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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
As filed with the Securities and Exchange Commission on January 8, 2018
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Altice USA, Inc.
(Exact name of registrant as specified in its Charter)
Delaware (State or other jurisdiction of incorporation or organization) |
4841 (Primary Standard Industrial Classification Code Number) |
38-3980194 (I.R.S. Employer Identification No.) |
1 Court Square West
Long Island City, NY 11101
(516) 803-2300
(Address, including zip code, and telephone number, including area code, of registrant's principal executive office)
David Connolly
Executive Vice President, General Counsel and Secretary
1 Court Square West
Long Island City, NY 11101
(516) 803-2300
(Name, address, including zip code, and telephone number, including area code, of agent for service)
With a copy to:
Richard B. Alsop
Scott Petepiece
Daniel Litowitz
Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022
(212) 848-4000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
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. (check one)
Large accelerated filer o | Accelerated filer o | Non-accelerated filer ý (Do not check if a smaller reporting company) |
Smaller reporting company o Emerging growth company o |
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 7(a)(2)(B) of the Securities Act. o
CALCULATION OF REGISTRATION FEE
|
||||||||
Title of Each Class of Securities to be Registered |
Amount to be Registered(1) |
Proposed Maximum Offering Price Per Share |
Proposed Maximum Aggregate Offering Price |
Amount of Registration Fee |
||||
---|---|---|---|---|---|---|---|---|
Class A common stock, par value $0.01 per share |
5,281,258 shares | $21.02(2) | $111,012,044(2) | $13,821 | ||||
Class B common stock, par value $0.01 per share |
490,085,674 shares | Not applicable(3) | $2,978,614,000(4) | $370,838 | ||||
Class A common stock, par value $0.01 per share |
490,085,674 shares(5) | (5) | (5) | (5) | ||||
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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. The securities described herein may not be distributed until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion,
Preliminary Prospectus dated January 8, 2018
PROSPECTUS
Shares
Altice USA, Inc.
Class A Common Stock
Class B Common Stock
This prospectus is being furnished to shareholders of record, as of , 2018, of Altice N.V., a public limited liability company ("Naamloze vennootschap") incorporated in the Netherlands, in connection with the planned pro rata distribution (the "Distribution") by Altice N.V. to its shareholders of shares consisting of a combination of Class B common stock, par value $0.01 per share (the "Class B common stock"), of Altice USA, Inc. ("Altice USA" or the "Company") and Class A common stock, par value $0.01 per share (the "Class A common stock" and, together with the Class B common stock, the "Altice USA common stock"). As of December 31, 2017, Altice N.V. indirectly owned 490,085,674 shares of Class B common stock and 51,458,337 shares of Class A common stock representing 73.5% of the total outstanding capital stock and 98.4% of the total voting power of the outstanding capital stock of Altice USA. The Distribution will not increase the number of outstanding shares of Altice USA.
Each Altice N.V. common share outstanding as of CET on , 2018, the record date for the Distribution (the "Record Date"), will entitle the holder thereof to receive shares of Class A common stock and/or Class B common stock as described below. Delivery of the shares in the Distribution will be made in book-entry form.
The Distribution will be structured as a distribution in kind to holders of Altice N.V.'s common shares A and common shares B. The number of shares of Altice USA common stock to be distributed to each Altice N.V. shareholder as of the Record Date will be based on such shareholder's ownership of Altice N.V. common shares. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution. The number of shares of Class B common stock distributed will be subject to a cap of 245 million shares, representing 50% of the shares of Class B common stock owned by Altice N.V. and approximately one-third of the total issued share capital of Altice USA (the "Class B Cap"). If the Class B Cap is exceeded, the shares of Class B common stock delivered to Altice N.V. shareholders of record who elect to receive them will be subject to proration, and such shareholders will receive shares of Class A common stock in lieu of the portion of shares of Class B common stock that is cut back.
If an Altice N.V. shareholder of record does not make an election by CET on , 2018 (the "Election Deadline"), such shareholder will receive only shares of Class A common stock in the Distribution (the "Default Election"). Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution.
Altice N.V. is ultimately controlled by Patrick Drahi through Next Alt S.à r.l. ("Next Alt"). As of December 31, 2017, Next Alt held 60.31% of the outstanding share capital and voting rights of Altice N.V., representing 49.5% of the economic rights and 66% of the voting power in general meetings. Mr. Drahi has informed us that Next Alt will elect to receive 100% of the shares of Altice USA to which it is entitled in the Distribution in the form of Class B common stock and will be subject to proration, in the same manner as other Altice N.V. shareholders, in the event the Class B Cap is exceeded. As a result of Next Alt's intended election, and voting agreements that Next Alt will enter into with certain members of Altice N.V. and Altice USA management with respect to all shares of Altice USA common stock they own, Mr. Drahi will control Altice USA immediately after giving effect to the Distribution regardless of the elections made by other Altice N.V. shareholders.
Fractional shares of Altice USA common stock will not be distributed in the Distribution. Fractional shares will be aggregated into whole shares of Class A common stock and Class B common stock (after conversion into Class A common stock), which will be sold in the open market at prevailing market prices. The aggregate cash proceeds from such sales, net of any brokerage fees and other costs, will be distributed pro rata to holders who would have otherwise been entitled to receive a fractional share in the Distribution.
The Distribution will be effective as of CET, on , 2018 (the "Distribution Date").
Altice N.V. shareholders will not be required to pay any consideration for the Altice USA common stock they receive in the Distribution, and they will not be required to surrender or exchange their common shares of Altice N.V. in connection with the Distribution. Prior to the Election Deadline and subject to the Class B Cap, Altice N.V. shareholders will, however, have the right to elect the percentage of shares of Class A common stock and shares of Class B common stock they wish to receive in the Distribution.
Our shares of Class A common stock are listed on the New York Stock Exchange (the "NYSE") under the symbol "ATUS." Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange.
In reviewing this prospectus, you should carefully consider the matters described in the "Risk Factors" section beginning on page 17 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2018.
This prospectus is being furnished solely to provide information to Altice N.V. shareholders as of the Record Date who will receive shares of Altice USA common stock in the Distribution. It is not and is not to be construed as an inducement or encouragement to buy or sell any securities of Altice N.V. or Altice USA. This prospectus describes Altice USA's business, its relationship with Altice N.V. and how the Distribution affects Altice USA and its shareholders, and provides other information to assist you in evaluating the benefits and risks of holding or disposing of the Altice USA common stock that they will receive in the Distribution.
The information contained in this prospectus is accurate only as of its date. Our business, financial condition, operating results and prospects may have changed since that date. Certain numerical figures included in this prospectus have been subject to rounding adjustments. Accordingly, such numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.
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TRADEMARKS, SERVICE MARKS AND TRADE NAMES
We own or have rights to use the trademarks, service marks and trade names that we and Altice N.V. use in connection with our businesses, such as Altice, Suddenlink, Optimum, Lightpath, Altice Media Solutions, Altice Labs, Altice Technical Services, News 12 Networks, News 12 Varsity and Audience Partners. Each trademark, service mark and trade name of any other company appearing in this prospectus is, to our knowledge, owned by such other company. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are listed without the ® and symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of any applicable licensors to these trademarks, service marks and trade names.
Market and industry data and forecasts used in this prospectus have been obtained from independent industry sources. Some market data and statistical information contained in this prospectus are also based on management's estimates and calculations, which are derived from our review and interpretation of the independent sources, our internal market and brand research, our knowledge of the industry and public filings. Although we believe these sources to be reliable, we have not independently verified the data obtained from these sources and we cannot assure you of the accuracy or completeness of the data. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements contained in this prospectus.
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The following is a glossary of certain industry terms used throughout this prospectus:
ARPU |
Average monthly revenue per residential customer. | |
Churn |
Customer attrition rate. | |
CLEC |
Competitive Local Exchange Carrier. | |
DBS |
Direct Broadcast Satellite. | |
DOCSIS |
Data Over Cable Service Interface Specification. | |
DSL |
Digital subscriber line. | |
DVR |
Digital video recorder. | |
FTTH |
Fiber-to-the-home. | |
FTTT |
Fiber-to-the-tower. | |
Gbps |
Gigabits per second. | |
HD |
High-definition. | |
HFC |
Hybrid fiber-coaxial. | |
Homes Passed |
Represents the estimated number of single residence homes, apartments and condominium units passed by the cable distribution network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our cable distribution network. | |
ILEC |
Incumbent Local Exchange Carrier. | |
Mbps |
Megabits per second. | |
MDU |
Multiple dwelling unit. | |
MVPD |
Multichannel video programming distributor. | |
OTT |
Over-the-top; video programming and other content transmitted over the Internet. | |
SIP |
Session Initiated Protocol. | |
SMATV |
Satellite Master Antenna Television. | |
SMB |
Small and medium-sized business. | |
VOD |
Video-on-demand. | |
VoIP |
Voice over Internet Protocol. |
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QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION
The following questions and answers briefly address some commonly asked questions about the Distribution. They may not include all the information that is important to you. We encourage you to read carefully this entire prospectus and the other documents referred to herein. We have included references in certain parts of this section to a more detailed discussion of each topic presented in this section.
Why Is Altice N.V. Distributing Its Shares in Altice USA?
Altice N.V. believes the proposed separation of Altice N.V. and Altice USA through the Distribution will unlock the full value of Altice USA and allow Altice N.V. management to effect a turnaround of its French business more expeditiously. In addition, the Distribution and resulting separation of Altice N.V. and Altice USA will help Altice N.V. and Altice USA focus on their core businesses. Altice N.V. believes the Distribution will enhance management accountability, transparency and focus for both Altice USA's business and the Altice N.V.'s remaining businesses. Altice N.V. also believes the Distribution will also better enable investors to invest specifically in the geographic regions in which they are interested and allow for better geographic alignment between investors and securities analysts and the companies.
Is Altice N.V. Shareholder Approval Needed in Connection with the Distribution?
Yes, under Altice N.V.'s articles of association, Altice N.V. is required to submit the distribution in kind that results in the Distribution to a shareholder vote at an Extraordinary General Meeting ("EGM"). At the EGM, the Altice N.V. shareholders will be asked to approve (i) the distribution in kind and (ii) the board resolution approving the change in identity and character of the business of Altice N.V resulting from the Distribution.
What Is Being Distributed in the Distribution?
shares in aggregate of our Class A common stock and Class B common stock will be distributed in the Distribution. The shares of Altice USA common stock to be distributed by Altice N.V. in connection with the Distribution will constitute approximately % of the issued and outstanding shares of Altice USA common stock immediately after the Distribution. The Distribution will not increase the number of outstanding shares of Altice USA.
The Distribution will be structured as a distribution in kind to holders of Altice N.V.'s common shares A and common shares B. The number of shares of Altice USA common stock to be distributed to each Altice N.V. shareholder as of the Record Date will be based on such shareholder's ownership of Altice N.V. common shares. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution. The number of shares of Class B common stock distributed will be subject to the Class B Cap. If the Class B Cap is exceeded, the shares of Class B common stock delivered to Altice N.V. shareholders of record who elect to receive them will be subject to proration, and such shareholders will receive shares of Class A common stock in lieu of the portion of shares of Class B common stock that is cut back.
If an Altice N.V. shareholder of record does not make an election by the Election Deadline, such shareholder will receive the Default Election. Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution.
Altice N.V. is ultimately controlled by Mr. Drahi through Next Alt. As of December 31, 2017, Next Alt held 60.31% of the outstanding share capital and voting rights of Altice N.V., representing 49.5% of the economic rights and 66% of the voting power in general meetings. Mr. Drahi has informed us that
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Next Alt will elect to receive 100% of the shares of Altice USA to which it is entitled in the Distribution in the form of Class B common stock and will be subject to proration, in the same manner as other Altice N.V. shareholders, in the event the Class B Cap is exceeded. As a result of Next Alt's intended election, and voting agreements that Next Alt will enter into with certain members of Altice N.V. and Altice USA management with respect to all shares of Altice USA common stock they own, Mr. Drahi will control Altice USA immediately after giving effect to the Distribution regardless of the elections made by other Altice N.V. shareholders.
Fractional shares of Altice USA common stock will not be distributed in the Distribution. Fractional shares will be aggregated into whole shares of Class A common stock and Class B common stock (after conversion into Class A common stock), which will be sold in the open market at prevailing market prices. The aggregate cash proceeds from such sales, net of any brokerage fees and other costs, will be distributed pro rata to holders who would have otherwise been entitled to receive a fractional share in the Distribution.
When Is the Distribution Expected to be Completed?
The Distribution is expected to be completed by the end of the second quarter of 2018.
What Will Altice N.V. Shareholders Receive in the Distribution?
Each Altice N.V. shareholder, irrespective of whether such Altice N.V. shareholder holds Altice N.V. common shares A or common shares B, will be entitled to receive 0.4163 shares of Altice USA common stock for each whole Altice N.V. share held on the Record Date. As described above, the number of shares of Class A common stock and Class B common stock to be received by a shareholder will depend on the mix elected by such shareholder and any proration as a result of the Class B Cap.
Who Is Entitled to Receive Shares of Altice USA Common Stock in the Distribution?
Each Altice N.V. common share outstanding as of the Record Date will entitle the holder thereof to receive shares of Class A common stock and/or Class B common stock as described above.
What Do Altice N.V. Shareholders Need to do to Receive Shares of Altice USA Common Stock?
Holders of Altice N.V. common shares on the Record Date are not required to pay any cash or deliver any other consideration or give up any Altice N.V. common shares to receive the shares of Altice USA common stock in the Distribution. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution until the Election Deadline, subject to the Class B Cap. Altice N.V. shareholders who hold their shares through a broker-dealer or financial institution will need to instruct such broker-dealer or financial institution to effect the election in accordance with its policies. Delivery of the shares in the Distribution will be made in book-entry form.
If an Altice N.V. shareholder of record does not make an election by the Election Deadline, such shareholder will receive the Default Election. Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution.
Holders of Altice N.V. common shares who sell those shares prior to the Record Date, so that they are not the record holder of such shares on the Record Date, will also be selling the right to receive the shares of Altice USA common stock that would have been distributed to them in the Distribution with respect to the Altice N.V. common shares they sell. Holders of Altice N.V. common shares on the
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Record Date will be entitled to receive the shares of Altice USA common stock issuable in respect of those shares even if such holders sell those Altice N.V. common shares prior to the Distribution Date.
Is the Distribution Subject to Any Conditions?
The implementation of the Distribution is expected to be subject to certain conditions precedent being satisfied or waived. Although Altice N.V. and the Company have not yet negotiated the final terms of the Distribution and related transactions, the Company expects that the following will be conditions to the Distribution:
Altice N.V. shall, in its sole and absolute discretion, determine the Record Date, the Distribution Date and all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition and notwithstanding anything to the contrary set forth in this prospectus, Altice N.V. may at any time and from time to time until the Distribution decide to abandon or modify the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution or modifying or changing the terms of the Distribution if, at any time, the Altice N.V. board of directors determines, in its sole and absolute discretion, that the Distribution is not in the best interests of Altice N.V. or its shareholders or is otherwise not advisable. Entering into, terminating or modifying any agreements between Altice N.V. and Altice USA require prior approval of our Audit Committee pursuant to our Related-Party Transaction Approval Policy. See "Certain Relationships and Related-Party TransactionsOur Policy Regarding Related-Party Transactions."
How Many Classes of Common Stock Does Altice USA Have Outstanding and How Do They Differ from One Another?
As of December 31, 2017, Altice USA has 246,982,292 shares of Class A common stock and 490,086,674 shares of Class B common stock issued and outstanding. As of the date hereof, Altice USA has not issued any shares of its Class C common stock or its preferred stock.
Holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to twenty-five votes per share, in each case, on any matter submitted to a vote of Altice USA stockholders. Except as set forth in Altice USA's amended and restated certificate of incorporation or as required by Delaware law, holders of shares of Class A common stock and Class B common stock will vote together as a single class on all matters (including the election of directors) submitted to a vote of Altice USA stockholders.
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Except as set forth in Altice USA's amended and restated certificate of incorporation or as required by Delaware law, all shares of Class A common stock and Class B common stock have the same rights and privileges and rank equally, share ratably and are identical in all respects for all matters.
Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock pursuant to Altice USA's amended and restated certificate of incorporation. For additional information about converting shares of Class B common stock into shares of Class A common stock, see "Description of Capital StockClass A Common Stock, Class B Common Stock and Class C Common StockConversion and Transfers."
Altice USA's amended and restated certificate of incorporation does not provide for the automatic conversion of shares of Class B common stock upon transfer under any circumstances. As a result, the holders of Class B common stock will be free to transfer them without converting them into shares of Class A common stock. Any shares of Class B common stock that are converted into Class A common stock may not be reissued. The disparate voting rights of the shares of Class B common stock will not change upon transfer unless first converted into shares of Class A common stock.
Our shares of Class A common stock are listed on the New York Stock Exchange (the "NYSE") under the symbol "ATUS." Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange.
For additional information about the Class A common stock and Class B common stock, please refer to the "Description of Capital Stock" included elsewhere in this prospectus.
What Will Govern Altice N.V. Shareholders' Rights as Altice USA Stockholders?
The rights of Altice USA stockholders are governed by Delaware law, as well as Altice USA's amended and restated certificate of incorporation and amended and restated bylaws. A description of these rights is included in this prospectus under the heading "Description of Capital Stock."
What If Altice N.V. Shareholders Want to Convert or Sell Shares of Our Class B Common Stock Received in the Distribution?
Our shares of Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and accordingly a trading market for our Class B common stock may not develop or be limited. Our Class B common stock is freely transferable (except for shares received by individuals who are our affiliates) and is convertible at any time, without cost to the holder, into our Class A common stock on a share-for-share basis. The conversion will be deemed to have been made immediately prior to the close of business on the date our transfer agent, American Stock Transfer & Trust Company, LLC ("AST"), is instructed to effect the conversion. Shares of our Class B common stock that have been converted into our Class A common stock, may not be converted back into shares of our Class B common stock. Individuals who may be considered our affiliates after the Distribution include individuals who control, are controlled by or are under common control with us, as those terms generally are interpreted for federal securities law purposes. These individuals may include some or all of our directors and executive officers. Individuals who are our affiliates will be permitted to sell their shares of Altice USA common stock only pursuant to an effective registration statement under the Securities Act, or an exemption from the registration requirements of the Securities Act, such as those afforded by Rule 144 thereunder.
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Do Altice N.V. Shareholders Have to Convert Shares of Class B Common Stock Before Selling Them?
No. Altice N.V. shareholders will be able to sell their shares of our Class B common stock without restriction, except for shares received by individuals who are our affiliates. Because our Class B common stock is unlisted, however, there may be a limited market for shares of our Class B common stock.
Are There Risks Associated with the Distribution and Our Business After the Distribution?
Yes. you should carefully review the risks described in this prospectus under the heading "Risk Factors" beginning on page 17.
Who Can Altice N.V. Shareholders Contact with Questions About the Distribution?
Altice N.V. shareholders should contact the following with questions about the Distribution:
Head of Investor Relations, Nick Brown: +41 79 720 1503 / nick.brown@altice.net
Is Altice USA Common Stock Listed on a Stock Exchange?
Our shares of Class A common stock are listed on the New York Stock Exchange under the symbol "ATUS." Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange.
What are the U.S. federal income tax consequences of the Distribution to Altice N.V. shareholders?
For U.S. federal income tax purposes, a U.S. Holder (as defined below) of Altice N.V. shares will be treated as receiving a distribution on their Altice N.V. shares in an amount equal to the fair market value of the Altice U.S. shares received by such U.S. Holder. As a result, the Distribution will be taxable as a foreign-source dividend to such U.S. Holder to the extent of the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder. Non-corporate U.S. Holders may benefit from the preferential long-term capital gains rate with respect to such dividend assuming they meet certain requirements. To the extent the fair market value of the Altice U.S. shares distributed to a U.S. Holder of Altice N.V. shares pursuant to the Distribution exceeds the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder, such excess will be treated as a non-taxable return of capital to the extent of the U.S. Holder's basis in the Altice N.V. shares, and as a capital gain thereafter.
The Non-U.S. Holders of Altice N.V. shares will not be subject to U.S. federal income tax on the Distribution (unless the Distribution is effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or business, and if an applicable income tax treaty requires, is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder in the United States).
For further information concerning the U.S. federal income tax consequences of the Distribution, see "Material U.S. Federal Income Tax Consequences of the Distribution" beginning on page 54.
How Will Altice N.V. Shareholders Determine the Tax Basis They Will Have in the Shares of the Altice USA Common Stock Received in the Distribution?
For U.S. federal income tax purposes, the shareholders of Altice N.V. will have a tax basis in each share of Altice USA Class A common stock and Class B common stock received in the Distribution equal to the fair market value of the share at the time of the Distribution.
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This summary of certain information contained in this prospectus may not include all the information that is important to you. To understand fully and for a more complete description of the terms and conditions of the Distribution, you should read this prospectus in its entirety and the documents referred to herein. See "Where You Can Find More Information."
Unless the context indicates otherwise, "Altice USA," "we," "us," "our" and the "Company" refer to Altice USA, Inc. and its consolidated subsidiaries, "Altice N.V." refers to our parent company, Altice N.V., prior to the Distribution and "Altice Group" refers to Altice N.V. and its consolidated subsidiaries. See "Industry Terms" for a glossary of certain abbreviations and terms used throughout this prospectus.
Information About Altice USA
Altice USA is one of the largest broadband communications and video services providers in the United States. We deliver broadband, pay television, telephony services, Wi-Fi hotspot access, proprietary content and advertising services to approximately 4.9 million residential and business customers. Our footprint extends across 21 states through a fiber-rich broadband network with more than 8.6 million homes passed as of September 30, 2017.
We acquired Cequel Corporation ("Suddenlink" or "Cequel") on December 21, 2015 and Cablevision Systems Corporation ("Optimum" or "Cablevision") on June 21, 2016. These acquisitions are referred to throughout this prospectus as the "Suddenlink Acquisition" or the "Cequel Acquisition" and the "Optimum Acquisition" or the "Cablevision Acquisition," respectively, and collectively as the "Acquisitions." We are a holding company that does not conduct any business operations of our own. We serve our customers through two business segments: Optimum, which operates in the New York metropolitan area, and Suddenlink, which principally operates in markets in the south-central United States. We have made significant progress in integrating the operations of Optimum and Suddenlink and are realizing the operational and commercial benefits of common ownership and one management team.
