ALTICE USA, INC., 10-Q filed on 5/2/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
Apr. 26, 2019
Document and Entity Information [Abstract]    
Entity Registrant Name Altice USA, Inc.  
Entity Central Index Key 0001702780  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2019  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   675,031,483
v3.19.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Current Assets:    
Cash and cash equivalents $ 123,007 $ 298,781
Restricted cash 258 257
Accounts receivable, trade (less allowance for doubtful accounts of $12,007 and $13,520) 405,030 448,399
Prepaid expenses and other current assets 181,726 136,285
Amounts due from affiliates 1,021 17,557
Derivative contracts 0 1,975
Total current assets 711,042 903,254
Property, plant and equipment, net of accumulated depreciation of $4,384,560 and $4,044,671 5,772,026 5,828,881
Right-of-use lease assets 259,223 0
Investment securities pledged as collateral 1,717,350 1,462,626
Derivative contracts 0 109,344
Other assets 75,030 84,382
Amortizable intangibles, net of accumulated amortization of $3,083,406 and $2,882,787 3,992,205 4,192,824
Indefinite-lived cable television franchises 13,020,081 13,020,081
Goodwill 8,012,416 8,012,416
Total assets 33,559,373 33,613,808
Current Liabilities:    
Accounts payable 835,481 857,502
Interest payable 272,018 386,475
Accrued employee related costs 100,925 139,806
Amounts due to affiliates 5,538 26,096
Deferred revenue 145,019 140,053
Current portion of long-term debt 123,966 158,625
LIABILITIES AND STOCKHOLDERS' EQUITY 318,873 312,634
Total current liabilities 1,801,820 2,021,191
Other liabilities 231,721 271,554
Deferred tax liability 4,717,667 4,723,937
Liabilities under derivative contracts 223,054 132,908
Right-of-use operating lease liability 245,871 0
Long-term debt, net of current maturities 23,137,835 22,653,975
Total liabilities 30,357,968 29,803,565
Commitments and contingencies (Note 16)
Redeemable equity 190,339 130,007
Stockholders' Equity:    
Preferred stock, $.01 par value, 100,000,000 shares authorized, no shares issued and outstanding 0 0
Paid-in capital 2,777,554 3,423,803
Retained earnings 226,831 251,830
Total stockholders' equity before accumulated other comprehensive Income and non-controlling interest 3,011,182 3,682,724
Accumulated other comprehensive loss (8,212) (11,783)
Total stockholders' equity 3,002,970 3,670,941
Noncontrolling interest 8,096 9,295
Total stockholders' equity 3,011,066 3,680,236
Total liabilities and stockholders' equity 33,559,373 33,613,808
Common Class A    
Stockholders' Equity:    
Common stock 4,909 4,961
Common Class B    
Stockholders' Equity:    
Common stock 1,888 2,130
Common Class C    
Stockholders' Equity:    
Common stock $ 0 $ 0
v3.19.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
ASSETS    
Accounts receivable, trade allowance for doubtful accounts $ 12,007 $ 13,520
Property, plant and equipment, accumulated depreciation 4,384,560 4,044,671
Amortizable intangible assets, accumulated amortization $ 3,083,406 $ 2,882,787
Stockholders' Equity:    
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 100,000,000 100,000,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Common stock, shares outstanding (in shares) 679,784,612  
Common Class A    
Stockholders' Equity:    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 4,000,000,000 4,000,000,000
Common stock, shares issued (in shares) 490,946,066 496,064,027
Common stock, shares outstanding (in shares) 490,946,066 496,064,027
Common Class B    
Stockholders' Equity:    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 1,000,000,000 1,000,000,000
Common stock, shares issued (in shares) 490,086,674 490,086,674
Common stock, shares outstanding (in shares) 188,838,546 212,976,259
Common Class C    
Stockholders' Equity:    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 4,000,000,000 4,000,000,000
Common stock, shares issued (in shares) 0 0
Common stock, shares outstanding (in shares) 0 0
v3.19.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Income Statement [Abstract]    
Revenue (including revenue from affiliates of $592 and $125, respectively) (See Note 15) $ 2,396,567 $ 2,329,714
Operating expenses:    
Programming and other direct costs (including charges from affiliates of $1,687 and $1,154, respectively) (See Note 15) 812,985 787,361
Other operating expenses (including charges from affiliates of $2,246 and $7,994, respectively) (See Note 15) 564,432 583,023
Restructuring and other expense 15,244 3,587
Depreciation and amortization (including impairments) 561,428 642,705
Total operating expenses 1,954,089 2,016,676
Operating income 442,478 313,038
Other income (expense):    
Interest expense (388,283) (377,258)
Interest income 1,819 3,103
Gain (loss) on investments and sale of affiliate interests, net 254,725 (248,602)
Gain (loss) on derivative contracts, net (177,029) 168,352
Loss on interest rate swap contracts (23,672) (31,922)
Loss on extinguishment of debt and write-off of deferred financing costs (157,902) (4,705)
Other income (expense), net 80 (11,658)
Total other income (expense) (490,262) (502,690)
Loss before income taxes (47,784) (189,652)
Income tax benefit 22,586 60,703
Net loss (25,198) (128,949)
Net loss (income) attributable to noncontrolling interests 199 (2)
Net loss attributable to Altice USA, Inc. stockholders $ (24,999) $ (128,951)
Loss per share:    
Basic and diluted income (loss) per share (in dollars per share) $ (0.04) $ (0.17)
Basic and diluted weighted average common shares (in shares) 695,528 737,069
Cash dividends declared per common share (in dollars per share) $ 0 $ 0
v3.19.1
CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Dec. 31, 2018
Income Statement [Abstract]      
Revenue from affiliates $ 592 $ 125 $ 125
Programming and other direct costs from affiliates 1,687 1,154 1,154
Other operating expenses from affiliates $ 2,246 $ 7,994 $ 7,994
v3.19.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement of Comprehensive Income [Abstract]    
Net loss $ (25,198) $ (128,949)
Defined benefit pension plans:    
Unrecognized actuarial gain 4,918 4,551
Applicable income taxes (1,292) (1,228)
