atus-20210930

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, 2021


☐			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 29, 2021			454,653,611

ALTICE USA, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION		2

Item 1. Financial Statements

ALTICE USA, INC. AND SUBSIDIARIES
Consolidated Financial Statements
	Consolidated Balance Sheets - September 30, 2021 (Unaudited) and December 31, 2020	4
	Consolidated Statements of Operations - Three and nine months ended September 30, 2021 and 2020 (Unaudited)	6
	Consolidated Statements of Comprehensive Income (Loss) - Three and nine months ended September 30, 2021 and 2020 (Unaudited)	7
	Consolidated Statements of Stockholders' Equity (Deficiency) - Three and nine months ended September 30, 2021 and 2020 (Unaudited)	8
	Consolidated Statements of Cash Flows - Nine months ended September 30, 2021 and 2020 (Unaudited)	12
	Combined Notes to Consolidated Financial Statements (Unaudited)	20
Supplemental Financial Statements Furnished:
CSC HOLDINGS, LLC AND SUBSIDIARIES
Consolidated Financial Statements
	Consolidated Balance Sheets - September 30, 2021 (Unaudited) and December 31, 2020	13
	Consolidated Statements of Operations - Three and nine months ended September 30, 2021 and 2020 (Unaudited)	15
	Consolidated Statements of Comprehensive Income (Loss) - Three and nine months ended September 30, 2021 and 2020 (Unaudited)	16
	Consolidated Statements of Member's Equity (Deficiency) - Three and nine months ended September 30, 2021 and 2020 (Unaudited)	17
	Consolidated Statements of Cash Flows - Nine months ended September 30, 2021 and 2020 (Unaudited)	19
	Combined Notes to Consolidated Financial Statements (Unaudited)	20
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		38
Item 3. Quantitative and Qualitative Disclosures About Market Risk		55
Item 4. Controls and Procedures		57
PART II. OTHER INFORMATION		58
Item 1. Legal Proceedings		58
Item 1A. Risk Factors		58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		59
Item 6. Exhibits		59
SIGNATURES		60

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, wireless data and telephony 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; 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 the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 11, 2021 (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 CONSOLIDATED BALANCE SHEETS (In thousands)
	September 30, 2021 (Unaudited)		December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	232,452	$	278,422
Restricted cash	264		264
Accounts receivable, trade (less allowance for doubtful accounts of $24,369 and $25,198)	434,011		442,581

Prepaid expenses and other current assets	170,555		200,252
Amounts due from affiliates	3,892		4,262


Derivative contracts	3,555		50,785
Total current assets	844,729		976,566
Property, plant and equipment, net of accumulated depreciation of $7,002,823 and $6,431,843	6,092,271		5,805,996

Right-of-use operating lease assets	227,059		241,342
Investment securities pledged as collateral	2,402,486		2,250,854
Derivative contracts	—		4,774
Other assets	81,928		87,429
Amortizable intangibles, net of accumulated amortization of $4,891,643 and $4,409,312	2,361,507		2,781,116
Indefinite-lived cable television franchises	13,216,355		13,068,017
Goodwill	8,206,365		8,160,566
Total assets	$	33,432,700	$	33,376,660

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, 2021 (Unaudited)		December 31, 2020
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable	$	892,694	$	795,576
Interest payable	237,068		252,060
Accrued employee related costs	125,492		142,116
Amounts due to affiliates	20,972		8,538
Deferred revenue	109,522		109,798
Debt	1,889,730		1,245,713
Other current liabilities	393,417		544,302
Total current liabilities	3,668,895		3,098,103

Other liabilities	146,743		192,563
Deferred tax liability	5,105,353		5,006,167
Liabilities under derivative contracts	518,246		523,150
Right-of-use operating lease liability	244,317		257,424
Long-term debt, net of current maturities	24,881,833		25,476,629
Total liabilities	34,565,387		34,554,036
Commitments and contingencies (Note 16)
Redeemable equity	—		25,763
Stockholders' Deficiency:
Preferred stock, $0.01 par value, 100,000,000 shares authorized, no shares issued and outstanding	—		—
Class A common stock: $0.01 par value, 4,000,000,000 shares authorized, 268,886,795 shares issued and 268,865,047 shares outstanding as of September 30, 2021 and 297,203,087 shares issued and 290,573,672 shares outstanding as of December 31, 2020	2,689		2,972
Class B common stock: $0.01 par value, 1,000,000,000 shares authorized, 490,086,674 issued, 185,788,232 shares outstanding as of September 30, 2021 and 185,895,903 shares outstanding as of December 31, 2020	1,858		1,859
Class C common stock: $0.01 par value, 4,000,000,000 shares authorized, no shares issued and outstanding	—		—
Paid-in capital	—		—
Accumulated deficit	(1,100,497)		(985,641)
	(1,095,950)		(980,810)
Treasury stock, at cost (21,748 and 6,629,415 Class A common shares at September 30, 2021 and December 31, 2020, respectively)	—		(163,866)
Accumulated other comprehensive income	9,421		3,646
Total Altice USA stockholders' deficiency	(1,086,529)		(1,141,030)
Noncontrolling interests	(46,158)		(62,109)
Total stockholders' deficiency	(1,132,687)		(1,203,139)
Total liabilities and stockholders' deficiency	$	33,432,700	$	33,376,660