We are currently majority-owned and controlled by Altice N.V., the multinational cable, fiber, telecommunications, content, media and advertising company founded and controlled by communications and media entrepreneur Mr. Drahi. As of December 31, 2017, entities controlled directly or indirectly by Mr. Drahi (the "Drahi Entities") owned, on a combined basis, 74.5% of our issued and outstanding shares of common stock, which represents 98.5% of the voting power of our outstanding capital stock.
Information About Altice N.V.
Altice Group is a multinational cable, fiber, mobile, telecommunications, content and media company operating in Western Europe (comprising France, Portugal and Switzerland), the U.S., Israel, the Dominican Republic and the French Overseas Territories.
The parent company of the Altice Group is Altice N.V., which succeeded Altice S.A. pursuant to a cross-border merger completed on August 9, 2015. Altice N.V. is a public company with limited liability (naamloze vennootschap) incorporated under the laws of the Netherlands. Altice N.V. is ultimately controlled by Mr. Drahi through Next Alt. As of December 31, 2017, Next Alt held 60.31% of the share capital and voting rights of Altice N.V., representing 49.5% of the economic rights and 66% of the voting power in general meetings. Altice N.V.'s common shares A and common shares B are listed on Euronext Amsterdam.
Altice Group has expanded internationally through a number of acquisitions of telecommunications businesses, including: SFR and PT Portugal in Western Europe; HOT in Israel; Altice Hispaniola and Tricom in the Dominican Republic; Cequel Corporation, which, through its
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subsidiary Cequel Communications, LLC, operates the 'Suddenlink' brand in the U.S., and Cablevision Systems Corporation in the U.S.
Risks Factors
There are a number of risks you should carefully consider regarding the Distribution, our business and Altice USA common stock. These risks are discussed more fully under "Risk Factors" beginning on page 17 of this prospectus
Company Information
We were incorporated in Delaware on September 14, 2015. Our principal executive office is located at 1 Court Square West, Long Island City, NY 11101. Our telephone number at that address is (516) 803-2300. Our website address is www.alticeusa.com. Information on our and our subsidiaries' websites or Twitter feeds, the Altice N.V. website or Twitter feed, or any Altice N.V. filing, is deemed not to be a part of this prospectus and inclusions of websites and Twitter feeds are inactive textual references only.
7
Distributing Company |
Altice N.V., a public limited liability company ("Naamloze vennootschap") incorporated in the Netherlands. | |
Distributed Company |
Altice USA, Inc., a Delaware corporation. |
|
Distributed Securities |
shares in aggregate of the Class A common stock and Class B common stock. |
|
Share Capital |
Altice USA has two classes of outstanding common stock: Class A common stock and Class B common stock. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to twenty-five votes and is convertible at any time into one share of Class A common stock. We also have authorized 4,000,000,000 shares of Class C common stock, par value $0.01 (the "Class C common stock"), which if issued will be non-voting. In addition, our amended and restated certificate of incorporation authorizes shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by our Board of Directors. |
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Record Date |
The Record Date is CET, on , 2018. |
|
Distribution Date |
The Distribution Date is CET, on , 2018. |
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Election Deadline |
The Election Deadline is CET, on , 2018. |
|
Distribution Election |
The Distribution will be structured as a distribution in kind to holders of Altice N.V.'s common shares A and common shares B. The number of shares of Altice USA common stock to be distributed to each Altice N.V. shareholder as of the Record Date will be based on such shareholder's ownership of Altice N.V. common shares. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution. The number of shares of Class B common stock distributed will be subject to the Class B Cap. If the Class B Cap is exceeded, the shares of Class B common stock delivered to Altice N.V. shareholders of record who elect to receive them will be subject to proration, and such shareholders will receive shares of Class A common stock in lieu of the portion of shares of Class B common stock that is cut back. |
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|
If an Altice N.V. shareholder of record does not make an election by the Election Deadline, such shareholder will receive the Default Election. Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution. |
8
|
Altice N.V. is ultimately controlled by Mr. Drahi through Next Alt. As of December 31, 2017, Next Alt held 60.31% of the outstanding share capital and voting rights of Altice N.V., representing 49.5% of the economic rights and 66% of the voting power in general meetings. Mr. Drahi has informed us that Next Alt will elect to receive 100% of the shares of Altice USA to which it is entitled in the Distribution in the form of Class B common stock and will be subject to proration, in the same manner as other Altice N.V. shareholders, in the event the Class B Cap is exceeded. As a result of Next Alt's intended election, and voting agreements that Next Alt will enter into with certain members of Altice N.V. and Altice USA management with respect to all shares of Altice USA common stock they own, Mr. Drahi will control Altice USA immediately after giving effect to the Distribution regardless of the elections made by other Altice N.V. shareholders. |
|
Distribution Ratio |
Each Altice N.V. shareholder, irrespective of whether such Altice N.V. shareholder holds Altice N.V. common shares A or common shares B, will be entitled to receive 0.4163 shares of Altice USA common stock for each whole Altice N.V. share held on the Record Date. As described above, the number of shares of Class A common stock and Class B common stock to be received by a shareholder will depend on the mix elected by such shareholder and any proration as a result of the Class B Cap. |
|
Fractional Shares |
Fractional shares of Altice USA common stock will not be distributed in the Distribution. Fractional shares will be aggregated into whole shares of Class A common stock and Class B common stock (after conversion into Class A common stock), which will be sold in the open market at prevailing market prices. The aggregate cash proceeds from such sales, net of any brokerage fees and other costs, will be distributed pro rata to holders who would have otherwise been entitled to receive a fractional share in the Distribution. |
|
Conditions to the Distribution |
The implementation of the Distribution is expected to be subject to certain conditions precedent being satisfied or waived. Although Altice N.V. and the Company have not yet negotiated the final terms of the Distribution and related transactions, the Company expects that the following will be conditions to the Distribution: |
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|
Approval of Altice N.V. shareholders at the EGM of (i) the distribution in kind and (ii) the board resolution approving the change in identity and character of the business of Altice N.V. resulting from the Distribution; |
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Receipt of certain U.S. regulatory approvals, which could take up to 180 days; |
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This Registration Statement being declared effective by the Commission; |
9
|
The entry into the Master Separation Agreement and the entry into, amendments to or termination of various arrangements between Altice N.V. and Altice USA, such as a license to use the Altice brand (which we expect to be on similar terms to the license Altice N.V. has from Next Alt), the stockholders' agreement among Altice USA, Altice N.V. and certain other parties and the management agreement pursuant to which we pay a quarterly management fee to Altice N.V.; and |
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The declaration and payment of the Pre-Distribution Dividend. |
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Altice N.V. shall, in its sole and absolute discretion, determine the Record Date, the Distribution Date and all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition and notwithstanding anything to the contrary set forth in this prospectus, Altice N.V. may at any time and from time to time until the Distribution decide to abandon or modify the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution or modifying or changing the terms of the Distribution if, at any time, the Altice N.V. board of directors determines, in its sole and absolute discretion, that the Distribution is not in the best interests of Altice N.V. or its shareholders or is otherwise not advisable. Entering into, terminating or modifying any agreements between Altice N.V. and Altice USA require prior approval of our Audit Committee pursuant to our Related-Party Transaction Approval Policy. See "Certain Relationships and Related-Party TransactionsOur Policy Regarding Related-Party Transactions." |
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Trading Market and Symbol |
Our Class A common stock is listed on the NYSE under the symbol "ATUS." Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange. |
10
Tax Consequences to Altice N.V. Shareholders |
For U.S. federal income tax purposes, a U.S. Holder (as defined below) of Altice N.V. shares will be treated as receiving a distribution on their Altice N.V. shares in an amount equal to the fair market value of the Altice U.S. shares received by such U.S. Holder. As a result, the Distribution will be taxable as a foreign-source dividend to such U.S. Holder to the extent of the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder. Non-corporate U.S. Holders may benefit from the preferential long-term capital gains rate with respect to such dividend assuming they meet certain requirements. To the extent the fair market value of the Altice U.S. shares distributed to a U.S. Holder of Altice N.V. shares pursuant to the Distribution exceeds the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder, such excess will be treated as a non-taxable return of capital to the extent of the U.S. Holder's basis in the Altice N.V. shares, and as a capital gain thereafter. The Non-U.S. Holders of Altice N.V. shares will not be subject to U.S. federal income tax on the Distribution (unless the Distribution is effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or business, and if an applicable income tax treaty requires, is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder in the United States). |
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Relationship with Altice N.V. after the Distribution |
In connection with the Distribution, we will enter into a Master Separation Agreement and certain agreements regarding, among other things, the license of the Altice brand, and amendments to certain commercial agreements between the Company, on the one hand, and Altice N.V. and its affiliates, on the other hand. Entering into, terminating or modifying any agreements between Altice N.V. and Altice USA require prior approval of our Audit Committee pursuant to our Related-Party Transaction Approval Policy. See "The Master Separation Agreement," "Ancillary Agreements" and "Certain Relationships and Related-Party TransactionsOur Policy Regarding Related-Party Transactions." |
11
Dividend Policy |
As a condition to the Distribution, our Board of Directors expects to declare and pay the Pre-Distribution Dividend. Other than this dividend, we currently intend to retain any future earnings to fund the operation, development and expansion of our business and do not intend to pay any dividends on our Class A or Class B common stock. Any future determination relating to our dividend policy will be made in the sole and absolute discretion of our Board of Directors and will depend upon then existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors that our Board of Directors may deem relevant. See "Dividend Policy" and "Description of Certain Indebtedness." |
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Although we do not currently intend to pay dividends other than as described above, our Board of Directors has authorized a share repurchase program of up to $2 billion with respect to our Class A common stock as a means to return capital to our stockholders, among other reasons. |
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Transfer Agents, Registrars and Conversion Agent |
The transfer agent and registrar for our Class A common stock and Class B common stock is AST. The conversion agent with respect to any conversions of Class B common stock to Class A common Stock is also AST. The transfer agent and registrar for Altice N.V.'s common shares A and common shares B is ING. |
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Risk Factors |
Our business faces both general and specific risks and uncertainties. Our business also faces risks relating to the Distribution. Accordingly, you should read carefully the information set forth under "Risk Factors" beginning on page 17 of this prospectus. |
12
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The summary consolidated historical balance sheet and operating data of Altice USA for the year ended December 31, 2016 presented below have been derived from the audited consolidated financial statements of Altice USA included elsewhere herein. The summary consolidated historical balance sheet and operating data of Altice USA as of and for the nine months ended September 30, 2017 and 2016 presented below have been derived from the unaudited condensed consolidated financial statements of Altice USA included elsewhere herein. The historical operating data of Altice USA for the year ended December 31, 2016 include the operating results of Cequel for the year ended December 31, 2016 and the operating results of Cablevision for the period from the date of acquisition, June 21, 2016, through December 31, 2016. The consolidated pro forma operating data of Altice USA for the year ended December 31, 2016 and the nine months ended September 30, 2016 have been derived from the unaudited pro forma consolidated statements of operations included in this prospectus and give effect to the Cablevision Acquisition as if it had occurred on January 1, 2016.
The summary historical and pro forma results presented below are not necessarily indicative of the results to be expected for any future period. This information should be read in conjunction with the audited consolidated financial statements of Altice USA, the Unaudited Pro Forma Consolidated
13
Information of Altice USA, and Management's Discussion and Analysis of Financial Condition and Results of Operations of Altice USA included elsewhere herein.
|
Altice USA | Altice USA | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Nine months ended September 30, | Year ended December 31, | ||||||||||||||
|
2017 | 2016 | 2016 | 2016 | 2016 | |||||||||||
|
Historical | Pro Forma | Historical | Pro Forma | Historical | |||||||||||
|
(dollars in thousands) |
|||||||||||||||
Revenue: |
||||||||||||||||
Residential: |
||||||||||||||||
Pay TV |
$ | 3,185,610 | $ | 3,168,292 | $ | 1,700,286 | $ | 4,227,222 | $ | 2,759,216 | ||||||
Broadband |
1,887,279 | 1,692,079 | 1,019,069 | 2,290,039 | 1,617,029 | |||||||||||
Telephony |
624,077 | 657,279 | 315,137 | 872,115 | 529,973 | |||||||||||
Business services and wholesale |
968,291 | 916,065 | 504,963 | 1,230,643 | 819,541 | |||||||||||
Advertising |
257,255 | 258,661 | 138,934 | 365,429 | 245,702 | |||||||||||
Other(a) |
38,680 | 156,540 | 32,922 | 169,368 | 45,751 | |||||||||||
| | | | | | | | | | | | | | | | |
Total revenue |
6,961,192 | 6,848,916 | 3,711,311 | 9,154,816 | 6,017,212 | |||||||||||
Operating expenses: |
||||||||||||||||
Programming and other direct costs |
2,272,147 | 2,266,365 | 1,177,808 | 2,988,549 | 1,899,994 | |||||||||||
Other operating expenses |
1,767,624 | 2,187,015 | 1,050,046 | 2,853,821 | 1,716,851 | |||||||||||
Restructuring and other expense (credits) |
142,765 | 162,491 | 155,086 | 229,774 | 240,395 | |||||||||||
Depreciation and amortization |
2,138,776 | 1,918,678 | 1,085,929 | 2,484,284 | 1,700,306 | |||||||||||
| | | | | | | | | | | | | | | | |
Operating income |
639,880 | 314,367 | 242,442 | 598,388 | 459,666 | |||||||||||
Other non-operating expenses, net |
(1,802,608 | ) | (1,162,406 | ) | (939,204 | ) | (1,769,940 | ) | (1,550,811 | ) | ||||||
| | | | | | | | | | | | | | | | |
Loss from continuing operations before income taxes |
(1,162,728 | ) | (848,039 | ) | (696,762 | ) | (1,171,552 | ) | (1,091,145 | ) | ||||||
Income tax benefit |
429,664 | 320,188 | 101,332 | 450,295 | 259,666 | |||||||||||
| | | | | | | | | | | | | | | | |
Loss from continuing operations, net of income taxes |
(733,064 | ) | (527,851 | ) | (595,430 | ) | (721,257 | ) | (831,479 | ) | ||||||
Loss from discontinued operations, net of income taxes |
| | | | | |||||||||||
| | | | | | | | | | | | | | | | |
Net loss |
(733,064 | ) | (527,851 | ) | (595,430 | ) | (721,257 | ) | (831,479 | ) | ||||||
Net income attributable to noncontrolling interests |
(737 | ) | 108 | 108 | (315 | ) | (551 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Net loss attributable to Altice USA stockholders |
$ | (733,801 | ) | $ | (527,743 | ) | $ | (595,322 | ) | $ | (721,572 | ) | $ | (832,030 | ) | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA(b) |
$ | 2,962,353 | $ | 2,422,437 | 1,485,127 | $ | 3,352,045 | $ | 2,414,735 | |||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA margin |
42.6 | % | 35.4 | % | 40.0 | % | 36.6 | % | 40.1 | % | ||||||
Capital Expenditures |
$ | 763,298 | $ | 707,857 | $ | 377,726 | $ | 955,672 | $ | 625,541 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Capital expenditures as a percentage of revenue |
11.0 | % | 10.3 | % | 10.2 | % | 10.4 | % | 10.4 | % | ||||||
Adjusted EBITDA less capital expenditures |
$ | 2,199,055 | $ | 1,714,580 | $ | 1,107,401 | $ | 2,396,373 | $ | 1,789,194 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA less capital expenditures as a percentage of revenue |
31.6 | % | 25.0 | % | 29.8 | % | 26.2 | % | 29.7 | % |
14
We
also use Adjusted EBITDA less Capital Expenditures as an indicator of the Company's financial performance. We believe this measure is one of several benchmarks used by investors, analysts and peers
for comparison of performance in the Company's industry, although it may not be directly comparable to similar measures reported by other companies.
The following is a reconciliation of net loss to Adjusted EBITDA:
|
Altice USA | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Nine Months Ended September 30, |
Year ended December 31, |
||||||||||||||
|
2017 | 2016 | 2016 | 2016 | 2016 | |||||||||||
|
Historical | Pro Forma | Historical | Pro Forma | Historical | |||||||||||
|
(dollars in thousands) |
(dollars in thousands) |
||||||||||||||
Net loss |
$ | (733,064 | ) | $ | (527,851 | ) | $ | (595,430 | ) | $ | (721,257 | ) | $ | (831,479 | ) | |
Income tax benefit |
(429,664 | ) | (320,188 | ) | (101,332 | ) | (450,295 | ) | (259,666 | ) | ||||||
Other expense (income)(a) |
(832 | ) | (7,392 | ) | (2,548 | ) | (9,184 | ) | (4,329 | ) | ||||||
Loss on extinguishment of debt and write-off of deferred financing costs |
600,240 | 19,948 | 19,948 | 127,649 | 127,649 | |||||||||||
Loss (gain) on interest rate swap contracts |
(12,539 | ) | (24,380 | ) | (24,380 | ) | 72,961 | 72,961 | ||||||||
Loss on equity derivative contracts, net(b) |
154,270 | 62,855 | 26,572 | 89,979 | 53,696 | |||||||||||
Loss (gain) on investments, net |
(169,888 | ) | (213,457 | ) | (83,467 | ) | (271,886 | ) | (141,896 | ) | ||||||
Interest expense, net |
1,231,357 | 1,324,832 | 1,003,079 | 1,760,421 | 1,442,730 | |||||||||||
Depreciation and amortization |
2,138,776 | 1,918,678 | 1,085,929 | 2,484,284 | 1,700,306 | |||||||||||
Restructuring and other expenses |
142,765 | 162,491 | 155,086 | 229,774 | 240,395 | |||||||||||
Share-based compensation |
40,932 | 26,901 | 1,670 | 39,599 | 14,368 | |||||||||||
| | | | | | | | | | | | | | | | |
Adjusted EBITDA |
$ | 2,962,353 | $ | 2,422,437 | $ | 1,485,127 | $ | 3,352,045 | $ | 2,414,735 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
|
Altice USA | ||||||
---|---|---|---|---|---|---|---|
|
As of Sept. 30, 2017 | As of Dec. 31, 2016 | |||||
Balance Sheet Data:
|
Actual | Actual | |||||
|
(dollars in thousands) |
||||||
Cash and cash equivalents |
$ | 550,131 | $ | 486,792 | |||
Total assets |
35,431,152 | 36,474,249 | |||||
Total debt |
22,640,623 | 24,030,065 | |||||
Net debt excluding collateralized indebtedness and notes payable to affiliates and related parties plus accrued distributions(1) |
21,325,835 | 20,507,204 |
15
Customer Metrics
The following table sets forth certain customer metrics by segment (unaudited):
|
As of September 30, 2017 | As of December 31, 2016 | As of September 30, 2016 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Cablevision | Cequel | Total | Cablevision | Cequel | Total | Cablevision | Cequel | Total | |||||||||||||||||||
|
(in thousands, except per customer amounts) |
|||||||||||||||||||||||||||
Homes passed(a) |
5,134 | 3,443 | 8,577 | 5,116 | 3,407 | 8,524 | 5,105 | 3,389 | 8,494 | |||||||||||||||||||
Total customer relationships(b)(c) |
3,149 | 1,749 | 4,898 | 3,141 | 1,751 | 4,892 | 3,135 | 1,736 | 4,871 | |||||||||||||||||||
Residential |
2,887 | 1,642 | 4,529 | 2,879 | 1,649 | 4,528 | 2,873 | 1,636 | 4,510 | |||||||||||||||||||
SMB |
262 | 107 | 369 | 262 | 102 | 364 | 261 | 100 | 361 | |||||||||||||||||||
Residential customers: |
||||||||||||||||||||||||||||
Pay TV |
2,382 | 1,048 | 3,430 | 2,428 | 1,107 | 3,535 | 2,443 | 1,113 | 3,556 | |||||||||||||||||||
Broadband |
2,653 | 1,368 | 4,021 | 2,619 | 1,344 | 3,963 | 2,603 | 1,324 | 3,927 | |||||||||||||||||||
Telephony |
1,959 | 588 | 2,547 | 1,962 | 597 | 2,559 | 1,969 | 594 | 2,563 | |||||||||||||||||||
Residential triple product customer penetration(d): |
64.3 | % | 25.4 | % | 50.2 | % | 64.8 | % | 25.5 | % | 50.5 | % | 65.3 | % | 25.6 | % | 50.9 | % | ||||||||||
Penetration of homes passed(e): |
61.3 | % | 50.8 | % | 57.1 | % | 61.4 | % | 51.4 | % | 57.4 | % | 61.4 | % | 51.2 | % | 57.3 | % | ||||||||||
ARPU(f) |
$ | 156.88 | $ | 110.64 | $ | 140.10 | $ | 154.49 | $ | 109.30 | $ | 138.07 | $ | 152.55 | $ | 108.19 | $ | 136.50 |
16
You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including the financial statements and the related notes included elsewhere in this prospectus and the information set forth under the caption "Cautionary Statement Regarding Forward-Looking Statements." We describe below what we believe are currently the material risks and uncertainties we face, but they are not the only risks and uncertainties we face. Some of the risks relate to our business, others to the Distribution. Some risks relate principally to the securities markets and ownership of our Class A common stock and Class B common stock. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occur, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In that event, the market price of our Class A common stock or Class B common stock could decline.
Risk Factors Relating to the Distribution
The Distribution will result in a taxable dividend to the U.S. Holders of Altice N.V. shares.
The Distribution will be taxable as a foreign-source dividend to the U.S. Holders of Altice N.V. shares to the extent of the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by the respective U.S. Holder. Non-corporate U.S. Holders may benefit from the preferential long-term capital gains rate with respect to such dividend assuming they meet certain requirements. To the extent the fair market value of the Altice U.S. shares distributed to a U.S. Holder of Altice N.V. shares pursuant to the Distribution exceeds the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder, such excess will be treated as a non-taxable return of capital to the extent of the U.S. Holder's basis in the Altice N.V. shares, and as a capital gain thereafter.
