Altice USA Inc
For the period ended Mar 31, 2024. Filed May 2, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 2, 2024
Contents
Item 1. Financial Statements
| ALTICE USA, INC. AND SUBSIDIARIES | ||
|---|---|---|
| Consolidated Financial Statements | ||
| Consolidated Balance Sheets - March 31, 2024 (Unaudited) and December 31, 2023 | 2 | |
| Consolidated Statements of Operations - Three months ended March 31, 2024 and 2023 (Unaudited) | 3 | |
| Consolidated Statements of Comprehensive Income (Loss) - Three months ended March 31, 2024 and 2023 (Unaudited) | 4 | |
| Consolidated Statements of Stockholders' Deficiency - Three months ended March 31, 2024 and 2023 (Unaudited) | 5 | |
| Consolidated Statements of Cash Flows - Three months ended March 31, 2024 and 2023 (Unaudited) | 6 | |
| Combined Notes to Consolidated Financial Statements (Unaudited) | 12 | |
| Supplemental Financial Statements Furnished: | ||
| CSC HOLDINGS, LLC AND SUBSIDIARIES | ||
| Consolidated Financial Statements | ||
| Consolidated Balance Sheets - March 31, 2024 (Unaudited) and December 31, 2023 | 7 | |
| Consolidated Statements of Operations - Three months ended March 31, 2024 and 2023 (Unaudited) | 8 | |
| Consolidated Statements of Comprehensive Income (Loss) - Three months ended March 31, 2024 and 2023 (Unaudited) | 9 | |
| Consolidated Statements of Member's Deficiency - Three months ended March 31, 2024 and 2023 (Unaudited) | 10 | |
| Consolidated Statements of Cash Flows - Three months ended March 31, 2024 and 2023 (Unaudited) | 11 | |
| Combined Notes to Consolidated Financial Statements (Unaudited) | 12 | |
| Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 25 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 42 | |
| Item 4. Controls and Procedures | 42 | |
| PART II. OTHER INFORMATION | 43 | |
| Item 1. Legal Proceedings | 43 | |
| Item 5. Other Information | 43 | |
| Item 6. Exhibits | 43 | |
| SIGNATURES | 44 | |
Part I. FINANCIAL INFORMATION
| ALTICE USA, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands) | ||
|---|---|---|
| March 31, 2024(Unaudited) | December 31, 2023 | |
| ASSETS | ||
| Current Assets: | ||
| Cash and cash equivalents | $284,450 | $302,058 |
| Restricted cash | 284 | 280 |
| Accounts receivable, trade (less allowance for doubtful accounts of $24,430 and $21,915, respectively) | 314,691 | 357,597 |
| Prepaid expenses and other current assets ($407 and $407 due from affiliates, respectively) | 258,284 | 174,859 |
| Derivative contracts | 51,212 | — |
| Total current assets | 908,921 | 834,794 |
| Property, plant and equipment, net of accumulated depreciation of $8,343,299 and $8,162,442, respectively | 8,197,655 | 8,117,757 |
| Right-of-use operating lease assets | 244,712 | 255,545 |
| Other assets | 159,094 | 195,114 |
| Amortizable intangibles, net of accumulated amortization of $5,958,636 and $5,874,612, respectively | 1,175,517 | 1,259,335 |
| Indefinite-lived cable television franchises | 13,216,355 | 13,216,355 |
| Goodwill | 8,044,716 | 8,044,716 |
| Total assets | $31,946,970 | $31,923,616 |
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||
| Current Liabilities: | ||
| Accounts payable | $963,226 | $936,950 |
| Interest payable | 304,389 | 274,507 |
| Accrued employee related costs | 135,478 | 182,146 |
| Deferred revenue | 87,295 | 85,018 |
| Debt | 344,117 | 359,407 |
| Other current liabilities ($87,129 and $71,523 due to affiliates, respectively) | 408,871 | 470,096 |
| Total current liabilities | 2,243,376 | 2,308,124 |
| Other liabilities | 229,796 | 221,249 |
| Deferred tax liability | 4,936,625 | 4,848,460 |
| Right-of-use operating lease liability | 254,576 | 264,647 |
| Long-term debt, net of current maturities | 24,717,702 | 24,715,554 |
| Total liabilities | 32,382,075 | 32,358,034 |
| Commitments and contingencies (Note 15) | ||
| Stockholders' Deficiency: | ||
| Preferred stock, $0.01 par value, 100,000,000 shares authorized, no shares issued and outstanding | — | — |
| Class A common stock: $0.01 par value, 4,000,000,000 shares authorized, 276,705,185 shares issued and 275,737,556 outstanding as of March 31, 2024 and 271,772,978 shares issued and outstanding as of December 31, 2023 | 2,767 | 2,718 |
| Class B common stock: $0.01 par value, 1,000,000,000 shares authorized, 490,086,674 issued, 184,224,142 shares outstanding as of March 31, 2024 and 184,224,428 shares outstanding as of December 31, 2023 | 1,842 | 1,842 |
| Class C common stock: $0.01 par value, 4,000,000,000 shares authorized, no shares issued and outstanding | — | — |
| Paid-in capital | 195,713 | 187,186 |
| Accumulated deficit | (622,268) | (601,075) |
| (421,946) | (409,329) | |
| Treasury stock, at cost (967,629 Class A common shares at March 31, 2024) | (10) | — |
| Accumulated other comprehensive loss | (9,208) | (12,851) |
| Total Altice USA stockholders' deficiency | (431,164) | (422,180) |
| Noncontrolling interests | (3,941) | (12,238) |
| Total stockholders' deficiency | (435,105) | (434,418) |
| Total liabilities and stockholders' deficiency | $31,946,970 | $31,923,616 |
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Revenue (including revenue from affiliates of $210 and $78, respectively) (See Note 14) | $2,250,935 | $2,293,978 |