Unrecognized gain arising during period, net of income taxes 3,626 3,323
Settlement loss included in other expense, net 171 606
Applicable income taxes 45 164
Settlement loss included in other expense, net, net of income taxes 126 442
Foreign currency translation adjustment (245) 0
Applicable income taxes 64 0
Foreign currency translation adjustment, net (181) 0
Other comprehensive income 3,571 3,765
Comprehensive loss (21,627) (125,184)
Comprehensive loss (income) attributable to noncontrolling interests 199 (2)
Comprehensive loss attributable to Altice USA, Inc. stockholders $ (21,428) $ (125,186)
v3.19.1
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)
$ in Thousands
Total
Total Stockholders' Equity
Paid-in Capital
Retained Earnings (Accumulated Deficit)
Accumulated Other Comprehensive Income
Non-controlling Interest
Common Class A
Common Stock
Common Class B
Common Stock
Beginning balance at Dec. 31, 2017 $ 5,504,753 $ 5,503,214 $ 4,665,229 $ 840,636 $ (10,022) $ 1,539 $ 2,470 $ 4,901
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net loss attributable to stockholders (128,951) (128,951)   (128,951)        
Net loss (income) attributable to noncontrolling interests (2)         (2)    
Pension liability adjustments, net of income taxes 3,765 3,765     3,765      
Foreign currency translation adjustment, net of income taxes 0              
Share-based compensation expense 21,623 21,623 21,623          
Change in fair value of redeemable equity (3,347) (3,347) (3,347)          
Other changes to equity (859) (859) (859)          
Ending balance at Mar. 31, 2018 5,396,986 5,395,445 4,682,646 713,848 (8,420) 1,541 2,470 4,901
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Adoption of ASU No. 2018-02 | ASU No. 2018-02       2,163 (2,163)      
Beginning balance at Dec. 31, 2018 3,680,236 3,670,941 3,423,803 251,830 (11,783) 9,295 4,961 2,130
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net loss attributable to stockholders (24,999) (24,999)   (24,999)        
Net loss (income) attributable to noncontrolling interests 199         199    
Distributions from 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 13,790 13,790 13,790          
Redeemable equity vested 1,364 1,364 1,364          
Change in fair value of redeemable equity (61,696) (61,696) (61,696)          
Class A shares acquired through share repurchase program and retired (600,001) (600,001) (599,707)       (294)  
Conversion of Class B to Class A shares             242 (242)
Ending balance at Mar. 31, 2019 $ 3,011,066 $ 3,002,970 $ 2,777,554 $ 226,831 $ (8,212) $ 8,096 $ 4,909 $ 1,888
v3.19.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Dec. 31, 2018
Cash flows from operating activities:      
Net loss $ (25,198) $ (128,949)  
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization (including impairments) 561,428 642,705  
Equity in net loss of affiliates 0 10,442  
Loss (gain) on investments and sale of affiliate interests, net (254,725) 248,602  
Loss (gain) on derivative contracts, net 177,029 (168,352)  
Loss on extinguishment of debt and write-off of deferred financing costs 157,902 4,705  
Amortization of deferred financing costs and discounts (premiums) on indebtedness 26,066 16,950  
Settlement loss related to pension plan 171 606  
Share-based compensation expense 13,790 21,623  
Deferred income taxes (19,918) (65,833)  
Provision for doubtful accounts 15,091 13,500  
Change in assets and liabilities, net of effects of acquisitions and dispositions:      
Accounts receivable, trade 28,278 25,207  
Other receivables (708) (28,759)  
Prepaid expenses and other assets (3,744) 9,609  
Amounts due from and due to affiliates (4,023) (1,465)  
Accounts payable 33,889 11,297  
Interest payable, accrued employee related costs and other liabilities (235,369) (224,787)  
Deferred revenue 8,915 11,929  
Liabilities related to interest rate swap and derivative contracts 25,120 31,922  
Net cash provided by operating activities 503,994 430,952  
Cash flows from investing activities:      
Capital expenditures (340,386) (257,615)  
Sale of affiliate interest 0 3,537  
Proceeds related to sale of equipment, including costs of disposal 479 965  
Increase in other investments 0 (2,500)  
Net cash used in investing activities (339,907) (262,687)  
Cash flows from financing activities:      
Proceeds from credit facility debt, net of discounts 1,390,000 1,642,500  
Repayment of credit facility debt (361,250) (610,663)  
Issuance of senior notes and debentures, including premiums 1,754,375 1,000,000  
Redemption of senior notes, including premiums and fees (2,462,692) (1,057,019)  
Proceeds from notes payable 0 6,812  
Repayment of notes payable (58,500) 0  
Principal payments on finance lease obligations (1,611) (3,067)  
Purchase of shares of Altice USA, Inc. Class A common stock, pursuant to a share repurchase program (586,759) 0  
Additions to deferred financing costs (11,678) (19,225)  
Contingent payment for acquisition (500) (28,940)  
Distributions to noncontrolling interests, net (1,000) 0  
Other 0 (859)  
Net cash provided by (used in) financing activities (339,615) 929,539  
Net increase (decrease) in cash and cash equivalents (175,528) 1,097,804  
Effect of exchange rate changes on cash and cash equivalents (245) 0  
Net increase (decrease) in cash and cash equivalents (175,773) 1,097,804  
Cash, cash equivalents and restricted cash at beginning of year 299,038 330,100 $ 330,100
Cash, cash equivalents and restricted cash at end of year $ 123,265 $ 1,427,904 $ 299,038
v3.19.1
DESCRIPTION OF BUSINESS AND RELATED MATTERS
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
DESCRIPTION OF BUSINESS AND RELATED MATTERS
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. Through June 8, 2018, the Company was majority-owned by Altice Europe N.V. ("Altice Europe"), a public company with limited liability (naamloze vennootshcap) under Dutch law. On June 8, 2018, Altice Europe distributed substantially all of its equity interest in the Company through a distribution in kind to holders of Altice Europe's common shares A and common shares B (the “Distribution”). The Company is now majority-owned by Patrick Drahi through Next Alt. S.a.r.l. ("Next Alt").
