atus-20200930

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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


			For the quarterly period ended			September 30, 2020


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

For the transition period from

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

☒

☐

Indicate by check mark whether the Registrant has submitted electronically 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 Registrant was required to submit such files).

Yes

☒

☐

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

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

(Do not check if a smaller reporting company)

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes

☐

☒

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	ATUS	NYSE


Number of shares of common stock outstanding as of October 23, 2020			558,409,957

ALTICE USA, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION		4

Item 1. Financial Statements

ALTICE USA, INC. AND SUBSIDIARIES
Consolidated Financial Statements
	Consolidated Balance Sheets - September 30, 2020 (Unaudited) and December 31, 2019	4
	Consolidated Statements of Operations - Three and nine months ended September 30, 2020 and 2019 (Unaudited)	6
	Consolidated Statements of Comprehensive Income - Three and nine months ended September 30, 2020 and 2019 (Unaudited)	7
	Consolidated Statements of Stockholders' Equity - Three and nine months ended September 30, 2020 and 2019 (Unaudited)	8
	Consolidated Statements of Cash Flows - Nine months ended September 30, 2020 and 2019 (Unaudited)	14
	Combined Notes to Consolidated Financial Statements (Unaudited)	24
Supplemental Financial Statements Furnished:
CSC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Financial Statements
	Consolidated Balance Sheets - September 30, 2020 (Unaudited) and December 31, 2019	16
	Consolidated Statements of Operations - Three and nine months ended September 30, 2020 and 2019 (Unaudited)	18
	Consolidated Statements of Comprehensive Income - Three and nine months ended September 30, 2020 and 2019 (Unaudited)	19
	Consolidated Statements of Member's Equity - Three and nine months ended September 30, 2020 and 2019 (Unaudited)	20
	Consolidated Statements of Cash Flows - Nine months ended September 30, 2020 and 2019 (Unaudited)	22
	Combined Notes to Consolidated Financial Statements (Unaudited)	24
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		45
Item 3. Quantitative and Qualitative Disclosures About Market Risk		64
Item 4. Controls and Procedures		65
PART II. OTHER INFORMATION		66
Item 1. Legal Proceedings		66
Item 1A. Risk Factors		66
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		67
Item 6. Exhibits		68
SIGNATURES		69

Part I. FINANCIAL INFORMATION

This Form 10-Q contains statements that constitute forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Securities Act of 1934, as amended. In this Form 10-Q there are statements concerning our future operating results and future financial performance. Words such as "expects", "anticipates", "believes", "estimates", "may", "will", "should", "could", "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. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors.

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, video 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 home communications hub;

•our ability to develop mobile voice and data services 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;

•the impact from the coronavirus ("COVID-19") pandemic;

•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; 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" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Altice USA's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") filed on February 14, 2020 (the "Annual Report") and in "Part II, Item 1A. Risk Factors" included herein.

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 CONSOLIDATED BALANCE SHEETS (In thousands)

	September 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	119,055	$	701,898
Restricted cash	865,270		262
Accounts receivable, trade (less allowance for doubtful accounts of $40,839 and $14,683)	405,005		457,118

Prepaid expenses and other current assets	215,973		215,304
Amounts due from affiliates	1,583		6,774



Total current assets	1,606,886		1,381,356
Property, plant and equipment, net of accumulated depreciation of $6,158,261 and $5,276,921	5,760,704		5,753,401

Right-of-use operating lease assets	237,497		280,340
Investment securities pledged as collateral	1,987,109		1,931,697
Derivative contracts	27,798		25,207
Other assets	89,741		92,622
Amortizable intangibles, net of accumulated amortization of $4,227,398 and $3,670,679	2,961,759		3,481,109
Indefinite-lived cable television franchises	13,068,017		13,020,081
Goodwill	8,160,501		8,142,309
Total assets	$	33,900,012	$	34,108,122

See accompanying notes to consolidated financial statements.

ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands, except share and per share amounts)


	September 30, 2020		December 31, 2019
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	837,506	$	799,618
Interest payable	223,965		385,655
Accrued employee related costs	125,052		111,337
Amounts due to affiliates	5,642		7,456
Deferred revenue	127,501		124,777
Debt	226,032		170,682
Other current liabilities	416,009		378,954
Total current liabilities	1,961,707		1,978,479

Other liabilities	230,416		204,904
Deferred tax liability	4,850,241		4,762,595
Liabilities under derivative contracts	366,814		255,666
Right-of-use operating lease liability	253,430		269,062
Long-term debt, net of current maturities	25,476,051		24,249,603
Total liabilities	33,138,659		31,720,309
Commitments and contingencies (Note 16)
Redeemable equity	16,010		108,551
Stockholders' 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, 383,862,589 shares issued and 377,121,626 shares outstanding as of September 30, 2020 and 457,207,079 shares issued and 446,749,307 shares outstanding as of December 31, 2019	3,839		4,572
Class B common stock: $0.01 par value, 1,000,000,000 shares authorized, 490,086,674 issued, 186,031,999 shares outstanding as of September 30, 2020 and 186,245,832 shares outstanding as of December 31, 2019	1,860		1,862
Class C common stock: $0.01 par value, 4,000,000,000 shares authorized, no shares issued and outstanding	—		—
Paid-in capital	405,043		2,039,918
Retained earnings	496,477		390,766
	907,219		2,437,118
Treasury stock, at cost (6,740,963 and 10,457,772 Class A common shares at September 30, 2020 and December 31, 2019, respectively)	(163,867)		(163,904)
Accumulated other comprehensive loss	(8,806)		(3,250)
Total stockholders' equity	734,546		2,269,964
Noncontrolling interest	10,797		9,298
Total stockholders' equity	745,343		2,279,262
	$	33,900,012	$	34,108,122

See accompanying notes to consolidated financial statements.

ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenue (including revenue from affiliates of $4,188, $70, $11,055, and $1,158 respectively) (See Note 15)	$	2,433,986	$	2,438,662	$	7,359,221	$	7,286,310
Operating expenses:
Programming and other direct costs (including charges from affiliates of $3,621, $3,508, $7,548 and $7,282, respectively) (See Note 15)	783,934		820,896		2,509,323		2,452,875
Other operating expenses (including charges from affiliates of $2,413, $1,602, $8,515 and $5,868, respectively) (See Note 15)	558,092		568,233		1,683,038		1,702,124
Restructuring and other expense	40,419		12,381		88,679		39,090
Depreciation and amortization (including impairments)	502,248		565,637		1,571,611		1,695,685
	1,884,693		1,967,147		5,852,651		5,889,774
Operating income	549,293		471,515		1,506,570		1,396,536
Other income (expense):
Interest expense	(322,618)		(388,800)		(1,038,854)		(1,158,301)
Interest income	164		1,524		1,974		3,948
Gain on investments and sale of affiliate interests, net	314,177		120,253		56,301		478,124
Gain (loss) on derivative contracts, net	(261,597)		(77,333)		26,203		(303,986)
Loss on interest rate swap contracts, net	(158)		(11,163)		(88,725)		(61,735)
Loss on extinguishment of debt and write-off of deferred financing costs	(250,489)		(503)		(250,489)		(159,599)
Other income (expense), net	1,685		(226)		3,277		66
	(518,836)		(356,248)		(1,290,313)		(1,201,483)
Income before income taxes	30,457		115,267		216,257		195,053
Income tax expense	(33,186)		(37,871)		(109,047)		(56,445)
Net income (loss)	(2,729)		77,396		107,210		138,608
Net income attributable to noncontrolling interests	(1,966)		(157)		(1,499)		(1)
Net income (loss) attributable to Altice USA, Inc. stockholders	$	(4,695)	$	77,239	$	105,711	$	138,607
Income (loss) per share:
Basic income (loss) per share	$	(0.01)	$	0.12	$	0.18	$	0.21
Basic weighted average common shares (in thousands)	571,031		643,797		593,262		668,929
Diluted income (loss) per share	$	(0.01)	$	0.12	$	0.18	$	0.21
Diluted weighted average common shares (in thousands)	571,031		646,006		595,479		669,855

See accompanying notes to consolidated financial statements.

ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income (loss)	$	(2,729)	$	77,396	$	107,210	$	138,608
Other comprehensive income (loss):
Defined benefit pension plans:
Unrecognized actuarial gain (loss)	5,183		(15,860)		(6,406)		(19,508)
Applicable income taxes	(1,374)		4,298		1,724		5,287
Unrecognized gain (loss) arising during period, net of income taxes	3,809		(11,562)		(4,682)		(14,221)



Settlement loss included in other expense, net	122		1,091		895		1,629
Applicable income taxes	(39)		(295)		(246)		(441)
Settlement loss included in other expense, net, net of income taxes	83		796		649		1,188



Foreign currency translation adjustment	(582)		(385)		(1,523)		(965)
Applicable income taxes	—		105		—		261
Foreign currency translation adjustment, net	(582)		(280)		(1,523)		(704)
Other comprehensive income (loss)	3,310		(11,046)		(5,556)		(13,737)
Comprehensive income	581		66,350		101,654		124,871
Comprehensive income attributable to noncontrolling interests	(1,966)		(157)		(1,499)		(1)
Comprehensive income (loss) attributable to Altice USA, Inc. stockholders	$	(1,385)	$	66,193	$	100,155	$	124,870

See accompanying notes to consolidated financial statements.


ALTICE USA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands) (Unaudited)
	Class A Common Stock		Class B Common Stock		Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity		Non-controlling Interest		Total Equity
Balance at January 1, 2020	$	4,572	$	1,862	$	2,039,918	$	390,766	$	(163,904)	$	(3,250)	$	2,269,964	$	9,298	$	2,279,262
Net loss attributable to stockholders	—		—		—		(858)		—		—		(858)		—		(858)
Net loss attributable to noncontrolling interests	—		—		—		—		—		—		—		(680)		(680)

Pension liability adjustments, net of income taxes	—		—		—		—		—		(9,503)		(9,503)		—		(9,503)
Foreign currency translation adjustment, net of income taxes	—		—		—		—		—		(424)		(424)		—		(424)
Share-based compensation expense	—		—		27,370		—		—		—		27,370		—		27,370
Redeemable equity vested	—		—		29,479		—		—		—		29,479		—		29,479
Change in redeemable equity	—		—		13,260		—		—		—		13,260		—		13,260

Class A shares acquired through share repurchase program and retired	(312)		—		(749,686)		—		—		—		(749,998)		—		(749,998)








Issuance of common shares pursuant to employee long term incentive plan	1		—		2,495		—		11		—		2,507		—		2,507



Balance at March 31, 2020	$	4,261	$	1,862	$	1,362,836	$	389,908	$	(163,893)	$	(13,177)	$	1,581,797	$	8,618	$	1,590,415

See accompanying notes to consolidated financial statements.


ALTICE USA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued) (In thousands) (Unaudited)
	Class A Common Stock		Class B Common Stock		Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity		Non-controlling Interest		Total Equity
Balance at March 31, 2020	$	4,261	$	1,862	$	1,362,836	$	389,908	$	(163,893)	$	(13,177)	$	1,581,797	$	8,618	$	1,590,415
Net income attributable to stockholders	—		—		—		111,264		—		—		111,264		—		111,264
Net income attributable to noncontrolling interests	—		—		—		—		—		—		—		213		213

Pension liability adjustments, net of income taxes	—		—		—		—		—		1,576		1,576		—		1,576
Foreign currency translation adjustment, net of income taxes	—		—		—		—		—		(517)		(517)		—		(517)
Share-based compensation expense	—		—		33,683		—		—		—		33,683		—		33,683
Redeemable equity vested	—		—		59,081		—		—		—		59,081		—		59,081
Change in redeemable equity	—		—		(8,764)		—		—		—		(8,764)		—		(8,764)

Class A shares acquired through share repurchase program and retired	(258)		—		(630,979)		—		—		—		(631,237)		—		(631,237)








Issuance of common shares pursuant to employee long term incentive plan	2		—		1,939		—		24		—		1,965		—		1,965



Balance at June 30, 2020	$	4,005	$	1,862	$	817,796	$	501,172	$	(163,869)	$	(12,118)	$	1,148,848	$	8,831	$	1,157,679

See accompanying notes to consolidated financial statements.