| Operating expenses: | ||
| Programming and other direct costs (including charges from affiliates of $3,355 and $2,642, respectively) (See Note 14) | 743,887 | 771,719 |
| Other operating expenses (including charges from affiliates of $12,289 and $4,676, respectively) (See Note 14) | 674,250 | 651,245 |
| Restructuring, impairments and other operating items (See Note 7) | 51,253 | 29,672 |
| Depreciation and amortization (including impairments) | 388,391 | 416,212 |
| 1,857,781 | 1,868,848 | |
| Operating income | 393,154 | 425,130 |
| Other income (expense): | ||
| Interest expense, net | (437,141) | (389,278) |
| Gain on investments and sale of affiliate interests, net | 292 | 192,010 |
| Loss on derivative contracts, net | — | (166,489) |
| Gain (loss) on interest rate swap contracts, net | 42,303 | (14,429) |
| Gain (loss) on extinguishment of debt and write-off of deferred financing costs | (7,035) | 4,393 |
| Other income (loss), net | (1,545) | 10,205 |
| (403,126) | (363,588) | |
| Income (loss) before income taxes | (9,972) | 61,542 |
| Income tax expense | (2,924) | (30,372) |
| Net income (loss) | (12,896) | 31,170 |
| Net income attributable to noncontrolling interests | (8,297) | (5,305) |
| Net income (loss) attributable to Altice USA, Inc. stockholders | $(21,193) | $25,865 |
| Income (loss) per share: | ||
| Basic income (loss) per share | $(0.05) | $0.06 |
| Basic weighted average common shares (in thousands) | 457,369 | 454,686 |
| Diluted income (loss) per share | $(0.05) | $0.06 |
| Diluted weighted average common shares (in thousands) | 457,369 | 455,594 |
| Cash dividends declared per common share | $— | $— |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Net income (loss) | $(12,896) | $31,170 |
| Other comprehensive income (loss): | ||
| Defined benefit pension plans | 5,825 | 1,454 |
| Applicable income taxes | (1,570) | (393) |
| Defined benefit pension plans, net of income taxes | 4,255 | 1,061 |
| Foreign currency translation adjustment | (612) | (190) |
| Other comprehensive income | 3,643 | 871 |
| Comprehensive income (loss) | (9,253) | 32,041 |
| Comprehensive income attributable to noncontrolling interests | (8,297) | (5,305) |
| Comprehensive income (loss) attributable to Altice USA, Inc. stockholders | $(17,550) | $26,736 |
| ALTICE USA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY(In thousands) (Unaudited) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Class ACommonStock | Class BCommonStock | Paid-inCapital | AccumulatedDeficit | Treasury Stock | AccumulatedOther ComprehensiveIncome (Loss) | TotalAltice USAStockholders' Deficiency | Non-controllingInterests | TotalDeficiency | |
| Balance at January 1, 2024 | $2,718 | $1,842 | $187,186 | $(601,075) | $— | $(12,851) | $(422,180) | $(12,238) | $(434,418) |
| Net loss attributable to Altice USA stockholders | — | — | — | (21,193) | — | — | (21,193) | — | (21,193) |
| Net income attributable to noncontrolling interests | — | — | — | — | — | — | — | 8,297 | 8,297 |
| Pension liability adjustments, net of income taxes | — | — | — | — | — | 4,255 | 4,255 | — | 4,255 |
| Foreign currency translation adjustment | — | — | — | — | — | (612) | (612) | — | (612) |
| Share-based compensation expense (equity classified) | — | — | 6,484 | — | — | — | 6,484 | — | 6,484 |
| Other, net | 49 | — | 2,043 | — | (10) | — | 2,082 | — | 2,082 |
| Balance at March 31, 2024 | 2,767 | 1,842 | 195,713 | (622,268) | (10) | (9,208) | (431,164) | (3,941) | (435,105) |
| Balance at January 1, 2023 | $2,719 | $1,843 | $182,701 | $(654,273) | $— | $(8,201) | $(475,211) | $(28,701) | $(503,912) |
|---|---|---|---|---|---|---|---|---|---|
| Net income attributable to Altice USA to stockholders | — | — | — | 25,865 | — | — | 25,865 | — | 25,865 |
| Net income attributable to noncontrolling interests | — | — | — | — | — | — | — | 5,305 | 5,305 |
| Pension liability adjustments, net of income taxes | — | — | — | — | — | 1,061 | 1,061 | — | 1,061 |
| Foreign currency translation adjustment | — | — | — | — | — | (188) | (188) | (2) | (190) |
| Share-based compensation benefit (equity classified) | — | — | (8,718) | — | — | — | (8,718) | — | (8,718) |
| Change in noncontrolling interest | — | — | (14,166) | — | — | — | (14,166) | (8,027) | (22,193) |
| Other, net | (15) | — | (67) | — | — | — | (82) | — | (82) |
| Balance at March 31, 2023 | 2,704 | 1,843 | 159,750 | (628,408) | — | (7,328) | (471,439) | (31,425) | (502,864) |
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Cash flows from operating activities: | ||
| Net income (loss) | $(12,896) | $31,170 |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
| Depreciation and amortization (including impairments) | 388,391 | 416,212 |
| Loss (gain) on investments and sale of affiliate interests, net | (292) | (192,010) |
| Loss on derivative contracts, net | — | 166,489 |
| Loss (gain) on extinguishment of debt and write-off of deferred financing costs | 7,035 | (4,393) |
| Amortization of deferred financing costs and discounts (premiums) on indebtedness | 6,893 | 10,719 |
| Share-based compensation | 13,757 | (2,623) |
| Deferred income taxes | 86,595 | (57,248) |
| Decrease in right-of-use assets | 11,488 | 11,324 |