The Company provides broadband communications and video services in the United States and markets its services under two brands: Optimum, in the New York metropolitan area, and Suddenlink, principally in markets in the south-central United States. It delivers broadband, video, telephony services, proprietary content and advertising services to residential and business customers. As these brands are managed on a consolidated basis, the Company classifies its operations in one segment.
The accompanying combined consolidated financial statements ("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. All significant inter-company accounts and transactions have been eliminated in consolidation.
Acquisition of Altice Technical Services US Corp
Altice Technical Services US Corp. ("ATS") was formed 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 Cablevision 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 technical workforce became employees of ATS in December 2017. Additionally, in the second quarter of 2017, the Company entered into an Independent Contractor Agreement with ATS that governed the terms of the services provided to the Company and entered into a Transition Services Agreement for the use of the Company's resources to provide various overhead functions to ATS, including accounting, legal and human resources and for the use of certain facilities, vehicles and technician tools during a transitional period. The Transition Services Agreement required ATS to reimburse the Company for its cost to provide such services.
In January 2018, the Company acquired 70% of the equity interests in 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 Europe 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 of ATS for all periods since its formation. In connection with the ATS Acquisition, the Company recorded goodwill of $23,101, representing the amount previously transferred to ATS.
Acquisition of i24NEWS
In April 2018, Altice Europe transferred its ownership of i24 US and i24 Europe ("i24NEWS"), Altice Europe'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 have not been revised to reflect the i24 Acquisition as the impact was deemed immaterial.
Altice Europe Distribution
On June 8, 2018, Altice Europe distributed substantially all of its equity interest in the Company through a distribution in kind to holders of Altice Europe's common shares A and common shares B (the “Distribution”). The Distribution took place by way of a special distribution in kind by Altice Europe of its 67.2% interest in the Company to Altice Europe shareholders. Each shareholder of Altice Europe 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 Europe.
Prior to Altice Europe'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 Europe which provided certain consulting, advisory and other services was terminated. See Note 15 for further details.
Stock Repurchase Plan
In June 2018, the Board of Directors of Altice USA also authorized a share repurchase program of $2.0 billion. 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 March 31, 2019, the Company repurchased an aggregate of 57,284,354 shares for a total purchase price of approximately $1,100,000.  These acquired shares were retired and the cost for these shares was recorded in paid in capital in the Company's consolidated balance sheet.  As of March 31, 2019, the Company had approximately $900,000 of availability remaining under its stock repurchase program and had 679,784,612 combined Class A and Class B shares outstanding.
v3.19.1
BASIS OF PRESENTATION
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
BASIS OF PRESENTATION
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information.  Accordingly, these financial statements do not include all the information and notes required for complete annual financial statements.
The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 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.
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, 2019.
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.
Reclassifications
Certain reclassifications have been made to the 2018 financial statements to conform to the 2019 presentation.
v3.19.1
ACCOUNTING PRONOUNCEMENTS
3 Months Ended
Mar. 31, 2019
Accounting Changes and Error Corrections [Abstract]  
ACCOUNTING PRONOUNCEMENTS
ACCOUNTING PRONOUNCEMENTS
Recently Issued But Not Yet Adopted Accounting Pronouncements
ASU No. 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU 2018-14")
In August 2018, the FASB issued ASU 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 2018-14 to have a material impact on its consolidated financial statements.
ASU No. 2018-15, Customer’s Accounting for Implementation Costs in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15")
Also in August 2018, the FASB issued ASU 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 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 2018-15 will have on its consolidated financial statements.
ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350) ("ASU 2017-04")
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350). ASU. 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 2017-04 becomes effective for the Company on January 1, 2020 with early adoption permitted and will be applied prospectively.
v3.19.1
NET LOSS PER SHARE ATTRIBUTABLE TO STOCKHOLDERS
3 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
NET LOSS PER SHARE ATTRIBUTABLE TO STOCKHOLDERS
NET LOSS PER SHARE ATTRIBUTABLE TO STOCKHOLDERS
Net Loss Per Share
Basic net loss per common share attributable to Altice USA stockholders is computed by dividing net loss attributable to Altice USA stockholders by the weighted average number of common shares outstanding during the period.  Diluted net loss per common share attributable to Altice USA stockholders excludes the effects of common stock equivalents of 11,480,467 shares and 5,165,746 shares for the three months ended March 31, 2019 and 2018, respectively, as they are anti-dilutive.
v3.19.1
REVENUE AND CONTRACT ASSETS
3 Months Ended
Mar. 31, 2019
Revenue from Contract with Customer [Abstract]  
REVENUE AND CONTRACT ASSETS
REVENUE AND CONTRACT ASSETS
The following table presents the composition of revenue:
 
