Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	For the quarterly period ended	September 30, 2018



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	For the transition period from		to



Commission File Number	Registrant; State of Incorporation; Address and Telephone Number	IRS Employer Identification No.

001-38126		38-3980194
	Altice USA, Inc.
	Delaware
	1 Court Square West
	Long Island City, New York 11101
	(516) 803-2300

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the

Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files). Yes ý No o

Indicate by check mark whether each 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	Smaller reporting company	o
(Do not check if a smaller reporting company)		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 13(a) of the Exchange Act. o



Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).	Yes	o	No	ý



Number of shares of common stock outstanding as of November 2, 2018:	715,100,411



ALTICE USA, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
		Page
Item 1. Financial Statements of Altice USA, Inc. and Subsidiaries
	Condensed Consolidated Balance Sheets - September 30, 2018 (Unaudited) and December 31, 2017	3
	Condensed Consolidated Statements of Operations - Three and nine months ended September 30, 2018 and 2017 (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and nine months ended September 30, 2018 and 2017 (Unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity - Nine months ended September 30, 2018 (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 2018 and 2017 (Unaudited)	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	10

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		37

Item 3. Quantitative and Qualitative Disclosures About Market Risk		57

Item 4. Controls and Procedures		59

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		60

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		60

Item 6. Exhibits		61

SIGNATURES		62

PART I. FINANCIAL INFORMATION

This Quarterly Report 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 Quarterly Report 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. 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. In addition, important factors that could cause our actual results to differ materially from those in our forward‑looking statements include:


•	competition for broadband, pay television and telephony customers from existing competitors (such as broadband communications companies, direct broadcast satellite ("DBS") providers and Internet‑based providers) and new competitors entering our footprint;


•	changes in consumer preferences, laws and regulations or technology that may cause us to change our operational strategies;


•	increased difficulty negotiating programming agreements on favorable terms, if at all, resulting in increased costs to us and/or the loss of popular programming;


•	increasing programming costs and delivery expenses related to our products and services;


•	our ability to achieve anticipated customer and revenue growth, to successfully introduce new products and services and to implement our growth strategy;


•	our ability to complete our capital investment plans on time and on budget, including our plan to build a fiber-to-the-home ("FTTH") network, and deploy Altice One, our new home communications hub;


•	our ability to develop and deploy mobile voice and data services pursuant to the agreement we entered into with Sprint in the fourth quarter of 2017, and our ability to attract customers to these services;


•	the effects of economic conditions or other factors which may negatively affect our customers’ demand for our current and future products and services;


•	the effects of industry conditions;


•	demand for digital and linear advertising products and services;


•	our substantial indebtedness and debt service obligations;


•	adverse changes in the credit market;


•	changes as a result of any tax reforms that may affect our business;


•	financial community and rating agency perceptions of our business, operations, financial condition and the industries in which we operate;


•	the restrictions contained in our financing agreements;


•	our ability to generate sufficient cash flow to meet our debt service obligations;


•	fluctuations in interest rates which may cause our interest expense to vary from quarter to quarter;


•	technical failures, equipment defects, physical or electronic break-ins to our services, computer viruses and similar problems;


•	the disruption or failure of our network, information systems or technologies as a result of computer hacking, computer viruses, “cyber-attacks,” misappropriation of data, outages, natural disasters and other material events;


•	our ability to obtain necessary hardware, software, communications equipment and services and other items from our vendors at reasonable costs;


•	our ability to effectively integrate acquisitions and to maximize expected operating efficiencies from our acquisitions or as a result of the transactions, if any;


•	significant unanticipated increases in the use of bandwidth-intensive Internet-based services;


•	the outcome of litigation, government investigations and other proceedings;


•	our ability to successfully operate our business following the completion of our separation from Altice Europe N.V.; and


•	other risks and uncertainties inherent in our cable and other broadband communications businesses and our other businesses, including those listed under the caption “Risk Factors” in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 6, 2018 (the "Annual Report").

These factors 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 are made only as of the date of this Quarterly Report. 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 Quarterly Report 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.

Certain numerical figures included in this quarterly report 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.

Item 1. Financial Statements



ALTICE USA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

ASSETS	September 30, 2018 (Unaudited)		December 31, 2017
Current Assets:
Cash and cash equivalents	$	486,208	$	329,848
Restricted cash	253		252
Accounts receivable, trade (less allowance for doubtful accounts of $13,259 and $13,420)	436,550		370,765
Prepaid expenses and other current assets	167,836		130,425
Amounts due from affiliates	18,387		19,764
Derivative contracts	3,269		52,545
Total current assets	1,112,503		903,599
Property, plant and equipment, net of accumulated depreciation of $3,708,770 and $2,599,579	5,760,479		6,023,826
Investment securities pledged as collateral	1,521,045		1,720,357
Derivative contracts	31,510		—
Other assets	97,537		57,904
Amortizable customer relationships, net of accumulated amortization of $1,979,595 and $1,409,021	3,991,289		4,561,863
Amortizable trade names, net of accumulated amortization of $678,248 and $588,574	388,835		478,509
Other amortizable intangibles, net of accumulated amortization of $16,772 and $10,978	20,872		26,082
Indefinite-lived cable television franchises	13,020,081		13,020,081
Goodwill	8,012,416		8,019,861
Total assets	$	33,956,567	$	34,812,082

See accompanying notes to condensed consolidated financial statements.

ALTICE USA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (In thousands, except share and per share amounts)

LIABILITIES AND STOCKHOLDERS' EQUITY	September 30, 2018 (Unaudited)			December 31, 2017

Current Liabilities:
Accounts payable	$	883,408		$	795,128
Accrued liabilities:
Interest	321,327			397,422
Employee related costs	123,387			147,727
Other accrued expenses	329,122			411,988
Amounts due to affiliates	23,424			10,998
Deferred revenue	131,133			111,197
Liabilities under derivative contracts	—			52,545
Credit facility debt	57,650			42,650
Senior notes and debentures	531,206			507,744
Capital lease obligations	4,147			9,539
Notes payable	71,873			33,424
Total current liabilities	2,476,677			2,520,362
Defined benefit plan obligations	84,755			103,163
Other liabilities	169,473			144,289
Deferred tax liability	4,809,745			4,769,286
Liabilities under derivative contracts	153,850			187,406
Collateralized indebtedness	1,400,398			1,349,474
Credit facility debt	6,163,843			4,600,873
Senior notes and debentures	14,824,532			15,352,688
Capital lease obligations	17,304			12,441
Notes payable	5,218			32,478
Deficit investment in affiliates	—			3,579
Total liabilities	30,105,795			29,076,039
Commitments and contingencies (Note 15)
Redeemable equity	179,799			231,290
Stockholders' Equity:
Preferred Stock, $.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, 510,702,726 and 246,982,292 issued and outstanding	5,107			2,470
Class B common stock: $0.01 par value, 1,000,000,000 shares authorized, 490,086,674 issued and 213,146,331and 490,086,674 outstanding	2,131			4,901
Class C common stock: $0.01 par value, 4,000,000,000 shares authorized, no shares issued and outstanding	—			—
Paid-in capital	3,618,709			4,665,229
Retained earnings	38,744			840,636
	3,664,691			5,513,236
Accumulated other comprehensive loss	(2,291		)	(10,022		)
Total stockholders' equity	3,662,400			5,503,214
Noncontrolling interest	8,573			1,539
Total stockholders' equity	3,670,973			5,504,753
	$	33,956,567		$	34,812,082

See accompanying notes to condensed consolidated financial statements.



