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the Company amended and restated its certificate of incorporation to, among other things, provide for Class A common stock, Class B common stock and Class C common stock;
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BC Partners LLP ("BCP") and Canada Pension Plan Investment Board (‘‘CPPIB" and together with BCP, the‘‘Co-Investors’’) and Uppernext S.C.S.p. ("Uppernext"), an entity controlled by Mr. Patrick Drahi (founder and controlling stockholder of Altice N.V.), exchanged their indirect ownership interest in the Company for shares of the Company’s common stock;
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Neptune Management LP (‘‘Management LP’’) redeemed its Class B units for shares of the Company’s common stock that it received from the redemption of its Class B units in Neptune Holding US LP;
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the Company converted $525,000 aggregate principal amount of notes issued by the Company to the Co-Investors (together with accrued and unpaid interest and applicable premium) into shares of the Company’s common stock at the IPO price (see Note 9 for further details);
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$1,225,000 aggregate principal amount of notes issued by the Company to a subsidiary of Altice N.V. (together with accrued and unpaid interest and applicable premium) was transferred to CVC 3 B.V., an indirect subsidiary of Altice N.V. ("CVC 3") and then the Company converted such notes into shares of the Company’s common stock at the IPO price (see Note 9 for further details);
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the Co-Investors, Neptune Holding US LP, A4 S.A. (an entity controlled by the family of Mr. Drahi), and former Class B unitholders of Management LP (including Uppernext) exchanged shares of the Company’s common stock for new shares of the Company’s Class A common stock; and
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CVC 3 and A4 S.A. exchanged shares of the Company’s common stock for new shares of the Company’s Class B common stock.
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DESCRIPTION OF BUSINESS, RELATED MATTERS AND BASIS OF PRESENTATION
The Company and Related Matters
Altice USA, Inc. ("Altice USA" or the "Company") was incorporated in Delaware on September 14, 2015. As of December 31, 2016, Altice USA is majority-owned by Altice N.V., a public company with limited liability (naamloze vennootshcap) under Dutch law ("Altice N.V.").
Altice N.V. acquired Cequel Corporation ("Cequel" or "Suddenlink") on December 21, 2015 and Cequel was contributed to Altice USA on June 9, 2016. Altice USA had no operations of its own other than the issuance of debt prior to the contribution of Cequel on June 9, 2016 by Altice N.V. The results of operations of Cequel for the year ended December 31, 2016 have been included in the results of operations of Altice USA for the same period, as Cequel was under common control with Altice USA throughout 2016. Altice USA acquired Cablevision Systems Corporation ("Cablevision" or "Optimum") on June 21, 2016.
In addition to the operating results of Cequel for the year ended December 31, 2016, the operating results of Altice USA include the operating results of Cablevision for the period from the date of acquisition, June 21, 2016 through December 31, 2016. In addition to the operating results of Cequel and Cablevision described above, Altice USA incurred net interest expense of $419,456. For the period from inception of Altice USA through December 31, 2015, the operating results of Altice USA include $157,192 of interest expense related to the indebtedness issued to fund the acquisition of Cablevision, discussed below, and the operating results of Cequel for the 10 day period, December 21, 2015 through December 31, 2015. The Company classifies its operations into two reportable segments: Cablevision, which operates in the New York metropolitan area, and Cequel, which principally operates in markets in the south-central United States.
Acquisition of Cablevision Systems Corporation
On June 21, 2016 (the "Cablevision Acquisition Date"), pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 16, 2015, by and among Cablevision, Altice N.V., Neptune Merger Sub Corp., a wholly-owned subsidiary of Altice N.V. ("Merger Sub"), Merger Sub merged with and into Cablevision, with Cablevision surviving the merger (the "Cablevision Acquisition").
In connection with the Cablevision Acquisition, each outstanding share of the Cablevision NY Group Class A common stock, par value $0.01 per share, and Cablevision NY Group Class B common stock, par value $0.01 per share, and together with the Cablevision NY Group Class A common stock, the "Shares") other than (i) Shares owned by Cablevision, Altice N.V. or any of their respective wholly-owned subsidiaries, in each case not held on behalf of third parties in a fiduciary capacity, received $34.90 in cash without interest, less applicable tax withholdings (the "Cablevision Acquisition Consideration").