Three Months Ended March 31,
 
2019
 
2018
Residential:
 
 
 
Video
$
1,017,330

 
$
1,033,708

Broadband
775,573

 
701,621

Telephony
154,464

 
166,038

Business services and wholesale
350,689

 
333,090

Advertising
93,545

 
87,582

Other
4,966

 
7,675

Total revenue
$
2,396,567

 
$
2,329,714


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 months ended March 31, 2019 and 2018, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $64,236 and $63,830, respectively.
Contract Assets
The following table provides information about contracts assets and contract liabilities related to contracts with customers:
 
March 31, 2019
 
December 31, 2018
Contract assets (a)
$
27,242

 
$
26,405

Deferred revenue (b)
198,971

 
190,056

 
(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 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 customers generally range from three to five years, and services may only be terminated in accordance with the contractual terms.
v3.19.1
SUPPLEMENTAL CASH FLOW INFORMATION
3 Months Ended
Mar. 31, 2019
Supplemental Cash Flow Elements [Abstract]  
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
The Company's non-cash investing and financing activities and other supplemental data were as follows:
 
Three Months Ended March 31,
 
2019
 
2018
Non-Cash Investing and Financing Activities:
 
 
 
 
 
 
 
Property and equipment accrued but unpaid
$
158,025

 
$
91,036

Notes payable issued to vendor for the purchase of equipment
16,266

 
30,237

Unsettled purchases of shares of Altice USA, Inc. Class A common stock, pursuant to a share repurchase program
13,242

 

Right-of-use assets acquired in exchange for finance lease obligations
4,970

 
656

Deferred financing costs accrued but unpaid
1,663

 

Supplemental Data:
 
 
 
Cash interest paid
475,109

 
464,763

Income taxes paid (refunded), net
110

 
(1,027
)
v3.19.1
RESTRUCTURING AND OTHER EXPENSE
3 Months Ended
Mar. 31, 2019
Restructuring and Related Activities [Abstract]  
RESTRUCTURING AND OTHER EXPENSE
RESTRUCTURING 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.
The following table summarizes the activity for these initiatives:
 
 
 
Severance and Other Employee Related Costs
 
Facility Realignment and Other Costs
 
Total
Accrual balance at December 31, 2018
$
21,454

 
$
13,615

 
$
35,069

Restructuring charges
2,522

 
4,569

 
7,091

Payments and other
(13,866
)
 
(536
)
 
(14,402
)
Impact of the adoption of ASC 842 (a)

 
(13,849
)
 
(13,849
)
Accrual balance at March 31, 2019
$
10,110

 
$
3,799

 
$
13,909

 
(a)
Certain accrued restructuring liabilities were netted against right-of-use operating assets on the Company's consolidated balance sheet as of January 1, 2019 in connection with the Company's adoption of ASC 842 (see Note 8).
In addition, for the three months ended March 31, 2019, the Company recorded restructuring charges of $8,549 related to the impairment of right-of-use operating lease assets, included in the Company's restructuring initiatives, as their carrying amount was not recoverable and exceeded their fair value.
Cumulative costs to date relating to these initiatives amounted to $423,166.
Transaction Costs
The Company recorded a net credit of $396 during the three months ended March 31, 2019 resulting from an adjustment to the contingent liability initially recorded for a business acquired in fourth quarter of 2017. The Company recorded transaction costs of $2,266 for the three months ended March 31, 2018, related to the Distribution discussed in Note 1.
v3.19.1
LEASES (Notes)
3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
LEASES
LEASES
On January 1, 2019, the Company adopted FASB Accounting Standards Codification, or ASC, Topic 842, Leases ("ASC 842"), 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 requires the recognition of the right-of-use ("ROU") assets and related operating and finance lease liabilities on the balance sheet. The Company adopted the new guidance using the modified retrospective approach with a cumulative-effect adjustment recorded on January 1, 2019. As a result, the consolidated balance sheet as of December 31, 2018 was not restated and is not comparative.
The adoption of ASC 842 resulted in the recognition of ROU assets of $274,292 and lease liabilities for operating leases of $299,900 on the Company's consolidated balance sheet as of January 1, 2019, with no material impact to its consolidated statements of operations. The difference between the ROU assets and the operating lease liability represents the reclassification of (i) deferred rent balances, resulting from the historical operating leases, and (ii) certain accrued restructuring liabilities (See Note 7). The Company's accounting for finance leases remained substantially unchanged from its accounting for capital leases in prior periods.
The Company elected the package of practical expedients permitted within the standard, which allow an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient related to land easements which allows the Company not to retrospectively treat land easements as leases; however, the Company must apply lease accounting prospectively to land easements if they meet the definition of a lease.
For contracts entered into on or after the effective date, at the inception of a contract the Company will assess whether the contract is, or contains, a lease. The Company's assessment is based on: (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed for classification.
For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases, and is subsequently measured at amortized cost using the effective interest method. The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease. The lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. All ROU assets are reviewed for impairment.
Lease expense for operating leases consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term. Lease expense for finance leases consists of the amortization of the asset on a straight-line basis over the earlier of the lease term or its useful life and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.
The Company's operating leases are comprised primarily of facility leases and finance leases are comprised primarily of vehicle leases.
Balance sheet information related to our leases is presented below:
 
 
 
March 31,
 
January 1,
 
December 31,
 
Balance Sheet location
 
2019
 
2019
 
2018
Operating leases:
 
 
 
 
 
 
 
Right-of-use lease assets
Right-of-use operating lease assets
 
$
259,223

 
$
274,292

 
$

Right-of-use lease liability, current
Other current liabilities
 
41,188

 
48,033

 

Right-of-use lease liability, long-term
Right-of-use operating lease liability
 
245,871

 
251,867

 

Finance leases:
 
 
 
 
 
 
 
Right-of-use lease assets
Property, plant and equipment
 
28,562

 
30,891

 
30,891

Right-of-use lease liability, current
Current portion of long-term debt
 
6,293

 
5,928

 
5,928

Right-of-use lease liability, long-term
Long-term debt
 
21,011

 
19,262

 
19,262


The following provides details of the Company's lease expense:
 
Three Months Ended March 31,
 
2019
Operating lease expense, net
$
15,278

Finance lease expense:
 
Amortization of assets
1,562

Interest on lease liabilities
358

Total finance lease expense
1,920

 
$
17,198


Other information related to leases is presented below:
 
As of March 31,
 
2019
Right-of-use assets acquired in exchange for operating lease obligations
$
4,193

 
 
Cash Paid For Amounts Included In Measurement of Liabilities:
 
Operating cash flows from finance leases
358

Operating cash flows from operating leases
16,482

 
 
Weighted Average Remaining Lease Term:
 
Operating leases
8.9 years

Finance leases
4.8 years

Weighted Average Discount Rate:
 
Operating leases
6.25
%
Finance leases
5.82
%

The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:
 