ALTICE USA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenue (including revenue from affiliates of $545, $426, $1,397 and $820, respectively) (See Note 14)	$	2,417,801		$	2,322,521		$	7,111,668		$	6,947,142
Operating expenses:
Programming and other direct costs (including charges from affiliates of $1,671, $1,196, $6,690 and $3,026, respectively) (See Note 14)	790,533			755,101			2,373,021			2,272,147
Other operating expenses (including charges from affiliates of $905, $8,302, $15,154 and $24,266, respectively) (See Note 14)	569,070			570,111			1,727,842			1,769,477
Restructuring and other expense	16,587			53,448			29,865			142,765
Depreciation and amortization (including impairments)	536,053			823,286			1,827,285			2,138,800
	1,912,243			2,201,946			5,958,013			6,323,189
Operating income	505,558			120,575			1,153,655			623,953
Other income (expense):
Interest expense (including $90,405 related to affiliates and related parties in 2017) (See Note 9)	(389,594		)	(379,066		)	(1,157,395		)	(1,232,730		)
Interest income	1,427			961			9,843			1,373
Gain (loss) on investments and sale of affiliate interests, net	111,684			(18,900		)	(182,031		)	169,888
Gain (loss) on derivative contracts, net	(79,628		)	(16,763		)	130,883			(154,270		)
Gain (loss) on interest rate swap contracts	(19,554		)	1,051			(64,405		)	12,539
Loss on extinguishment of debt and write-off of deferred financing costs (including $513,723 related to affiliates and related parties in 2017) (See Note 9)	—			(38,858		)	(41,616		)	(600,240		)
Other expense, net	(186		)	(2,984		)	(12,473		)	(9,019		)
	(375,851		)	(454,559		)	(1,317,194		)	(1,812,459		)
Income (loss) before income taxes	129,707			(333,984		)	(163,539		)	(1,188,506		)
Income tax benefit (expense)	(95,968		)	141,550			(29,675		)	439,945
Net income (loss)	33,739			(192,434		)	(193,214		)	(748,561		)
Net income attributable to noncontrolling interests	(1,186		)	(135		)	(1,039		)	(737		)
Net income (loss) attributable to Altice USA, Inc. stockholders	$	32,553		$	(192,569	)	$	(194,253	)	$	(749,298	)
INCOME (LOSS) PER SHARE:
Basic income (loss) per share attributable to Altice USA, Inc. stockholders:
Net income (loss)	$	0.04		$	(0.26	)	$	(0.26	)	$	(1.10	)
Basic weighted average common shares (in thousands)	732,963			$	737,069		735,685			682,234
Diluted income (loss) per share attributable to Altice USA, Inc. stockholders:
Net income (loss)	$	0.04		$	(0.26	)	$	(0.26	)	$	(1.10	)
Diluted weighted average common shares (in thousands)	732,963			737,069			735,685			682,234

See accompanying notes to condensed consolidated financial statements.

ALTICE USA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017

Net income (loss)	$	33,739		$	(192,434	)	$	(193,214	)	$	(748,561	)
Other comprehensive income (loss):
Defined benefit pension plans:
Unrecognized actuarial gain (loss)	9,602			(4,056		)	13,794			(8,389		)
Applicable income taxes	(2,592		)	1,622			(3,723		)	3,356
Unrecognized gain (loss) arising during period, net of income taxes	7,010			(2,434		)	10,071			(5,033		)
Settlement loss included in other expense, net	65			1,014			929			1,403
Applicable income taxes	(18		)	(406		)	(252		)	(561		)
Settlement loss included in other expense, net, net of income taxes	47			608			677			842
Curtailment loss	—			—			—			(3,195		)
Applicable income taxes	—			—			—			1,278
Curtailment loss, net of income taxes	—			—			—			(1,917		)
Foreign currency translation adjustment	437			—			1,351			—
Applicable income taxes	(27		)	—			(365		)	—
Foreign currency translation adjustment, net	410			—			986			—
Other comprehensive gain (loss)	7,467			(1,826		)	11,734			(6,108		)
Comprehensive income (loss)	41,206			(194,260		)	(181,480		)	(754,669		)
Comprehensive income attributable to noncontrolling interests	(1,186		)	(135		)	(1,039		)	(737		)
Comprehensive income (loss) attributable to Altice USA, Inc. stockholders	$	40,020		$	(194,395	)	$	(182,519	)	$	(755,406	)

See accompanying notes to condensed consolidated financial statements.



ALTICE USA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (In thousands) (Unaudited)
	Class A Common Stock			Class B Common Stock			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity			Non-controlling Interest		Total Equity
Balance at January 1, 2018, as reported	$	2,470		$	4,901		$	4,642,128		$	854,824		$	(10,022	)	$	5,494,301		$	1,539	$	5,495,840
Impact of change in accounting policies (See Note 3)	—			—			—			12,666			—			12,666			—		12,666
Impact of ATS Acquisition (See Note 3)	—			—			23,101			(26,854		)	—			(3,753		)	—		(3,753		)
Balance at January 1, 2018, as adjusted	2,470			4,901			4,665,229			840,636			(10,022		)	5,503,214			1,539		5,504,753
Net loss attributable to stockholders	—			—			—			(194,253		)	—			(194,253		)	—		(194,253		)
Net loss attributable to noncontrolling interests	—			—			—			—			—			—			1,039		1,039
Contributions from noncontrolling interests	—			—			—			—			—			—			5,995		5,995
Pension liability adjustments, net of income taxes	—			—			—			—			10,748			10,748			—		10,748
Foreign currency translation adjustment	—			—			—			—			986			986			—		986
Share-based compensation expense	—			—			46,176			—			—			46,176			—		46,176
Redeemable equity vested	—			—			124,415			—			—			124,415			—		124,415
Change in redeemable equity	—			—			(72,924		)	—			—			(72,924		)	—		(72,924		)
Dividend payment	—			—			(963,711		)	(536,224		)	—			(1,499,935		)	—		(1,499,935		)
Class A shares acquired through share repurchase program and retired	(133		)	—			(240,666		)	—			—			(240,799		)	—		(240,799		)
Conversion of Class B to Class A shares, including $2,424 in connection with the Distribution	2,770			(2,770		)	—			—			—			—			—		—
Impact of i24 Acquisition	—			—			61,049			(73,578		)	(1,840		)	(14,369		)			(14,369		)
Other changes to equity	—			—			(859		)	—			—			(859		)	—		(859		)
Adoption of ASU No. 2018-02	—			—			—			2,163			(2,163		)	—			—		—
Balance at September 30, 2018	$	5,107		$	2,131		$	3,618,709		$	38,744		$	(2,291	)	$	3,662,400		$	8,573	$	3,670,973

See accompanying notes to condensed consolidated financial statements.

