although the outcome of these matters cannot be predicted and the impact of the final resolution of these matters on our results of operations in a particular subsequent reporting period is not known, management does not believe that the resolution of these matters, individually, will have a material adverse effect on our operations or financial position or our ability to meet our financial obligations as they become due, but they could be material to our consolidated results of operations or cash flows for any one period.
NOTE 18. SUBSEQUENT EVENTS
In January 2024, CSC Holdings issued $2,050,000 in aggregate principal amount of senior guaranteed notes due 2029 ("CSC Holdings 2029 Guaranteed Notes"). These notes bear interest at a rate of 11.750 % and will mature on January 31, 2029. The proceeds from the sale of these notes were used to repay certain indebtedness including (i) the outstanding principal balance of the Term Loan B, (ii) the outstanding principal balance of the Incremental Term Loan B-3, and (iii) pay the fees, costs and expenses associated with these transactions.
Also in January 2024, we notified the holders of our 5.250 % Senior Notes due 2024 and 5.250 % Series B Senior Notes due 2024 that we will be redeeming these notes in full (in accordance with the terms of the indenture). We expect to drawdown $750,000 under our Revolving Credit Facility to repay these notes on February 28, 2024. In connection with this refinancing, the carrying value of outstanding notes of $742,746 as of December 31, 2023 has been classified as long-term debt.
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