Financing leases
 
Operating leases
2019 (excluding the three months ended March 31, 2019)
$
5,775

 
$
43,386

2020
6,859

 
58,231

2021
5,538

 
49,829

2022
5,510

 
39,308

2023
4,967

 
29,260

Thereafter
2,580

 
157,402

Total future minimum lease payments, undiscounted
31,229

 
377,416

Less: Imputed interest
(3,925
)
 
(90,357
)
Present value of future minimum lease payments
$
27,304

 
$
287,059

LEASES
NOTE 8.    LEASES
On January 1, 2019, the Company adopted FASB Accounting Standards Codification, or ASC, Topic 842, Leases ("ASC 842"), 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 requires the recognition of the right-of-use ("ROU") assets and related operating and finance lease liabilities on the balance sheet. The Company adopted the new guidance using the modified retrospective approach with a cumulative-effect adjustment recorded on January 1, 2019. As a result, the consolidated balance sheet as of December 31, 2018 was not restated and is not comparative.
The adoption of ASC 842 resulted in the recognition of ROU assets of $274,292 and lease liabilities for operating leases of $299,900 on the Company's consolidated balance sheet as of January 1, 2019, with no material impact to its consolidated statements of operations. The difference between the ROU assets and the operating lease liability represents the reclassification of (i) deferred rent balances, resulting from the historical operating leases, and (ii) certain accrued restructuring liabilities (See Note 7). The Company's accounting for finance leases remained substantially unchanged from its accounting for capital leases in prior periods.
The Company elected the package of practical expedients permitted within the standard, which allow an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient related to land easements which allows the Company not to retrospectively treat land easements as leases; however, the Company must apply lease accounting prospectively to land easements if they meet the definition of a lease.
For contracts entered into on or after the effective date, at the inception of a contract the Company will assess whether the contract is, or contains, a lease. The Company's assessment is based on: (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed for classification.
For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases, and is subsequently measured at amortized cost using the effective interest method. The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease. The lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. All ROU assets are reviewed for impairment.
Lease expense for operating leases consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term. Lease expense for finance leases consists of the amortization of the asset on a straight-line basis over the earlier of the lease term or its useful life and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.
The Company's operating leases are comprised primarily of facility leases and finance leases are comprised primarily of vehicle leases.
Balance sheet information related to our leases is presented below:
 
 
 
March 31,
 
January 1,
 
December 31,
 
Balance Sheet location
 
2019
 
2019
 
2018
Operating leases:
 
 
 
 
 
 
 
Right-of-use lease assets
Right-of-use operating lease assets
 
$
259,223

 
$
274,292

 
$

Right-of-use lease liability, current
Other current liabilities
 
41,188

 
48,033

 

Right-of-use lease liability, long-term
Right-of-use operating lease liability
 
245,871

 
251,867

 

Finance leases:
 
 
 
 
 
 
 
Right-of-use lease assets
Property, plant and equipment
 
28,562

 
30,891

 
30,891

Right-of-use lease liability, current
Current portion of long-term debt
 
6,293

 
5,928

 
5,928

Right-of-use lease liability, long-term
Long-term debt
 
21,011

 
19,262

 
19,262


The following provides details of the Company's lease expense:
 
Three Months Ended March 31,
 
2019
Operating lease expense, net
$
15,278

Finance lease expense:
 
Amortization of assets
1,562

Interest on lease liabilities
358

Total finance lease expense
1,920

 
$
17,198


Other information related to leases is presented below:
 
As of March 31,
 
2019
Right-of-use assets acquired in exchange for operating lease obligations
$
4,193

 
 
Cash Paid For Amounts Included In Measurement of Liabilities:
 
Operating cash flows from finance leases
358

Operating cash flows from operating leases
16,482

 
 
Weighted Average Remaining Lease Term:
 
Operating leases
8.9 years

Finance leases
4.8 years

Weighted Average Discount Rate:
 
Operating leases
6.25
%
Finance leases
5.82
%

The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:
 
Financing leases
 
Operating leases
2019 (excluding the three months ended March 31, 2019)
$
5,775

 
$
43,386

2020
6,859

 
58,231

2021
5,538

 
49,829

2022
5,510

 
39,308

2023
4,967

 
29,260

Thereafter
2,580

 
157,402

Total future minimum lease payments, undiscounted
31,229

 
377,416

Less: Imputed interest
(3,925
)
 
(90,357
)
Present value of future minimum lease payments
$
27,304

 
$
287,059

v3.19.1
INTANGIBLE ASSETS
3 Months Ended
Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS
INTANGIBLE ASSETS
The following table summarizes information relating to the Company's acquired amortizable intangible assets: 
 
As of March 31, 2019
 
As of December 31, 2018
 
 
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Estimated Useful Lives
Customer relationships
$
5,970,884

 
$
(2,337,085
)
 
$
3,633,799

 
$
5,970,884

 
$
(2,162,110
)
 
$
3,808,774

 
8 to 18 years
Trade names
1,067,083

 
(725,748
)
 
341,335

 
1,067,083

 
(701,998
)
 
365,085

 
2 to 5 years
Other amortizable intangibles
37,644

 
(20,573
)
 
17,071

 
37,644

 
(18,679
)
 
18,965

 
1 to 15 years
 
$
7,075,611

 
$
(3,083,406
)
 
$
3,992,205

 
$
7,075,611

 
$
(2,882,787
)
 
$
4,192,824

 
 

Amortization expense for the three months ended March 31, 2019 and 2018 aggregated $200,619 and $231,817, respectively.
v3.19.1
DEBT
3 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]  
DEBT
DEBT
The following table provides details of the Company's outstanding debt:
 
 
 
Interest Rate
 
March 31, 2019
 
December 31, 2018
Date Issued
 
Maturity Date
 
Principal Amount
 
Carrying Amount (a)
 
Principal Amount
 
Carrying Amount (a)
CSC Holdings Senior Notes:
 
 
 
 
 
 
 
 
 