ALTICE USA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

	Nine Months Ended September 30,
	2018			2017
Cash flows from operating activities:
Net loss	$	(193,214	)	$	(748,561	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization (including impairments)	1,827,285			2,138,800
Equity in net loss of affiliates	10,849			5,697
Loss (gain) on investments and sale of affiliate interests, net	182,031			(169,888		)
Loss (gain) on derivative contracts, net	(130,883		)	154,270
Loss on extinguishment of debt and write-off of deferred financing costs	41,616			600,240
Amortization of deferred financing costs and discounts (premiums) on indebtedness	60,526			18,517
Settlement loss related to pension plan	929			1,403
Share-based compensation expense	46,176			40,932
Deferred income taxes	14,399			(470,841		)
Provision for doubtful accounts	50,643			54,501
Change in assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable, trade	(111,446		)	(45,493		)
Other receivables	(138		)	(5,520		)
Prepaid expenses and other assets	(41,890		)	(816		)
Amounts due from and due to affiliates	7,203			(40,355		)
Accounts payable	85,497			53,433
Accrued liabilities	(198,196		)	(303,717		)
Deferred revenue	56,326			9,382
Liabilities related to interest rate swap contracts	62,549			(9,552		)
Net cash provided by operating activities	1,770,262			1,282,432
Cash flows from investing activities:
Capital expenditures	(832,824		)	(718,919		)
Payments for acquisitions, net of cash acquired	(10,753		)	(43,608		)
Sale of affiliate interest	(3,537		)	—
Settlement of put call options	—			(24,039		)
Proceeds related to sale of equipment, including costs of disposal	7,802			3,398
Increase in other investments	(2,500		)	(4,800		)
Additions to other intangible assets	(584		)	(1,700		)
Net cash used in investing activities	(842,396		)	(789,668		)

See accompanying notes to condensed consolidated financial statements.

ALTICE USA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (In thousands)

	Nine Months Ended September 30,
	2018			2017
Cash flows from financing activities:
Proceeds from credit facility debt, net of discounts	$	2,217,500		$	5,602,425
Repayment of credit facility debt	(635,738		)	(3,684,668		)
Issuance of senior notes and debentures	2,050,000			—
Redemption of senior notes, including premiums and fees	(2,623,756		)	(1,729,400		)
Proceeds from collateralized indebtedness, net	516,513			662,724
Repayment of collateralized indebtedness and related derivative contracts, net	(516,513		)	(654,989		)
Dividends to stockholders	(1,499,935		)	(919,317		)
Proceeds from notes payable	15,955			24,649
Repayment of notes payable	(14,089		)	—
Principal payments on capital lease obligations	(8,581		)	(11,518		)
Purchase of shares of Altice USA, Inc. Class A common stock, pursuant to a share repurchase program	(226,803		)	—
Additions to deferred financing costs	(21,570		)	(9,486		)
Other	(859		)	—
Contingent payment for acquisition	(30,000		)	—
Contributions from noncontrolling interests, net	5,995			50,800
Proceeds from IPO, net of fees	—			348,460
Net cash used in financing activities	(771,881		)	(320,320		)
Net increase in cash and cash equivalents	155,985			172,444

Effect of exchange rate changes on cash and cash equivalents	376			—
Net increase in cash and cash equivalents	156,361			172,444
Cash, cash equivalents and restricted cash at beginning of year	330,100			503,093
Cash, cash equivalents and restricted cash at end of period	$	486,461		$	675,537

See accompanying notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

NOTE 1. DESCRIPTION OF BUSINESS AND RELATED MATTERS

The Company and Related Matters

Altice USA, Inc. ("Altice USA" or the "Company") was incorporated in Delaware on September 14, 2015. Prior to the Altice N.V. distribution discussed below, Altice USA was majority-owned by Altice N.V., a public company with limited liability (naamloze vennootshcap) under Dutch law. Since the completion of the Altice N.V. distribution discussed below, the Company is no longer majority-owned by Altice N.V. Altice N.V. changed its name to Altice Europe N.V. ("Altice Europe") upon completion of the distribution.

The Company provides broadband communications and video services in the United States. It delivers broadband, pay television, telephony services, proprietary content and advertising services to residential and business customers.

Altice N.V., through a subsidiary, acquired Cequel Corporation ("Cequel" or "Suddenlink") on December 21, 2015 (the "Cequel Acquisition") and Cequel was contributed to Altice USA on June 9, 2016. Altice USA acquired Cablevision Systems Corporation ("Cablevision" or "Optimum") on June 21, 2016 (the "Cablevision Acquisition").

The Company classifies its operations into two reportable segments: Cablevision, which operates in the New York metropolitan area, and Cequel, which principally operates in markets in the south-central United States.

The accompanying condensed combined consolidated financial statements ("condensed consolidated financial statements") include the accounts of the Company and all subsidiaries in which the Company has a controlling interest and gives effect to the ATS Acquisition and the i24 Acquisition discussed below on a combined basis. All significant inter-company accounts and transactions have been eliminated in consolidation.

The accompanying condensed consolidated operating results for the three and nine months ended September 30, 2017 reflect the retrospective adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers and ASU No. 2017-07 Compensation-Retirement Benefits (Topic 715). See Note 3 for further details of the impact on the Company's historical financial statements.

In June 2017, the Company completed its initial public offering ("IPO") of 71,724,139 shares of its Class A common stock. The Company’s Class A common stock began trading on June 22, 2017, on the New York Stock Exchange under the symbol "ATUS".

Acquisition of Altice Technical Services US Corp

ATS was formed in 2017 to provide network construction and maintenance services and commercial and residential installations, disconnections, and maintenance. 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. A substantial portion of the Cequel segment technical workforce became employees of ATS in December 2017.

In January 2018, the Company acquired 70% of the equity interests in Altice Technical Services US Corp. ("ATS") for $1.00 (the "ATS Acquisition") and the Company became the owner of 100% of the equity interests in ATS in March 2018. ATS was previously owned by Altice N.V. and a member of ATS's management through a holding company. As the acquisition was a combination of businesses under common control, the Company combined the results of operations and related assets and liabilities of ATS for all periods since its formation. See Note 3 for the impact of the ATS Acquisition on the Company's condensed consolidated balance sheet as of December 31, 2017 and on the Company's statement of operations for the three and nine months ended September 30, 2017.