The terms of our arrangements with the Altice Group, or that we obtained because we were part of the Altice Group, may be more favorable than we will be able to obtain from an unaffiliated third party or following the Distribution when we are lo longer a subsidiary of Altice N.V. We may be unable to replace the services, products and technology the Altice Group provides us in a timely manner or on comparable terms.
Prior to the Distribution, our business has been operated as part of the Altice Group. As part of the Altice Group, we entered into a variety of transactions and agreements with our affiliates, including:
We negotiated these arrangements with the Altice Group in the context of a parent-subsidiary relationship. Although the Altice Group is contractually obligated to provide us with services, products and technology during the term of the relevant agreements, we cannot assure our stockholders that we will be able to replace these services, products or technology in a timely manner or on comparable terms. They also contain terms and provisions that may be more favorable than terms and provisions
17
we might have obtained in arm's-length negotiations with unaffiliated third parties. When Altice Group ceases to provide services and products pursuant to those arrangements, our costs of procuring those services from third parties may increase. In addition, we may have received more favorable pricing or other terms from third party vendors because we were part of the Altice Group. After the Distribution, when we are no longer a subsidiary of Altice N.V., we may not be able to obtain equally favorable terms.
Our inter-company agreements are being negotiated while we are a subsidiary of Altice N.V.
In connection with the Distribution, we will enter into a Master Separation Agreement and certain agreements regarding, among other things, the license of the Altice brand, and amendments to certain commercial agreements between the Company, on the one hand, and Altice N.V. and its affiliates, on the other hand. See "The Master Separation Agreement" and "Ancillary Agreements". The terms of these inter-company agreements are being established while we are a subsidiary of Altice N.V. and, therefore, may not be the result of arms'-length negotiations. We believe that the terms of these inter-company agreements are commercially reasonable and fair to all parties under the circumstances; however, conflicts could arise in the interpretation or any extension or renegotiation of the foregoing agreements after the Distribution. These inter-company arrangements are subject to compliance with the Altice USA Related-Party Transaction Approval Policy, which requires Audit Committee approval of certain agreements with Altice N.V. See "Certain Relationships and Related-Party TransactionsOur Policy Regarding Related-Party Transactions."
We may not realize the potential benefits from the Distribution in the near term or at all.
We believe that, as an independent company, we will be able to, among other things, better focus our financial and operational resources on our specific business, implement and maintain a capital structure designed to meet our specific needs, design and implement corporate strategies and policies that are exclusively targeted to our business and more effectively respond to industry dynamics, and decouple our business from Altice N.V. as it focuses resources on addressing issues within other Altice Group businesses. However, by separating from Altice N.V., we may have less leverage with suppliers and we may experience other adverse events. In addition, we may be unable to achieve some or all of the benefits that we expect to achieve as an independent company in the time we expect, if at all. The completion of the Distribution will also require significant amounts of our management's time and effort, which may divert management's attention from operating and growing our business.
Altice N.V.'s board of directors may abandon the Distribution at any time.
No assurance can be given that the Distribution will occur, or if it occurs that it will occur on the terms described in this prospectus. In addition to the conditions to the Distribution described herein (certain of which may be waived by the Altice N.V. board of directors in its sole discretion), the Altice N.V. board of directors may abandon the Distribution at any time prior to the Distribution Date for any reason or for no reason. If any condition to the Distribution is waived or if any material amendments or modifications are made to the terms of the Distribution, we intend to promptly issue a press release and file an amendment to this Registration Statement or file a Current Report on Form 8-K informing the market of the substance of such waiver, amendment or modification.
The combined market values of Altice N.V. common shares and Altice USA common stock that Altice N.V. shareholders will hold after the Distribution may be less than the market value of Altice N.V. common shares prior to the Distribution.
After the Distribution, holders of Altice N.V. common shares prior to the Distribution will own a combination of Altice N.V. common shares and Altice USA common stock. Any number of matters, including the risks described in this prospectus, may adversely impact the value of Altice N.V. common
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shares and Altice USA common stock after the Distribution. Some of these matters may not have been identified by Altice N.V. prior to the consummation of the Distribution and, in any event, may not be within Altice N.V.'s or our control. In the event of any adverse circumstances, facts, changes or effects, the combined market values of Altice N.V. common shares and Altice USA common stock held by Altice N.V. shareholders after the Distribution may be less than the market value of Altice N.V. common shares before the Distribution.
Following the Distribution, certain of our overlapping directors and officers will have relationships with Altice N.V., Next Alt and A4 S.A., which may result in the diversion of corporate opportunities and other conflicts with respect to our business and executives.
Following the Distribution, four of our directors, including Mr. Drahi, who is expected to join our Board of Directors as Chairman upon the completion of the Distribution, will be employed by or affiliated with Altice N.V., Next Alt or A4 S.A., an entity controlled by the family of Mr. Drahi. These directors have fiduciary duties to us and, in addition, have duties to Altice N.V., Next Alt and A4 S.A. As a result, these directors and officers may face real or apparent conflicts of interest with respect to matters affecting both us and Altice N.V., Next Alt or A4 S.A., whose interests may be adverse to ours in some circumstances.
Our amended and restated certificate of incorporation recognizes that Mr. Drahi and certain directors, principals, officers, employees and/or other representatives of Altice N.V., Next Alt and A4 S.A. and their affiliates (each such director, principal, officer, employee and/or other representative, an "Altice Group Representative" and collectively, the "Altice Group Representatives") may serve as our directors, officers or agents and that Mr. Drahi, Next Alt, Altice N.V., A4 S.A., the Altice Group Representatives and their respective affiliates, and members of our Board of Directors designated by Next Alt and A4 S.A. pursuant to the stockholders' agreement (the "Designated Directors"), may now engage, may continue to engage and may in the future engage in the same or similar activities or related lines of business as those in which we, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which we, directly or indirectly, may engage. In the amended and restated certificate of incorporation we have renounced our rights to certain business opportunities and the amended and restated certificate of incorporation provides that none of Mr. Drahi, Next Alt, Altice N.V., A4 S.A., any Altice Group Representative, any Designated Director, or their respective affiliates, have any duty to refrain from, directly or indirectly, engaging in the same or similar business activities or lines of businesses in which we or any of our affiliates engage or are reasonably likely to engage, or otherwise competing with us or any of our affiliates, or have any duty to communicate such opportunities to us, unless such opportunities arise in or are predominantly related to North America. The amended and restated certificate of incorporation further provides that, to the fullest extent permitted by law, none of Mr. Drahi, Next Alt, Altice N.V., A4 S.A., any Altice Group Representative, any Designated Director (including any Designated Director who serves as one of our officers) or any of the foregoing persons' affiliates shall be liable to us or our stockholders for breach of any fiduciary duty solely because they engage in such activities.
In connection with the Distribution, Altice USA will agree to indemnify Altice N.V. for certain liabilities and Altice N.V. will agree to indemnify Altice USA for certain liabilities, and such indemnities may not be adequate.
Pursuant to the Master Separation Agreement and other agreements with Altice N.V., including the Indemnification Agreement, Altice N.V. will agree to indemnify Altice USA for certain liabilities and Altice USA will agree to indemnify Altice N.V. for certain liabilities, in each case, for uncapped amounts. See "The Master Separation Agreement" and "Ancillary Agreements." Indemnity payments that Altice USA may be required to pay to Altice N.V. may be significant and could negatively impact our business. There can be no assurance that the indemnity from Altice N.V. will be sufficient to protect Altice USA against the full amount of such liabilities or that Altice N.V. will be able to fully
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satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from Altice N.V. any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves.
Risk Factors Relating to Our Business
We operate in a highly competitive business environment which could materially adversely affect our business, financial condition, results of operations and liquidity.
We operate in a highly competitive, consumer-driven industry and we compete against a variety of broadband, pay television and telephony providers and delivery systems, including broadband communications companies, wireless data and telephony providers, satellite-delivered video signals, Internet-delivered video content and broadcast television signals available to residential and business customers in our service areas. Some of our competitors include AT&T and its DirecTV subsidiary, CenturyLink, DISH Network, Frontier and Verizon. In addition, our pay television services compete with all other sources of leisure, news, information and entertainment, including movies, sporting or other live events, radio broadcasts, home-video services, console games, print media and the Internet.
In some instances, our competitors have fewer regulatory burdens, easier access to financing, greater resources, greater operating capabilities and efficiencies of scale, stronger brand-name recognition, longstanding relationships with regulatory authorities and customers, more subscribers, more flexibility to offer promotional packages at prices lower than ours and greater access to programming or other services. This competition creates pressure on our pricing and has adversely affected, and may continue to affect, our ability to add and retain customers, which in turn adversely affects our business, financial condition and results of operations. The effects of competition may also adversely affect our liquidity and ability to service our debt. For example, we face intense competition from Verizon, which has constructed FTTH network infrastructure that passes a significant number of households in our New York metropolitan service area. We estimate that Verizon is currently able to sell a fiber-based triple play, including broadband, pay television and telephony services, to at least half of the households in our New York metropolitan service area and may expand these and other service offerings to more customers in the future. Any estimate of Verizon's build-out and sales activity in our New York metropolitan service area is difficult to assess because it is based on visual inspections and other limited estimating techniques and therefore serves only as an approximation.
Our competitive risks are heightened by the rapid technological change inherent in our business, evolving consumer preferences and the need to acquire, develop and adopt new technology to differentiate our products and services from those of our competitors, and to meet consumer demand. We may need to anticipate far in advance which technology we should use for the development of new products and services or the enhancement of existing products and services. The failure to accurately anticipate such changes may adversely affect our ability to attract and retain customers, which in turn could adversely affect our business, financial condition and results of operations. Consolidation and cooperation in our industry may allow our competitors to acquire service capabilities or offer products that are not available to us or offer similar products and services at prices lower than ours. For example, Comcast and Charter Communications have agreed to jointly explore operational efficiencies to speed their respective entries into the wireless market, including in the areas of creating common operating platforms and emerging wireless technology platforms. In addition, changes in the regulatory and legislative environments may result in changes to the competitive landscape.
In addition, certain of our competitors own directly or are affiliated with companies that own programming content or have exclusive arrangements with content providers that may enable them to obtain lower programming costs or offer exclusive programming that may be attractive to prospective subscribers. For example, DirecTV has exclusive arrangements with the National Football League that give it access to programming we cannot offer. AT&T also has an agreement to acquire Time Warner, which owns a number of cable networks, including TBS, CNN and HBO, as well as Warner Bros.
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Entertainment, which produces television, film and home-video content. AT&T's and DirecTV's potential access to Time Warner programming could allow AT&T and DirecTV to offer competitive and promotional packages that could negatively affect our ability to maintain or increase our existing customers and revenues. DBS operators such as DISH Network and DirecTV also have marketing arrangements with certain phone companies in which the DBS provider's pay television services are sold together with the phone company's broadband and mobile and traditional phone services.
Another source of competition for our pay television services is the delivery of video content over the Internet directly to subscribers, some of which is offered without charging a fee for access to the content. This competition comes from a number of different sources, including companies that deliver movies, television shows and other video programming over broadband Internet connections, such as Netflix, Hulu, iTunes, YouTube, Amazon Prime, Sling TV, Playstation Vue, DirecTV Now and Go90. It is possible that additional competitors will enter the market and begin providing video content over the Internet directly to subscribers. Increasingly, content owners, such as HBO and CBS, are selling their programming directly to consumers over the Internet without requiring a pay-television subscription. The availability of these services has and will continue to adversely affect customer demand for our pay television services, including premium and on-demand services. Further, due to consumer electronics innovations, consumers are able to watch such Internet-delivered content on television sets and mobile devices, such as smartphones and tablets. Internet access services are also offered by providers of wireless services, including traditional cellular phone carriers and others focused solely on wireless data services. All wireless carriers have started to offer unlimited data plans, which could, in some cases, become a substitute for the fixed broadband services we provide. The Federal Communications Commission ("FCC") is likely to continue to make additional radio spectrum available for these wireless Internet access services.
Our pay television services also face competition from broadcast television stations, entities that make digital video recorded movies and programs available for home rental or sale, SMATV systems, which generally serve large MDUs under an agreement with the landlord and service providers and open video system operators. Private cable systems can offer improved reception of local television stations and many of the same satellite-delivered program services that are offered by cable systems. SMATV systems currently benefit from operating advantages not available to franchised cable systems, including fewer regulatory burdens. Cable television has also long competed with broadcast television, which consists of television signals that the viewer is able to receive without charge using an "off-air" antenna. The extent of such competition is dependent upon the quality and quantity of broadcast signals available through "off-air" reception, compared to the services provided by the local cable system. The use of radio spectrum now provides traditional broadcasters with the ability to deliver HD television pictures and multiple digital-quality program streams. There can be no assurance that existing, proposed or as yet undeveloped technologies will not become dominant in the future and render our video service offering less profitable or even obsolete.
Most broadband communications companies, which already have wired networks, an existing customer base and other operational functions in place (such as billing and service personnel), offer DSL services. We believe DSL service competes with our broadband service and is often offered at prices lower than our Internet services. However, DSL is often offered at speeds lower than the speeds we offer. In addition, DSL providers may currently be in a better position to offer Internet services to businesses since their networks tend to be more complete in commercial areas. They may also increasingly have the ability to combine video services with telephone and Internet services offered to their customers, particularly as broadband communications companies enter into co-marketing agreements with other service providers. In addition, current and future fixed and wireless Internet services, such as 3G, 4G and 5G fixed and wireless broadband services and Wi-Fi networks, and devices such as wireless data cards, tablets and smartphones, and mobile wireless routers that connect to such devices, may compete with our broadband services.
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Our telephony services compete directly with established broadband communications companies and other carriers, including wireless providers, as increasing numbers of homes are replacing their traditional telephone service with wireless telephone service. We also compete against VoIP providers like Vonage, Skype, GoogleTalk, Facetime, WhatsApp and magicJack that do not own networks but can provide service to any person with a broadband connection, in some cases free of charge. In addition, we compete against ILECs, other CLECs and long-distance voice-service companies for large commercial and enterprise customers. While we compete with the ILECs, we also enter into interconnection agreements with ILECs so that our customers can make and receive calls to and from customers served by the ILECs and other telecommunications providers. Federal and state law and regulations require ILECs to enter into such agreements and provide facilities and services necessary for connection, at prices subject to regulation. The specific price, terms and conditions of each agreement, however, depend on the outcome of negotiations between us and each ILEC. Interconnection agreements are also subject to approval by the state regulatory commissions, which may arbitrate negotiation impasses. We have entered into interconnection agreements with Verizon for New York, New Jersey and portions of Connecticut, and with Frontier for portions of Connecticut, which have been approved by the respective state commissions. We have also entered into interconnection agreements with other ILECs in New York and New Jersey. These agreements, like all interconnection agreements, are for limited terms and upon expiration are subject to renegotiation, potential arbitration and approval under the laws in effect at that time.
We also face competition for our advertising sales from traditional and non-traditional media outlets, including television and radio stations, traditional print media and the Internet.
We face significant risks as a result of rapid changes in technology, consumer expectations and behavior.
The broadband communications industry has undergone significant technological development over time and these changes continue to affect our business, financial condition and results of operations. Such changes have had, and will continue to have, a profound impact on consumer expectations and behavior. Our video business faces technological change risks as a result of the continuing development of new and changing methods for delivery of programming content such as Internet-based delivery of movies, shows and other content which can be viewed on televisions, wireless devices and other developing mobile devices. Consumers' video consumption patterns are also evolving, for example, with more content being downloaded for time-shifted consumption. A proliferation of delivery systems for video content can adversely affect our ability to attract and retain subscribers and the demand for our services and it can also decrease advertising demand on our delivery systems. Our broadband business faces technological challenges from rapidly evolving wireless Internet solutions. Our telephony service offerings face technological developments in the proliferation of telephony delivery systems including those based on Internet and wireless delivery. If we do not develop or acquire and successfully implement new technologies, we will limit our ability to compete effectively for subscribers, content and advertising. We cannot provide any assurance that we will realize, in full or in part, the anticipated benefits we expect from the introduction of our home communications hub, Altice One, or that it will be rolled out across our footprint in the timeframe we anticipate. In addition, we may be required to make material capital and other investments to anticipate and to keep up with technological change. These challenges could adversely affect our business, financial condition and results of operations.
In the fourth quarter of 2017, we entered into a multi-year strategic agreement with Sprint pursuant to which we will utilize Sprint's network to provide mobile voice and data services to our customers throughout the nation, and our broadband network will be utilized to accelerate the densification of Sprint's network. We believe this additional product offering will enable us to deliver greater value and more benefits to our customers, including by offering "quad play" offerings that bundle broadband, pay television, telephony and mobile voice and data services to our customers. Some of our competitors already offer, or have announced plans to offer, their own "quad-play" offerings that bundle broadband, pay television, telephony and mobile voice and data services. If our customers
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do not view our quad play offers as competitive with those offered by our competitors, we could experience increased customer churn. We cannot provide any assurance that we will realize, in full or in part, the anticipated benefits we expect from the introduction of our mobile voice and data services, or that they will be rolled out in the timeframe we anticipate. In addition, we may be required to make material capital and other investments to anticipate and to keep up with technological change. These challenges could adversely affect our business, financial condition and results of operations.
Programming and retransmission costs are increasing and we may not have the ability to pass these increases on to our subscribers. Disputes with programmers and the inability to retain or obtain popular programming can adversely affect our relationship with subscribers and lead to subscriber losses.
Programming costs are one of our largest categories of expenses. In recent years, the cost of programming in the cable and satellite video industries has increased significantly and is expected to continue to increase, particularly with respect to costs for sports programming and broadcast networks. We may not be able to pass programming cost increases on to our subscribers due to the increasingly competitive environment. If we are unable to pass these increased programming costs on to our subscribers, our results of operations would be adversely affected. Moreover, programming costs are related directly to the number of subscribers to whom the programming is provided. Our smaller subscriber base relative to our competitors may limit our ability to negotiate lower per-subscriber programming costs, which could result in reduced operating margins relative to our competitors with a larger subscriber base.
The expiration dates of our various programming contracts are staggered, which results in the expiration of a portion of our programming contracts throughout each year. We attempt to control our programming costs and, therefore, the cost of our video services to our customers, by negotiating favorable terms for the renewal of our affiliation agreements with programmers. On certain occasions in the past, such negotiations have led to disputes with programmers that have resulted in temporary periods during which we did not carry or decided to stop carrying a particular broadcast network or programming service or services. Additionally, in our Suddenlink segment, we were unable to reach agreement with Viacom on acceptable economic terms for a long-term contract renewal and, effective October 1, 2014, all Viacom networks were removed from our channel lineups in our Suddenlink footprint. We and Viacom did not reach a new agreement to include certain Viacom networks in the Suddenlink channel lineup until May 2017. To the extent we are unable to reach agreement with certain programmers on terms we believe are reasonable, we may be forced to, or determine for strategic or business reasons to, remove certain programming channels from our line-up and may decide to replace such programming channels with other programming channels, which may not be available on acceptable terms or be as attractive to customers. Such disputes, or the removal or replacement of programming, may inconvenience some of our subscribers and can lead to customer dissatisfaction and, in certain cases, the loss of customers, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. There can be no assurance that our existing programming contracts will be renewed on favorable or comparable terms, or at all, or that the rights we negotiate will be adequate for us to execute our business strategy.
We may also be subject to increasing financial and other demands by broadcast stations. Federal law allows commercial television broadcast stations to make an election between "must-carry" rights and an alternative "retransmission consent" regime. Local stations that elect "must-carry" are entitled to mandatory carriage on our systems, but at no fee. When a station opts for retransmission consent, cable operators negotiate for the right to carry the station's signal, which typically requires payment of a per-subscriber fee. Our retransmission agreements with stations expire from time to time. Upon expiration of these agreements, we may carry some stations under short-term arrangements while we attempt to negotiate new long-term retransmission agreements. In connection with any negotiation of new retransmission agreements, we may become subject to increased or additional costs, which we may not be able to pass on to our customers. To the extent that we cannot pass on such increased or
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additional costs to customers or offset such increased or additional costs through the sale of additional services, our business, financial condition, results of operations and liquidity could be materially adversely affected. In addition, in the event contract negotiations with stations are unsuccessful, we could be required, or determine for strategic or business reasons, to cease carrying such stations' signals, possibly for an indefinite period. Any loss of stations could make our video service less attractive to our customers, which could result in a loss of customers, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. There can be no assurance that any expiring retransmission agreements will be renewed on favorable or comparable terms, or at all.
We may not be able to successfully implement our growth strategy.
Our future growth, profitability and results of operations depend upon our ability to successfully implement our business strategy, which, in turn, is dependent upon a number of factors, including our ability to continue to:
There can be no assurance that we can successfully achieve any or all of the above initiatives in the manner or time period that we expect. Furthermore, achieving these objectives will require investments which may result in short-term costs without generating any current revenues and therefore may be dilutive to our earnings. We cannot provide any assurance that we will realize, in full or in part, the anticipated benefits we expect our strategy will achieve. The failure to realize those benefits could have a material adverse effect on our business, financial condition and results of operations. In addition, if we are unable to continue improving our operational performance and customer experience we may face a decrease in new subscribers and an increase in subscriber churn, which could have a material adverse effect on our business, financial condition and results of operations. In particular, there can be no assurance that we will be able to successfully implement our plan to build a FTTH network within the anticipated five-year timeline or at all or within the cost parameters we currently expect. Similarly, we may not be successful in deploying Altice One or the mobile voice and data services we intend to offer under our agreement with Sprint on our current timeline or realize, in full or in part, the anticipated benefits we expect from the introduction thereof, and we may face technological or other challenges in pursuing these or other initiatives.
The financial markets are subject to volatility and disruptions, which have in the past, and may in the future, adversely affect our business, including by affecting the cost of new capital and our ability to fund acquisitions or other strategic transactions.
The capital markets experience volatility and disruption. At times, the markets have exerted extreme downward pressure on stock prices and upward pressure on the cost of new debt, which has severely restricted credit availability for many companies.