February 12, 2009
 
February 15, 2019
8.625
%
 
$

 
$

 
$
526,000

 
$
527,749

November 15, 2011
 
November 15, 2021
6.750
%
 
1,000,000

 
971,652

 
1,000,000

 
969,285

May 23, 2014
 
June 1, 2024
5.250
%
 
750,000

 
674,731

 
750,000

 
671,829

October 9, 2015
 
January 15, 2023
10.125
%
 

 

 
1,800,000

 
1,781,424

October 9, 2015
 
October 15, 2025
10.875
%
 
1,684,221

 
1,663,549

 
1,684,221

 
1,663,027

November 27, 2018
 
December 15, 2021
5.125
%
 
1,240,762

 
1,161,667

 
1,240,762

 
1,155,264

November 27, 2018
 
July 15, 2025
7.750
%
 
617,881

 
604,295

 
617,881

 
603,889

November 27, 2018
 
April 1, 2028
7.500
%
 
1,045,882

 
1,044,175

 
1,045,882

 
1,044,143

CSC Holdings Senior Guaranteed Notes:
 
 
 
 
 
 
 
 
October 9, 2015
 
October 15, 2025
6.625
%
 
1,000,000

 
988,396

 
1,000,000

 
988,052

September 23, 2016
 
April 15, 2027
5.500
%
 
1,310,000

 
1,305,056

 
1,310,000

 
1,304,936

January 29, 2018
 
February 1, 2028
5.375
%
 
1,000,000

 
992,232

 
1,000,000

 
992,064

November 27, 2018
 
July 15, 2023
5.375
%
 
1,095,825

 
1,079,260

 
1,095,825

 
1,078,428

November 27, 2018
 
May 15, 2026
5.500
%
 
1,498,806

 
1,484,671

 
1,498,806

 
1,484,278

January 24, 2019
 
February 1, 2029
6.500
%
 
1,750,000

 
1,746,831

 

 

Cablevision Senior Notes (b):
 
 
 
 
 
 
 
 
 
April 15, 2010
 
April 15, 2020
8.000
%
 
500,000

 
496,159

 
500,000

 
495,302

September 27, 2012
 
September 15, 2022
5.875
%
 
649,024

 
589,400

 
649,024

 
585,817

October 19, 2018
 
December 15, 2021
5.125
%
 
8,886

 
8,320

 
8,886

 
8,274

October 19, 2018
 
July 15, 2025
7.750
%
 
1,740

 
1,691

 
1,740

 
1,690

October 19, 2018
 
April 1, 2028
7.500
%
 
4,118

 
4,111

 
4,118

 
4,110

 
 
15,157,145

 
14,816,196

 
15,733,145

 
15,359,561

CSC Holdings Credit Facility Debt (Restricted Group):
 
 
 
 
 
 
 
 
Revolving Credit Facility (c) (e)
4.879
%
(d)
300,000

 
284,969

 
250,000

 
231,425

Term Loan B
 
July 17, 2025
4.734
%
(d)
2,947,500

 
2,932,491

 
2,955,000

 
2,939,425

Incremental Term Loan B-2
 
January 25, 2026
4.984
%
(d)
1,488,750

 
1,472,554

 
1,492,500

 
1,475,778

Incremental Term Loan B-3
 
January 15, 2026
4.734
%
(d)
1,275,000

 
1,269,135

 
1,275,000

 
1,268,931

Incremental Term Loan B-4
 
April 15, 2027
5.591
%
(d)
1,000,000

 
986,152

 

 

 
7,011,250

 
6,945,301

 
5,972,500

 
5,915,559

Collateralized indebtedness (see Note 11)
1,459,638

 
1,411,869

 
1,459,638

 
1,406,182

Finance lease obligations (see Note 8)
27,304

 
27,304

 
25,190

 
25,190

Notes Payable
61,131

 
61,131

 
106,108

 
106,108

 
23,716,468

 
23,261,801

 
23,296,581

 
22,812,600

Less: current portion of credit facility debt
(65,250
)
 
(65,250
)
 
(54,563
)
 
(54,563
)
Less: current portion of notes payable
(52,423
)
 
(52,423
)
 
(98,134
)
 
(98,134
)
Less: current portion of finance lease obligations
(6,293
)
 
(6,293
)
 
(5,928
)
 
(5,928
)
 
 
(123,966
)
 
(123,966
)
 
(158,625
)
 