Acquisition of i24NEWS

In April 2018, Altice N.V. transferred its ownership of i24 US and i24 Europe ("i24NEWS"), Altice N.V.'s 24/7 international news and current affairs channels to the Company for minimal consideration (the "i24 Acquisition"). As the acquisition was a combination of businesses under common control, the Company combined the results of operations and related assets and liabilities of i24NEWS as of April 1, 2018. Operating results for periods prior to April 1, 2018 and the balance sheet as of December 31, 2017 have not been revised to reflect the i24 Acquisition as the impact was deemed immaterial.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Altice N.V. Distribution

On June 8, 2018, Altice N.V. distributed substantially all of its equity interest in the Company through a distribution in kind to holders of Altice N.V.'s common shares A and common shares B (the “Distribution”). The Distribution took place by way of a special distribution in kind by Altice N.V. of its 67.2% interest in the Company to Altice N.V. shareholders. Each shareholder of Altice N.V. on May 23, 2018, the Distribution record date, received 0.4163 shares of the Company's common stock for every share held by such shareholder in Altice N.V. Between May 24, 2018 and June 4, 2018, each Altice N.V. shareholder was given the opportunity to elect the percentage of shares of the Company's Class A common stock and shares of the Company's Class B common stock such shareholder would receive in the Distribution, whereby the number of shares of the Company's Class B common stock to be distributed was subject to a cap of 50% of the total shares of the Company's common stock being distributed (the “Class B Cap”). Because the Class B Cap had been exceeded, the shares of the Company's Class B common stock delivered to Altice N.V.’s shareholders of record who elected to receive them were subject to proration, and such shareholders received shares of the Company's Class A common stock.

Immediately following the Distribution, there were 489,384,523 shares of Altice USA Class A common stock and 247,684,443 shares of Altice USA Class B common stock outstanding.

Prior to Altice N.V.'s announcement of the Distribution, the Board of Directors of Altice USA, acting through its independent directors, approved the payment of a $2.035 dividend to all shareholders of record on May 22, 2018. The payment of the dividend, aggregating $1,499,935, was made on June 6, 2018, and was funded with cash at CSC Holdings LLC, a wholly-owned subsidiary of Cablevision, from financings completed in January 2018, and cash generated from operations at Cequel. In connection with the payment of the dividend, the Company recorded a decrease in retained earnings of $536,224, representing the cumulative earnings through the payment date, and a decrease in paid in capital of $963,711.

In connection with the Distribution, the Management Advisory and Consulting Services Agreement with Altice N.V. which provided certain consulting, advisory and other services was terminated. Compensation under the terms of the agreement was an annual fee of $30,000 paid by the Company.

In addition, the Board of Directors of Altice USA also authorized a share repurchase program of $2.0 billion, effective June 8, 2018. Under the repurchase program, shares of Altice USA Class A common stock may be purchased from time to time in the open market and may include trading plans entered into with one or more brokerage firms in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. Size and timing of these purchases will be determined based on market conditions and other factors.

From inception through September 30, 2018, the Company repurchased an aggregate of 13,219,909 shares for a total purchase price of approximately $240,799. These acquired shares were retired and the cost for these shares was recorded in paid in capital in the Company's condensed consolidated balance sheet. As of September 30, 2018, the Company had approximately $1,759,201 of availability remaining under its stock repurchase program and had 723,849,057 combined Class A and Class B shares outstanding.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all the information and notes required for complete annual financial statements.

The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 and the Company's financial statements and notes thereto included on Form 8-K filed on May 21, 2018.

The financial statements presented in this report are unaudited; however, in the opinion of management, such financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

The results of operations for the interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2018.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The primary provision of ASU No. 2018-02 allows for the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. ASU No. 2018-02 also requires certain disclosures about stranded tax effects. ASU No. 2018-02 is effective for the Company on January 1, 2019, with early adoption permitted and will be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company elected to adopt ASU No. 2018-02 during the first quarter of 2018. The adoption resulted in the reclassification of stranded tax amounts of $2,163 associated with net unrecognized losses from the Company's pension plans from accumulated other comprehensive loss to retained earnings.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718). ASU No. 2017-09 provides clarity and guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU No. 2017-09 was adopted by the Company on January 1, 2018 and it had no impact to the Company's condensed consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715). ASU No. 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. It also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and what component of net benefit cost is eligible for capitalization. ASU No. 2017‑07 was adopted by the Company on January 1, 2018 and was applied retrospectively. As a result of the adoption, the Company reclassified the non-service cost components of the Company's pension expense for the three and nine months ended September 30, 2017 from other operating expenses to other income (expense), net. The Company elected to apply the practical expedient which allowed it to reclassify amounts disclosed previously in the benefits plan note as the basis for applying retrospective presentation for comparative periods, as the Company determined it was impracticable to disaggregate the cost components for amounts capitalized and amortized in those periods. See Note 3 for information on the impact of the adoption of ASU No. 2017-07.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business, which amends Topic 805 to interpret the definition of a business by adding guidance to assist in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company adopted the new guidance on January 1, 2018 and it had no impact to the Company's condensed consolidated financial statements.

In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in order to clarify the Codification and to correct any unintended application of the guidance. The amendments in this update affected the guidance in ASC 606. ASC 606 was adopted by the Company on January 1, 2018 on a full retrospective basis, which required the Company to reflect the impact of the updated guidance for all periods presented. The adoption of ASC 606 did not have a material impact on the Company’s financial position or results of operations. See Note 3 for information on the impact of the adoption of ASC 606.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that the statement of cash flows disclose the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. ASU No. 2016-18 provides specific guidance on the presentation of restricted cash in the statement of cash flows. ASU No. 2016-18 was adopted by the Company on January 1, 2018 and was applied retrospectively for all periods presented.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU No. 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The Company adopted the new guidance on January 1, 2018 and it had no impact to the Company's condensed consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 modifies how entities measure certain equity investments and also modifies the recognition of changes in the fair value of financial liabilities measured under the fair value option. Entities will be required to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. For financial liabilities measured using the fair value option, entities will be required to record changes in fair value caused by a change in instrument-specific credit risk (own credit risk) separately in other comprehensive income. ASU No. 2016-01 was adopted by the Company on January 1, 2018 and it had no impact to the Company's condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASC 606"), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASC 606 replaced most existing revenue recognition guidance in GAAP (See Note 3).

Recently Issued But Not Yet Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans, which amends ASC 715 to clarify certain disclosure requirements related to defined benefit pension and other postretirement plans. ASU 2018-14 becomes effective for the Company on January 1, 2022, although early adoption is permitted. The Company does not expect the adoption of ASU 2017-14 to have a material impact on its consolidated financial statements.

Also in August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs in a Cloud Computing Arrangement That Is a Service Contract, which requires upfront implementation costs incurred in a cloud computing arrangement (or hosting arrangement) that is a service contract to be amortized to hosting expense over the term of the arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. ASU No. 2018-14 becomes effective for the Company on January 1, 2020, although early adoption is permitted. The Company is currently in the process of evaluating the impact that the adoption of ASU No. 2018-15 will have on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350). ASU No. 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two‑step impairment test. The amendment requires an entity to perform its annual, or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 becomes effective for the Company on January 1, 2020 with early adoption permitted and will be applied prospectively.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019. Although the Company has not yet completed its evaluation of the guidance, or quantified its impact, the Company believes the most significant impact will be the recognition of right of use assets and liabilities on its consolidated balance sheet. The Company expects its lease obligations designated as operating leases will be reported on the consolidated balance sheets upon adoption. The Company is also evaluating other potential lease arrangements of the business, including arrangements that have been previously disclosed as a contractual commitment. The Company is currently in the process of collecting and validating lease data and implementing a software solution. In addition, the Company is assessing practical expedients and policy elections offered by the standard, and is evaluating its processes and internal controls to meet the accounting, reporting and disclosure requirements.