Historical market disruptions have typically been accompanied by a broader economic downturn, which has historically led to lower demand for our products, such as video services, as well as lower levels of television advertising, and increased incidence of customers' inability to pay for the services we
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provide. A recurrence of these conditions may further adversely impact our business, financial condition and results of operations.
We rely on the capital markets, particularly for offerings of debt securities and borrowings under syndicated facilities, to meet our financial commitments and liquidity needs and to fund acquisitions or other strategic transactions. Disruptions or volatility in the capital markets could also adversely affect our ability to refinance on satisfactory terms, or at all, our scheduled debt maturities and could adversely affect our ability to draw on our revolving credit facilities.
Disruptions in the capital markets as well as the broader global financial market can also result in higher interest rates on publicly issued debt securities and increased costs under credit facilities. Such disruptions could increase our interest expense, adversely affecting our business, financial position and results of operations.
Our access to funds under our revolving credit facilities is dependent on the ability of the financial institutions that are parties to those facilities to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our revolving credit facilities are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others.
Longer term, volatility and disruptions in the capital markets and the broader global financial market as a result of uncertainty, changing or increased regulation of financial institutions, reduced alternatives or failures of significant financial institutions could adversely affect our access to the liquidity needed for our businesses. Such disruptions could require us to take measures to conserve cash or impede or delay potential acquisitions, strategic transactions and refinancing transactions until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged.
We are highly leveraged and have substantial indebtedness, which reduces our capability to withstand adverse developments or business conditions.
We have incurred substantial amounts of indebtedness to finance the Acquisitions, our operations, upgrades to our cable plant and acquisitions of other cable systems, sources of programming and other businesses. We have also incurred substantial indebtedness in order to offer new or upgraded services to our current and potential customers. At September 30, 2017, our total aggregate indebtedness was approximately $22.6 billion. Because we are highly leveraged, our payments on our indebtedness are significant in relation to our revenues and cash flow, which exposes us to significant risk in the event of downturns in our businesses (whether through competitive pressures or otherwise), our industry or the economy generally, since our cash flows would decrease, but our required payments under our indebtedness would not.
Economic downturns may impact our ability to comply with the covenants and restrictions in our indentures, credit facilities and agreements governing our other indebtedness and may impact our ability to pay or refinance our indebtedness as it comes due. If we do not repay or refinance our debt obligations when they become due and do not otherwise comply with the covenants and restrictions in our indentures, credit facilities and agreements governing our other indebtedness, we would be in default under those agreements and the underlying debt could be declared immediately due and payable. In addition, any default under any of our indentures, credit facilities or agreements governing our other indebtedness could lead to an acceleration of debt under any other debt instruments or agreements that contain cross-acceleration or cross-default provisions. If the indebtedness incurred under our indentures, credit facilities and agreements governing our other indebtedness were accelerated, we would not have sufficient cash to repay amounts due thereunder. To avoid a default, we
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could be required to defer capital expenditures, sell assets, seek strategic investments from third parties or otherwise reduce or eliminate discretionary uses of cash. However, if such measures were to become necessary, there can be no assurance that we would be able to sell sufficient assets or raise strategic investment capital sufficient to meet our scheduled debt maturities as they come due. In addition, any significant reduction in necessary capital expenditures could adversely affect our ability to retain our existing customer base and obtain new customers, which would adversely affect our business, financial position and results of operations.
Our overall leverage and the terms of our financing arrangements could also:
In addition, a substantial portion of our indebtedness bears interest at variable rates. If market interest rates increase, our variable-rate debt will have higher debt service requirements, which could adversely affect our cash flows and financial condition. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsQuantitative and Qualitative Disclosures About Market RiskInterest Rate Risk." Although we have historically entered into, and may in the future enter into, hedging arrangements to limit our exposure to an increase in interest rates, such arrangements may not offer complete protection from this risk.
If we incur additional indebtedness, such indebtedness could further exacerbate the risks associated with our substantial indebtedness.
If we incur additional indebtedness, including to fund the Pre-Distribution Dividend, such indebtedness will be added to our current debt levels and the related risks we currently face could be magnified. Any decrease in our revenues or an increase in operating costs (and corresponding reduction in our cash flows) would also adversely affect our ability to pay our indebtedness as it comes due.
We have in past periods incurred substantial losses from continuing operations, and we may do so in the future, which may reduce our ability to raise needed capital.
We have in the past incurred substantial losses from continuing operations and we may do so in the future. Significant losses from continuing operations could limit our ability to raise any needed financing, or to do so on favorable terms, as such losses could be taken into account by potential investors, lenders and the organizations that issue investment ratings on our indebtedness.
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A lowering or withdrawal of the ratings assigned to our subsidiaries' debt securities and credit facilities by ratings agencies may further increase our future borrowing costs and reduce our access to capital.
Credit rating agencies continually revise their ratings for companies they follow. The condition of the financial and credit markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future. In addition, developments in our business and operations or the amount of indebtedness could lead to a ratings downgrade on our or our subsidiaries' indebtedness. The debt ratings for our subsidiaries' debt securities and credit facilities are currently below the "investment grade" category, which results in higher borrowing costs as well as a reduced pool of potential investors of that debt as some investors will not purchase debt securities or become lenders under credit facilities that are not rated in an investment grade rating category. In addition, there can be no assurance that any rating assigned will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency, if in that rating agency's judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Any such fluctuation in the rating of us or our subsidiaries may impact our ability to access debt markets in the future or increase our cost of future debt which could have a material adverse effect on our business, financial condition and results of operations, which in return may adversely affect the market price of shares of our Class A common stock or Class B common stock.
Our subsidiaries' ability to meet obligations under their indebtedness may be restricted by limitations on our other subsidiaries' ability to send funds.
Our subsidiaries that have incurred indebtedness under indentures and credit facilities are primarily holding companies whose ability to pay interest and principal on such indebtedness is wholly or partially dependent upon the operations of their respective subsidiaries and the distributions or other payments of cash, in the form of distributions, loans or advances, those other subsidiaries deliver to our indebted subsidiaries. Our subsidiaries are separate and distinct legal entities and, unless any such subsidiaries has guaranteed the underlying indebtedness, have no obligation, contingent or otherwise, to pay any amounts due on our indebted subsidiaries' indebtedness or to make any funds available to our indebted subsidiaries to do so. These subsidiaries may not generate enough cash to make such funds available to our indebted subsidiaries and in certain circumstances legal and contractual restrictions may also limit their ability to do so. Also, our subsidiaries' creditors, including trade creditors, in the event of a liquidation or reorganization of any subsidiary, would be entitled to a claim on the assets of such subsidiaries, including any assets transferred to those subsidiaries, prior to any of our claims as a stockholder and those creditors are likely to be paid in full before any distribution is made to us. To the extent that we are a creditor of a subsidiary, our claims could be subordinated to any security interest in the assets of that subsidiary and/or any indebtedness of that subsidiary senior to that held by us.
In addition, our Optimum and Suddenlink businesses are each currently financed on a standalone basis and constitute separate financing groups, which are subject to covenants that restrict the use of their respective cash flows outside their respective restricted groups. Consequently, cash flows from operations of Optimum and its subsidiaries may not be able to be applied to meet the obligations or other expenses of Suddenlink and its subsidiaries and cash flows from operations of Suddenlink may not be able to be applied to meet the obligations or other expenses of Optimum and its subsidiaries, except to the extent that the relevant restricted group is able to pay a dividend under the agreements governing their respective indebtedness.
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Our ability to incur additional indebtedness and use our funds is limited by significant restrictive covenants in financing agreements.
The indentures, credit facilities and agreements governing the indebtedness of our subsidiaries contain various negative covenants that restrict our subsidiaries' (and their respective subsidiaries') ability to, among other things:
We are also subject to certain affirmative covenants under our subsidiaries' revolving credit facilities, which, among other things, require the relevant Optimum and Suddenlink subsidiaries to each maintain a specified financial ratio if there are any outstanding utilizations. Our ability to meet these financial ratios may be affected by events beyond our control and, as a result, we cannot assure our stockholders that we will be able to meet these ratios.
Violation of these covenants could result in a default that would permit the relevant creditors to require the immediate repayment of the borrowings thereunder, which could result in a default under other debt instruments and agreements that contain cross-default provisions and, in the case of revolving credit facilities, permit the relevant lenders to restrict the relevant borrower's ability to borrow undrawn funds under such revolving credit facilities. A default under any of the agreements governing our indebtedness could materially adversely affect our growth, financial condition and results of operations.
As a result, we may be:
These restrictions could have a material adverse effect on our ability to grow in accordance with our strategy and on the value of our debt and equity securities. In addition, our financial results, substantial indebtedness and credit ratings could materially adversely affect the availability and terms of our financing.
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We will need to raise significant amounts of funding over the next several years to fund capital expenditures, repay existing obligations and meet other obligations and the failure to do so successfully could adversely affect our business. We may also engage in extraordinary transactions that involve the incurrence of large amounts of indebtedness.
Our business is capital intensive. Operating and maintaining our cable systems requires significant amounts of cash payments to third parties. Capital expenditures were $625.5 million in 2016 and $763.3 million for the nine months ended September 30, 2017, and primarily included payments for customer premise equipment, network infrastructure, support and other costs.
We have commenced a five-year plan to build a FTTH network, which will enable us to deliver more than 10 Gbps broadband speeds across our entire Optimum footprint and part of our Suddenlink footprint. We also introduced Altice One during the fourth quarter of 2017, which is our most advanced home communications hub, and expect to roll it out across our footprint in the coming months. Also in the fourth quarter of 2017, we entered into a multi-year strategic agreement pursuant to which we will utilize Sprint's network to provide mobile voice and data services to our customers throughout the nation, and our broadband network will be utilized to accelerate the densification of Sprint's network. We may not be able to execute these initiatives within the anticipated timelines and we may incur greater than anticipated costs and capital expenditures in connection therewith, fail to realize anticipated benefits, experience business disruptions or encounter other challenges to executing either as planned. The failure to realize the anticipated benefits of these initiatives could have a material adverse effect on our business, financial condition and results of operations.
We expect these capital expenditures to continue to be significant as we further enhance our service offerings. We may have substantial future capital commitments in the form of long-term contracts that require substantial payments over a period of time. We may not be able to generate sufficient cash internally to fund anticipated capital expenditures, meet these obligations and repay our indebtedness at maturity. Accordingly, we may have to do one or more of the following:
However, we may not be able to refinance existing obligations or raise any required additional capital or to do so on favorable terms. Borrowing costs related to future capital raising activities may be significantly higher than our current borrowing costs and we may not be able to raise additional capital on favorable terms, or at all, if financial markets experience volatility. If we are unable to pursue our current and future spending programs, we may be forced to cancel or scale back those programs. Our choice of which spending programs to cancel or reduce may be limited. Failure to successfully pursue our capital expenditure and other spending plans could materially and adversely affect our ability to compete effectively. It is possible that in the future we may also engage in extraordinary transactions and such transactions could result in the incurrence of substantial additional indebtedness.
We rely on network and information systems for our operations and a disruption or failure of, or defects in, those systems may disrupt our operations, damage our reputation with customers and adversely affect our results of operations.
Network and information systems are essential to our ability to deliver our services to our customers. While we have in place multiple security systems designed to protect against intentional or unintentional disruption, failure, misappropriation or corruption of our network and information
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systems, there can be no assurance that our efforts to protect our network and information systems will prevent any of the problems identified above. A problem of this type might be caused by events such as computer hacking, computer viruses, worms and other destructive or disruptive software, "cyber-attacks" and other malicious activity, defects in the hardware and software comprising our network and information systems, as well as natural disasters, power outages, terrorist attacks and similar events. Such events could have an adverse impact on us and our customers, including degradation of service, service disruption, excessive call volume to call centers and damage to our plant, equipment and data. Operational or business delays may result from the disruption of network or information systems and the subsequent remediation activities. Moreover, these events may create negative publicity resulting in reputation or brand damage with customers and our results of operations could suffer.
We also use certain vendors to supply some of the hardware, software and support of our network, some of which have been customized or altered to fit our business needs. Certain of these vendors and suppliers may have leverage over us considering that there are limited suppliers of certain products and services, or that there is a long lead time and/or significant expense required to transition to another provider. In addition, some of these vendors and suppliers do not have a long operating history or may not be able to continue to supply the equipment and services we desire. Some of our hardware, software and operational support vendors and some of our service providers represent our sole source of supply or have, either through contract or as a result of intellectual property rights, a position of some exclusivity. In addition, because of the pace at which technological innovations occur in our industry, we may not be able to obtain access to the latest technology on reasonable terms. Any delays or the termination or disruption in these relationships as a result of contractual disagreements, operational or financial failures on the part of our vendors and suppliers, or other adverse events that prevent such vendors and suppliers from providing the equipment or services we need, with the level of quality we require, in a timely manner and at reasonable prices, could result in significant costs to us and have a negative effect on our ability to provide services and rollout advanced services. Our ability to replace such vendors and suppliers may be limited and, as a result, our business, financial condition, results of operations and liquidity could be materially adversely affected.
If we experience a significant data security breach or fail to detect and appropriately respond to a significant data security breach, our results of operations and reputation could suffer.
The nature of our business involves the receipt and storage of information about our customers and employees. We have procedures in place to detect and respond to data security incidents. However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures. In addition, hardware, software or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. Unauthorized parties may also attempt to gain access to our systems or facilities and to our proprietary business information. If our efforts to protect the security of information about our customers and employees are unsuccessful, a significant data security breach may result in costly government enforcement actions, private litigation and negative publicity resulting in reputation or brand damage with customers, and our financial condition and results of operations could suffer.
A portion of our workforce is represented by labor unions. Collective bargaining agreements can increase our expenses. Labor disruptions could adversely affect our business, financial condition and results of operations.
As of December 31, 2017, 208 Altice USA full-time employees were covered by collective bargaining agreements (primarily technicians in Brooklyn, New York) with the Communication Workers of America ("CWA"). Optimum and the CWA entered into a collective bargaining agreement in 2015. This agreement was renewed in June 2016 for an additional three-year term. On March 10, 2017, the
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International Brotherhood of Electrical Workers ("IBEW") was certified to represent 100 employees in Oakland, New Jersey. We are currently negotiating a collective bargaining agreement with the IBEW relating to these employees and there can be no assurance that we will be able to reach an agreement on terms acceptable to us. The collective bargaining agreements with the CWA and IBEW covering these groups of employees or any other agreements with other unions may increase our expenses. In addition, any disruptions to our operations due to labor related problems could have an adverse effect on our business, financial condition and results of operations.
A significant amount of our book value consists of intangible assets that may not generate cash in the event of a voluntary or involuntary sale.
At September 30, 2017, we reported approximately $35.4 billion of consolidated total assets, of which approximately $26.4 billion were intangible. Intangible assets primarily included franchises from city and county governments to operate cable systems, goodwill, customer relationships and trade names. While we believe the carrying values of our intangible assets are recoverable, we may not receive any cash in the event of a voluntary or involuntary sale of these intangible assets, particularly if we were not continuing as an operating business. We urge our stockholders to read carefully our consolidated financial statements contained herein, which provide more detailed information about these intangible assets.
We may engage in acquisitions and other strategic transactions and the integration of such acquisitions and other strategic transactions could materially adversely affect our business, financial condition and results of operations.
Our business has grown significantly as a result of acquisitions, including the Acquisitions, which entail numerous risks including:
We also participate in competitive bidding processes, some of which may involve significant cable systems. If we are the winning bidder in any such process involving significant cable systems or we otherwise engage in acquisitions or other strategic transactions in the future, we may incur additional debt, contingent liabilities and amortization expenses, which could materially adversely affect our
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business, financial condition and results of operations. We could also issue substantial additional equity which could dilute existing stockholders.
If our acquisitions, including the Acquisitions and the integration of the Optimum and Suddenlink businesses, do not result in the anticipated operating efficiencies, are not effectively integrated, or result in costs which exceed our expectations, our business, financial condition and results of operations could be materially adversely affected.
Significant unanticipated increases in the use of bandwidth-intensive Internet-based services could increase our costs.
The rising popularity of bandwidth-intensive Internet-based services poses risks for our broadband services. Examples of such services include peer-to-peer file sharing services, gaming services and the delivery of video via streaming technology and by download. If heavy usage of bandwidth-intensive broadband services grows beyond our current expectations, we may need to incur more expenses than currently anticipated to expand the bandwidth capacity of our systems or our customers could have a suboptimal experience when using our broadband service. In order to continue to provide quality service at attractive prices, we need the continued flexibility to develop and refine business models that respond to changing consumer uses and demands and to manage bandwidth usage efficiently. Our ability to undertake such actions could be restricted by regulatory and legislative efforts to impose so-called "net neutrality" requirements on broadband communication providers like us that provide broadband services. For more information, see "RegulationBroadband."
Our business depends on intellectual property rights and on not infringing on the intellectual property rights of others.
We rely on our patents, copyrights, trademarks and trade secrets, as well as licenses and other agreements with our vendors and other parties, to use our technologies, conduct our operations and sell our products and services. Our intellectual property rights may be challenged and invalidated by third parties and may not be strong enough to provide meaningful commercial competitive advantage. Third parties have in the past, and may in the future, assert claims or initiate litigation related to exclusive patent, copyright, trademark and other intellectual property rights to technologies and related standards that are relevant to us. These assertions have increased over time as a result of our growth and the general increase in the pace of patent claims assertions, particularly in the United States. Because of the existence of a large number of patents in the networking field, the secrecy of some pending patents and the rapid rate of issuance of new patents, we believe it is not possible to determine in advance whether a product or any of its components infringes or will infringe on the patent rights of others. Asserted claims and/or initiated litigation can include claims against us or our manufacturers, suppliers or customers, alleging infringement of their proprietary rights with respect to our existing or future products and/or services or components of those products and/or services.
Regardless of the merit of these claims, they can be time-consuming, result in costly litigation and diversion of technical and management personnel, or require us to modify our business, develop a non-infringing technology, be enjoined from use of certain intellectual property, use alternate technology or enter into license agreements. There can be no assurance that licenses will be available on acceptable terms and conditions, if at all, or that our indemnification by our suppliers will be adequate to cover our costs if a claim were brought directly against us or our customers. Furthermore, because of the potential for high court awards that are not necessarily predictable, it is not unusual to find even arguably unmeritorious claims settled for significant amounts. If any infringement or other intellectual property claim made against us by any third party is successful, if we are required to indemnify a customer with respect to a claim against the customer, or if we fail to modify our business, develop non-infringing technology, use alternate technology or license the proprietary rights on
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commercially reasonable terms and conditions, our business, financial condition and results of operations could be materially adversely affected.
We may be liable for the material that content providers distribute over our networks.
The law relating to the liability of private network operators for information carried on, stored or disseminated through their networks is still unsettled. As such, we could be exposed to legal claims relating to content disseminated on our networks. Claims could challenge the accuracy of materials on our network or could involve matters such as defamation, invasion of privacy or copyright infringement. If we need to take costly measures to reduce our exposure to these risks or are required to defend ourselves against such claims, our business, reputation, financial condition and results of operations could be materially adversely affected.
If we are unable to retain key employees, our ability to manage our business could be adversely affected.
Our operational results have depended, and our future results will depend, upon the retention and continued performance of our management team. The competitive environment for management talent in the broadband communications industry could adversely impact our ability to retain and hire new key employees for management positions. The loss of the services of key members of management and the inability or delay in hiring new key employees could adversely affect our ability to manage our business and our future operational and financial results.
Impairment of Altice Group's or Mr. Drahi's reputation could adversely affect current and future customers' perception of Altice USA.
Our ability to attract and retain customers depends, in part, upon the external perceptions of Altice Group's and Mr. Drahi's reputation and the quality of Altice Group's products and its corporate and management integrity. The broadband communications and video services industry is by its nature more prone to reputational risks than other industries. This has been compounded in recent years by the free flow of unverified information on the Internet and, in particular, on social media. Impairment, including any loss of goodwill or reputational advantages, of Altice Group's or Mr. Drahi's reputation in markets in which we do not operate could adversely affect current and future customers' perception of Altice USA.
Macroeconomic developments may adversely affect our business.
Our performance is subject to global economic conditions and the related impact on consumer spending levels. Continued uncertainty about global economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit, unemployment, negative financial news, and/or declines in income or asset values, which could have a material negative effect on demand for our products and services. As our business depends on consumer discretionary spending, our results of operations are sensitive to changes in macroeconomic conditions. Our customers may have less money for discretionary purchases as a result of job losses, foreclosures, bankruptcies, increased fuel and energy costs, higher interest rates, higher taxes, reduced access to credit, and lower home values. These and other economic factors could adversely affect demand for our products, which in turn could adversely affect our financial condition and results of operations.
Online piracy of entertainment and media content could result in reduced revenues and increased expenditures which could materially harm our business, financial condition and results of operations.
Online entertainment and media content piracy is extensive in many parts of the world and is made easier by technological advances. This trend facilitates the creation, transmission and sharing of high quality unauthorized copies of entertainment and media content. The proliferation of
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unauthorized copies of this content will likely continue, and if it does, could have an adverse effect on our business, financial condition and results of operations because these products could reduce the revenue we receive for our products. Additionally, in order to contain this problem, we may have to implement elaborate and costly security and antipiracy measures, which could result in significant expenses and losses of revenue. There can be no assurance that even the highest levels of security and anti-piracy measures will prevent piracy.
The AMC Networks Distribution could result in significant tax liability.
We have received private letter rulings from the Internal Revenue Service (the "IRS") to the effect that, among other things, the AMC Networks Distribution (whereby Optimum distributed to its stockholders all of the outstanding common stock of AMC Networks, a company which consisted principally of national programming networks, including AMC, WE tv, IFC and Sundance Channel, previously owned and operated by Optimum) and certain related transactions, will qualify for tax-free treatment under the Code.
Although a private letter ruling from the IRS generally is binding on the IRS, if the factual representations or assumptions made in the letter ruling request are untrue or incomplete in any material respect, we will not be able to rely on the ruling. Furthermore, the IRS will not rule on whether a distribution satisfies certain requirements necessary to obtain tax-free treatment under the Code. Rather, the ruling is based upon our representations that these conditions have been satisfied, and any inaccuracy in such representations could invalidate the ruling.