(158,625
)
Long-term debt
$
23,592,502

 
$
23,137,835

 
$
23,137,956

 
$
22,653,975

 
(a)
The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums and with respect to certain notes, a fair value adjustment resulting from the Cequel and Cablevision acquisitions.
(b)
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.
(c)
At March 31, 2019, $163,014 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $2,099,486 of the facility was undrawn and available, subject to covenant limitations.
(d)
Represents interest rate at March 31, 2019.
(e)
The revolving credit facility matures on January 31, 2024, however $350,000 is due on November 30, 2021.
In January 2019, CSC Holdings issued $1,500,000 in aggregate principal amount of senior guaranteed notes due 2029 ("CSC Holdings 2029 Guaranteed Notes"). The notes bear interest at a rate of 6.5% and will mature on February 1, 2029. The net proceeds from the sale of the notes were used to repay certain indebtedness, including to repay at maturity $526,000 aggregate principal amount of CSC Holdings' 8.625% senior notes due February 2019 plus accrued interest, redeem approximately $905,300 of the aggregate outstanding amount of CSC Holdings' 10.125% senior notes due 2023 at a redemption price of 107.594% plus accrued interest, and paid fees and expenses associated with the transactions. In connection with this refinancing, $526,000 of short-term senior notes were reclassified to long-term debt as of December 31, 2018.
In February 2019, CSC Holdings issued an additional $250,000 CSC Holdings 2029 Guaranteed Notes at a price of 101.75% of the principal value. The proceeds of these notes were used to repay amounts outstanding under the CSC Holdings Revolving Credit Facility.
During the three months ended March 31, 2019, CSC Holdings borrowed $400,000 under its revolving credit facility and repaid $350,000 of amounts outstanding under the revolving credit facility, a portion of which was funded from the proceeds of the issuance of an additional $250,000 principal amount of CSC Holdings 2029 Guaranteed Notes (see discussion above).
In January 2019, CSC Holdings refinanced its existing revolving credit facility. After the refinancing, the total size of the new revolving credit facility is $2,562,500, including $2,212,500 extended to January 2024 and priced at LIBOR plus 2.25%. The remaining $350,000 matures in November 2021.
In February 2019, CSC Holdings entered into a $1,000,000 senior secured Term Loan B ("Incremental Term Loan B-4") maturing on April 15, 2027, the proceeds of which were used to redeem $894,700 in aggregate principal amount of CSC Holdings’ 10.125% Senior Notes due 2023, representing the entire aggregate principal amount outstanding, and paying related fees, costs and expenses. The Incremental Term Loan B-4 bears interest at a rate per annum equal to LIBOR plus 3.0% and was issued with an original issue discount of 1.0%.
The CSC Credit Facilities Agreement also contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, an event of default upon a change of control). If an event of default occurs, the lenders under the CSC Credit Facilities will be entitled to take various actions, including the acceleration of amounts due under the CSC Credit Facilities and all actions permitted to be taken by a secured creditor.
As of March 31, 2019, the Company was in compliance with all of its financial covenants under the CSC Holdings Credit Facilities and with all of its financial covenants under the indentures under which the senior and senior guaranteed notes were issued.
The following table provides a summary of the loss on extinguishment of debt and the write-off of deferred financing costs recorded by the Company upon the redemption of senior notes and the refinancing of credit facilities:
For the Three Months Ended March 31, 2019:
 
 
CSC Holdings 10.125% Senior Notes due 2023
$
154,666

 
CSC Holdings credit facility refinancing
3,236

 
 
$
157,902

For the Three Months Ended March 31, 2018:
 
 
Cablevision 7.75% Senior Notes due 2018
$
4,705


Summary of Debt Maturities
The future maturities of debt payable by the Company under its various debt obligations outstanding as of March 31, 2019, including notes payable and collateralized indebtedness (see Note 11), but excluding finance lease obligations (see Note 8), are as follows:
2019 (excluding the three months ended March 31, 2019)
$
94,162

2020
578,253

2021
3,779,571

2022
718,124

2023
1,164,330

Thereafter
17,354,724

v3.19.1
DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS
3 Months Ended
Mar. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS
DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS
Prepaid Forward Contracts
The Company has entered into various transactions to limit the exposure against equity price risk on its shares of Comcast Corporation ("Comcast") common stock.  The Company has monetized all of its stock holdings in Comcast through the execution of prepaid forward contracts, collateralized by an equivalent amount of the respective underlying stock.  At maturity, the contracts provide for the option to deliver cash or shares of Comcast stock with a value determined by reference to the applicable stock price at maturity.  These contracts, at maturity, are expected to offset declines in the fair value of these securities below the hedge price per share while allowing the Company to retain upside appreciation from the hedge price per share to the relevant cap price.  
The Company received cash proceeds upon execution of the prepaid forward contracts discussed above which has been reflected as collateralized indebtedness in the accompanying consolidated balance sheets.  In addition, the Company separately accounts for the equity derivative component of the prepaid forward contracts.  These equity derivatives have not been designated as hedges for accounting purposes.  Therefore, the net fair values of the equity derivatives have been reflected in the accompanying consolidated balance sheets as an asset or liability and the net increases or decreases in the fair value of the equity derivative component of the prepaid forward contracts are included in gain (loss) on derivative contracts in the accompanying consolidated statements of operations.
All of the Company's monetization transactions are obligations of its wholly-owned subsidiaries that are not part of the Restricted Group; however, CSC Holdings has provided guarantees of the subsidiaries' ongoing contract payment expense obligations and potential payments that could be due as a result of an early termination event (as defined in the agreements).  If any one of these contracts were terminated prior to its scheduled maturity date, the Company would be obligated to repay the fair value of the collateralized indebtedness less the sum of the fair values of the underlying stock and equity collar, calculated at the termination date.  As of March 31, 2019, the Company did not have an early termination shortfall relating to any of these contracts.
The Company monitors the financial institutions that are counterparties to its equity derivative contracts.  All of the counterparties to such transactions carry investment grade credit ratings as of March 31, 2019.
Interest Rate Swap Contracts
To manage interest rate risk, we have from time to time entered into interest rate swap contracts to adjust the proportion of total debt that is subject to variable and fixed interest rates. Such contracts effectively fix the borrowing rates on floating rate debt to provide an economic hedge against the risk of rising rates and/or effectively convert fixed rate borrowings to variable rates to permit the Company to realize lower interest expense in a declining interest rate environment. We monitor the financial institutions that are counterparties to our interest rate swap contracts and we only enter into interest rate swap contracts with financial institutions that are rated investment grade. All such contracts are carried at their fair market values on our consolidated balance sheets, with changes in fair value reflected in the consolidated statements of operations. As of March 31, 2019, the Company did not hold and has not issued derivative instruments for trading or speculative purposes.
The following represents the location of the assets and liabilities associated with the Company's derivative instruments within the consolidated balance sheets:
Derivatives Not Designated as Hedging Instruments
 
Balance Sheet Location
 
Fair Value at
 
 
March 31, 2019
 
December 31, 2018
 
 
 
 
 
 
 
Asset Derivatives:
 
 
 
 
 
 
Interest rate swap contracts
 
Derivative contracts, current
 
$

 
$
1,975

Prepaid forward contracts
 
Derivative contracts, long-term
 

 
109,344

 
 
 
 

 
111,319

Liability Derivatives:
 
 
 
 
 
 
Interest rate swap contracts
 
Other current liabilities
 
(754
)
 
(70
)
Prepaid forward contracts
 
Liabilities under derivative contracts, long-term
 
(67,685
)
 