| Provision for doubtful accounts | 21,998 | 20,259 |
| Other | 1,510 | 316 |
| Change in operating assets and liabilities, net of effects of acquisitions and dispositions: | ||
| Accounts receivable, trade | 20,908 | 26,364 |
| Prepaid expenses and other assets | (85,655) | (45,931) |
| Amounts due from and due to affiliates | 15,606 | 10,084 |
| Accounts payable and accrued liabilities | (64,859) | (20,577) |
| Deferred revenue | 3,056 | 13,833 |
| Interest rate swap contracts | (13,874) | 32,858 |
| Net cash provided by operating activities | 399,661 | 416,846 |
| Cash flows from investing activities: | ||
| Capital expenditures | (336,095) | (582,897) |
| Other, net | 318 | (198) |
| Net cash used in investing activities | (335,777) | (583,095) |
| Cash flows from financing activities: | ||
| Proceeds from long-term debt | 2,950,000 | 350,000 |
| Repayment of debt | (2,967,306) | (268,936) |
| Proceeds from derivative contracts in connection with the settlement of collateralized debt | — | 38,902 |
| Principal payments on finance lease obligations | (35,396) | (37,861) |
| Payment related to acquisition of a noncontrolling interest | (7,261) | — |
| Additions to deferred financing costs | (17,138) | — |
| Other, net | (3,775) | (700) |
| Net cash provided by (used in) financing activities | (80,876) | 81,405 |
| Net decrease in cash and cash equivalents | (16,992) | (84,844) |
| Effect of exchange rate changes on cash and cash equivalents | (612) | (190) |
| Net decrease in cash and cash equivalents | (17,604) | (85,034) |
| Cash, cash equivalents and restricted cash at beginning of year | 302,338 | 305,751 |
| Cash, cash equivalents and restricted cash at end of period | $284,734 | $220,717 |
| CSC HOLDINGS, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands) | ||
|---|---|---|
| March 31, 2024(Unaudited) | December 31, 2023 | |
| ASSETS | ||
| Current Assets: | ||
| Cash and cash equivalents | $284,444 | $302,051 |
| Restricted cash | 284 | 280 |
| Accounts receivable, trade (less allowance for doubtful accounts of $24,430 and $21,915, respectively) | 314,691 | 357,597 |
| Prepaid expenses and other current assets ($407 and $407 due from affiliates, respectively) | 258,284 | 174,859 |
| Derivative contracts | 51,212 | — |
| Total current assets | 908,915 | 834,787 |
| Property, plant and equipment, net of accumulated depreciation of $8,343,299 and $8,162,442, respectively | 8,197,655 | 8,117,757 |
| Right-of-use operating lease assets | 244,712 | 255,545 |
| Other assets | 159,094 | 195,114 |
| Amortizable intangibles, net of accumulated amortization of $5,958,636 and $5,874,612, respectively | 1,175,517 | 1,259,335 |
| Indefinite-lived cable television franchises | 13,216,355 | 13,216,355 |
| Goodwill | 8,044,716 | 8,044,716 |
| Total assets | $31,946,964 | $31,923,609 |
| LIABILITIES AND MEMBER'S DEFICIENCY | ||
|---|---|---|
| Current Liabilities: | ||
| Accounts payable | $963,226 | $936,950 |
| Interest payable | 304,389 | 274,507 |
| Accrued employee related costs | 135,478 | 182,146 |
| Deferred revenue | 87,295 | 85,018 |
| Debt | 344,117 | 359,407 |
| Other current liabilities ($87,129 and $71,523 due to affiliates, respectively) | 408,871 | 470,097 |
| Total current liabilities | 2,243,376 | 2,308,125 |
| Other liabilities | 229,796 | 221,249 |
| Deferred tax liability | 4,940,125 | 4,851,959 |
| Right-of-use operating lease liability | 254,576 | 264,647 |
| Long-term debt, net of current maturities | 24,717,702 | 24,715,554 |
| Total liabilities | 32,385,575 | 32,361,534 |
| Commitments and contingencies (Note 15) | ||
| Member's deficiency (100 membership units issued and outstanding) | (425,462) | (412,836) |
| Accumulated other comprehensive loss | (9,208) | (12,851) |
| Total member's deficiency | (434,670) | (425,687) |
| Noncontrolling interests | (3,941) | (12,238) |
| Total deficiency | (438,611) | (437,925) |
| Total liabilities and member's deficiency | $31,946,964 | $31,923,609 |
CSC HOLDINGS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Revenue (including revenue from affiliates of $210 and $78, respectively) (See Note 14) | $2,250,935 | $2,293,978 |
| Operating expenses: | ||
| Programming and other direct costs (including charges from affiliates of $3,355 and $2,642, respectively) (See Note 14) | 743,887 | 771,719 |
| Other operating expenses (including charges from affiliates of $12,289 and $4,676, respectively) (See Note 14) | 674,250 | 651,245 |
| Restructuring, impairments and other operating items (See Note 7) | 51,253 | 29,672 |
| Depreciation and amortization (including impairments) | 388,391 | 416,212 |
| 1,857,781 | 1,868,848 | |
| Operating income | 393,154 | 425,130 |
| Other income (expense): | ||
| Interest expense, net | (437,141) | (389,278) |
| Gain on investments and sale of affiliate interests, net | 292 | 192,010 |
| Loss on derivative contracts, net | — | (166,489) |
| Gain (loss) on interest rate swap contracts, net | 42,303 | (14,429) |
| Gain (loss) on extinguishment of debt and write-off of deferred financing costs | (7,035) | 4,393 |
| Other income (loss), net | (1,545) | 10,205 |
| (403,126) | (363,588) | |
| Income (loss) before income taxes | (9,972) | 61,542 |
| Income tax expense | (2,924) | (30,372) |