If the AMC Networks Distribution does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, we would be subject to tax as if we had sold the AMC Networks common stock, as the case may be, in a taxable sale for its fair value. Optimum stockholders at the time of the distribution would be subject to tax as if they had received a distribution equal to the fair value of AMC Networks common stock that was distributed to them, which generally would be treated as a taxable dividend. It is expected that the amount of any such taxes to Optimum's stockholders and us would be substantial.
Risk Factors Relating to Regulatory and Legislative Matters
Our business is subject to extensive governmental legislation and regulation, which could adversely affect our business, increase our operational and administrative expenses and limit our revenues.
Regulation of the cable, telephone, and broadband industries imposes operational and administrative expenses and limits their revenues. The Company operates in all of these industries and is therefore subject to, among other things:
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Many aspects of these regulations are currently the subject of judicial proceedings and administrative or legislative proposals. There are also efforts to amend or expand the federal, state and local regulation of some of our cable systems, which may compound the regulatory risks we already face, and proposals that might make it easier for our employees to unionize. The Permanent Internet Tax Freedom Act prohibits many taxes on Internet access service, but certain states and localities are considering new taxes and fees on our provision of cable, broadband, and telecommunications taxes that could increase operating expenses. Certain states are also considering adopting energy efficiency regulations governing the operation of equipment that we use, which could constrain innovation. Congress periodically considers whether to rewrite the entire Communications Act of 1934, as amended (the "Communications Act") to account for changes in the communications marketplace or to adopt more focused changes. In response to recent data breaches and increasing concerns regarding the protection of consumers' personal information, Congress, states, and regulatory agencies are considering the adoption of new privacy and data security laws and regulations that could result in additional privacy, as well as network and information security, requirements for our business. These new laws, as well as existing legal and regulatory obligations, could require significant expenditures.
Additionally, there have been statements by federal government officials indicating that some laws and regulations applicable to our industry may be repealed or modified in a way that could be favorable to us and our competitors. There can be no assurance that any such repeal or modification will be beneficial to us or will not be more beneficial to our current and future competitors.
Our cable system franchises are subject to non-renewal or termination. The failure to renew a franchise in one or more key markets could adversely affect our business.
Our cable systems generally operate pursuant to franchises, permits and similar authorizations issued by a state or local governmental authority controlling the public rights-of-way. Some franchises establish comprehensive facilities and service requirements, as well as specific customer service standards and monetary penalties for non-compliance. In many cases, franchises are terminable if the franchisee fails to comply with significant provisions set forth in the franchise agreement governing system operations. Franchises are generally granted for fixed terms and must be periodically renewed. Franchising authorities may resist granting a renewal if either past performance or the prospective operating proposal is considered inadequate. Franchise authorities often demand concessions or other commitments as a condition to renewal. In some instances, local franchises have not been renewed at expiration, and we have operated and are operating under either temporary operating agreements or without a franchise while negotiating renewal terms with the local franchising authorities.
As of September 30, 2017, one of our largest franchises, the Town of Hempstead, New York, comprising an aggregate of approximately 85,000 pay television customers, was expired. We are currently lawfully operating in the Town of Hempstead, New York franchise area under temporary authority recognized by the State of New York. Lightpath holds a franchise from New York City that expired on December 20, 2008 and the renewal process is ongoing. We believe New York City is treating the expiration date of this franchise as extended until a formal determination on renewal is made, but there can be no assurance that we will be successful in renewing this franchise on anticipated
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terms or at all. We expect to renew or continue to operate under all or substantially all of our franchises.
The traditional cable franchising regime is currently undergoing significant change as a result of various federal and state actions. Some state franchising laws do not allow incumbent operators like us to immediately opt into favorable statewide franchising as quickly as new entrants, and often require us to retain certain franchise obligations that are more burdensome than those applied to new entrants.
We cannot assure our stockholders that we will be able to comply with all significant provisions of our franchise agreements and certain of our franchisors have from time to time alleged that we have not complied with these agreements. Additionally, although historically we have renewed our franchises without incurring significant costs, we cannot assure our stockholders that we will be able to renew, or to renew on terms as favorable, our franchises in the future. A termination of or a sustained failure to renew a franchise in one or more key markets could adversely affect our business in the affected geographic area.
Our cable system franchises are non-exclusive. Accordingly, local and state franchising authorities can grant additional franchises and create competition in market areas where none existed previously, resulting in overbuilds, which could adversely affect our results of operations.
Cable systems are operated under non-exclusive franchises historically granted by local authorities. More than one cable system may legally be built in the same area, which is referred to as an overbuild. It is possible that a franchising authority might grant a second franchise to another cable operator and that such franchise might contain terms and conditions more favorable than those afforded to us. Although entry into the cable industry involves significant cost barriers and risks, well-financed businesses from outside the cable industry, such as online service providers, or public utilities that already possess fiber optic and other transmission lines in the areas they serve, may over time become competitors. In addition, there are a few cities that have constructed their own cable systems, in a manner similar to city-provided utility services, and private cable companies not affiliated with established local exchange carriers have also demonstrated an interest in constructing overbuilds. We believe that for any potential competitor to be successful, such competitor's overbuild would need to be able to serve the homes and businesses in the overbuilt area with equal or better service quality, on a more cost-effective basis than we can.
In some cases, local government entities and municipal utilities may legally compete with us without securing a local franchise or on more favorable franchise terms. In recent years, federal legislative and regulatory proposals have sought to facilitate the ability of municipalities to construct and deploy broadband facilities that could compete with our cable systems. In addition, certain telephone companies have sought or are seeking authority to operate in communities without first obtaining a local franchise. As a result, competing operators may build systems in areas in which we hold franchises. The FCC has adopted rules that streamline entry for new competitors (including those affiliated with telephone companies) and reduce franchising burdens for these new entrants. The FCC subsequently extended more modest relief to incumbent cable operators like the Company, but a recent federal court decision curtailed a portion of this relief that relates to the cap on in-kind payments to franchising authorities. At the same time, a substantial number of states have adopted franchising laws designed to streamline entry for new competitors, and they often provide advantages for these new entrants that are not immediately available to existing operators.
We believe the markets we serve are not significantly overbuilt. However, the FCC and some state regulatory commissions direct certain subsidies to entities deploying broadband to areas deemed to be "unserved" or "underserved." Many other organizations have applied for and received these funds, including broadband services competitors and new entrants into such services. We have generally opposed such subsidies when directed to areas that we serve and have deployed broadband capable
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networks. Despite those efforts, we could be placed at a competitive disadvantage if recipients use these funds to subsidize services that compete with our broadband services.
Local franchising authorities have the ability to impose additional regulatory constraints on our business, which could reduce our revenues or increase our expenses.
In addition to the franchise agreement, local franchising authorities in some jurisdictions have adopted cable regulatory ordinances that further regulate the operation of cable systems. This additional regulation increases the cost of operating our business. For example, some local franchising authorities impose minimum customer service standards on our operations. There are no assurances that the local franchising authorities will not impose new and more restrictive requirements.
Further regulation of the cable industry could restrict our marketing options or impair our ability to raise rates to cover our increasing costs.
The cable industry has operated under a federal rate regulation regime for more than three decades. Currently, rate regulation by franchising authorities is strictly limited to the basic service tier and associated equipment and installation activities. A franchising authority that wishes to regulate basic cable service offered by a particular cable system must certify and demonstrate that the cable system is not subject to "effective competition" as defined by federal law. Our franchise authorities have not certified to exercise this limited rate regulation authority. If any of our local franchising authorities obtain certification to regulate rates, they would have the power to reduce rates and order refunds on the rates charged for basic service and equipment, which could reduce our revenues. The FCC and Congress also continue to be concerned that cable rate increases are exceeding inflation. It is possible that either the FCC or Congress will adopt more extensive rate regulation for our pay television services or regulate our other services, such as broadband and telephony services, which could impede our ability to raise rates, or require rate reductions. To the extent we are unable to raise our rates in response to increasing costs, or are required to reduce our rates, our business, financial condition, results of operations and liquidity will be materially adversely affected. There has been legislative and regulatory interest in requiring cable operators to offer historically bundled programming services on an à la carte basis. It is possible that new marketing restrictions could be adopted in the future. These restrictions could affect how we provide, and limit, customer equipment used in connection with our services and how we provide access to video programming beyond conventional cable delivery.
There also continues to be interest at the FCC and in Congress in proposals that would allow subscribers to receive cable service without having to rent a set-top box from their cable operator. These proposals could, if adopted, adversely affect our relationship with our customers and programmers and our operations. It is also possible that regulations will be adopted affecting the negotiations between MVPDs (like us) and programmers. While these regulations might provide us with additional rights and protections in our programming negotiations, they might also limit our flexibility in ways that adversely affect our operations.
We may be materially adversely affected by regulatory changes related to pole attachment costs.
Pole attachments are cable wires that are attached to utility poles. Cable system pole attachments to utility poles historically have been regulated at the federal or state level, generally resulting in favorable pole attachment rates for attachments used to provide cable service. Any changes in the current pole attachment approach could result in a substantial increase in our pole attachment costs.
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Changes in channel carriage regulations could impose significant additional costs on us.
Cable operators also face significant regulation affecting the carriage of broadcast and other programming channels. We can be required to devote substantial capacity to the carriage of programming that we might not otherwise carry voluntarily, including certain local broadcast signals; local public, educational and governmental access programming; and unaffiliated, commercial leased access programming (channel capacity designated for use by programmers unaffiliated with the cable operator). Regulatory changes in this area could disrupt existing programming commitments, interfere with our preferred use of limited channel capacity and limit our ability to offer services that would maximize our revenue potential. It is possible that other legal restraints will be adopted limiting our discretion over programming decisions.
Increasing regulation of our Internet-based products and services could adversely affect our ability to provide new products and services.
On February 26, 2015, the FCC adopted a new "network neutrality" or Open Internet order (the "2015 Order") that: (1) reclassified broadband Internet access service as a Title II common carrier service, (2) applied certain existing Title II provisions and associated regulations; (3) forbore from applying a range of other existing Title II provisions and associated regulations, but to varying degrees indicated that this forbearance may be only temporary and (4) issued new rules expanding disclosure requirements and prohibiting blocking, throttling, paid prioritization and unreasonable interference with the ability of end users and edge providers to reach each other. The 2015 Order also subjected broadband providers' Internet traffic exchange rates and practices to potential FCC oversight and created a mechanism for third parties to file complaints regarding these matters. The 2015 Order could limit our ability to efficiently manage our cable systems and respond to operational and competitive challenges. In December 2017, the FCC adopted an order (the "2017 Order") that in large part reverses the 2015 Order. The 2017 Order has not yet gone into effect, however, and the 2015 Order will remain binding until the 2017 Order takes effect. The 2017 Order is expected to be subject to legal challenge that may delay its effect or overturn it. Additionally, Congress and some states are considering legislation that may codify "network neutrality" rules.
Offering telephone services may subject us to additional regulatory burdens, causing us to incur additional costs.
We offer telephone services over our broadband network and continue to develop and deploy interconnected VoIP services. The FCC has ruled that competitive telephone companies that support VoIP services, such as those that we offer to our customers, are entitled to interconnect with incumbent providers of traditional telecommunications services, which ensures that our VoIP services can operate in the market. However, the scope of these interconnection rights are being reviewed in a current FCC proceeding, which may affect our ability to compete in the provision of telephony services or result in additional costs. It remains unclear precisely to what extent federal and state regulators will subject VoIP services to traditional telephone service regulation. Expanding our offering of these services may require us to obtain certain authorizations, including federal and state licenses. We may not be able to obtain such authorizations in a timely manner, or conditions could be imposed upon such licenses or authorizations that may not be favorable to us. The FCC has already extended certain traditional telecommunications requirements, such as E911 capabilities, Universal Service Fund contribution, Communications Assistance for Law Enforcement Act ("CALEA"), measures to protect Customer Proprietary Network Information, customer privacy, disability access, number porting, battery back-up, network outage reporting, rural call completion reporting and other regulatory requirements to many VoIP providers such as us. If additional telecommunications regulations are applied to our VoIP service, it could cause us to incur additional costs and may otherwise materially adversely impact our operations. In 2011, the FCC released an order significantly changing the rules governing intercarrier
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compensation for the origination and termination of telephone traffic between interconnected carriers. These rules have resulted in a substantial decrease in interstate compensation payments over a multi-year period. The FCC is currently considering additional reforms that could further reduce interstate compensation payments. Further, although the FCC recently declined to impose additional regulatory burdens on certain point to point transport ("special access") services provided by cable companies, that FCC decision has been appealed by multiple parties. If those appeals are successfully, there could be additional regulatory burdens and additional costs placed on these services.
We may be materially adversely affected by regulatory, legal and economic changes relating to our physical plant.
Our systems depend on physical facilities, including transmission equipment and miles of fiber and coaxial cable. Significant portions of those physical facilities occupy public rights-of-way and are subject to local ordinances and governmental regulations. Other portions occupy private property under express or implied easements, and many miles of the cable are attached to utility poles governed by pole attachment agreements. No assurances can be given that we will be able to maintain and use our facilities in their current locations and at their current costs. Changes in governmental regulations or changes in these relationships could have a material adverse effect on our business and our results of operations.
Certain aspects of the Tax Reform Bill could have an adverse impact on us or our stockholders
On December 20, 2017, the U.S. Congress passed the Tax Cuts and Jobs Act (H.R. 1) (the "Tax Reform Bill"), and on December 22, 2017, President Trump signed the Tax Reform Bill into law. The Tax Reform Bill makes significant changes to the U.S. federal income tax rules applicable to both individuals and entities, including corporations. The details of any forthcoming regulations or guidance in connection with the Tax Reform Bill are uncertain and could have an adverse impact on our business and financial condition or on our stockholders. Our stockholders should consult with their tax advisors with respect to the potential effects of the Tax Reform Bill on their investment in our common stock.
Risk Factors Relating to Ownership of Our Class A Common Stock and Class B Common Stock
Prior to the Distribution, no market exists for our Class B common stock and we cannot assure you that an active, liquid trading market will develop for our Class B common stock. Holders of shares of our Class B common stock may need to convert them into shares of our Class A common stock to realize their full potential value, which over time could further concentrate voting power with remaining holders of our Class B common stock.
Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange. There is currently no trading market for the Class B common stock and we cannot assure you that an active trading market will develop or be sustained. If an active market is not developed or sustained, the market price and liquidity of the Class B common stock may be adversely affected. Because the Class B common stock is unlisted, holders of shares of Class B common stock may need to convert them into shares of our Class A common stock, which is listed on the NYSE, in order to realize their full potential value. Sellers of a significant amount of shares of Class B common stock may be more likely to convert them into shares of Class A common stock and sell them on the NYSE. This could over time reduce the number of shares of Class B common stock outstanding and potentially further concentrate voting power with remaining holders of Class B common stock.
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Our stockholders' percentage ownership in us may be diluted by future issuances of capital stock, which could reduce their influence over matters on which stockholders vote.
Pursuant to our amended and restated certificate of incorporation, our Board of Directors will have the authority, without action or vote of our stockholders, to issue all or any part of our authorized but unissued shares of Class A common stock, including shares issuable upon the exercise of options, Class B common stock, Class C common stock or shares of our authorized but unissued preferred stock. We may issue such capital stock to meet a number of our business needs, including funding any potential acquisitions or other strategic transactions. Future issuances of Class A common stock, Class B common stock or voting preferred stock could reduce our stockholders' influence over matters on which our stockholders vote and, in the case of issuances of preferred stock, would likely result in their interest in us being subject to the prior rights of holders of that preferred stock.
The market price of our Class A common stock or Class B common stock may be volatile after the Distribution.
Securities markets often experience significant price and volume fluctuations. Even if an active trading market develops for our Class B common stock after the Distribution, the market price of our Class B common stock may be highly volatile and could be subject to wide fluctuations. The market price of our Class A common stock may also be highly volatile after the Distribution, and the market prices of our Class A common stock and Class B common stock will be influenced by many factors, some of which are beyond our control, including those described above in "Risk Factors Relating to Our Business" and include, but are not limited to, the following:
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Following the Distribution, the market price for shares of our Class A common stock may be affected by factors different from those affecting the market price for shares of our Class B common stock. As a result of the above and other factors, holders of our Class A common stock or Class B common stock may not be able to resell their shares at or above the value at the time of the Distribution or may not be able to resell them at all. These broad market and industry factors may materially reduce the market price of our Class A common stock or Class B common stock, regardless of our operating performance. In addition, price volatility may be greater if the public float and trading volume of our Class A common stock and Class B common stock is low.
Because we have no current plans to pay cash dividends on our Class A common stock or Class B common stock following the Distribution and for the foreseeable future, our stockholders may not receive any return on investment unless they sell their Class A common stock or Class B common stock.
As a condition to the Distribution, our Board of Directors expects to declare and pay the Pre-Distribution Dividend. Other than this dividend, we intend to retain future earnings, if any, for future operations, expansion and debt repayment and have no other current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of Class A common stock and shares of Class B common stock will be at the sole discretion of our Board of Directors. Our Board of Directors may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us and such other factors as our Board of Directors may deem relevant. In addition, our ability to pay dividends is limited by covenants contained in the agreements governing our existing indebtedness and may be limited by covenants contained in any future indebtedness we or our subsidiaries incur. As a result, our stockholders may not receive any return on an investment in our Class A common stock or Class B common stock unless our stockholders sell our Class A common stock or Class B common stock. For more information, see "Dividend Policy."
Future sales, or the perception of future sales, by us or our existing stockholders in the public market following the Distribution could cause the market price for our Class A common stock or Class B common stock to decline.
After the Distribution, the sale of substantial amounts of shares of our Class A common stock or Class B common stock, or the perception that such sales could occur, could cause the prevailing market price of shares of our Class A common stock or Class B common stock to decline. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
As of December 31, 2017, we have a total of 246,982,292 shares of Class A common stock outstanding and 490,086,674 shares of Class B common stock outstanding. All of the shares of Class A common stock and Class B common stock distributed in the Distribution will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the "Securities Act"), except for shares received by individuals who are our affiliates.
Any shares held by our affiliates, as that term is defined under Rule 144 of the Securities Act ("Rule 144"), including Next Alt and its affiliates, may be sold only in compliance with the limitations described in "Shares Eligible for Future Sale."
The remaining shares will be "restricted securities" within the meaning of Rule 144 and subject to certain restrictions on resale following the Distribution. Restricted securities may be sold in the public
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market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration such as Rule 144, as described in "Shares Eligible for Future Sale."
In addition, pursuant to a stockholders and registration rights agreement, our existing owners have the right, subject to certain conditions, to require us to register the sale of their shares of our Class A common stock, or shares of Class A common stock issuable on conversion of shares of Class B common stock under the Securities Act. By exercising their registration rights and selling a large number of shares, our existing owners could cause the prevailing market price of our Class A common stock to decline. In connection with the Distribution, we expect Next Alt to become a party to our stockholders and registration rights agreement with Altice N.V., funds advised by BC Partners LLP ("BCP") and entities affiliated with the Canada Pension Plan Investment Board ("CPPIB" and together with BCP, the "Sponsors"). We do not expect there will be any other material changes made to this agreement in connection with the Distribution. See "Certain Relationships and Related-Party Transactions." Following completion of the Distribution, the shares covered by registration rights would represent approximately % of our outstanding capital. Registration of any of these outstanding shares of capital stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement, except for shares received by individuals who are our affiliates. See "Shares Eligible for Future Sale."
As restrictions on resale end or if these stockholders exercise their registration rights, the market price of our Class A common stock or Class B common stock could drop significantly if the holders of Class A common stock or Class B common stock sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our Class A common stock or Class B common stock or other securities. In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our Class A common stock, Class B common stock or Class C common stock issued in connection with an investment or acquisition could constitute a material portion of then-outstanding shares of our Class A common stock and Class B common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.
Following the Distribution, the tri-class structure of Altice USA common stock will have the effect of concentrating voting control with Next Alt. This will limit or preclude our stockholders' ability to influence corporate matters, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction requiring stockholder approval. Shares of Class B common stock will not automatically convert to shares of Class A common stock upon transfer to a third party.
Each share of Class B common stock is entitled to twenty-five votes per share and each share of Class A common stock is entitled to one vote per share. If we issue any shares of Class C common stock, they will be non-voting.
Because of the twenty-five to one voting ratio between our Class B common stock and Class A common stock, following the Distribution, Next Alt will control a majority of the combined voting power of our capital stock and therefore be able to control all matters submitted to our stockholders for approval until such date as the holders of our Class B common stock choose to voluntarily convert their shares into shares of Class A common stock such that they cease to own shares of our capital stock entitling them to cast a majority of the outstanding votes. This concentrated control will limit or preclude our stockholders' ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction requiring stockholder approval. The disparate voting rights of Altice USA common stock may also prevent or discourage unsolicited acquisition proposals or offers for our capital stock that our stockholders may feel are in
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their best interest as one of our stockholders. For additional information, see "Description of Capital Stock."
Shares of our Class B common stock will be convertible into shares of our Class A common stock at the option of the holder at any time. Our amended and restated certificate of incorporation does not provide for the automatic conversion of shares of Class B common stock upon transfer under any circumstances. The holders of Class B common stock thus will be free to transfer them without converting them into shares of Class A common stock.
Next Alt will control us after the Distribution and its interests may conflict with ours or our stockholders in the future.
The aggregate voting power of Next Alt following the Distribution will depend on the number of shares of Class B common stock distributed in the Distribution. If the number of shares of Class B common stock distributed to Altice N.V. shareholders other than Next Alt is maximized up to the Class B Cap, Next Alt will own % of our issued and outstanding Class A and Class B common stock which will represent approximately % of the voting power of our outstanding capital stock. If no shares of Class B common stock are distributed to Altice N.V. shareholders other than Next Alt, Next Alt will own % of our issued and outstanding Class A and Class B common stock which will represent approximately % of the voting power of our outstanding capital stock. So long as Next Alt continues to control a majority of the voting power of our capital stock, Next Alt and, through his control of Next Alt, Mr. Drahi, will be able to significantly influence the composition of our Board of Directors and thereby influence our policies and operations, including the appointment of management, future issuances of Altice USA common stock or other securities, the payment of dividends, if any, on Altice USA common stock, the incurrence or modification of debt by us, amendments to our amended and restated certificate of incorporation and amended and restated bylaws and the entering into of extraordinary transactions, and their interests may not in all cases be aligned with our stockholders' interests. In addition, Next Alt may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment or improve its financial condition, even though such transactions might involve risks to our stockholders. For example, Next Alt could cause us to make acquisitions that increase our indebtedness or cause us to sell revenue-generating assets.