Reclassifications

Certain reclassifications have been made to the 2017 financial statements to conform to the 2018 presentation.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

NOTE 3. CHANGE IN ACCOUNTING POLICIES AND ATS ACQUISITION

Adoption of ASC 606 - Revenue from Contracts with Customers

On January 1, 2018, the Company adopted the guidance pursuant to ASC 606. The Company elected to apply the guidance on a full retrospective basis, which required the Company to reflect the impact of the updated guidance for all periods presented. The adoption of the guidance resulted in the deferral of certain installation revenue, the deferral of certain commission expenses, and a reduction of revenue due to the reclassification of certain third party giveaways and incentives from operating expense. Additionally, the Company made changes in the composition of revenue resulting from the allocation of value related to bundled services sold to residential customers at a discount.

Installation Services Revenue

Pursuant to ASC 606, the Company's installation services revenue is deferred and recognized over the benefit period. For residential customers, the benefit period is less than one year. For business and wholesale customers, the benefit period is the contract term. Prior to the adoption of ASC 606, the Company recognized installation services revenue for residential and small and medium-sized business ("SMB") customers when installations were completed. As a result of the deferral of installation services revenue for residential and SMB customers, the Company recognized contract liabilities of $6,978 and recorded a cumulative effect adjustment of $5,093 (net of tax of $1,885) to retained earnings. The accounting for installation services revenue related to business and wholesale customers has not changed.

Commission Expenses

Pursuant to ASC 606, the Company defers commission expenses related to obtaining a contract with a customer when the expected period of benefit is greater than one year and amortizes these costs over the average contract term. For commission expenses related to customer contracts with a term of one year or less, the Company is utilizing the practical expedient and is recognizing the costs when incurred. Prior to the adoption of ASC 606, the Company recognized commission expenses related to the sale of its services when incurred. As a result of the change in the timing of recognition of these commission expenses, the Company recognized contract assets of $24,329 and recorded a cumulative effect adjustment of $17,759 (net of tax of $6,570) to retained earnings.

Third Party Product Giveaways and Incentives

When the Company acts as the agent in providing certain product giveaways or incentives, revenue is recorded net of the costs of the giveaways and incentives. For the three and nine months ended September 30, 2017, costs of $4,094 and $13,490, respectively for the giveaways and incentives recorded in other operating expense have been reclassified to revenue.

Bundled Services

The Company provides bundled services at a discounted rate to its customers. Under ASC 606, revenue should be allocated to separate performance obligations within a bundled offering based on the relative stand-alone selling price of each service within the bundle. In connection with the adoption of ASC 606, the Company revised the amounts allocated to each performance obligation within its bundled offerings which reduced previously reported revenue for telephony services and increased previously reported revenue allocated to pay television and broadband services.

Adoption of ASU No. 2017-07 - Compensation-Retirement Benefits (Topic 715)

On January 1, 2018, the Company adopted the guidance pursuant to ASU No. 2017‑07. ASU No. 2017‑07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. In connection with the adoption of ASU No. 2017‑07, the Company retroactively reclassified certain pension costs from other operating expenses to other income (expense), net. The adoption of ASU No. 2017-07 had no impact on the Company's condensed consolidated balance sheet.

Acquisition of ATS

As discussed in Note 1, the Company completed the ATS Acquisition in the first quarter of 2018. ATS was previously owned by Altice N.V. and a member of ATS's management through a holding company. As the acquisition is a combination of businesses under common control, the Company combined the results of operations and related assets and liabilities

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

of ATS for all periods since the formation of ATS, including goodwill of $23,101, representing the amount previously transferred to ATS.

The following table summarizes the impact of adopting ASC 606 and the impact of the ATS Acquisition on the Company's condensed consolidated balance sheet:



	December 31, 2017
	As Reported		Impact of ASC 606		Impact of ATS Acquisition			As Adjusted
Cash and cash equivalents	$	273,329	$	—	$	56,519		$	329,848
Other current assets	580,231		14,068		(20,548		)	573,751
Property, plant and equipment, net	6,063,829		—		(40,003		)	6,023,826
Goodwill	7,996,760		—		23,101			8,019,861
Other assets, long-term	19,861,076		10,261		(6,541		)	19,864,796
Total assets	$	34,775,225	$	24,329	$	12,528		$	34,812,082
Current liabilities	$	2,492,983	$	6,978	$	20,401		$	2,520,362
Deferred tax liability, long-term	4,775,115		4,685		(10,514		)	4,769,286
Liabilities, long-term	21,779,997		—		6,394			21,786,391
Total liabilities	29,048,095		11,663		16,281			29,076,039
Redeemable equity	231,290		—		—			231,290
Paid-in capital	4,642,128		—		23,101			4,665,229
Retained earnings	854,824		12,666		(26,854		)	840,636
Total stockholders' equity	5,495,840		12,666		(3,753		)	5,504,753
Total liabilities and stockholders' equity	$	34,775,225	$	24,329	$	12,528		$	34,812,082

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

The following table summarizes the impact of adopting ASC 606 and ASU No. 2017-07 and the impact of the ATS Acquisition on the Company's condensed consolidated statements of operations:



	Three Months Ended September 30, 2017
	As Reported			Impact of ASC 606			Impact of ASU No. 2017-07			Impact of ATS Acquisition			As Adjusted
Residential:
Pay TV	$	1,054,392		$	15,807		$	—		$	(253	)	$	1,069,946
Broadband	646,094			12,372			—			(188		)	658,278
Telephony	204,753			(32,155		)	—			(119		)	172,479
Business services and wholesale	324,760			(118		)	—			—			324,642
Advertising	89,292			—			—			—			89,292
Other	7,884			—			—			—			7,884
Total revenue	2,327,175			(4,094		)	—			(560		)	2,322,521

Programming and other direct costs	755,101			—			—			—			755,101
Other operating expenses	560,497			(4,094		)	(2,921		)	16,629			570,111
Restructuring and other expense	53,448			—			—			—			53,448
Depreciation and amortization	823,265			—			—			21			823,286
Operating income	134,864			—			2,921			(17,210		)	120,575
Other expense, net	(451,638		)	—			(2,921		)	—			(454,559		)
Loss before income taxes	(316,774		)	—			—			(17,210		)	(333,984		)
Income tax benefit	134,688			—			—			6,862			141,550
Net loss	$	(182,086	)	$	—		$	—		$	(10,348	)	$	(192,434	)



	Nine Months Ended September 30, 2017
	As Reported			Impact of ASC 606			Impact of ASU No. 2017-07			Impact of ATS Acquisition			As Adjusted
Residential:
Pay TV	$	3,185,610		$	39,630		$	—		$	(253	)	$	3,224,987
Broadband	1,887,279			39,725			—			(188		)	1,926,816
Telephony	624,077			(92,257		)	—			(119		)	531,701
Business services and wholesale	968,291			(588		)	—			—			967,703
Advertising	270,154			—			—			—			270,154
Other	25,781			—			—			—			25,781
Total revenue	6,961,192			(13,490		)	—			(560		)	6,947,142