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,
	2021		2020		2021		2020
Revenue (including revenue from affiliates of $3,277, $4,188, $9,718 and $11,055 respectively) (See Note 15)	$	2,574,882	$	2,433,986	$	7,569,711	$	7,359,221
Operating expenses:
Programming and other direct costs (including charges from affiliates of $5,294, $3,621, $12,026 and $7,548, respectively) (See Note 15)	843,909		783,934		2,545,645		2,509,323
Other operating expenses (including charges from affiliates of $3,274, $2,413, $9,149 and $8,515, respectively) (See Note 15)	590,519		558,092		1,760,132		1,683,038
Restructuring and other expense	1,885		40,419		10,958		88,679
Depreciation and amortization (including impairments)	447,958		502,248		1,327,142		1,571,611
	1,884,271		1,884,693		5,643,877		5,852,651
Operating income	690,611		549,293		1,925,834		1,506,570
Other income (expense):
Interest expense	(319,033)		(322,618)		(954,807)		(1,038,854)
Interest income	32		164		123		1,974
Gain (loss) on investments and sale of affiliate interests, net	(46,821)		314,177		151,651		56,301
Gain (loss) on derivative contracts, net	43,385		(261,597)		(109,020)		26,203
Gain (loss) on interest rate swap contracts, net	5,521		(158)		59,600		(88,725)
Loss on extinguishment of debt and write-off of deferred financing costs	—		(250,489)		(51,712)		(250,489)
Other income, net	2,280		1,685		7,606		3,277
	(314,636)		(518,836)		(896,559)		(1,290,313)
Income before income taxes	375,975		30,457		1,029,275		216,257
Income tax expense	(105,226)		(33,186)		(279,053)		(109,047)
Net income (loss)	270,749		(2,729)		750,222		107,210
Net income attributable to noncontrolling interests	(3,896)		(1,966)		(11,573)		(1,499)
Net income (loss) attributable to Altice USA, Inc. stockholders	$	266,853	$	(4,695)	$	738,649	$	105,711
Income (loss) per share:
Basic income (loss) per share	$	0.59	$	(0.01)	$	1.61	$	0.18
Basic weighted average common shares (in thousands)	454,049		571,031		460,023		593,262

Diluted income (loss) per share	$	0.58	$	(0.01)	$	1.59	$	0.18
Diluted weighted average common shares (in thousands)	457,163		571,031		465,349		595,479
Cash dividends declared per common share	$	—	$	—	$	—	$	—

See accompanying notes to consolidated financial statements.

ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	270,749	$	(2,729)	$	750,222	$	107,210
Other comprehensive income (loss):
Defined benefit pension plans:
Unrecognized actuarial gain (loss)	(1,551)		5,183		9,984		(6,406)
Applicable income taxes	413		(1,374)		(2,657)		1,724
Unrecognized gain (loss) arising during period, net of income taxes	(1,138)		3,809		7,327		(4,682)
Amortization of actuarial gains	(11)		—		(11)		—
Applicable income taxes	3		—		3		—
Amortization of actuarial gains included in other expense, net of tax	(8)		—		(8)		—
Settlement loss (gain) included in other expense, net	(522)		122		(1,917)		895
Applicable income taxes	139		(39)		512		(246)
Settlement loss (gain) included in other expense, net, net of income taxes	(383)		83		(1,405)		649



Foreign currency translation adjustment	(619)		(582)		(140)		(1,523)
Applicable income taxes	—		—		—		—
Foreign currency translation adjustment, net	(619)		(582)		(140)		(1,523)
Other comprehensive income (loss)	(2,148)		3,310		5,774		(5,556)
Comprehensive income	268,601		581		755,996		101,654
Comprehensive income attributable to noncontrolling interests	(3,896)		(1,966)		(11,573)		(1,499)
Comprehensive income (loss) attributable to Altice USA, Inc. stockholders	$	264,705	$	(1,385)	$	744,423	$	100,155

See accompanying notes to consolidated financial statements.