In addition, Next Alt will be able to determine the outcome of all matters requiring stockholder approval and will be able to cause or prevent a change of control of the Company or a change in the composition of our Board of Directors and could preclude any unsolicited acquisition of the Company. The concentration of ownership could deprive our stockholders of an opportunity to receive a premium for their shares of our Class A common stock or Class B common stock as part of a sale of the Company and ultimately might affect the market price of our Class A common stock or Class B common stock.
If conflicts arise between us and Next Alt, these conflicts could be resolved in a manner that is unfavorable to us and as a result, our business, financial condition and results of operations could be materially adversely affected. See "Certain Relationships and Related Party Transactions." In addition, if Next Alt ceases to control us, our business, financial condition and results of operations could be adversely affected.
Anti-takeover provisions in our organizational documents could delay or prevent a change of control transaction.
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider
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in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.
These provisions provide for, among other things:
These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third-party's offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares of our Class A common stock. See "Description of Capital Stock." In addition, so long as Next Alt controls a majority of our combined voting power it will be able to prevent a change of control of the Company.
Holders of a single class of Altice USA common stock may not have any remedies if an action by our directors has an adverse effect on only that class of Altice USA common stock.
Under Delaware law, the board of directors has a duty to act with due care and in the best interests of all of our stockholders, including the holders of all classes of Altice USA common stock. Principles of Delaware law established in cases involving differing treatment of multiple classes of stock provide that a board of directors owes an equal duty to all common stockholders regardless of class and does not have separate or additional duties to any group of stockholders. As a result, in some circumstances, our Board of Directors may be required to make a decision that could be viewed as adverse to the holders of one class of Altice USA common stock. Under the principles of Delaware law and the business judgment rule, holders may not be able to successfully challenge decisions that they believe have a disparate impact upon the holders of one class of our stock if our Board of Directors is disinterested and independent with respect to the action taken, is adequately informed with respect to the action taken and acts in good faith and in the honest belief that the board is acting in the best interest of all of our stockholders.
Following the Distribution, we will continue to be a "controlled company" within the meaning of the rules of the NYSE. As a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that would otherwise provide protection to stockholders of other companies.
After completion of the Distribution, Next Alt will control a majority of the voting power of our capital stock. As a result, we will continue to be a "controlled company" within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain corporate governance requirements, including:
Consistent with these exemptions, we will continue not to have a majority of independent directors on our Board of Directors or a nominating and governance committee. Accordingly, our stockholders
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will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.
If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our Class A common stock or Class B common stock, or if our operating results do not meet their expectations, the market price of our Class A common stock or Class B common stock could decline.
The trading market for our Class A common stock and Class B common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrades our Class A common stock or Class B common stock, or if our operating results do not meet their expectations, the market price of our Class A common stock or Class B common stock could decline.
We could be subject to securities class action litigation.
In the past, securities class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in the price of our Class A common stock or Class B common stock, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and results of operations and divert management's attention and resources from our business.
Our amended and restated bylaws provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other stockholders.
Our amended and restated bylaws provides that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state or federal court located in the State of Delaware) is the exclusive forum for: (i) any derivative action or proceeding brought in our name or on our behalf; (ii) any action asserting a breach of fiduciary duty; (iii) any action asserting a claim against us arising under the General Corporation Law of the State of Delaware ("DGCL"); (iv) any action regarding our amended and restated certificate of incorporation or our amended and restated bylaws; or (v) any action asserting a claim against us that is governed by the internal affairs doctrine. Our amended and restated bylaws permits our Board of Directors to approve the selection of an alternative forum. Unless waived, this exclusive forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other stockholders, which may discourage such lawsuits against us and our directors, officers and other stockholders. Alternatively, if a court were to find this provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition and results of operations.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, "forward-looking statements." These "forward-looking statements" appear throughout this prospectus, including in sections entitled "Prospectus Summary," Risk Factors," "Management's Discussion of Analysis of Financial Condition and Results of Operations" and "Business" and relate to matters such as anticipated future growth in revenues, operating income, cash provided by operating activities and other financial measures. Words such as "expects," "anticipates," "believes," "estimates," "may," "will," "should," "could," "seeks," "potential," "continue," "intends," "plans" and similar words and terms used in the discussion of future operating results, future financial performance and future events identify forward-looking statements in this prospectus. All of these forward-looking statements are based on management's current expectations and beliefs about future events. As with any projection or forecast, they are susceptible to uncertainty and changes in circumstances.
We operate in a highly competitive, consumer and technology driven and rapidly changing business that is affected by government regulation and economic, strategic, technological, political and social conditions. Various factors could adversely affect our operations, business or financial results in the future and cause our actual results to differ materially from those contained in the forward-looking statements, including those factors discussed under "Risk Factors" in this prospectus. In addition, important factors that could cause our actual results to differ materially from those in our forward-looking statements include:
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Additional risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from those expressed or implied in our forward-looking statements may be found under "Risk Factors" contained in this prospectus. These factors and other risk factors disclosed in this prospectus are not necessarily all of the important factors that could cause our actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could cause our actual results to differ materially from those expressed in any of our forward-looking statements.
Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this prospectus are made only as of the date of this prospectus. Except to the extent required by law, we do not undertake, and specifically decline any obligation, to update any forward-looking statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. We qualify all forward-looking statements by these cautionary statements.
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The discussion in this prospectus of the Distribution and the principal terms of the Master Separation Agreement is subject to, and qualified by reference to, the Master Separation Agreement which will be filed as an exhibit to the registration statement that contains this prospectus and is incorporated by reference into this prospectus.
Background
On January 8, 2018, Altice N.V. announced plans for the separation of Altice USA from Altice N.V. Altice N.V. will distribute substantially all of its equity interest in us through a distribution in kind to holders of Altice N.V.'s common shares A and common shares B. Following the Distribution, Altice N.V. will no longer own a controlling equity interest in us, and we will operate independently from Altice N.V. The implementation of the Distribution is expected to be subject to certain conditions precedent being satisfied or waived. See "Conditions to the Distribution" below.
Reasons For the Distribution
Altice N.V. believes the proposed separation of Altice N.V. and Altice USA through the Distribution will unlock the full value of Altice USA and allow Altice N.V. management to effect a turnaround of its French business more expeditiously. In addition, the Distribution and resulting separation of Altice N.V. and Altice USA will help Altice N.V. and Altice USA focus on their core businesses. Altice N.V. believes that the Distribution will enhance management accountability, transparency and focus for both Altice USA's business and the remaining Altice N.V. businesses. Altice N.V. also believes the Distribution will also better enable investors to invest specifically in the geographic regions in which they are interested and allow for better geographic alignment between investors and securities analysts and the companies.
Ownership Structure of Altice USA Before and After the Distribution
As of December 31, 2017, Altice USA was owned 74.5% by the Drahi Entities on a combined basis; 14.6% by BCP and CPPIB; and 0.6% by Altice USA executive officers and directors.
The following chart sets out the current ownership and control structure of Altice USA as of December 31, 2017:
As of December 31, 2017, Altice USA has 246,982,292 shares of Class A common stock and 490,086,674 shares of Class B common stock issued and outstanding. The Distribution will not increase the number of outstanding shares of Altice USA.
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The actual number of shares of our Class A common stock and our Class B common stock to be distributed in the Distribution will depend upon the election of each Altice N.V. shareholder as of the Record Date regarding the mix of Altice USA common stock to be received in the Distribution and any proration as a result of the Class B Cap.
On , 2018, we had approximately holders of record of our Class A common stock (which amount does not include the number of stockholders whose shares are held of record by banks, brokerage houses or other institutions, but includes each such institution as one stockholder) and two holders of record of our Class B common stock. Immediately following the Distribution, we expect to have approximately holders of record of our Class A common stock and holders of record of our Class B common stock, based upon the number of holders of record of Altice USA common stock as of , 2018 (which amount does not include the number of stockholders whose shares are held of record by banks, brokerage houses or other institutions, but includes each such institution as one stockholder).
Separation Arrangements
In connection with the Distribution, we will enter into a Master Separation Agreement and certain agreements regarding, among other things, the license of the Altice brand, and amendments to certain commercial agreements between the Company, on the one hand, and Altice N.V. and its affiliates, on the other hand. See "The Master Separation Agreement" and "Ancillary Agreements."
Conditions to the Distribution
The implementation of the Distribution is expected to be subject to certain conditions precedent being satisfied or waived. Although Altice N.V. and the Company have not yet negotiated the final terms of the Distribution and related transactions, the Company expects that the following will be conditions to the Distribution:
Altice N.V. shall, in its sole and absolute discretion, determine the Record Date, the Distribution Date and all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition and notwithstanding anything to the contrary set forth in this prospectus, Altice N.V. may at any time and from time to time until the Distribution decide to abandon or modify the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution or modifying or changing the terms of the Distribution if, at any time, the Altice N.V. board of directors determines, in its sole and absolute discretion, that the Distribution is not in the best interests of Altice N.V. or its shareholders or is otherwise not advisable. Entering into, terminating or
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modifying any agreements between Altice N.V. and Altice USA require prior approval of our audit committee pursuant to our Related-Party Transaction Approval Policy. See "Certain Relationships and Related-Party TransactionsOur Policy Regarding Related-Party Transactions."
Manner of Effecting the Distribution
The Distribution will be structured as a distribution in kind to holders of Altice N.V.'s common shares A and common shares B. The number of shares of Altice USA common stock to be distributed to each Altice N.V. shareholder as of the Record Date will be based on such shareholder's ownership of Altice N.V. common shares. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution. The number of shares of Class B common stock distributed will be subject to the Class B Cap. If the Class B Cap is exceeded, the shares of Class B common stock delivered to Altice N.V. shareholders of record who elect to receive them will be subject to proration, and such shareholders will receive shares of Class A common stock in lieu of the portion of shares of Class B common stock that is cut back.
If an Altice N.V. shareholder of record does not make an election by the Election Deadline, such shareholder will receive the Default Election. Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution.
Altice N.V. is ultimately controlled by Mr. Drahi through Next Alt. As of December 31, 2017, Next Alt held 60.31% of the outstanding share capital and voting rights of Altice N.V., representing 49.5% of the economic rights and 66% of the voting power in general meetings. Mr. Drahi has informed us that Next Alt will elect to receive 100% of the shares of Altice USA to which it is entitled in the Distribution in the form of Class B common stock and will be subject to proration, in the same manner as other Altice N.V. shareholders, in the event the Class B Cap is exceeded. As a result of Next Alt's intended election, and voting agreements that Next Alt will enter into with certain members of Altice N.V. and Altice USA management with respect to all shares of Altice USA common stock they own, Mr. Drahi will control Altice USA immediately after giving effect to the Distribution regardless of the elections made by other Altice N.V. shareholders.
After having considered all the possible options and having obtained advice from external financial and legal advisers, the board of Altice N.V. believes this transaction structure to be the most effective and expedient way to implement the Distribution. The Distribution is expected to be completed by the end of the second quarter of 2018.
The completion of the Distribution is within Altice N.V.'s discretion and remains subject to various conditions, including the conditions set forth above as well as market conditions. See "Conditions to the Distribution."
Under Altice N.V.'s articles of association, Altice N.V. is required to submit the distribution in kind as contemplated by the Distribution to a shareholder vote at the EGM. At the EGM, the Altice N.V. shareholders will be asked to approve (i) the distribution in kind and (ii) the board resolution approving the change in identity and character of the business of Altice N.V. resulting from the Distribution.
The Altice N.V. board of directors conditioned the approval of the Distribution on the receipt of the applicable approvals of our Board of Directors with respect to the Pre-Distribution Dividend. Our Board of Directors delegated the approval or disapproval of the Pre-Distribution Dividend to the our Audit Committee which is comprised entirely of independent directors, and following such delegation, our Audit Committee approved, among other things, the Pre-Distribution Dividend in connection with the Distribution. No additional approval by our Board of Directors or the shareholders of Altice USA
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is required for the Distribution. In addition, certain other transactions contemplated in connection with the Distribution will require prior approval of our Audit Committee pursuant to our Related-Party Transaction Approval Policy, including entering into the Master Separation Agreement and certain ancillary agreements relating thereto regarding, among other things, the license of the Altice brand, and amendments to certain commercial agreements between the Company, on the one hand, and Altice N.V. and its affiliates, on the other hand, as well as the stockholders' agreement to be entered into with Next Alt and A4 S.A. that will be effective following the completion of the Distribution. See "The Master Separation Agreement," "Ancillary Agreements" and "Certain Relationships and Related-Party TransactionsOur Policy Regarding Related-Party Transactions.
What Altice N.V. Shareholders Need to do to Receive Shares of Altice USA Common Stock
Holders of Altice N.V. common shares on the Record Date are not required to pay any cash or deliver any other consideration or give up any Altice N.V. common shares to receive the shares of Altice USA common stock in the Distribution. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution until the Election Deadline, subject to the Class B Cap. Altice N.V. shareholders who hold their shares through a broker-dealer or financial institution will need to instruct such broker-dealer or financial institution to effect the election in accordance with its policies. Delivery of the shares in the Distribution will be made in book-entry form.
If an Altice N.V. shareholder of record does not make an election by the Election Deadline, such shareholder will receive the Default Election. Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution.
Holders of Altice N.V. common shares who sell those shares prior to the Record Date, so that they are not the record holder of such shares on the Record Date, will also be selling the right to receive the shares of Altice USA common stock that would have been distributed to them in the Distribution with respect to the Altice N.V. common shares they sell. Holders of Altice N.V. common shares on the Record Date will be entitled to receive the shares of Altice USA common stock issuable in respect of those shares even if such holders sell those Altice N.V. common shares prior to the Distribution Date.
Treatment of Fractional Shares
Fractional shares of Altice USA common stock will not be distributed in the Distribution. Fractional shares will be aggregated into whole shares of Class A common stock and Class B common stock (after conversion into Class A common stock), which will be sold in the open market at prevailing market prices. The aggregate cash proceeds from such sales, net of any brokerage fees and other costs, will be distributed pro rata to holders who would have otherwise been entitled to receive a fractional share in the Distribution.
Management of Altice USA after the Distribution
After the Distribution, our executive officers will be the same as our executive officers immediately before the Distribution and will remain in office until their respective successors are duly elected or appointed and qualified in accordance with our amended and restated certificate of incorporation and our amended and restated bylaws or as otherwise provided by law.
For further information regarding our management, see "Management."
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Board of Directors of Altice USA after the Distribution
Mr. Drahi is expected to join Altice USA as Chairman and Director upon the completion of the Distribution. Other than this change, our Board of Directors will be the same after the Distribution as our Board of Directors immediately before the Distribution and will remain in office until the directors' respective successors are duly elected or appointed and qualified in accordance with our amended and restated certificate of incorporation and our amended and restated bylaws or as otherwise provided by law.
For further information regarding our Board of Directors, see "Management."
Transferability of Altice USA Common Stock
The shares of Altice USA common stock distributed to Altice N.V. shareholders will be freely transferable, except for shares received by individuals who are our affiliates. Individuals who may be considered our affiliates after the Distribution include individuals who control, are controlled by or are under common control with us, as those terms generally are interpreted for federal securities law purposes. These individuals may include some or all of our directors and executive officers. Individuals who are our affiliates will be permitted to sell their shares of Altice USA common stock only pursuant to an effective registration statement under the Securities Act, or an exemption from the registration requirements of the Securities Act, such as those afforded by Section 4(1) of the Securities Act or Rule 144 thereunder.
Conversion of Class B Common Stock
Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock.
Our amended and restated certificate of incorporation does not provide for the automatic conversion of shares of our Class B common stock upon transfer under any circumstances. As a result, the holders of Class B common stock are free to transfer them without converting them into shares of our Class A common stock. Any shares of Class B common stock that are converted into Class A common stock may not be reissued. The disparate voting rights of the shares of our Class B common stock will not change upon transfer unless first converted into shares of Class A common stock.
Immediately prior to any conversion of all outstanding shares of Class B common stock into Class A common stock, the holders of majority of the voting power of the Class B common stock at the time of such conversion may, in connection with such conversion, require that each share of Class C common stock shall automatically be converted into one share of Class A common stock on a date fixed by our Board of Directors, which date shall be no less than 61 days and no more than 180 days following the conversion of all outstanding shares of Class B common stock.
Listing and Markets for Altice USA Common Stock
Our Class A common stock trades on the New York Stock Exchange under the symbol "ATUS". Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange. Because the Class B common stock is unlisted, an active trading market may not develop.
Neither we nor Altice N.V. can assure Altice N.V. shareholders as to the trading price of Altice N.V. common shares or Altice USA common stock after the Distribution, or as to whether the combined trading prices of Altice USA common stock and the Altice N.V. common shares after the Distribution will be less than, equal to or greater than the trading prices of Altice N.V. common shares
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prior to the Distribution. The trading price of Altice USA common stock may fluctuate significantly following the Distribution.
See "Risk FactorsRisk Factors Relating to Ownership of Our Class A Common Stock and Class B Common Stock" for more detail.
Transfer Agents, Registrars and Conversion Agent
The transfer agent and registrar for our Class A common stock and Class B common stock is AST. The conversion agent with respect to any conversions of Class B common stock to Class A common Stock is also AST. The transfer agent and registrar for Altice N.V.'s common shares A and common shares B is ING.
Expenses
It is expected that we will incur an aggregate of $ million in expenses in connection with the Distribution. These expenses will be comprised of:
These expenses will be paid by us from our existing cash balances. These fees and expenses, however, do not include the payment of cash in lieu of the issuance of fractional shares of Altice USA common stock.
Appraisal Rights
Under Dutch law, Altice N.V.'s shareholders will not have appraisal rights in connection with the Distribution.
Reasons for Furnishing this Prospectus
This prospectus is being furnished solely to provide information to Altice N.V. shareholders as of the Record Date who will receive shares of Altice USA common stock in the Distribution. We believe that the information contained in this prospectus is accurate as of the date set forth on the cover. Changes to the information contained in this prospectus may occur after that date, and neither we nor Altice N.V. undertakes any obligation to update the information except in the normal course of our respective public disclosure obligations and practices.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax consequences to the shareholders of Altice N.V. associated with the Distribution and their ownership of our Class A and Class B common stock as a result of the Distribution, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations promulgated thereunder ("Treasury Regulations"), administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, and any changes may result in U.S. federal income tax consequences different from those set forth below. We have not sought any ruling from the Internal Revenue Service (the "IRS") with respect to the statements made and the conclusions reached in the following summary. The authorities on which this discussion is based are subject to various interpretations and there can be no assurance that the IRS or the courts will agree with such statements and conclusions.
This summary also does not address the tax considerations arising under the laws of any state, local or non-U.S. jurisdiction or under U.S. federal gift and estate tax laws, except to the limited extent set forth below. This summary is limited to persons who hold our Class A or Class B common stock as a capital asset for U.S. federal income tax purposes (within the meaning of section 1221 of the Code). In addition, because this section is a general summary, it does not address all aspects of taxation that may be relevant to particular stockholders in light of their personal investment or tax circumstances, or to certain types of stockholders that are subject to special treatment under the U.S. federal income tax laws, including, without limitation, brokers or dealers in securities, insurance companies, banks or other financial institutions, hybrid entities, regulated investment companies, real estate investment trusts, tax-exempt organizations or accounts, persons holding Class A or Class B common stock as a part of a hedging, integrated, conversion transaction, straddle or other risk reduction transaction, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, persons subject to the alternative minimum tax or the Medicare tax on net investment income, entities or arrangements treated as partnerships for U.S. federal income tax purposes or investors in such entities, persons who acquired our Class A or Class B common stock through the exercise of employee stock options or otherwise as compensation for services, certain former U.S. citizens or long-term residents, U.S. expatriates, "controlled foreign corporations" or "passive foreign investment companies" within the meaning of the Code, and persons deemed to sell our Class A or Class B common stock under the constructive sale provisions of the Code. If a partnership, including any entity or arrangement treated as a partnership for U.S. federal income tax purposes, holds shares of our Class A or Class B common stock, the U.S. federal income tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Such partners and partnerships should consult their tax advisors regarding the tax consequences of the purchase, ownership or disposition of our Class A or Class B common stock.
The shareholders of Altice N.V. are urged to consult their tax advisors with respect to the application of the U.S. federal income tax laws to their particular situations, as well as any tax consequences of the ownership of our Class A or Class B common stock arising under the U.S. federal estate or gift tax rules or under the laws of any state, local, non-U.S. or other taxing jurisdiction or under any applicable tax treaty.
U.S. Holder and Non-U.S. Holder Defined
As used in this discussion, the term "U.S. Holder" means a beneficial owner of Altice N.V. shares that will ultimately acquire, pursuant to the Distribution, shares of our Class A and/or Class B common stock and that is, for U.S. federal income tax purposes:
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As used in this discussion, the term "Non-U.S. Holder" means a beneficial owner of Altice N.V. shares other than a U.S. Holder.
The One-Time Dividend Prior to the Distribution
As a condition to the Distribution, our Board of Directors expects to declare and pay the Pre-Distribution Dividend. The Pre-Distribution Dividend will be treated as described below under "Distributions on Altice USA Common Stock."