Programming and other direct costs	2,272,147			—			—			—			2,272,147
Other operating expenses	1,767,624			(13,490		)	(9,852		)	25,195			1,769,477
Restructuring and other expense	142,765			—			—			—			142,765
Depreciation and amortization	2,138,776			—			—			24			2,138,800
Operating income	639,880			—			9,852			(25,779		)	623,953
Other expense, net	(1,802,608		)	—			(9,852		)	1			(1,812,459		)
Loss before income taxes	(1,162,728		)	—			—			(25,778		)	(1,188,506		)
Income tax benefit	429,664			—			—			10,281			439,945
Net loss	$	(733,064	)	$	—		$	—		$	(15,497	)	$	(748,561	)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

NOTE 4. NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO STOCKHOLDERS

Basic net income (loss) per common share attributable to Altice USA stockholders is computed by dividing net income (loss) attributable to Altice USA stockholders by the weighted average number of common shares outstanding during the period. Diluted income per common share attributable to Altice USA stockholders reflects the dilutive effects of stock options. For such awards that are performance based, the diluted effect is reflected upon the achievement of the performance criteria. Diluted net loss per common share attributable to Altice USA excludes the effects of common stock equivalents as they are anti-dilutive.

Anti-dilutive shares (options whose exercise price exceeds the average market price of the Company's common stock during the period) totaling approximately 5,841,000 shares, have been excluded from diluted weighted average shares outstanding when calculating diluted net income per share attributable to Altice USA stockholders for the three months ended September 30, 2018. In addition, approximately 73,000 performance based options for the three months ended September 30, 2018, issued pursuant to the Company's employee stock plan have also been excluded from the diluted weighted average shares outstanding as the performance criteria on these awards had not yet been satisfied for the respective period.

The weighted average number of shares used to compute basic and diluted net loss per share for the nine months ended September 30, 2017 reflect the retroactive impact of certain organizational transactions that occurred prior to the Company's IPO.

NOTE 5. REVENUE AND CONTRACT ASSETS

Revenue Recognition

Residential Services

The Company derives revenue through monthly charges to residential customers of its pay television, broadband, and telephony services, including installation services. In addition, the Company derives revenue from digital video recorder ("DVR"), video-on-demand ("VOD"), pay-per-view, home shopping commissions and equipment fees which are reflected in "Residential pay TV" revenues. The Company recognizes pay television, broadband, and telephony revenues as the services are provided to a customer on a monthly basis. Revenue from the sale of bundled services at a discounted rate is allocated to each product based on the standalone selling price of each performance obligation within the bundled offer. The relative standalone selling price requires judgment and is typically determined based on the current prices at which the separate services are sold by the Company. Installation revenue for the Company's residential services is deferred and recognized over the benefit period, which is estimated to be less than one year. The estimated benefit period takes into account both quantitative and qualitative factors including the significance of average installation fees to total recurring revenue per customer.

The Company is assessed non-income related taxes by governmental authorities, including franchising authorities (generally under multi-year agreements), and collects such taxes from its customers. In instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customers are recorded as revenue. For the three and nine months ended September 30, 2018 the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $63,703 and $190,895, respectively. For the three and nine months ended September 30, 2017 the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $64,254 and $194,045, respectively.

Business and Wholesale Services

The Company derives revenue from the sale of products and services to both large enterprise and SMB customers, including broadband, telephony, networking, and pay television services reflected in "Business services and wholesale" revenues. The Company's business services also include Ethernet, data transport, and IP-based virtual private networks. The Company also provides managed services to businesses, including hosted telephony services (cloud based SIP-based private branch exchange), managed Wi-Fi, managed desktop and server backup and managed collaboration services including audio and web conferencing. The Company also offers fiber-to-the-tower services to wireless carriers for cell tower backhaul and enable wireline communications service providers to connect to customers that their own networks

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

do not reach. The Company recognizes revenues for these services as the services are provided to a customer on a monthly basis.

Substantially all of our SMB customers are billed monthly and large enterprise customers are billed in accordance with the terms of their contracts which is typically also on a monthly basis. Contracts with large enterprise customers typically range from three to five years. Installation revenue related to our large enterprise customers is deferred and recognized over the average contract term. Installation revenue related to SMB customers is deferred and recognized over the benefit period, which is less than a year. The estimated benefit period for SMB customers takes into account both quantitative and qualitative factors including the significance of average installation fees to total recurring revenue per customer.

Advertising

As part of the agreements under which the Company acquires pay television programming, the Company typically receives an allocation of scheduled advertising time during such programming into which the Company's cable systems can insert commercials. In several of the markets in which the Company operates, it has entered into agreements commonly referred to as interconnects with other cable operators to jointly sell local advertising. In some of these markets, the Company represents the advertising sales efforts of other cable operators; in other markets, other cable operators represent the Company. Advertising revenues are recognized when commercials are aired. Arrangements in which the Company controls the sale of advertising and acts as the principal to the transaction, the Company recognizes revenue earned from the advertising customer on a gross basis and the amount remitted to the distributor as an operating expense. Arrangements in which the Company does not control the sale of advertising and acts as an agent to the transaction, the Company recognizes revenue net of any fee remitted to the distributor.

The Company's advanced advertising businesses provide data-driven, audience-based advertising solutions using advanced analytics tools that provide granular measurement of consumer groups, accurate hyper-local ratings and other insights into target audience behavior not available through traditional sample-based measurement services. Revenue earned from the Company's advanced advertising businesses are recognized when services are provided.

Other

Revenues derived from other sources are recognized when services are provided or events occur.

Contract Assets

Incremental costs incurred in obtaining a contract with a customer are deferred and recorded as a contract asset if the period of benefit is expected to be greater than one year. Sales commissions for enterprise and certain SMB customers are deferred and amortized over the average contract term. For sales commission expenses related to residential and SMB customers with a term of one year or less, the Company is utilizing the practical expedient and is recognizing the costs when incurred. Cost of fulfilling a contract with a customer are deferred and recorded as a contract asset if they generate or enhance resources of the Company that will be used in satisfying future performance obligations and are expected to be recovered. Installation costs related to residential and SMB customers that are not capitalized as part of the initial deployment of new customer premise equipment are expensed as incurred pursuant to industry-specific guidance.

The following table provides information about contracts assets and contract liabilities related to contracts with customers:



	September 30, 2018		December 31, 2017, as adjusted
Contract assets (a)	$	25,806	$	24,329
Deferred revenue (b)	173,956		117,679


(a)	Contract assets include primarily sales commissions for enterprise customers that are deferred and amortized over the average contract term.


(b)	Deferred revenue represents payments received from customers for services that have yet to be provided and installation revenue which is deferred and recognized over the benefit period. The majority of the Company's deferred revenue represents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

payments for services for up to one month in advance from residential and SMB customers which is realized within the following month as services are performed.