Pursuant to an agreement, dated December 21, 2015, by and among CVC 2 B.V., CIE Management IX Limited, for and on behalf of the limited partnerships BC European Capital IX-1 through 11 and Canada Pension Plan Investment Board, certain affiliates of BCP and CPPIB (the "Co-Investors") funded approximately $1,000,000 toward the payment of the aggregate Per Share Cablevision Acquisition Consideration, and indirectly acquired approximately 30% of the Shares of Cablevision.
Also in connection with the Cablevision Acquisition, outstanding equity-based awards granted under Cablevision's equity plans were cancelled and converted into cash based upon the $34.90 per Share Cablevision Acquisition price in accordance with the original terms of the awards. The total consideration for the outstanding CNYG Class A Shares, the outstanding CNYG Class B Shares, and the equity-based awards amounted to $9,958,323.
In connection with the Cablevision Acquisition, in October 2015, Neptune Finco Corp. ("Finco"), an indirect wholly-owned subsidiary of Altice N.V. formed to complete the financing described herein and the merger with CSC Holdings, LLC ("CSC Holdings"), a wholly-owned subsidiary of Cablevision, borrowed an aggregate principal amount of $3,800,000 under a term loan facility (the "Term Credit Facility") and entered into revolving loan commitments in an aggregate principal amount of $2,000,000 (the "Revolving Credit Facility" and, together with the Term Credit Facility, the "Credit Facilities").
Finco also issued $1,800,000 aggregate principal amount of 10.125% senior notes due 2023 (the "2023 Notes"), $2,000,000 aggregate principal amount of 10.875% senior notes due 2025 (the "2025 Notes"), and $1,000,000 aggregate principal amount of 6.625% senior guaranteed notes due 2025 (the "2025 Guaranteed Notes") (collectively the "Cablevision Acquisition Notes").
On June 21, 2016, immediately following the Cablevision Acquisition, Finco merged with and into CSC Holdings, with CSC Holdings surviving the merger (the "CSC Holdings Merger"), and the Cablevision Acquisition Notes and the Credit Facilities became obligations of CSC Holdings.
On June 21, 2016, in connection with the Cablevision Acquisition, the Company issued notes payable to affiliates and related parties aggregating $1,750,000, of which $875,000 bear interest at 10.75% and $875,000 bear interest at 11%.
The Cablevision Acquisition was accounted for as a business combination in accordance with ASC Topic 805. Accordingly, the Company stepped up 100% of the assets and liabilities assumed to their fair value at the Cablevision Acquisition Date. See Note 3 for further details.
Acquisition of Cequel Corporation
On December 21, 2015, Altice N.V. acquired approximately 70% of the total outstanding equity interests in Cequel Corporation (the "Cequel Acquisition") from the direct and indirect stockholders of Cequel Corporation (the "Sellers"). The consideration for the acquired equity interests was based on a total equity valuation for 100% of the capital and voting rights of Cequel of $3,973,528 which includes $2,797,928 of cash consideration, $675,600 of retained equity held by entities affiliated with BC Partners and CPPIB and $500,000 funded by the issuance by an affiliate of Altice N.V. of a senior vendor note that was subscribed by entities affiliated with BC Partners and CPPIB. Following the closing of the Cequel Acquisition, entities affiliated with BC Partners and CPPIB retained a 30% equity interest in a parent entity of the Company. In addition, the carried interest plans of the Stockholders were cashed out whereby payments were made to participants in such carried interest plans, including certain officers and directors of Cequel.
The Cequel Acquisition was accounted for as a business combination in accordance with ASC Topic 805. Accordingly, the Company stepped up 100% of the assets and liabilities assumed to their fair value at the Cequel Acquisition Date. See Note 3 for further details.
In June 2016, Cequel was contributed to Altice USA. The accompanying consolidated financial statements include the operating results of Cequel from January 1, 2016 through December 31, 2016 and the operating results of Cablevision from the Cablevision Acquisition Date through December 31, 2016.
Basis of Presentation
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("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 revenues and expenses during the reporting period. Actual results could differ from those estimates. See Note 11 for a discussion of fair value estimates.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes video, high-speed data, and voice services revenues as the services are provided to customers. Revenue received from customers who purchase bundled services at a discounted rate is allocated to each product in a pro-rata manner based on the individual product's selling price (generally, the price at which the product is regularly sold on a standalone basis). Installation revenue for the Company's video, consumer high-speed data and VoIP services is recognized as installations are completed, as direct selling costs have exceeded this revenue in all periods reported. Advertising revenues are recognized when commercials are aired.