Any amount of the Pre-Distribution Dividend that is treated as a dividend and is received by a U.S. Holder that is a corporation may, depending on the circumstances, constitute an "extraordinary dividend" subject to the provisions of Section 1059 of the Code. Under Section 1059 of the Code, a corporate holder generally must reduce the tax basis of all of the holder's shares (but not below zero) by the "non-taxed portion" of any "extraordinary dividend" and, if the non-taxed portion exceeds the holder's tax basis for the shares, must treat any excess as gain from the sale or exchange of the shares in the year the payment is received. Generally, there is an "extraordinary dividend" on common stock when (1) all dividends received by a corporate shareholder which have ex-dividend dates within a period of 85 consecutive days exceed, in the aggregate, 10% of the shareholder's basis in the stock, or (2) all dividends received by a corporate shareholder which have ex-dividend dates within a period of 365 consecutive days exceed, in the aggregate, 20% of the taxpayer's basis in the stock (in each case, unless the shareholder has held the shares for more than two years before the dividend announcement date). The "non-taxed portion" of the dividend is the amount of the dividend that is not taxable to the shareholder as a result of the "dividends received deduction."
A U.S. Holder of Altice USA common stock that is a corporation should consult its tax advisors as to the application of Section 1059 of the Code in light of its particular facts and circumstances.
The Distribution
Each shareholder of Altice N.V. will be treated as receiving a distribution on their Altice N.V. shares in an amount equal to the fair market value of the Altice U.S. shares received by such shareholder and any cash received in lieu of fractional shares.
For the U.S. Holders of Altice N.V. shares, the Distribution will be taxable as a foreign-source dividend to the extent of the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder. The current earnings and profits of Altice N.V. for the year of the Distribution will include, but are not limited to, any earnings and profits resulting from the portion of the Pre-Distribution Dividend distributed to Altice N.V., as well as from the recognition of gain by Altice N.V. with respect to its Altice U.S. shares pursuant to the Distribution.
U.S. Holders of Altice N.V. shares that are corporations will not benefit from a dividend-received deduction with respect to the dividend resulting from the Distribution unless such holder owns 10% of the vote or value of Altice N.V. Non-corporate U.S. Holders of Altice N.V. shares may benefit from the preferential long-term capital gains rate with respect to the dividend resulting from the Distribution to
55
the extent they have held their Altice N.V. shares for at least 61 days during the 121-day period beginning on the date which is 61 days before the ex-dividend date for the Distribution.
To the extent the fair market value of the Altice U.S. shares distributed to a U.S. Holder of Altice N.V. shares pursuant to the Distribution and any cash received in lieu of fractional shares exceeds the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder, such excess will be treated as a non-taxable return of capital to the extent of the U.S. Holder's basis in the Altice N.V. shares, and as a capital gain thereafter.
The shareholders of Altice N.V. will have a tax basis in each share of Altice US Class A common stock and Class B common stock received in the Distribution equal to the fair market value of the share at the time of the Distribution, and the holding period for those shares generally would begin on the day after the Distribution. Except to the extent that the distribution resulting from the Distribution is treated as a return of capital as described above, the distribution would generally not affect a U.S. Holder's tax basis in its Altice N.V. shares.
Altice N.V. believes, and the discussion in this section regarding the tax consequences of the Distribution is based on the determination, that Altice N.V. is not and has not been a passive foreign investment company ("PFIC") for U.S. federal income tax purposes for the taxable year of the Distribution or any prior taxable year. Because the determination of whether a non-U.S. corporation is a PFIC is primarily factual and there is little administrative or judicial authority on which to rely to make a determination, the IRS might not agree that Altice N.V. is not a PFIC. If this determination were incorrect, the tax consequences of the Distribution to U.S. Holders of Altice N.V. shares could be different and could be materially more adverse than described herein.
U.S. Holders should consult their tax advisors as to the application of the rules discussed above.
The Non-U.S. Holders of Altice N.V. shares will not be subject to U.S. federal income tax on the Distribution (unless the Distribution is effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or business, and if an applicable income tax treaty requires, is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder in the United States).
Conversion of Our Class B Common Stock into Our Class A Common Stock
As noted above, our Class B common stock is convertible at any time, without cost to our stockholders, into our Class A common stock on a share-for-share basis. It is expected that any such conversion would qualify as a tax-free exchange for U.S. federal income tax purposes, and that the exchanging shareholders would take a tax basis in the shares of Class A common stock equal to their tax basis in the surrendered shares of Class B common stock.
Distributions on Altice USA Common Stock
We do not anticipate making distributions on Altice USA common stock in the foreseeable future. However, if distributions of cash or property (other than certain pro rata stock distributions) are made on shares of our Class A or Class B common stock, such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first reduce a shareholder's basis in Altice USA common stock (determined separately with respect to each share of Altice USA common stock), but not below zero, and then will be treated as gain from the sale of that share common stock as described below under "Gain on Disposition of Altice USA Common Stock."
Any dividend paid on Altice USA common stock to a U.S. Holder will be included in the U.S. Holder's gross income. Dividends paid to a corporate U.S. Holder will generally qualify for the
56
dividends received deduction if the requisite holding period and other requirements are satisfied. Dividends paid to non-corporate U.S. Holders may be subject to tax at the preferential long-term capital gains rate if the requisite holding period and other requirements are satisfied.
Except as described in the next paragraph and subject to the discussion of FATCA, any dividend paid to a Non-U.S. Holder generally will be subject to U.S. federal withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, the Non-U.S. Holder must provide the applicable withholding agent in a timely manner a properly completed IRS Form W-8BEN or W-8BEN-E, whichever is applicable, or other appropriate version of IRS Form W-8, certifying qualification for the reduced rate. A Non-U.S. Holder of shares of Altice USA common stock eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS in a timely manner. If the Non-U.S. Holder holds the Altice USA common stock through a financial institution or other agent acting on the Non-U.S. Holder's behalf, the Non-U.S. Holder will be required to provide appropriate documentation to the agent, which then will be required to provide certification to the applicable withholding agent, either directly or through other intermediaries.
The withholding tax shall not apply to any dividend paid to a Non-U.S. Holder if such dividend is effectively connected with a U.S. trade or business conducted by such non-U.S. Holder. In order to claim this exemption, the Non-U.S. Holder must provide the applicable withholding agent with a properly completed IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to U.S. federal withholding tax, will generally be subject to U.S. federal income tax on a net income basis at applicable graduated U.S. federal income tax rates, subject to an applicable income tax treaty providing otherwise. In addition, dividends received by a Non-U.S. Holder that is treated as a corporation for U.S. federal income tax purposes that are effectively connected with such Non-U.S. Holder's conduct of a U.S. trade or business may also be subject to a "branch profits tax" at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty.
Gain on Disposition of Altice USA Common Stock
Gain or loss realized by a U.S. Holder on the sale or other disposition of Altice USA common stock will be capital gain or loss for U.S. federal income tax purposes, and will be long-term capital gain or loss if the U.S. Holder held the Altice USA common stock for more than one year. The amount of the U.S. Holder's gain or loss will be equal to the difference between the U.S. Holder's tax basis in the Altice USA common stock disposed of and the amount realized on the disposition. The deductibility of capital losses is subject to limitations.
Subject to the discussion of FATCA and backup withholding, Non-U.S. Holders generally will not be required to pay U.S. federal income tax, including by way of withholding, on any gain realized upon the sale or other disposition of Altice USA common stock unless:
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shorter of the five-year period preceding the Non-U.S. Holder's disposition of, or the Non-U.S. Holder's holding period for, Altice USA common stock.
Generally, a corporation is a USRPHC if the fair market value of its U.S. real property interests (within the meaning of the Code and applicable Treasury Regulations) equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. We believe that we are not currently a USRPHC and, based on our business plan and anticipated operations, do not expect to become a USRPHC in the future. However USRPHC status is an inherently factual determination that involves complex legal considerations. We have not sought an IRS ruling with respect to whether we are a USRPHC and we cannot give definitive assurance regarding our non-USRPHC status. Additionally, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we are or become a USRPHC, as long as our Class A common stock is regularly traded on an established securities market (within the meaning of the Code and applicable Treasury Regulations), such Class A common stock will not be treated as a U.S. real property interest in the hands of any Non-U.S. Holder who does not hold (actually or constructively) more than 5% of our Class A common stock at any time during the shorter of the five-year period preceding the Non-U.S. Holder's disposition of, or the Non-U.S. Holder's holding period for, our Class A common stock. Non-U.S. Holders should be aware that no prediction can be made as to whether our Class A common stock will be regularly traded on an established securities market (within the meaning of the Code and applicable Treasury Regulations).
Non-U.S. Holders described in the first bullet above will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and a corporate Non-U.S. Holder described in the first bullet above also may be subject to the branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty. Individual Non-U.S. Holders described in the second bullet above will be required to pay a flat 30% tax on the gain derived from the sale, which gain may be offset by U.S.-source capital losses for that year.
Medicare Tax
A U.S. Holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, is subject to a 3.8% tax on the lesser of (1) the U.S. Holder's "net investment income" (or "undistributed net investment income" in the case of an estate or trust) for the relevant taxable year and (2) the excess of the U.S. holder's modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals is between $125,000 and $250,000, depending on the individual's circumstances). A holder's net investment income generally includes its dividend income and its net gains with respect to its Altice shares, unless such dividend income or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). A U.S. Holder that is an individual, estate or trust, is urged to consult his or her tax advisors regarding the applicability of the Medicare tax to his or her income and gains in respect of the Distribution, the distributions on Altice USA common stock and/or the gains from the disposition of Altice USA common stock.
U.S. Federal Estate Taxes
If shares of Altice USA common stock are included in the gross estate of an individual that is a U.S. citizen or resident for U.S. federal estate tax purposes, then U.S. federal estate tax might be payable with respect to such shares in connection with the death of such holder.
If shares of Altice USA common stock are included in the gross estate of an individual that is not a U.S. citizen or resident for U.S. federal estate tax purposes, such shares may be subject to U.S.
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federal estate tax because they will be considered U.S. situs assets, unless an applicable estate tax treaty or other treaty provides otherwise.
Backup Withholding and Information Reporting
For noncorporate U.S. Holders of Altice N.V. shares, information reporting requirements, on IRS Form 1099, generally will apply to dividend payments or other taxable distributions made to them within the United States. Additionally, backup withholding may apply to such payments if a U.S. Holder fails to comply with applicable certification requirements or are notified by the IRS that such U.S. Holder has failed to report all interest and dividends required to be shown on its federal income tax returns. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against the applicable U.S. Holder's U.S. federal income tax liability, provided that such U.S. Holder furnishes the required information to the IRS.
Generally, we must report annually to the IRS the amount of dividends paid to a Non-U.S. Holder, the Non-U.S. Holder's name and address, and the amount of U.S. federal income tax withheld, if any. A similar report will be sent to the Non-U.S. Holder. These information reporting requirements apply even if withholding was not required because the dividends were effectively connected to the conduct of a Non-U.S. Holder's trade or business within the United States or withholding was reduced by an applicable income tax treaty. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in the Non-U.S. Holder's country of residence. Payments of dividends on, or of proceeds from the disposition of, Altice USA common stock made to Non-U.S. Holders may be subject to additional information reporting and backup withholding unless the Non-U.S. Holder establishes an exemption, for example, by properly certifying its non-U.S. status on an IRS Form W-8BEN or W-8BEN-E, whichever is applicable, or another appropriate version of IRS Form W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if the applicable withholding agent has actual knowledge, or reason to know, that a holder claiming to be a Non-U.S. Holder is a U.S. person.
U.S. information reporting and backup withholding generally will not apply to a payment of proceeds of a disposition of common stock where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. However, information reporting requirements, but not backup withholding, generally will apply to such a payment if the broker is (i) a U.S. person; or (ii) a foreign person with certain U.S. connections, unless the broker has documentary evidence in its records that the holder is a Non-U.S. Holder and certain conditions are met or the holder otherwise establishes an exemption. As noted above, backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.
Shareholders of Altice N.V. shares should consult their own tax advisors regarding the application of backup withholding in their particular circumstances and the availability of and procedure for obtaining an exemption from backup withholding under current Treasury Regulations.
FATCA
Legislation commonly known as FATCA (under Sections 1471 to 1474 of the Code) generally will impose a U.S. federal withholding tax of 30% on dividends on and the gross proceeds of a disposition of Altice USA common stock paid to a "foreign financial institution" (as defined under FATCA and the applicable Treasury Regulations), unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding the U.S. account holders of such institution (which includes certain
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equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise establishes an exemption. The legislation also generally will impose a U.S. federal withholding tax of 30% on dividends on and the gross proceeds of a disposition of common stock paid to a non-financial foreign entity unless such entity provides the applicable withholding agent with a certification identifying certain substantial direct and indirect U.S. owners of the entity, certifies that there are none or otherwise establishes an exemption. The withholding taxes described above will apply to any dividend payments on Altice USA common stock and, after December 31, 2018, to payments of gross proceeds from dispositions of Altice USA common stock. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph. Non-U.S. Holders of Altice N.V. shares are urged to consult with their own tax advisors regarding the possible implications of this legislation on their ownership in Altice USA common stock.
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Neither we nor Altice N.V. will receive any proceeds from the distribution of our Class A common stock or Class B common stock in the Distribution.
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MARKET PRICE OF CLASS A COMMON STOCK
Shares of our Class A common stock began trading on the NYSE under the symbol "ATUS" on June 22, 2017. Prior to that, there was no public market for shares our Class A common stock. Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange.
The table below sets forth the intraday high and low sales prices for shares of our Class A common stock for each full quarterly period since our initial public offering on June 22, 2017.
|
High | Low | |||||
---|---|---|---|---|---|---|---|
Fourth Quarter 2017 |
$ | 28.45 | $ | 17.80 | |||
Third Quarter 2017 |
$ | 34.86 | $ | 26.11 |
On December 31, 2017, we had approximately six registered holders of record of our Class A common stock (which amount does not include the number of stockholders whose shares are held of record by banks, brokerage houses or other institutions, but includes each such institution as one stockholder) and two registered holders of record of our Class B common stock.
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During fiscal year 2015, Cablevision, our predecessor company, paid a regular quarterly cash dividend of $0.15 per share to holders of both Cablevision's Class A common stock and Class B common stock on April 3, 2015, June 12, 2015 and September 10, 2015. In the fourth quarter of 2016, we declared combined cash dividends of approximately $445 million to our stockholders of which approximately $365 million was paid in the fourth quarter of 2016 and approximately $80 million was paid in the first quarter of 2017. In addition, we made cash distributions of $839.7 million during the second quarter of 2017, $500 million of which were funded with borrowings under CSC Holdings' revolving credit facility. We have not declared or paid any dividends since our initial public offering in June 2017.
As a condition to the Distribution, our Board of Directors expects to declare and pay the Pre-Distribution Dividend. Other than this dividend, we currently intend to retain any future earnings to fund the operation, development and expansion of our business and do not intend to pay any other dividends on Altice USA common stock. Any future determination relating to our dividend policy will be made in the sole and absolute discretion of our Board of Directors and will depend upon then existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors that our Board of Directors may deem relevant. See "Risk FactorsRisk Factors Relating to Ownership of Our Class A Common Stock and Class B Common StockBecause we have no current plans to pay cash dividends on our Class A common stock or Class B common stock following the Distribution and for the foreseeable future, our stockholders may not receive any return on investment unless they sell their Class A common stock or Class B common stock."
In addition, we are a holding company that does not conduct any business operations of our own. As a result, our ability to pay cash dividends on our Class A common stock is dependent upon cash dividends and distributions and other transfers from our subsidiaries. The terms of certain debt instruments to which our subsidiaries are a party currently limit, subject to certain exceptions and qualifications, their ability and the ability of their restricted subsidiaries to: (i) pay dividends or make other distributions or repurchase or redeem our capital stock or subordinated debt, (ii) engage in certain transactions with affiliates and (iii) enter into agreements that restrict the payment of dividends by subsidiaries or the repayment of intercompany loans and advances. See "Description of Certain Indebtedness."
Although we do not currently intend to pay dividends other than as described above, our Board of Directors has authorized a share repurchase program of up to $2 billion with respect to our Class A common stock as a means to return capital to our stockholders, among other reasons.
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|
September 30, 2017 | ||||||
---|---|---|---|---|---|---|---|
(Dollars in thousands, except share data) |
Actual | As adjusted(1) | |||||
Cash and cash equivalents |
$ | 550,131 | $ | 550,131 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Debt: |
|||||||
Short-term debt: |
|||||||
Credit facility debt, senior notes and debentures, capital lease obligations and notes payable |
1,705,595 | 1,705,595 | |||||
Collateralized indebtedness |
| | |||||
Long-term debt: |
|||||||
Credit facility debt, senior notes and debentures, capital lease obligations and notes payable |
19,620,240 | 21,120,240 | |||||
Collateralized indebtedness |
1,314,788 | 1,314,788 | |||||
| | | | | | | |
Total debt |
22,640,623 | 24,140,623 | |||||
| | | | | | | |
Redeemable equity |
390,268 | 390,268 | |||||
| | | | | | | |
Equity: |
|||||||
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, 246,982,292 issued and outstanding |
2,470 | 2,470 | |||||
Class B common stock: $0.01 par value, 1,000,000,000 shares authorized, 490,086,674 issued and outstanding |
4,901 | 4,901 | |||||
Class C common stock: $0.01 par value, 4,000,000,000 shares authorized, no shares issued and outstanding |
| | |||||
Additional paid-in capital |
4,466,040 | 2,966,040 | |||||
Accumulated deficit |
(1,401,548 | ) | (1,401,548 | ) | |||
Accumulated other comprehensive income |
(4,130 | ) | (4,130 | ) | |||
Noncontrolling interest |
689 | 689 | |||||
| | | | | | | |
Total equity |
3,068,422 | 1,568,422 | |||||
| | | | | | | |
Total capitalization |
$ | 26,099,313 | 26,099,313 | ||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total debt excluding collateralized indebtedness |
$ | 21,325,835 | $ | 22,825,835 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net debt excluding collateralized indebtedness(2) |
$ | 20,775,704 | $ | 22,275,704 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
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SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The selected consolidated historical balance sheet and operating data of Altice USA as of and for the year ended December 31, 2016 presented below have been derived from the audited consolidated financial statements of Altice USA included elsewhere herein. The selected consolidated historical balance sheet data of Altice USA as of September 30, 2017 and the operating data of Altice USA for the nine months ended September 30, 2017 and 2016 presented below have been derived from the unaudited condensed consolidated financial statements of Altice USA included elsewhere herein. The operating data of Altice USA for the year ended December 31, 2016 include the operating results of Cequel for the year ended December 31, 2016 and the operating results of Cablevision for the period from the date of acquisition, June 21, 2016, through December 31, 2016. The operating data of Altice USA for the nine months ended September 30, 2016 include the operating results of Cequel for the nine months ended September 30, 2016 and the operating results of Cablevision for the period from June 21, 2016 through September 30, 2016.
The consolidated pro forma operating data of Altice USA for the year ended December 31, 2016 and the nine months ended September 30, 2016 have been derived from the unaudited pro forma financial information included elsewhere herein and give effect to the Cablevision Acquisition as if it had occurred on January 1, 2016.
The selected consolidated historical balance sheet and operating data of Cablevision have been presented for the periods prior to the Cablevision Acquisition as Cablevision is deemed to be the predecessor entity. The selected consolidated historical operating data of Cablevision for the period January 1, 2016 to June 20, 2016 and years ended December 31, 2015 and 2014 presented below have been derived from the audited consolidated financial statements of Cablevision included elsewhere herein. The selected consolidated historical operating data of Cablevision for the years ended December 31, 2013 and 2012 are derived from Cablevision's audited consolidated financial statements which are not included in this prospectus.