| Net income (loss) | (12,896) | 31,170 |
| Net income attributable to noncontrolling interests | (8,297) | (5,305) |
| Net income (loss) attributable to CSC Holdings, LLC sole member | $(21,193) | $25,865 |
CSC HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Net income (loss) | $(12,896) | $31,170 |
| Other comprehensive income (loss): | ||
| Defined benefit pension plans | 5,825 | 1,454 |
| Applicable income taxes | (1,570) | (393) |
| Defined benefit pension plans, net of income taxes | 4,255 | 1,061 |
| Foreign currency translation adjustment | (612) | (190) |
| Other comprehensive income | 3,643 | 871 |
| Comprehensive income (loss) | (9,253) | 32,041 |
| Comprehensive income attributable to noncontrolling interests | (8,297) | (5,305) |
| Comprehensive income (loss) attributable to CSC Holdings, LLC's sole member | $(17,550) | $26,736 |
CSC HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBER'S DEFICIENCY
| Member'sDeficiency | Accumulated Other Comprehensive Income (Loss) | TotalMember's Deficiency | NoncontrollingInterests | TotalDeficiency | |
|---|---|---|---|---|---|
| Balance at January 1, 2024 | $(412,836) | $(12,851) | $(425,687) | $(12,238) | $(437,925) |
| Net loss attributable to CSC Holdings' sole member | (21,193) | — | (21,193) | — | (21,193) |
| Net income attributable to noncontrolling interests | — | — | — | 8,297 | 8,297 |
| Pension liability adjustments, net of income taxes | — | 4,255 | 4,255 | — | 4,255 |
| Foreign currency translation adjustment | — | (612) | (612) | — | (612) |
| Share-based compensation expense (equity classified) | 6,484 | — | 6,484 | — | 6,484 |
| Cash distributions to parent | (3,775) | — | (3,775) | — | (3,775) |
| Non-cash contributions from parent | 5,858 | — | 5,858 | — | 5,858 |
| Balance at March 31, 2024 | (425,462) | (9,208) | (434,670) | (3,941) | (438,611) |
| Balance at January 1, 2023 | $(475,650) | $(8,201) | $(483,851) | $(28,701) | $(512,552) |
|---|---|---|---|---|---|
| Net income attributable to CSC Holdings' sole member | 25,865 | — | 25,865 | — | 25,865 |
| Net income attributable to noncontrolling interests | — | — | — | 5,305 | 5,305 |
| Pension liability adjustments, net of income taxes | — | 1,061 | 1,061 | — | 1,061 |
| Foreign currency translation adjustment, net of income taxes | — | (188) | (188) | (2) | (190) |
| Share-based compensation benefit (equity classified) | (8,718) | — | (8,718) | — | (8,718) |
| Change in noncontrolling interest | (14,166) | — | (14,166) | (8,027) | (22,193) |
| Other, net | (82) | — | (82) | — | (82) |
| Balance at March 31, 2023 | (472,751) | (7,328) | (480,079) | (31,425) | (511,504) |
CSC HOLDINGS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Cash flows from operating activities: | ||
| Net income (loss) | $(12,896) | $31,170 |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
| Depreciation and amortization (including impairments) | 388,391 | 416,212 |
| Loss (gain) on investments and sale of affiliate interests, net | (292) | (192,010) |
| Loss on derivative contracts, net | — | 166,489 |
| Loss (gain) on extinguishment of debt and write-off of deferred financing costs | 7,035 | (4,393) |
| Amortization of deferred financing costs and discounts (premiums) on indebtedness | 6,893 | 10,719 |
| Share-based compensation | 13,757 | (2,623) |
| Deferred income taxes | 86,595 | (57,248) |
| Decrease in right-of-use assets | 11,488 | 11,324 |
| Provision for doubtful accounts | 21,998 | 20,259 |
| Other | 1,510 | 316 |
| Change in operating assets and liabilities, net of effects of acquisitions and dispositions: | ||
| Accounts receivable, trade | 20,908 | 26,364 |
| Prepaid expenses and other assets | (85,655) | (45,931) |
| Amounts due from and due to affiliates | 15,606 | 10,084 |
| Accounts payable and accrued liabilities | (64,858) | (20,577) |
| Deferred revenue | 3,056 | 13,833 |
| Interest rate swap contracts | (13,874) | 32,858 |
| Net cash provided by operating activities | 399,662 | 416,846 |
| Cash flows from investing activities: | ||
| Capital expenditures | (336,095) | (582,897) |
| Other, net | 318 | (198) |
| Net cash used in investing activities | (335,777) | (583,095) |
| Cash flows from financing activities: | ||
| Proceeds from long-term debt | 2,950,000 | 350,000 |
| Repayment of debt | (2,967,306) | (268,936) |
| Proceeds from derivative contracts in connection with the settlement of collateralized debt | — | 38,902 |
| Principal payments on finance lease obligations | (35,396) | (37,861) |
| Payment to acquire noncontrolling interest | (7,261) | — |
| Additions to deferred financing costs | (17,138) | — |
| Other, net | (3,775) | (700) |
| Net cash provided by (used in) financing activities | (80,876) | 81,405 |
| Net decrease in cash and cash equivalents | (16,991) | (84,844) |
| Effect of exchange rate changes on cash and cash equivalents | (612) | (190) |
| Net decrease in cash and cash equivalents | (17,603) | (85,034) |
| Cash, cash equivalents and restricted cash at beginning of year | 302,331 | 305,744 |
| Cash, cash equivalents and restricted cash at end of period | $284,728 | $220,710 |
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, ("Altice Europe") and its subsidiaries and other entities.