Revenues derived from other sources are recognized when services are provided or events occur.
Multiple-Element Transactions
In the normal course of business, the Company may enter into multiple-element transactions where it is simultaneously both a customer and a vendor with the same counterparty or in which it purchases multiple products and/or services, or settles outstanding items contemporaneous with the purchase of a product or service from a single counterparty. The Company's policy for accounting for each transaction negotiated contemporaneously is to record each deliverable of the transaction based on its best estimate of selling price in a manner consistent with that used to determine the price to sell each deliverable on a standalone basis. In determining the fair value of the respective deliverable, the Company will utilize quoted market prices (as available), historical transactions or comparable transactions.
Gross Versus Net Revenue Recognition
In the normal course of business, 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. The Company's policy is that, in instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities and amounts received from the customers are recorded on a gross basis. That is, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customer are recorded as revenue. For the year ended December 31, 2016, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $154,732.
Technical and Operating Expenses
Costs of revenue related to sales of services are classified as "programming and other direct costs" in the accompanying consolidated statement of operations.
Programming Costs
Programming expenses related to the Company's video service represent fees paid to programming distributors to license the programming distributed to subscribers. This programming is acquired generally under multi-year distribution agreements, with rates usually based on the number of subscribers that receive the programming. If there are periods when an existing distribution agreement has expired and the parties have not finalized negotiations of either a renewal of that agreement or a new agreement for certain periods of time, the Company continues to carry and pay for these services until execution of definitive replacement agreements or renewals. The amount of programming expense recorded during the interim period is based on the Company's estimates of the ultimate contractual agreement expected to be reached, which is based on several factors, including previous contractual rates, customary rate increases and the current status of negotiations. Such estimates are adjusted as negotiations progress until new programming terms are finalized.
In addition, the Company has received, or may receive, incentives from programming distributors for carriage of the distributors' programming. The Company generally recognizes these incentives as a reduction of programming costs in "programming and other direct costs", generally over the term of the distribution agreement.
Advertising Expenses
Advertising costs are charged to expense when incurred and are reflected in "other operating expenses" in the accompanying consolidated statement of operations. Advertising costs amounted to $135,513 for the year ended December 31, 2016.
Share-Based Compensation
Share-based compensation cost relates to awards of units in a carried unit plan. For carried interest units, the Company measures share-based compensation cost at the grant date fair value and recognizes the expense over the requisite service period or when it is probable any related performance condition will be met. For carried interest units with graded vesting requirement, compensation cost is recognized on an accelerated method under the graded vesting method over the requisite service period for the carried interest unit. Carried interest units that vest entirely at the end of the vesting requirement are expensed on a straight-line basis.
The Company estimates the fair value of carried interest units using an option pricing model. Key inputs that are used in applying the option pricing method are total equity value, equity volatility, risk free rate and time to liquidity event. The estimate of total equity value is determined using a combination of the income approach, which incorporates cash flow projections that are discounted at an appropriate rate, and the market approach, which involves applying a market multiple to the Company's projected operating results. The Company estimates volatility based on the historical equity volatility of comparable publicly-traded companies. Because there has been no public market for our equity prior to this offering, the estimates and assumptions the Company uses in the share-based compensation valuations are highly complex and subjective. Following the offering, such subjective valuations and estimates will no longer be necessary because we will rely on the market price of the Company's common stock to determine the fair value of share-based compensation awards. See Note 14 to the consolidated financial statements for additional information about our share-based compensation.
Income Taxes
The Company's provision for income taxes is based on current period income, changes in deferred tax assets and liabilities and changes in estimates with regard to uncertain tax positions. Deferred tax assets are subject to an ongoing assessment of realizability. The Company provides deferred taxes for the outside basis difference of its investment in partnerships.
Cash and Cash Equivalents
The Company's cash investments are placed with money market funds and financial institutions that are investment grade as rated by Standard & Poor's and Moody's Investors Service. The Company selects money market funds that predominantly invest in marketable, direct obligations issued or guaranteed by the United States government or its agencies, commercial paper, fully collateralized repurchase agreements, certificates of deposit, and time deposits.