ALTICE USA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (In thousands) (Unaudited)
	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Income		Total Stockholders' Deficiency		Non-controlling Interests		Total Deficiency
Balance at January 1, 2021	$	2,972	$	1,859	$	—	$	(985,641)	$	(163,866)	$	3,646	$	(1,141,030)	$	(62,109)	$	(1,203,139)
Net income attributable to stockholders	—		—		—		274,136		—		—		274,136		—		274,136
Net income attributable to noncontrolling interests	—		—		—		—		—		—		—		4,403		4,403

Pension liability adjustments, net of income taxes	—		—		—		—		—		6,356		6,356		—		6,356
Foreign currency translation adjustment, net of income taxes	—		—		—		—		—		619		619		—		619
Share-based compensation expense (equity classified)	—		—		—		27,964		—		—		27,964		—		27,964
Redeemable equity vested	—		—		—		20,131		—		—		20,131		—		20,131
Change in redeemable equity	—		—		—		2,528		—		—		2,528		—		2,528
Class A shares acquired through share repurchase program and retired	(152)		—		—		(522,521)		—		—		(522,673)		—		(522,673)
Conversion of Class B to Class A shares	1		(1)		—		—		—		—		—		—		—
Issuance of common shares pursuant to employee long term incentive plan	1		—		—		2,037		6		—		2,044		—		2,044
Other	—		—		—		(4,244)		—		—		(4,244)		4,302		58
Balance at March 31, 2021	$	2,822	$	1,858	$	—	$	(1,185,610)	$	(163,860)	$	10,621	$	(1,334,169)	$	(53,404)	$	(1,387,573)
Net income attributable to stockholders	—		—		—		197,660		—		—		197,660		—		197,660
Net income attributable to noncontrolling interests	—		—		—		—		—		—		—		3,274		3,274
Pension liability adjustments, net of income taxes	—		—		—		—		—		1,088		1,088		—		1,088
Foreign currency translation adjustment, net of income taxes	—		—		—		—		—		(140)		(140)		—		(140)
Share-based compensation expense (equity classified)	—		—		—		27,385		—		—		27,385		—		27,385
Redeemable equity vested	—		—		—		3,618		—		—		3,618		—		3,618
Change in redeemable equity	—		—		—		(514)		—		—		(514)		—		(514)
Class A shares acquired through share repurchase program and retired	(58)		—		—		(202,787)		—		—		(202,845)		—		(202,845)

Issuance of common shares pursuant to employee long term incentive plan	8		—		—		(488)		9,365		—		8,885		—		8,885
Retirement of treasury stock	(59)		—		—		(154,436)		154,495		—		—		—		—
Other			—		—		92		—		—		92		76		168
Balance at June 30, 2021	$	2,713	$	1,858	$	—	$	(1,315,080)	$	—	$	11,569	$	(1,298,940)	$	(50,054)	$	(1,348,994)

See accompanying notes to consolidated financial statements.


ALTICE USA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (continued) (In thousands) (Unaudited)
	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Income		Total Stockholders' Deficiency		Non-controlling Interest		Total Deficiency
Balance at June 30, 2021	$	2,713	$	1,858	$	—	$	(1,315,080)	$	—	$	11,569	$	(1,298,940)	$	(50,054)	$	(1,348,994)
Net income attributable to stockholders	—		—		—		266,853		—		—		266,853		—		266,853
Net income attributable to noncontrolling interests	—		—		—		—		—		—		—		3,896		3,896
Pension liability adjustments, net of income taxes	—		—		—		—		—		(1,529)		(1,529)		—		(1,529)
Foreign currency translation adjustment, net of income taxes	—		—		—		—		—		(619)		(619)		—		(619)
Share-based compensation expense (equity classified)	—		—		—		24,172		—		—		24,172		—		24,172


Class A shares acquired through share repurchase program and retired	(26)		—		—		(79,384)		—		—		(79,410)		—		(79,410)
Issuance of common shares pursuant to employee long term incentive plan	2		—		—		2,956		—		—		2,958		—		2,958

Other	—		—		—		(14)		—		—		(14)		—		(14)
Balance at September 30, 2021	$	2,689	$	1,858	$	—	$	(1,100,497)	$	—	$	9,421	$	(1,086,529)	$	(46,158)	$	(1,132,687)

See accompanying notes to consolidated financial statements.


ALTICE USA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (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
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