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 inone 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, 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 an SEC registrant.
NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all the information and notes required for complete annual financial statements.
The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
The financial statements presented in this report are unaudited; however, in the opinion of management, such financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented.
The results of operations for the interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2024.
The preparation of financial statements in conformity with 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 11 for a discussion of fair value estimates.
Reclassifications
Certain reclassifications have been made to the 2023 amounts to conform to the 2024 presentation.
NOTE 3. ACCOUNTING STANDARDS
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 2023-07 is effective for annual periods beginning after December 15, 2023 (year ending December 31, 2024 for the Company). 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 2023-09 is effective for annual periods beginning after December 15, 2024 (year ending December 31, 2025 for the Company). Early adoption is permitted. We are currently evaluating the impact of adopting ASU No. 2023-09.
NOTE 4. REVENUE
The following table presents the composition of revenue:
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Residential: | ||
| Broadband | $916,994 | $957,045 |
| Video | 755,594 | 770,601 |
| Telephony | 70,965 | 77,681 |
| Mobile (a) | 24,893 | 15,526 |
| Residential revenue (a) | 1,768,446 | 1,820,853 |
| Business services and wholesale (a) | 364,861 | 363,641 |
| News and advertising | 105,725 | 98,737 |
| Other (a) | 11,903 | 10,747 |
| Total revenue | $2,250,935 | $2,293,978 |
(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.
We are assessed non-income related taxes by governmental authorities, including franchising authorities (generally under multi-year agreements), and collect such taxes from our 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 three months ended March 31, 2024 and 2023, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $54,694 and $56,455, respectively.
Customer Contract Costs
Deferred enterprise sales commission costs are included in other current and noncurrent assets in the consolidated balance sheets and totaled $18,283 and $18,109 as of March 31, 2024 and December 31, 2023, respectively.
A significant portion of our revenue is derived from residential and small and medium-sized business ("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 tofive years, and services may only be terminated in accordance with the contractual terms.
Concentration of Credit Risk
We did not have a single customer that represented 10% or more of our consolidated revenues for the three months ended March 31, 2024 and 2023 or 10% or more of our consolidated net trade receivables at March 31, 2024 and December 31, 2023, respectively.
NOTE 5. NET INCOME (LOSS) PER SHARE
Basic net income (loss) 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. Diluted net loss per common share attributable to Altice USA stockholders excludes the effects of common stock equivalents as they are anti-dilutive.
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:
| Three Months Ended March 31, 2023 | |
|---|---|
| (in thousands) | |
| Basic weighted average shares outstanding | 454,686 |
| Effect of dilution: | |
| Restricted stock | 245 |
| Deferred cash-denominated awards (Note 13) | 663 |
| Diluted weighted average shares outstanding | 455,594 |
| Weighted average shares excluded from diluted weighted average shares outstanding: | |
| Anti-dilutive shares | 50,539 |
| Share-based compensation awards whose performance metrics have not been achieved | 6,921 |
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 6. SUPPLEMENTAL CASH FLOW INFORMATION
Our non-cash investing and financing activities and other supplemental data were as follows:
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Non-Cash Investing and Financing Activities: | ||
| Altice USA and CSC Holdings: | ||
| Property and equipment accrued but unpaid | $320,389 | $407,013 |
| Notes payable for the purchase of equipment and other assets | 36,278 | 70,440 |
| Right-of-use assets acquired in exchange for finance lease obligations | 8,290 | 35,175 |
| Other | 1,798 | — |
| Supplemental Data: | ||
| Altice USA and CSC Holdings: | ||
| Cash interest paid, net of capitalized interest | 401,987 | 389,162 |
| Income taxes paid, net | 11,151 | 12,661 |
NOTE 7. RESTRUCTURING, IMPAIRMENTS AND OTHER OPERATING ITEMS
Our restructuring, impairments and other operating items are comprised of the following:
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Contract termination costs (a) | $37,136 | $— |
| Contractual payments for terminated employees | 5,993 | 28,019 |
| Facility realignment costs | 5,304 | 382 |
| Impairment of right-of-use operating lease assets | 1,027 | 5 |
| Other | 1,793 | 1,266 |
| $51,253 | $29,672 | |
(a) Represents the cost to early terminate a contract with a vendor.
NOTE 8. GOODWILL AND 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 March 31, 2024 · As of December 31, 2023 | |||||||
|---|---|---|---|---|---|---|---|
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Estimated Useful Lives | |
| Customer relationships | $6,073,152 | $(4,907,471) | $1,165,681 | $6,073,152 | $(4,824,140) | $1,249,012 | 3 to 18 years |
| Trade names | 1,010,300 | (1,010,300) | — | 1,010,300 | (1,010,300) | — | 4 to 7 years |
| Other amortizable intangibles | 50,701 | (40,865) | 9,836 | 50,495 | (40,172) | 10,323 | 1 to 15 years |
| $7,134,153 | $(5,958,636) | $1,175,517 | $7,133,947 | $(5,874,612) | $1,259,335 | ||
Amortization expense for the three months ended March 31, 2024 and 2023 aggregated $84,024 and $105,695, respectively.
Goodwill and the value of indefinite-lived cable franchises acquired in business combinations are not amortized. Rather, such assets are tested for impairment annually, as of October 1, or whenever events or changes in circumstances indicate that it is more likely than not that the assets may be impaired. The carrying amount of indefinite-lived cable franchise rights was $13,216,355 and goodwill was $8,044,716 as of March 31, 2024 and December 31, 2023.