The Company considers the balance of its investment in funds that substantially hold securities that mature within three months or less from the date the fund purchases these securities to be cash equivalents. The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.
Accounts Receivable
Accounts receivable are recorded at net realizable value. The Company periodically assesses the adequacy of valuation allowances for uncollectible accounts receivable by evaluating the collectability of outstanding receivables and general factors such as historical collection experience, length of time individual receivables are past due, and the economic and competitive environment.
Investments
Investment securities and investment securities pledged as collateral are classified as trading securities and are stated at fair value with realized and unrealized holding gains and losses included in net income.
Long-Lived Assets and Amortizable Intangible Assets
Property, plant and equipment, including construction materials, are carried at cost, and include all direct costs and certain indirect costs associated with the construction of cable systems, and the costs of new equipment installations. Equipment under capital leases is recorded at the present value of the total minimum lease payments. Depreciation on equipment is calculated on the straight-line basis over the estimated useful lives of the assets or, with respect to equipment under capital leases and leasehold improvements, amortized over the shorter of the lease term or the assets' useful lives and reported in depreciation and amortization (including impairments) in the consolidated statements of operations.
The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized over the estimated useful life of the software and reported in depreciation and amortization (including impairments).
Customer relationships, trade names and other intangibles established in connection with acquisitions that are finite-lived are amortized in a manner that reflects the pattern in which the projected net cash inflows to the Company are expected to occur, such as the sum of the years' digits method, or when such pattern does not exist, using the straight-line basis over their respective estimated useful lives.
The Company reviews its long-lived assets (property, plant and equipment, and intangible assets subject to amortization that arose from acquisitions) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and the value of franchises, trademarks, and certain other intangibles acquired in purchase business combinations which have indefinite useful lives are not amortized. Rather, such assets are tested for impairment annually or upon the occurrence of a triggering event.
The Company assesses qualitative factors for its reporting units that carry goodwill. If the qualitative assessment results in a conclusion that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting unit.
When the qualitative assessment is not used, or if the qualitative assessment is not conclusive and it is necessary to calculate the fair value of a reporting unit, then the impairment analysis for goodwill is performed at the reporting unit level using a two-step approach. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill utilizing an enterprise-value based premise approach. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of goodwill impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill which would be recognized in a business combination.
The Company assesses qualitative factors to determine whether it is necessary to perform the one-step quantitative identifiable indefinite-lived intangible assets impairment test. This quantitative test is required only if the Company concludes that it is more likely than not that a unit of accounting's fair value is less than its carrying amount. When the qualitative assessment is not used, or if the qualitative assessment is not conclusive, the impairment test for other intangible assets not subject to amortization requires a comparison of the fair value of the intangible asset with its carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Deferred Financing Costs
Deferred financing costs are being amortized to interest expense using the effective interest method over the terms of the related debt.
Derivative Financial Instruments
The Company accounts for derivative financial instruments as either assets or liabilities measured at fair value. The Company uses derivative instruments to manage its exposure to market risks from changes in certain equity prices and interest rates and does not hold or issue derivative instruments for speculative or trading purposes. These derivative instruments are not designated as hedges, and changes in the fair values of these derivatives are recognized in the statement of operations as gains (losses) on derivative contracts.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when the Company believes it is probable that a liability has been incurred and the amount of the contingency can be reasonably estimated.
Recently Adopted Accounting Pronouncements
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that the statement of cash flows disclose the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. ASU No. 2016-18 provides specific guidance on the presentation of restricted cash in the statement of cash flows. The new guidance was adopted as of December 31, 2016.
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17 (Topic 740), Balance Sheet Classification of Deferred Taxes. This ASU amends existing guidance to require the presentation of deferred tax liabilities and assets as noncurrent within a classified statement of financial position. ASU No. 2015-17 was adopted by the Company in the fourth quarter 2016 and was applied prospectively to all deferred tax liabilities and assets.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Prior to the issuance of the standard, entities were required to retrospectively apply adjustments made to provisional amounts recognized in a business combination. ASU No. 2015-16 was adopted by the Company on January 1, 2016.