ALTICE USA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued) (In thousands) (Unaudited)
	Class A Common Stock		Class B Common Stock		Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity		Non-controlling Interest		Total Equity
Balance at June 30, 2020	$	4,005	$	1,862	$	817,796	$	501,172	$	(163,869)	$	(12,118)	$	1,148,848	$	8,831	$	1,157,679
Net loss attributable to stockholders	—		—		—		(4,695)		—		—		(4,695)		—		(4,695)
Net income attributable to noncontrolling interests	—		—		—		—		—		—		—		1,966		1,966

Pension liability adjustments, net of income taxes	—		—		—		—		—		3,894		3,894		—		3,894
Foreign currency translation adjustment, net of income taxes	—		—		—		—		—		(582)		(582)		—		(582)
Share-based compensation expense	—		—		34,057		—		—		—		34,057		—		34,057
Redeemable equity vested	—		—		5,219		—		—		—		5,219		—		5,219
Change in redeemable equity	—		—		(5,734)		—		—		—		(5,734)		—		(5,734)

Class A shares acquired through share repurchase program and retired	(169)		—		(448,684)		—		—		—		(448,853)		—		(448,853)
Conversion of Class B to Class A shares	2		(2)		—		—		—		—		—		—		—







Issuance of common shares pursuant to employee long term incentive plan	1		—		2,389		—		2		—		2,392		—		2,392



Balance at September 30, 2020	$	3,839	$	1,860	$	405,043	$	496,477	$	(163,867)	$	(8,806)	$	734,546	$	10,797	$	745,343

See accompanying notes to consolidated financial statements.


ALTICE USA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued) (In thousands) (Unaudited)
	Class A Common Stock		Class B Common Stock		Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity		Non-controlling Interest		Total Equity
Balance at January 1, 2019	$	4,961	$	2,130	$	3,423,803	$	251,830	$	—	$	(11,783)	$	3,670,941	$	9,295	$	3,680,236
Net loss attributable to stockholders	—		—		—		(24,999)		—		—		(24,999)		—		(24,999)
Net loss attributable to noncontrolling interests	—		—		—		—		—		—		—		(199)		(199)
Distributions to noncontrolling interests	—		—		—		—		—		—		—		(1,000)		(1,000)
Pension liability adjustments, net of income taxes	—		—		—		—		—		3,752		3,752		—		3,752
Foreign currency translation adjustment, net of income taxes	—		—		—		—		—		(181)		(181)		—		(181)
Share-based compensation expense (equity classified)	—		—		13,790		—		—		—		13,790		—		13,790
Redeemable equity vested	—		—		1,364		—		—				1,364		—		1,364
Change in redeemable equity	—		—		(61,696)		—		—		—		(61,696)		—		(61,696)
Class A shares acquired through share repurchase program and retired	(294)		—		(599,707)		—		—		—		(600,001)		—		(600,001)
Conversion of Class B to Class A shares	242		(242)		—		—		—		—		—		—		—



Balance at March 31, 2019	$	4,909	$	1,888	$	2,777,554	$	226,831	$	—	$	(8,212)	$	3,002,970	$	8,096	$	3,011,066

See accompanying notes to consolidated financial statements.

ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
(In thousands)
(Unaudited)

Class A Common Stock

Class B Common Stock

Paid-in Capital

Retained Earnings

Treasury Stock

Accumulated Other Comprehensive Loss

Total Stockholders' Equity

Non-controlling Interest

Total Equity

Balance at March 31, 2019

4,909