NOTE 9. DEBT
The following table provides details of our outstanding debt:
| Interest Rate at March 31, 2024 · March 31, 2024 · December 31, 2023 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Date Issued · Maturity Date · Principal Amount · Carrying Amount (a) · Principal Amount · Carrying Amount (a) | ||||||||||||
| CSC Holdings Senior Notes: | ||||||||||||
| May 23, 2014 (g) | $— | $— | $750,000 | $742,746 | ||||||||
| October 18, 2018 | April 1, 2028 | 7.500% | 4,118 | 4,115 | 4,118 | 4,114 | ||||||
| November 27, 2018 | April 1, 2028 | 7.500% | 1,045,882 | 1,044,982 | 1,045,882 | 1,044,933 | ||||||
| July 10 and October 7, 2019 | January 15, 2030 | 5.750% | 2,250,000 | 2,274,997 | 2,250,000 | 2,275,915 | ||||||
| June 16 and August 17, 2020 | December 1, 2030 | 4.625% | 2,325,000 | 2,358,046 | 2,325,000 | 2,359,078 | ||||||
| May 13, 2021 | November 15, 2031 | 5.000% | 500,000 | 498,563 | 500,000 | 498,525 | ||||||
| 6,125,000 | 6,180,703 | 6,875,000 | 6,925,311 | |||||||||
| CSC Holdings Senior Guaranteed Notes: | ||||||||||||
| September 23, 2016 | April 15, 2027 | 5.500% | 1,310,000 | 1,307,868 | 1,310,000 | 1,307,709 | ||||||
| January 29, 2018 | February 1, 2028 | 5.375% | 1,000,000 | 996,162 | 1,000,000 | 995,940 | ||||||
| January 24, 2019 | February 1, 2029 | 6.500% | 1,750,000 | 1,748,177 | 1,750,000 | 1,748,098 | ||||||
| June 16, 2020 | December 1, 2030 | 4.125% | 1,100,000 | 1,096,607 | 1,100,000 | 1,096,499 | ||||||
| August 17, 2020 | February 15, 2031 | 3.375% | 1,000,000 | 997,631 | 1,000,000 | 997,556 | ||||||
| May 13, 2021 | November 15, 2031 | 4.500% | 1,500,000 | 1,495,715 | 1,500,000 | 1,495,598 | ||||||
| April 25, 2023 | May 15, 2028 | 11.250% | 1,000,000 | 994,334 | 1,000,000 | 994,072 | ||||||
| January 25, 2024 | January 31, 2029 | 11.750% | 2,050,000 | 2,031,568 | — | — | ||||||
| 10,710,000 | 10,668,062 | 8,660,000 | 8,635,472 | |||||||||
| CSC Holdings Restricted Group Credit Facility: | ||||||||||||
| Revolving Credit Facility (b) | July 13, 2027 | 7.678% | 1,600,000 | 1,596,861 | 825,000 | 821,632 | ||||||
| Term Loan B (f) | — | — | 1,520,483 | 1,518,530 | ||||||||
| Incremental Term Loan B-3 (f) | — | — | 521,744 | 520,988 | ||||||||
| Incremental Term Loan B-5 (c) | April 15, 2027 | 7.940% | 2,880,000 | 2,869,447 | 2,887,500 | 2,876,131 | ||||||
| Incremental Term Loan B-6 (d) | January 15, 2028 | 9.825% | 1,981,923 | 1,945,521 | 1,986,928 | 1,948,503 | ||||||
| 6,461,923 | 6,411,829 | 7,741,655 | 7,685,784 | |||||||||
| Lightpath Senior Notes: | ||||||||||||
| September 29, 2020 | September 15, 2028 | 5.625% | 415,000 | 409,407 | 415,000 | 409,136 | ||||||
| Lightpath Senior Secured Notes: | ||||||||||||
| September 29, 2020 | September 15, 2027 | 3.875% | 450,000 | 444,759 | 450,000 | 444,410 | ||||||
| Lightpath Term Loan (e) | November 30, 2027 | 8.690% | 580,500 | 571,011 | 582,000 | 571,898 | ||||||
| Lightpath Revolving Credit Facility | — | — | — | — | ||||||||
| 1,445,500 | 1,425,177 | 1,447,000 | 1,425,444 | |||||||||
| Finance lease obligations | 201,250 | 201,250 | 228,356 | 228,356 | ||||||||
| Notes payable and supply chain financing | 174,798 | 174,798 | 174,594 | 174,594 | ||||||||
| 25,118,471 | 25,061,819 | 25,126,605 | 25,074,961 | |||||||||
| Less: current portion of credit facility debt | (56,019) | (56,019) | (61,177) | (61,177) | ||||||||
| Less: current portion of finance lease obligations | (113,300) | (113,300) | (123,636) | (123,636) | ||||||||
| Less: current portion of notes payable and supply chain financing | (174,798) | (174,798) | (174,594) | (174,594) | ||||||||
| (344,117) | (344,117) | (359,407) | (359,407) | |||||||||
| Long-term debt | $24,774,354 | $24,717,702 | $24,767,198 | $24,715,554 | ||||||||
(a)The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums.
(b)At March 31, 2024, $137,512 of the revolving credit facility was restricted for certain letters of credit issued on our behalf and $737,488 of the $2,475,000 facility was undrawn and available, subject to covenant limitations. The revolving credit facility bears interest at a rate of Secured Overnight Financing Rate ("SOFR") (plus a Term SOFR credit adjustment spread of 0.10%) plus 2.25% per annum.
(c)Incremental Term Loan B-5 requires quarterly installments of $7,500 and bears interest at a rate equal to Synthetic USD London Interbank Offered Rate ("LIBOR") plus 2.50% per annum.
(d)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.
(e)Pursuant to the loan agreement, interest will be calculated for any (i) SOFR 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.
(f)The Term Loan B and Incremental Term Loan B-3 were repaid with proceeds from the issuance of senior guaranteed notes in January 2024. See discussion below.