Interest rate swap contracts
 
Liabilities under derivative contracts, long-term
 
(155,369
)
 
(132,908
)
 
 
 
 
$
(223,808
)
 
$
(132,978
)

The gain (loss) from the Company's derivative contracts related to the Comcast common stock for the three months ended March 31, 2019 and 2018 of $(177,029) and $168,352, respectively, is reflected in gain (loss) on derivative contracts, net in the Company's consolidated statements of operations.
For the three months ended March 31, 2019 and 2018 the Company recorded a gain (loss) on investments of $254,725 and $(252,576), respectively, representing the net increase (decrease) in the fair value of the Comcast common stock pledged as collateral. 
For the three months ended March 31, 2019 and 2018 the Company recorded a loss on interest rate swap contracts of $23,672 and $31,922, respectively.
v3.19.1
FAIR VALUE MEASUREMENT
3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable.  Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity's pricing based upon their own market assumptions.  The fair value hierarchy consists of the following three levels:
Level I - Quoted prices for identical instruments in active markets.
Level II - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level III - Instruments whose significant value drivers are unobservable.
The following table presents for each of these hierarchy levels, the Company's financial assets and financial liabilities that are measured at fair value on a recurring basis:
 
Fair Value
Hierarchy
 
March 31, 2019
 
December 31, 2018
Assets:
 
 
 
 
 
Money market funds
Level I
 
$
32,004

 
$
91,852

Investment securities pledged as collateral
Level I
 
1,717,350

 
1,462,626

Prepaid forward contracts
Level II
 

 
109,344

Interest rate swap contracts
Level II
 

 
1,975

Liabilities:
 
 
 
 
 
Prepaid forward contracts
Level II
 
67,685

 

Interest rate swap contracts
Level II
 
156,123

 
132,978

Contingent consideration related to 2017 and 2018 acquisitions
Level III
 
5,139

 
6,195


The Company's cash equivalents, investment securities and investment securities pledged as collateral are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.
The Company's derivative contracts and liabilities under derivative contracts on the Company's consolidated balance sheets are valued using market-based inputs to valuation models.  These valuation models require a variety of inputs, including contractual terms, market prices, yield curves, and measures of volatility.  When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit risk considerations.  Such adjustments are generally based on available market evidence.  Since model inputs can generally be verified and do not involve significant management judgment, the Company has concluded that these instruments should be classified within Level II of the fair value hierarchy.
The fair value of the contingent consideration as of March 31, 2019 is equal to the contractual obligation expected to be paid based on a probability assessment of attaining the targets as of such date. The maximum amount that could be paid if all targets are achieved is approximately $11,000.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate fair value of each class of financial instruments for which it is practicable to estimate:
Credit Facility Debt, Collateralized Indebtedness, Senior Notes and Debentures, Senior Guaranteed Notes, and Notes Payable
The fair values of each of the Company's debt instruments are based on quoted market prices for the same or similar issues or on the current rates offered to the Company for instruments of the same remaining maturities. The fair value of notes payable is based primarily on the present value of the remaining payments discounted at the borrowing cost.
The carrying values, estimated fair values, and classification under the fair value hierarchy of the Company's financial instruments, excluding those that are carried at fair value in the accompanying consolidated balance sheets, are summarized as follows:
 
 
 
March 31, 2019
 
December 31, 2018
 
Fair Value
Hierarchy
 
Carrying
Amount (a)
 
Estimated
Fair Value
 
Carrying
Amount (a)
 
Estimated
Fair Value
CSC Holdings debt instruments:
 
 
 
 
 
 
 
 
 
Credit facility debt
Level II
 
$
6,945,301

 
$
7,011,250

 
$
5,915,559

 
$
5,972,500

Collateralized indebtedness
Level II
 
1,411,869

 
1,392,790

 
1,406,182

 
1,374,203

Senior guaranteed notes
Level II
 
7,596,446

 
7,925,722

 
5,847,758

 
5,646,468

Senior notes and debentures
Level II
 
6,120,069

 
6,811,420

 
8,416,610

 
8,972,722

Notes payable
Level II
 
61,131

 
61,091

 
106,108

 
105,836

Cablevision debt instruments:
 
 
 
 
 
 
 
 
 
Senior notes and debentures
Level II
 
1,099,681

 
1,216,269

 
1,095,193

 
1,163,843

 
 
 
$
23,234,497

 
$
24,418,542

 
$
22,787,410

 
$
23,235,572

 
(a)
Amounts are net of unamortized deferred financing costs and discounts/premiums.
The fair value estimates related to the Company's debt instruments presented above are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.
v3.19.1
INCOME TAXES
3 Months Ended
Mar. 31, 2019
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
In general, the Company is required to use an estimated annual effective tax rate ("AETR") to measure the income tax expense or benefit recognized on a year to date basis in an interim period. In addition, certain items included in income tax expense as well as the tax impact of certain items included in pretax income must be treated as discrete items. The income tax expense or benefit associated with these discrete items is fully recognized in the interim period in which the items occur.
For the three months ended March 31, 2019, the Company recorded a tax benefit of $22,586 on pre-tax loss of $47,784, resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was due to revaluation of state deferred taxes primarily due to certain changes to the state tax rates used to measure the Company’s deferred tax liabilities and certain non-deductible expenses.
For the three months ended March 31, 2018, the Company recorded a tax benefit of $60,703 on pre-tax loss of $189,652, resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was primarily due to state taxes and non-deductible expenses.
v3.19.1
SHARE-BASED COMPENSATION
3 Months Ended
Mar. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION
Carry Unit Plan
Certain employees of the Company and its affiliates received awards of units in a carry unit plan of Neptune Management LP, an entity which has an ownership interest in the Company. The following table summarizes activity relating to these carry units:
 
Number of Time
Vesting Awards
 
Number of Performance
Based Vesting Awards
 
Weighted Average Grant Date Fair Value
Balance, December 31, 2018
83,575,000

 
10,000,000

 
$
1.14

Vested</