A significant portion of our revenue is derived from residential and SMB customer contracts which are month-to month. As such, the amount of revenue related to unsatisfied performance obligations is not necessarily indicative of the future revenue to be recognized from our existing customer base. Contracts with enterprise and wholesale customers generally range from three to five years, and services may only be terminated in accordance with the contractual terms.

NOTE 6. SUPPLEMENTAL CASH FLOW INFORMATION

The Company considers the balance of its investment in funds that substantially hold securities that mature within three months or less from the date the fund purchases these securities to be cash equivalents. The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.

The Company's non-cash investing and financing activities and other supplemental data were as follows:



	Nine Months Ended September 30,
	2018		2017
Non-Cash Investing and Financing Activities:
Continuing Operations:
Conversion of notes payable to affiliates and related parties of $1,750,000 (together with accrued and unpaid interest and applicable premium) to common stock (See Note 9)	$	—	$	2,264,252
Property and equipment accrued but unpaid	166,800		84,847
Notes payable issued to vendor for the purchase of equipment	49,780		25,879
Capital lease obligations	8,162		—
Leasehold improvements paid by landlord	350		3,998
Deferred financing costs accrued but unpaid	1,006		—
Contingent consideration for acquisitions	6,733		30,000
Receivable related to the sale of an investment	11,954		—
Unsettled purchases of shares of Altice USA, Inc. Class A common stock, pursuant to a share repurchase program	13,996		—
Supplemental Data:
Cash interest paid	1,174,154		1,481,363
Income taxes paid, net	12,148		26,396

The Company’s previously reported statement of cash flows for the three months ended March 31, 2017 reflected distributions to stockholders of $79,617 in cash flows from operating activities. These distributions should have been reflected in cash flows from financing activities.

NOTE 7. RESTRUCTURING COSTS AND OTHER EXPENSE

Restructuring

Beginning in the first quarter of 2016, the Company commenced restructuring initiatives that were intended to simplify the Company's organizational structure.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)



The following table summarizes the activity for these initiatives during 2018:
	Severance and Other Employee Related Costs			Facility Realignment and Other Costs			Total
Accrual balance at December 31, 2017	$	113,474		$	9,626		$	123,100
Restructuring charges	4,182			3,334			7,516
Payments and other	(65,692		)	(5,853		)	(71,545		)
Accrual balance at June 30, 2018	51,964			7,107			59,071
Restructuring charges	5,841			8,826			14,667
Payments and other	(24,991		)	(2,613		)	(27,604		)
Accrual balance at September 30, 2018	$	32,814		$	13,320		$	46,134

The Company recorded restructuring charges of $52,081 and $141,078 for the three and nine months ended September 30, 2017 relating to these restructuring initiatives.

Cumulative costs to date relating to these initiatives amounted to $327,521 and $71,162 for our Cablevision and Cequel segments, respectively.

Transaction Costs

The Company incurred transaction costs of $1,920 and $7,682 for the three and nine months ended September 30, 2018 relating to the Distribution discussed in Note 1 and $1,367 and $1,687 for the three and nine months ended September 30, 2017 related to the acquisition of a business.

NOTE 8. INTANGIBLE ASSETS

The following table summarizes information relating to the Company's acquired amortizable intangible assets:



	September 30, 2018							December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Estimated Useful Lives

Customer relationships	$	5,970,884	$	(1,979,595	)	$	3,991,289	$	5,970,884	$	(1,409,021	)	$	4,561,863	8 to 18 years
Trade names	1,067,083		(678,248		)	388,835		1,067,083		(588,574		)	478,509		2 to 5 years
Other amortizable intangibles	37,644		(16,772		)	20,872		37,060		(10,978		)	26,082		1 to 15 years
	$	7,075,611	$	(2,674,615	)	$	4,400,996	$	7,075,027	$	(2,008,573	)	$	5,066,454

Amortization expense for the three and nine months ended September 30, 2018 aggregated $208,172 and $666,041, respectively, and for the three and nine months ended September 30, 2017 aggregated $426,419 and $981,657, respectively.

The following table summarizes information relating to the Company's acquired indefinite-lived intangible assets:



	September 30, 2018						December 31, 2017
	Cablevision		Cequel		Total		Cablevision		Cequel		Total
Cable television franchises	$	8,113,575	$	4,906,506	$	13,020,081	$	8,113,575	$	4,906,506	$	13,020,081
Goodwill	5,873,716		2,138,700		8,012,416		5,866,120		2,153,741		8,019,861
Total	$	13,987,291	$	7,045,206	$	21,032,497	$	13,979,695	$	7,060,247	$	21,039,942

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

The carrying amount of goodwill is presented below:



Gross goodwill as of December 31, 2017, as reported	$	7,996,760
ATS goodwill included in Cablevision segment (See Note 3 for further details)	23,101
Gross goodwill as of December 31, 2017, as adjusted	8,019,861
Goodwill recorded in Cablevision segment in connection with an acquisition during the third quarter of 2018	7,608
Adjustment to Cablevision segment purchase accounting relating to business acquired in fourth quarter of 2017	(12		)
Reclassification of Cequel segment goodwill to property, plant and equipment	(15,041		)
Net goodwill as of September 30, 2018	$	8,012,416

NOTE 9. DEBT

The following table provides details of the Company's outstanding credit facility debt:



				September 30, 2018				December 31, 2017
	Maturity Date	Interest Rate		Principal Amount		Carrying Amount (a)		Principal Amount		Carrying Amount (a)
CSC Holdings Restricted Group:
Revolving Credit Facility (b)	$20,000 on October 9, 2020, remaining balance on November 30, 2021	5.40	%	$	575,000	$	554,908	$	450,000	$	425,488
Term Loan Facility	July 17, 2025	4.41	%	2,962,500		2,946,318		2,985,000		2,967,818
Incremental Term Loan Facility	January 25, 2026	4.66	%	1,496,250		1,478,995		—		—
Cequel:
Revolving Credit Facility (c)	$65,000 on November 30, 2021, and remaining balance on April 5, 2023	—	%	—		—		—		—
Term Loan Facility	July 28, 2025	4.49	%	1,249,188		1,241,272		1,258,675		1,250,217
				$	6,282,938	6,221,493		$	4,693,675	4,643,523
Less: Current portion						57,650				42,650
Long-term debt						$	6,163,843			$	4,600,873


(a)	The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums.


(b)	At September 30, 2018, $139,929 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $1,585,071 of the facility was undrawn and available, subject to covenant limitations.


(c)	At September 30, 2018, $7,636 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $342,364 of the facility was undrawn and available, subject to covenant limitations.

In January 2018, CSC Holdings borrowed $150,000 under its revolving credit facility and entered into a new $1,500,000 incremental term loan facility (the "Incremental Term Loan") under its existing credit facilities agreement. The Incremental Term Loan was priced at 99.5% and will mature on January 25, 2026. The Incremental Term Loan is comprised of eurodollar borrowings or alternate base rate borrowings, and bears interest at a rate per annum equal to the adjusted LIBO rate or the alternate base rate, as applicable, plus the applicable margin, where the applicable margin is (i) with respect to any alternate base rate loan, 1.50% per annum and (ii) with respect to any eurodollar loan, 2.50% per annum.