(g)The 5.250% senior notes were redeemed in February 2024 with proceeds from drawings under the CSC Holdings Revolving Credit Facility. See discussion below.
For financing purposes, we have two debt silos: CSC Holdings and Lightpath. The CSC Holdings silo is structured as a restricted group (the "CSC Holdings Restricted Group") and an unrestricted group, which includes certain designated subsidiaries and investments. The CSC Holdings Restricted Group is comprised of CSC Holdings and substantially all of its wholly-owned operating subsidiaries excluding Cablevision Lightpath which became an unrestricted subsidiary in September 2020. These CSC Holdings 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.
CSC Holdings Revolving Credit Facility
During the three months ended March 31, 2024, CSC Holdings borrowed $900,000 under its revolving credit facility and repaid $125,000 of amounts outstanding under the revolving credit facility.
CSC Holdings Senior Guaranteed Notes and Senior Notes
In January 2024, CSC Holdings issued $2,050,000 in aggregate principal amount of senior guaranteed notes due 2029. 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 (i) repay the outstanding principal balance of the Term Loan B, (ii) repay the outstanding principal balance of the Incremental Term Loan B-3, and (iii) pay the fees, costs and expenses associated with these transactions. In connection with these transactions, we recorded a write-off of the outstanding deferred financing costs on these loans of $2,598.
In February 2024, we redeemed the CSC Holdings 5.250% Senior Notes and 5.250% Series B Senior Notes due June 2024 with proceeds under the CSC Revolving Credit Facility. In connection with these transactions, we recorded a write-off of the outstanding deferred financing costs on these notes of $4,437.
Lightpath Credit Facility
In February 2024, Lightpath entered into an extension amendment (the "Extension Amendment") to its amended credit agreement (the "Amended Credit Agreement") that provides for, among other things, (a) an extension of the scheduled maturity date with respect to the 2027 Revolving Credit Commitments (as defined in the Extension Amendment) under the credit agreement to the date (the "New Maturity Date") that is the later of (x) November 30, 2025 and (y) the earlier of (i) June 15, 2027 and (ii) the date that is five business days after any Extension Breach Date (as defined in the Amended Credit Agreement) and (b) incremental revolving credit commitments in an aggregate principal amount of $15,000 which shall be of the same class and type as the 2027 Revolving Credit Commitments and will, for the avoidance of doubt, mature on the New Maturity Date. After giving effect to the Extension Amendment, the aggregate principal amount of revolving loan commitments available under the Amended Credit Agreement equaled $115,000.
Under the Extension Amendment, the aggregate principal amount of 2027 Revolving Credit Commitments equaled $95,000 and the aggregate principal amount of 2025 Revolving Credit Commitments (as defined in the Extension Amendment) equaled $20,000. Interest will be calculated at a rate per annum equal to the adjusted Term SOFR rate or the alternate base rate, as applicable, plus the applicable margin, where the applicable margin is (i) with respect to any alternate base rate loan,2.25% per annum and (ii) with respect to any Term SOFR loan,3.25% per annum.
Debt Compliance
As of March 31, 2024, 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.
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, 2023 | $174,454 |
|---|---|
| Purchases financed | 36,278 |
| Repayments | (35,934) |
| Balance as of March 31, 2024 | $174,798 |
Summary of Debt Maturities
The future principal payments under our various debt obligations outstanding as of March 31, 2024, including notes payable and supply chain financing, but excluding finance lease obligations, are as follows:
| 2024 | $180,535 |
| 2025 | 92,297 |
| 2026 | 56,019 |
| 2027 | 6,741,520 |
| 2028 (a) | 5,371,850 |
| Thereafter | 12,475,000 |
(a)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.
NOTE 10. 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.
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 March 31, 2024, 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.
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 | |||
|---|---|---|---|
| March 31, 2024 · December 31, 2023 | |||
| Asset Derivatives: | |||
| Interest rate swap contracts | Derivative contracts | $51,212 | $— |
| Interest rate swap contracts | Other assets, long-term | 75,576 | 112,914 |
| $126,788 | $112,914 | ||
The following table presents certain consolidated statement of operations data related to our derivative contracts and the underlying Comcast common stock:
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Loss on derivative contracts related to change in the value of equity derivative contracts related to Comcast common stock | $— | $(166,489) |
| Change in the fair value of Comcast common stock included in gain (loss) on investments | — | 192,010 |
| Gain (loss) on interest rate swap contracts, net | 42,303 | (14,429) |
Interest Rate Swap Contract
The following is a summary of the terms of our interest rate swap contracts:
| Maturity Date | Notional Amount | Company Pays | Company Receives |
|---|---|---|---|
| CSC Holdings: | |||
| January 2025 | $500,000 | Fixed rate of 1.3281% | One-month SOFR |
| January 2025 | 500,000 | Fixed rate of 1.4223% | One-month SOFR |
| January 2025 | 500,000 | Fixed rate of 1.2567% | One-month SOFR |
| December 2026 | 750,000 | Fixed rate of 2.7129% | One-month SOFR |
| December 2026 | 750,000 | Fixed rate of 2.6999% | One-month SOFR |
| Lightpath: | |||
| December 2026 | 300,000 | Fixed rate of 2.11% | One-month SOFR |
| December 2026 | 180,000 | Fixed rate of 3.523% | One-month SOFR |
NOTE 11. 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 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 ValueHierarchy | March 31, 2024 | December 31, 2023 | |
|---|---|---|---|
| Assets: | |||
| Money market funds | Level I | $39,906 | $49,541 |
| Interest rate swap contracts | Level II | 126,788 | 112,914 |
| Liabilities: | |||
| Contingent consideration related to acquisition | Level III | 2,303 | 2,037 |
Our money market funds which are classified as cash equivalents are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.