The selected historical and pro forma results presented below are not necessarily indicative of the results to be expected for any future period. This information should be read in conjunction with the audited consolidated financial statements of Altice USA and Cablevision and the notes thereto, the Unaudited Pro Forma Consolidated Financial Information of Altice USA, Management's Discussion
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and Analysis of Financial Condition and Results of Operations of Altice USA and Cablevision included elsewhere herein.
|
Altice USA | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Nine Months Ended September 30, | |||||||||
|
2017 | 2016 | 2016 | |||||||
|
Historical | Pro Forma | Historical | |||||||
|
(dollars in thousands) |
|||||||||
Revenue |
$ | 6,961,192 | $ | 6,848,916 | $ | 3,711,311 | ||||
Operating expenses |
6,321,312 | 6,534,549 | 3,468,869 | |||||||
| | | | | | | | | | |
Operating income |
639,880 | 314,367 | 242,442 | |||||||
Other income (expense): |
||||||||||
Interest expense, net |
(1,231,357 | ) | (1,324,832 | ) | (1,003,079 | ) | ||||
Gain on investments, net |
169,888 | 213,457 | 83,467 | |||||||
Loss on derivative contracts, net |
(154,270 | ) | (62,855 | ) | (26,572 | ) | ||||
Gain on interest rate swap contracts, net |
12,539 | 24,380 | 24,380 | |||||||
Loss on extinguishment of debt and write-off of deferred financing costs |
(600,240 | ) | (19,948 | ) | (19,948 | ) | ||||
Other income, net |
832 | 7,392 | 2,548 | |||||||
| | | | | | | | | | |
Loss from continuing operations before income taxes |
(1,162,728 | ) | (848,039 | ) | (696,762 | ) | ||||
Income tax benefit |
429,664 | 320,188 | 101,332 | |||||||
| | | | | | | | | | |
Net loss |
(733,064 | ) | (527,851 | ) | (595,430 | ) | ||||
Net loss (income) attributable to noncontrolling interests |
(737 | ) | 108 | 108 | ||||||
| | | | | | | | | | |
Net loss attributable to Altice USA stockholders |
$ | (733,801 | ) | $ | (527,743 | ) | $ | (595,322 | ) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
LOSS PER SHARE: |
||||||||||
Basic and diluted loss per share attributable to Altice USA stockholders: |
||||||||||
Net loss |
$ | (1.08 | ) | $ | (0.81 | ) | $ | (0.92 | ) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Basic and diluted weighted average common shares (in thousands) |
682,234 | 649,525 | 649,525 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Cash dividends declared and paid per common share |
$ | | $ | | $ | | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
66
|
Altice USA | Cablevision(a) | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Years ended December 31, |
|
|
|
|
|
||||||||||||||||
|
2016 | 2016 | January 1, 2016 to June 20, 2016 |
Years Ended December 31, | ||||||||||||||||||
|
Pro Forma | Historical | 2015 | 2014 | 2013 | 2012(b) | ||||||||||||||||
|
(dollars in thousands) |
|||||||||||||||||||||
Revenue |
$ | 9,154,816 | $ | 6,017,212 | $ | 3,137,604 | $ | 6,545,545 | $ | 6,508,557 | $ | 6,287,383 | $ | 6,180,677 | ||||||||
Operating expenses |
8,556,428 | 5,557,546 | 2,662,298 | 5,697,074 | 5,587,299 | 5,588,159 | 5,411,629 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Operating income |
598,388 | 459,666 | 475,306 | 848,471 | 921,258 | 699,224 | 769,048 | |||||||||||||||
Other income (expense): |
||||||||||||||||||||||
Interest expense, net |
(1,760,421 | ) | (1,442,730 | ) | (285,508 | ) | (584,839 | ) | (575,580 | ) | (600,637 | ) | (660,074 | ) | ||||||||
Gain (loss) on investments, net |
271,886 | 141,896 | 129,990 | (30,208 | ) | 129,659 | 313,167 | 294,235 | ||||||||||||||
Gain (loss) on equity derivative contracts, net |
(89,979 | ) | (53,696 | ) | (36,283 | ) | 104,927 | (45,055 | ) | (198,688 | ) | (211,335 | ) | |||||||||
Loss on interest rate swap contracts, net |
(72,961 | ) | (72,961 | ) | | | | | (1,828 | ) | ||||||||||||
Loss on extinguishment of debt and write-off of deferred financing costs |
(127,649 | ) | (127,649 | ) | | (1,735 | ) | (10,120 | ) | (22,542 | ) | (66,213 | ) | |||||||||
Other income, net |
9,184 | 4,329 | 4,855 | 6,045 | 4,988 | 2,436 | 2,486 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations before income taxes |
(1,171,552 | ) | (1,091,145 | ) | 288,360 | 342,661 | 425,150 | 192,960 | 126,319 | |||||||||||||
Income tax benefit (expense) |
450,295 | 259,666 | (124,848 | ) | (154,872 | ) | (115,768 | ) | (65,635 | ) | (51,994 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations, net of income taxes |
(721,257 | ) | (831,479 | ) | 163,512 | 187,789 | 309,382 | 127,325 | 74,325 | |||||||||||||
Income (loss) from discontinued operations, net of income taxes(c) |
| | | (12,541 | ) | 2,822 | 338,316 | 159,288 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) |
(721,257 | ) | (831,479 | ) | 163,512 | 175,248 | 312,204 | 465,641 | 233,613 | |||||||||||||
Net loss (income) attributable to noncontrolling interests |
(315 | ) | (551 | ) | 236 | 201 | (765 | ) | 20 | (90 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) attributable to Altice USA / Cablevision stockholders |
$ | (721,572 | ) | $ | (832,030 | ) | $ | 163,748 | $ | 175,449 | $ | 311,439 | $ | 465,661 | $ | 233,523 | ||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
67
|
Altice USA | Cablevision(a) | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Years ended December 31, |
|
|
|
|
|
||||||||||||||||
|
2016 | 2016 | January 1, 2016 to June 20, 2016 |
Years Ended December 31, | ||||||||||||||||||
|
Pro Forma | Historical | 2015 | 2014 | 2013 | 2012(b) | ||||||||||||||||
|
(dollars in thousands, except per share data for Cablevision) |
|||||||||||||||||||||
INCOME (LOSS) PER SHARE: |
||||||||||||||||||||||
Basic income (loss) per share attributable to Altice USA / Cablevision stockholders: |
||||||||||||||||||||||
Income (loss) from continuing operations, net of income taxes |
$ | (7,216 | ) | $ | (8,320 | ) | $ | 0.60 | $ | 0.70 | $ | 1.17 | $ | 0.49 | $ | 0.28 | ||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from discontinued operations, net of income taxes |
$ | | $ | | $ | | $ | (0.05 | ) | $ | 0.01 | $ | 1.30 | $ | 0.61 | |||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) |
$ | (7,216 | ) | $ | (8,320 | ) | $ | 0.60 | $ | 0.65 | $ | 1.18 | $ | 1.79 | $ | 0.89 | ||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Basic weighted average common shares (in thousands) |
0.1 | 0.1 | 272,035 | 269,388 | 264,623 | 260,763 | 262,258 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Diluted income (loss) per share attributable to Altice USA / Cablevision stockholders: |
||||||||||||||||||||||
Income (loss) from continuing operations, net of income taxes |
$ | (7,216 | ) | $ | (8,320 | ) | $ | 0.58 | $ | 0.68 | $ | 1.14 | $ | 0.48 | $ | 0.28 | ||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from discontinued operations, net of income taxes |
$ | | $ | | $ | | $ | (0.05 | ) | $ | 0.01 | $ | 1.27 | $ | 0.60 | |||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) |
$ | (7,216 | ) | $ | (8,320 | ) | $ | 0.58 | $ | 0.63 | $ | 1.15 | $ | 1.75 | $ | 0.87 | ||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Diluted weighted average common shares (in thousands) |
0.1 | 0.1 | 280,199 | 276,339 | 270,703 | 265,935 | 267,330 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Cash dividends declared and paid per common share |
$ | | $ | | $ | | $ | 0.45 | $ | 0.60 | $ | 0.60 | $ | 0.60 | ||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Amounts attributable to Altice USA / Cablevision stockholders: |
||||||||||||||||||||||
Income (loss) from continuing operations, net of income taxes |
$ | (721,572 | ) | $ | (832,030 | ) | $ | 163,748 | $ | 187,990 | $ | 308,617 | $ | 127,345 | $ | 74,235 | ||||||
Income (loss) from discontinued operations, net of income taxes(c) |
| | | (12,541 | ) | 2,822 | 338,316 | 159,288 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) |
$ | (721,572 | ) | $ | (832,030 | ) | $ | 163,748 | $ | 175,449 | $ | 311,439 | $ | 465,661 | $ | 233,523 | ||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
68
Balance Sheet Data:
|
Altice USA | Cablevision | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 30, | December 31, | |||||||||||||||||
|
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||
|
(dollars in thousands) |
|
|||||||||||||||||
Total assets(a) |
$ | 35,431,152 | $ | 36,474,249 | $ | 6,800,174 | $ | 6,682,021 | $ | 6,500,967 | $ | 7,155,058 | |||||||
Notes payable to affiliates and related parties |
| 1,750,000 | | | | | |||||||||||||
Credit facility debt(a) |
5,376,902 | 3,444,790 | 2,514,454 | 2,769,153 | 3,745,625 | 3,900,218 | |||||||||||||
Collateralized indebtedness |
1,314,788 | 1,286,069 | 1,191,324 | 986,183 | 817,950 | 556,152 | |||||||||||||
Senior notes and debentures(a) |
15,853,175 | 17,507,325 | 5,801,011 | 5,784,213 | 5,068,926 | 5,406,771 | |||||||||||||
Notes payable |
79,525 | 13,726 | 14,544 | 23,911 | 5,334 | 12,585 | |||||||||||||
Capital leases and other obligations |
16,233 | 28,155 | 45,966 | 46,412 | 31,290 | 56,569 | |||||||||||||
Total debt(a) |
22,640,623 | 24,030,065 | 9,567,299 | 9,609,872 | 9,669,125 | 9,932,295 | |||||||||||||
Redeemable equity |
390,268 | 68,147 | | 8,676 | 9,294 | 11,999 | |||||||||||||
Stockholders' equity (deficiency) |
3,067,733 | 2,029,555 | (4,911,316 | ) | (5,041,469 | ) | (5,284,330 | ) | (5,639,164 | ) | |||||||||
Noncontrolling interest |
689 | 287 | (268 | ) | 779 | 786 | 1,158 | ||||||||||||
Total equity (deficiency) |
3,068,422 | 2,029,842 | (4,911,584 | ) | (5,040,690 | ) | (5,283,544 | ) | (5,638,006 | ) |
The following table sets forth certain customer metrics by segment (unaudited):
|
As of September 30, 2017 | As of December 31, 2016 | As of September 30, 2016 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Cablevision | Cequel | Total | Cablevision | Cequel | Total | Cablevision | Cequel | Total | |||||||||||||||||||
|
(in thousands, except per customer amounts) |
|||||||||||||||||||||||||||
Homes passed(a) |
5,134 | 3,443 | 8,577 | 5,116 | 3,407 | 8,524 | 5,105 | 3,389 | 8,494 | |||||||||||||||||||
Total customer relationships(b)(c) |
3,149 | 1,749 | 4,898 | 3,141 | 1,751 | 4,892 | 3,135 | 1,736 | 4,871 | |||||||||||||||||||
Residential |
2,887 | 1,642 | 4,529 | 2,879 | 1,649 | 4,528 | 2,873 | 1,636 | 4,510 | |||||||||||||||||||
SMB |
262 | 107 | 369 | 262 | 102 | 364 | 261 | 100 | 361 | |||||||||||||||||||
Residential customers: |
||||||||||||||||||||||||||||
Pay TV |
2,382 | 1,048 | 3,430 | 2,428 | 1,107 | 3,535 | 2,443 | 1,113 | 3,556 | |||||||||||||||||||
Broadband |
2,653 | 1,368 | 4,021 | 2,619 | 1,344 | 3,963 | 2,603 | 1,324 | 3,927 | |||||||||||||||||||
Telephony |
1,959 | 588 | 2,547 | 1,962 | 597 | 2,559 | 1,969 | 594 | 2,563 | |||||||||||||||||||
Residential triple product customer penetration(d): |
64.3 | % | 25.4 | % | 50.2 | % | 64.8 | % | 25.5 | % | 50.5 | % | 65.3 | % | 25.6 | % | 50.9 | % | ||||||||||
Penetration of homes passed(e): |
61.3 | % | 50.8 | % | 57.1 | % | 61.4 | % | 51.4 | % | 57.4 | % | 61.4 | % | 51.2 | % | 57.3 | % | ||||||||||
ARPU(f) |
$ | 156.88 | $ | 110.64 | $ | 140.10 | $ | 154.49 | $ | 109.30 | $ | 138.07 | $ | 152.55 | $ | 108.19 | $ | 136.50 |
69
accounts, but they are limited to a prescribed group. Most of these accounts are also not entirely free, as they typically generate revenue through pay-per-view or other pay services and certain equipment fees. Free status is not granted to regular customers as a promotion. In counting bulk residential customers, such as an apartment building, we count each subscribing family unit within the building as one customer, but do not count the master account for the entire building as a customer. We count a bulk commercial customer, such as a hotel, as one customer, and do not count individual room units at that hotel.
70
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated statement of operations of Altice USA, Inc. ("Altice USA" or the "Company") for the year ended December 31, 2016 is based on the audited historical consolidated financial statements of the Company and gives effect to the Cablevision Acquisition (defined below) as if it had occurred on January 1, 2016. The unaudited pro forma consolidated statement of operations of the Company for the nine months ended September 30, 2016 is based on the unaudited historical condensed consolidated financial statements of the Company and gives effect to the Cablevision Acquisition (defined below) as if it had occurred on January 1, 2016. The unaudited pro forma net loss per share data for the year ended December 31, 2016 and the nine months ended September 30, 2016 give effect to the issuances of common stock in connection with the organizational transactions that occurred prior to the Company's IPO, as discussed in Note 1 to the September 30, 2017 financial statements, as if they occurred at the beginning of the respective period. The Company's historical consolidated results of operations for the nine months ended September 30, 2016 include the operating results of Cequel for the nine months ended September 30, 2016 and Cablevision for the period subsequent to the Cablevision Acquisition, June 21, 2016 to September 30, 2016. The Company's historical consolidated results of operations for the year ended December 31, 2016 include the operating results of Cequel for the year ended December 31, 2016 and Cablevision for the period subsequent to the Cablevision Acquisition, June 21, 2016 to December 31, 2016, the "Cablevision Successor" period.
The accompanying unaudited pro forma consolidated statements of operations of Altice USA include the accounts of Altice USA and its wholly-owned subsidiaries. All significant intercompany transactions and balances are eliminated in the consolidated financial statements.
The accompanying unaudited pro forma consolidated statements of operations have been prepared based on assumptions deemed appropriate by the Company. The pro forma adjustments are described in the accompanying notes. The unaudited pro forma consolidated statements of operations are for informational purposes only. The pro forma statements of operations are unaudited and do not purport to reflect the results of operations that would have occurred if the Cablevision Acquisition had been consummated on the date indicated above, nor does it purport to represent the results of operations of the Company for any future dates or periods.
Future results may vary significantly from the information reflected in the unaudited pro forma consolidated statements of operations set forth below due to factors beyond the control of the Company.
The unaudited pro forma consolidated statements of operations do not include any adjustment for costs that may result from integration activities or for synergies resulting from the acquisitions. In 2016, the Company recorded restructuring expenses resulting from initiatives that are intended to simplify the Company's organizational structure. No adjustments have been made to the pro forma statements of operations for these restructuring expenses. The unaudited pro forma statement of operations for the year ended December 31, 2016 does not include an estimated $33,501 of transaction costs incurred in connection with the Cablevision Acquisition.
ATS Acquisition
Altice Technical Services US Corp. ("ATS"), which is currently owned by Altice N.V. and a member of ATS's management through a holding company, provides services pursuant to an Independent Contractor Agreement and Transition Services Agreement with the Company. In light of Altice N.V.'s determination to focus on businesses other than the Company, we and Altice N.V. have concluded it is in Altice N.V.'s and the Company's interests for Altice USA to own and operate ATS. The Company expects to acquire 70% of the equity interests in from the holding company for $1.00 in January 2018 and the remaining equity interests prior to the Distribution. ATS was formed to provide
71
network construction and maintenance services and commercial and residential installations, disconnections, and maintenance. In the second quarter of 2017, the Company entered into an Independent Contractor Agreement with ATS that governs the terms of the services described above. The Company also entered into a Transition Services Agreement for the use of the Company's resources to provide various overhead functions to ATS, including accounting, legal and human resources and for the use of certain facilities, vehicles and technician tools during a transitional period that generally ends on December 31, 2017, although the term can be extended on a service-by-service basis. The Transition Services Agreement requires ATS to reimburse the Company for its cost to provide such services. During the second quarter of 2017, a substantial portion of the Company's technical workforce at the Cablevision segment either accepted employment with ATS or became employees of ATS and ATS commenced operations and began to perform services for the Company. Therefore the primary workforce of ATS is comprised of former employees of the Company. The Company's operating results reflect a reduction in employee related expenses due to certain employees becoming employed by ATS and an increase in contractor costs for services provided by ATS.
The Company plans to combine the operations of ATS with Altice USA which will result in a combination of businesses under common control and will result in the retroactive consolidation of ATS results of operations and related assets and liabilities. Therefore ATS results for the quarters ended June 30, 2017 and September 30, 2017 will ultimately be combined with Altice USA quarterly results for the quarters ending June 30, 2017 and September 30, 2017. Had the ATS acquisition occurred as of April 1, 2017, the consolidated results of operations of Altice USA would have reflected additional net operating expenses of approximately $28,000 for the nine months ended September 30, 2017 primarily reflecting the start-up of operations of ATS in the second quarter of 2017. The assets and liabilities acquired in connection with the ATS acquisition will be recorded at historical cost due to the entities being under common control.
Management Advisory and Consulting Services Agreement
In connection with the Distribution, it is expected that the Management Advisory and Consulting Services Agreement with a subsidiary of Altice N.V. which provides certain consulting, advisory and other services will be terminated. Compensation under the terms of the agreement is an annual fee of $30,000 paid by the Company. Fees associated with this agreement recorded by the Company amounted to approximately $22,500 for the nine months ended September 30, 2017.
Optimum Acquisition
On June 21, 2016 (the "Cablevision Acquisition Date"), pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 16, 2015, by and among Cablevision, Altice N.V., Neptune Merger Sub Corp., a wholly-owned subsidiary of Altice ("Merger Sub"), Merger Sub merged with and into Cablevision, with Cablevision surviving the merger (the "Cablevision Acquisition").
In connection with the Cablevision Acquisition, each outstanding share of the Cablevision NY Group Class A common stock, par value $0.01 per share, and Cablevision NY Group Class B common stock, par value $0.01 per share, and together with the Cablevision NY Group Class A common stock, the "Shares") other than (i) Shares owned by Cablevision, Altice N.V. or any of their respective wholly-owned subsidiaries, in each case not held on behalf of third parties in a fiduciary capacity, received $34.90 in cash without interest, less applicable tax withholdings (the "Optimum Acquisition Consideration").
Also in connection with the Cablevision Acquisition, outstanding equity-based awards granted under Cablevision's equity plans were cancelled and converted into cash based upon the $34.90 per Share Cablevision Acquisition price in accordance with the original terms of the awards. The total
72
consideration for the outstanding CNYG Class A Shares, the outstanding CNYG Class B Shares, and the equity-based awards amounted to $9,958,323.
In connection with the Cablevision Acquisition, in October 2015, Neptune Finco Corp. ("Finco"), an indirect wholly-owned subsidiary of Altice formed to complete the financing described herein and the merger with CSC Holdings, a wholly-owned subsidiary of Cablevision, borrowed an aggregate principal amount of $3,800,000 under a term loan facility (the "Term Credit Facility") and entered into revolving loan commitments in an aggregate principal amount of $2,000,000 (the "Revolving Credit Facility" and, together with the Term Credit Facility, the "Credit Facilities").
Finco also issued $1,800,000 aggregate principal amount of 10.125% senior notes due 2023 (the "2023 Notes"), $2,000,000 aggregate principal amount of 10.875% senior notes due 2025 (the "2025 Notes"), and $1,000,000 aggregate principal amount of 6.625% senior guaranteed notes due 2025 (the "2025 Guaranteed Notes") (collectively the "Cablevision Acquisition Notes"). On June 21, 2016, immediately following the Cablevision Acquisition, Finco merged with and into CSC Holdings, with CSC Holdings surviving the merger (the "CSC Holdings Merger"), and the Cablevision Acquisition Notes and the Credit Facilities became obligations of CSC Holdings.
On June 21, 2016, in connection with the Cablevision Acquisition, the Company issued notes payable to affiliates and related parties aggregating $1,750,000, of which $875,000 bear interest at 10.75% and $875,000 bear interest at 11%.
The following table provides the allocation of the total purchase price of $9,958,323 to the identifiable tangible and intangible assets and liabilities of Cablevision based on their respective fair values.
|
Cablevision | |||
---|---|---|---|---|
|
Fair Values | |||
|
(dollars in thousands) |
|||
Current assets |
$ | 1,923,071 | ||
Accounts receivable |
271,305 | |||
Property, plant and equipment |
4,864,621 | |||
Goodwill |
5,842,172 | |||
Cable television franchise rights |
8,113,575 | |||
Customer relationships |
4,850,000 | |||
Trade names |
1,010,000 | |||
Amortizable intangible assets |
23,296 | |||
Other non-current assets |
748,998 | |||
Current liabilities |
(2,311,201 | ) | ||
Long-term debt |
(8,355,386 | ) | ||
Deferred income taxes |
(6,832,773 | ) | ||
Other non-current liabilities |
(189,355 | ) | ||
| | | | |
Total |
$ | 9,958,323 | ||
| | | | |
| | | | |
| | | | |
73
ALTICE USA, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2016
(dollars in thousands, except per share amounts)
|
Historical(1) | Cablevision(2) | Pro Forma Adjustments |
Pro forma | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue |
$ | 6,017,212 | $ | 3,137,604 | $ | | $ | 9,154,816 | |||||
| | | | | | | | | | | | | |
Operating expenses: |
|||||||||||||
Programming and other direct costs |
1,899,994 | 1,088,555 | | 2,988,549 | |||||||||
Other operating expenses |
1,716,851 | 1,136,970 | | 2,853,821 | |||||||||
Restructuring and other expense |
240,395 | 22,223 | (32,844 | )(3) | 229,774 | ||||||||
Depreciation and amortization (including impairments) |
1,700,306 | 414,550 | 369,428 | (4) | 2,484,284 | ||||||||
| | | | | | | | | | | | | |
|
5,557,546 | 2,662,298 | 336,584 | 8,556,428 | |||||||||
| | | | | | | | | | | | | |
Operating income |
459,666 | 475,306 | (336,584 | ) | 598,388 | ||||||||
Other income (expense): |
|||||||||||||
Interest expense |
(1,456,541 | ) | (287,098 | ) | (20,032 | )(5) | (1,763,671 | ) | |||||
Interest income |
13,811 | 1,590 | (12,151 | )(6) | 3,250 | ||||||||
Gain on investments, net |
141,896 | 129,990 | | 271,886 | |||||||||
Loss on equity derivative contracts, net |
(53,696 | ) | (36,283 | ) | | (89,979 | ) | ||||||
Loss on interest rate swap contracts |
(72,961 | ) | | | (72,961 | ) | |||||||
Loss on extinguishment of debt and write-off of deferred financing costs |
(127,649 | ) | | | (127,649 | ) | |||||||
Other income, net |
4,329 | 4,855 | | 9,184 | |||||||||
| | | | | | | | | | | | | |
|
(1,550,811 | ) | (186,946 | ) | (32,183 | ) | (1,769,940 | ) | |||||
| | | | | | | | | | | | | |
Income (loss) from continuing operations before income taxes |
(1,091,145 | ) | 288,360 | (368,767 | ) | (1,171,552 | ) | ||||||
Income tax benefit (expense) |
259,666 | (124,848 | ) | 315,477 | (7) | 450,295 | |||||||
| | | | | | | | | | | | | |
Net income (loss) |
(831,479 | ) | 163,512 | (53,290 | ) | (721,257 | ) | ||||||
Net loss (income) attributable to noncontrolling interests |
(551 | ) | 236 | | (315 | ) | |||||||
| | | | | | | | | | | | | |
Net income (loss) attributable to Altice USA stockholders |
$ | (832,030 | ) | $ | 163,748 | $ | (53,290 | ) | $ | (721,572 | ) | ||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Pro forma basic and diluted net loss per share attributable to Altice USA stockholders(8) |
$ | (1.11 | ) | ||||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Pro forma basic and diluted weighted average common shares in thousands(8) |
649,525 | ||||||||||||
| | | | | | | | | | | | | |
| | | | | |