The Company made a voluntary repayment of $600,000 under the CSC Holdings revolving credit facility in January 2018.

On March 22, 2018, Altice US Finance I Corporation, an indirect wholly-owned subsidiary of the Company, entered into a Fourth Amendment to the Cequel Credit Agreement (Extension Amendment), by and among the borrower, the Revolving Consent Lenders (as defined in the Fourth Amendment) and JPMorgan Chase Bank, N.A., as administrative agent for the lenders (the “Fourth Amendment”). The Fourth Amendment amends and supplements the Borrower’s

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

credit agreement, dated as of June 12, 2015, as amended by the first amendment (refinancing amendment), dated as of October 25, 2016, the second amendment (extension amendment), dated as of December 9, 2016, and the third amendment (incremental loan assumption agreement and refinancing amendment), dated as of March 15, 2017, as so amended and as may be further amended, restated, modified or supplemented from time to time and as further amended by the Fourth Amendment among, inter alios, the borrower, the lenders party thereto and the administrative agent.

The Fourth Amendment extends the maturity date of the revolving loans and/or commitments of the Revolving Consent Lenders to April 5, 2023. The Fourth Amendment and the extended maturity date will not apply to the revolving loans and/or commitments of revolving lenders under the Cequel Credit Agreement that are not Revolving Consent Lenders.

In July 2018, the Company borrowed $575,000 under the CSC Holdings revolving credit facility agreement and used a portion of the proceeds to repay the $500,000 principal amount of senior notes due July 15, 2018.

As of September 30, 2018, the Company was in compliance with all of its financial covenants under the CSC Holdings credit facilities agreement and the Cequel credit facilities agreement.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Senior Guaranteed Notes, Senior Secured Notes and Senior Notes and Debentures

The following table summarizes the Company's senior guaranteed notes, senior secured notes and senior notes and debentures:



							September 30, 2018				December 31, 2017
Date Issued	Maturity Date	Interest Rate					Principal Amount		Carrying Amount (a)		Principal Amount		Carrying Amount (a)
CSC Holdings Senior Notes:
February 6, 1998	February 15, 2018	7.875	%	(b)	(f)	(o)	$	—	$	—	$	300,000	$	301,184
July 21, 1998	July 15, 2018	7.625	%	(b)	(f)	(q)	—		—		500,000		507,744
February 12, 2009	February 15, 2019	8.625	%	(c)	(f)		526,000		531,206		526,000		541,165
November 15, 2011	November 15, 2021	6.750	%	(c)	(f)		1,000,000		966,913		1,000,000		960,146
May 23, 2014	June 1, 2024	5.250	%	(c)	(f)		750,000		668,918		750,000		660,601
October 9, 2015	January 15, 2023	10.125	%	(e)			1,800,000		1,780,504		1,800,000		1,777,914
October 9, 2015	October 15, 2025	10.875	%	(e)			1,684,221		1,662,507		1,684,221		1,661,135
CSC Holdings Senior Guaranteed Notes:
October 9, 2015	October 15, 2025	6.625	%	(e)			1,000,000		987,707		1,000,000		986,717
September 23, 2016	April 15, 2027	5.500	%	(g)			1,310,000		1,304,816		1,310,000		1,304,468
January 29, 2018	February 1, 2028	5.375	%	(n)			1,000,000		991,896		—		—
Cablevision Senior Notes (k):
April 15, 2010	April 15, 2018	7.750	%	(c)	(f)	(o)	—		—		750,000		754,035
April 15, 2010	April 15, 2020	8.000	%	(c)	(f)		500,000		494,445		500,000		492,009
September 27, 2012	September 15, 2022	5.875	%	(c)	(f)		649,024		582,236		649,024		572,071
Cequel and Cequel Capital Senior Notes (l):
Oct. 25, 2012 Dec. 28, 2012	September 15, 2020	6.375	%	(d)	(m)		—		—		1,050,000		1,027,493
May 16, 2013 Sept. 9, 2014	December 15, 2021	5.125	%	(d)			1,250,000		1,157,405		1,250,000		1,138,870
June 12, 2015	July 15, 2025	7.750	%	(i)			620,000		605,540		620,000		604,374
April 5, 2018	April 1, 2028	7.500	%	(p)			1,050,000		1,048,222		—		—
Altice US Finance I Corporation Senior Secured Notes (l):
June 12, 2015	July 15, 2023	5.375	%	(h)			1,100,000		1,084,542		1,100,000		1,082,482
April 26, 2016	May 15, 2026	5.500	%	(j)			1,500,000		1,488,881		1,500,000		1,488,024
							$	15,739,245	15,355,738		$	16,289,245	15,860,432
Less: current portion									531,206				507,744
Long-term debt									$	14,824,532			$	15,352,688


(a)	The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums.


(b)	The debentures are not redeemable by CSC Holdings prior to maturity.


(c)	Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date.


(d)	The Company may redeem some or more of all the notes at the redemption price set forth in the relevant indenture, plus accrued and unpaid interest.


(e)	The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

the notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a “make whole” premium specified in the relevant indenture plus accrued and unpaid interest.


(f)	The carrying value of the notes was adjusted to reflect their fair value on the date of the Cablevision Acquisition (aggregate reduction of $52,788 at the date of the acquisition).

(g)

The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest.


(h)	Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any.


(i)	Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any.


(j)	Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%.


(k)	The issuers of these notes have no ability to service interest or principal on the notes, other than through any dividends or distributions received from CSC Holdings. CSC Holdings is restricted, in certain circumstances, from paying dividends or distributions to the issuers by the terms of the CSC Holdings credit facilities agreement.

(l)

The issuers of these notes have no ability to service interest or principal on the notes, other than through any contributions/distributions from Cequel Communications, LLC (an indirect subsidiary of Cequel and the parent of Altice US Finance I). Cequel Communications, LLC is restricted in certain circumstances, from paying dividends or distributions to the issuers by the terms of the Cequel credit facilities agreement.


(m)	These notes were repaid in April 2018 with the proceeds from the issuance of new senior notes.

(n)

The 2028 Guaranteed Notes are redeemable at any time on or after February 1, 2023 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% of the original aggregate principal amount of the notes may be redeemed using the proceeds of certain equity offerings before February 1, 2021, at a redemption price equal to 105.375%, plus accrued and unpaid interest.


(o)	These notes were repaid in February 2018 with the proceeds from the 2028 Guaranteed Notes (defined below) and with the proceeds from the Incremental Term Loan.

(p)

The 2028 Senior Notes are redeemable at any time prior to April 1, 2023 at a redemption price equal to 100% of the principal amount thereof plus the applicable premium plus accrued and unpaid interest, if any. Up to 40% of the original aggregate principal amount of the 2028 Senior Notes may be redeemed using the proceeds of certain equity offerings before April 1, 2021, at a redemption price equal to