The interest rate swap contracts on our 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, we have concluded that these instruments should be classified within Level II of the fair value hierarchy.
The fair values of the contingent consideration as of March 31, 2024 and December 31, 2023 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, Senior Notes, Senior Guaranteed Notes, Senior Secured Notes, Notes Payable, and Supply Chain Financing
The fair values of each of our debt instruments are based on quoted market prices for the same or similar issues or on the current rates offered to us 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).
The carrying values, estimated fair values, and classification under the fair value hierarchy of our financial instruments, excluding those that are carried at fair value in the accompanying consolidated balance sheets, are summarized below:
| March 31, 2024 · December 31, 2023 | |||||
|---|---|---|---|---|---|
| Fair ValueHierarchy | CarryingAmount (a) | EstimatedFair Value | CarryingAmount (a) | EstimatedFair Value | |
| Credit facility debt | Level II | $6,982,840 | $7,042,423 | $8,257,682 | $8,323,654 |
| Senior guaranteed notes and senior secured notes | Level II | 11,112,821 | 9,428,313 | 9,079,882 | 7,784,288 |
| Senior notes | Level II | 6,590,110 | 3,653,838 | 7,334,447 | 4,932,931 |
| Notes payable and supply chain financing | Level II | 174,798 | 174,798 | 174,594 | 174,594 |
| $24,860,569 | $20,299,372 | $24,846,605 | $21,215,467 | ||
(a)Amounts are net of unamortized deferred financing costs and discounts/premiums.
The fair value estimates related to our debt instruments presented above are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
NOTE 12. INCOME TAXES
We use an estimated annual effective tax rate ("AETR") to measure the income tax expense or benefit recognized on a year-to-date basis in an interim period. In addition, certain items included in income tax expense as well as the tax impact of certain items included in pretax income must be treated as discrete items. The income tax expense or benefit associated with these discrete items is fully recognized in the interim period in which the items occur.
For the three months ended March 31, 2024, we recorded tax expense of $2,924 on a pre-tax loss of $9,972, resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was primarily due to the impact of state tax expense, certain non-deductible expenses, and tax deficiencies on share-based compensation.
For the three months ended March 31, 2023, we recorded a tax expense of $30,372 on pre-tax income of $61,542, resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was due to the impact of certain non-deductible expenses, state tax expense, and tax deficiencies on share-based compensation.
NOTE 13. SHARE-BASED COMPENSATION
The following table presents share-based compensation expense (benefit) and unrecognized compensation cost:
| Share-Based Compensation · Unrecognized Compensation Cost as of March 31, 2024 | |||
|---|---|---|---|
| Three Months Ended March 31, | |||
| 2024 · 2023 | |||
| Awards issued pursuant to LTIP: | |||
| Stock option awards (a) | $(1,688) | $(5,585) | $5,278 |
| Performance stock units (a) | (1,730) | (7,198) | 5,392 |
| Restricted share units | 9,752 | 3,396 | 80,984 |
| Cash denominated performance awards | 5,292 | 326 | 35,932 |
| Other | 2,131 | 6,438 | 4,251 |
| $13,757 | $(2,623) | $131,837 | |
(a)The benefit for 2023 includes credits due to the modification of awards to certain former executive officers and other forfeitures.
Restricted Share Units
The following table summarizes activity related to restricted share units granted to our employees:
| Number of Units | |
|---|---|
| Balance at December 31, 2023 | 22,493,888 |
| Granted | 16,268,960 |
| Vested | (3,266,648) |
| Forfeited | (1,504,386) |
| Balance at March 31, 2024 | 33,991,814 |
Cash Denominated Performance Awards
The following table summarizes activity related to cash denominated performance award granted to our employees:
| Number of Units | |
|---|---|
| Balance at December 31, 2023 | 48,492,500 |
| Forfeited | (2,740,000) |
| Balance at March 31, 2024 | 45,752,500 |
The deferred cash denominated performance awards cliff vest in three years. The payout of these awards can range from 0% to 200% of the target value based on the Company’s achievement of certain revenue and Adjusted EBITDA targets during a three year performance period. These awards will be settled in shares of the Company's Class A common stock, or cash, at the Company's option.
Lightpath Plan Awards
As of March 31, 2024,494,286 Class A-1 management incentive units and 250,829 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 $29,438 and will be expensed in the period in which a partial exit or a liquidity event is consummated.
NOTE 14. 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.
The following table summarizes the revenue and expenses related to services provided to or received from affiliates and related parties:
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Revenue | $210 | $78 |
| Operating expenses: | ||
| Programming and other direct costs | (3,355) | (2,642) |
| Other operating expenses, net | (12,289) | (4,676) |
| Operating expenses, net | (15,644) | (7,318) |
| Net charges | $(15,434) | $(7,240) |
| Capital expenditures | $50,093 | $28,134 |
Revenue
We recognize revenue primarily from the sale of advertising to a subsidiary of Altice Europe.
Programming and other direct costs
Programming and other direct costs include costs incurred for advertising services provided by 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.
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:
| March 31, 2024 | December 31, 2023 | |
|---|---|---|
| Due from: | ||
| Altice Europe | $137 | $137 |
| Other affiliates and related parties | 270 | 270 |
| $407 | $407 | |
| Due to: | ||
| Altice Europe | $87,129 | $71,523 |
| $87,129 | $71,523 | |
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
During the three months ended March 31, 2024 and 2023, CSC Holdings made cash equity distribution payments to its parent of $3,775 and $83, respectively and non-cash contributions of $5,858 and $1, respectively.
NOTE 15. COMMITMENTS AND CONTINGENCIES
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.
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 8,000 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.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.