In April 2015, the FASB issued ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. ASU No. 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU No. 2015-05 was adopted by the Company on January 1, 2016 and did not have a material impact on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs from line-of-credit arrangements after adoption of ASU No. 2015-03. ASU No. 2015-15 clarifies that the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU No. 2015-03 was adopted by the Company on January 1, 2016.
In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU No. 2014-15 was adopted by the Company for the annual period ended December 31, 2016.
In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period. ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. ASU No. 2014-12 was adopted by the Company on January 1, 2016 on a prospective basis and did not have any impact on the Company's consolidated financial statements.
Recently Issued But Not Yet Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and allows the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14 that approved deferring the effective date by one year so that ASU No. 2014-09 would become effective for the Company on January 1, 2018. The FASB also approved, in July 2015, permitting the early adoption of ASU No. 2014-09, but not before the original effective date for the Company of January 1, 2017.
In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in order to clarify the Codification and to correct any unintended application of the guidance. These items are not expected to have a significant effect on the current accounting standard. The amendments in this update affect the guidance in ASU No. 2014-09, which is not yet effective. ASU No. 2014-09 will be effective, reflecting the one-year deferral, for interim and annual periods beginning after December 15, 2017 (January 1, 2018 for the Company). Early adoption of the standard is permitted but not before the original effective date. Companies can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact that the adoption of ASU No. 2014-09 will have on its consolidated financial statements and selecting the method of transition to the new standard. We currently expect the adoption to impact the timing of the recognition of residential installation revenue and the recognition of commission expenses.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU No. 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The new guidance becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2016-15 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which provides simplification of income tax accounting for share-based payment awards. The new guidance becomes effective for the Company on January 1, 2017 with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value will be applied using the modified retrospective transition method. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term will be applied prospectively. The Company may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. In connection with the adoption on January 1, 2017, a deferred tax asset of approximately $309,000 for previously unrealized excess tax benefits will be recognized with the offset recorded to accumulated deficit.
In February 2016, the FASB issued ASU 2016-02, Leases, which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019 with early adoption permitted and will be applied using the modified retrospective method. The Company has not yet completed the evaluation of the effect that ASU No. 2016-02 will have on its consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07 Compensation—Retirement Benefits (Topic 715). ASU No. 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. It also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and what component of net benefit cost is eligible for capitalization. ASU No. 2017-07 becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2017-07 will have on its consolidated financial statements.
Common Stock
At December 31, 2016, the Company had 100 shares of common stock with a par value of $.01 issued and outstanding.
Net Loss Per Share
Basic and diluted net loss per share have been computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share excludes the effects of common stock equivalents as they are anti-dilutive.
Concentrations of Credit Risk
Financial instruments that may potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents and trade account receivables. The Company monitors the financial institutions and money market funds where it invests its cash and cash equivalents with diversification among counterparties to mitigate exposure to any single financial institution. The Company's emphasis is primarily on safety of principal and liquidity and secondarily on maximizing the yield on its investments. Management believes that no significant concentration of credit risk exists with respect to its cash and cash equivalents balances because of its assessment of the creditworthiness and financial viability of the respective financial institutions.
The Company did not have a single customer that represented 10% or more of its consolidated revenues for the year ended December 31, 2016, or 10% or more of its consolidated net trade receivables at December 31, 2016.
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Fair Values | Estimated Useful Lives | ||||
Current assets | $ | 1,923,071 | |||
Accounts receivable | 271,305 | ||||
Property, plant and equipment | 4,864,621 | 2-18 years | |||
Goodwill | 5,842,172 | ||||
Indefinite-lived cable television franchises | 8,113,575 | Indefinite-lived | |||
Customer relationships | 4,850,000 | 8 to 18 years | |||
Trade names (a) | 1,010,000 | 12 years | |||
Amortizable intangible assets | 23,296 | 1-15 years | |||
Other non-current assets | 748,998 | ||||
Current liabilities | (2,311,201 | ) | |||
Long-term debt | (8,355,386 | ) | |||
Deferred income taxes. | (6,832,773 | ) | |||
Other non-current liabilities | (189,355 | ) | |||
Total | $ | 9,958,323 |
(a) | See Note 8 for additional information regarding a change in the remaining estimated useful lives of the Company's trade names. |
Nine Months Ended September 30, 2016 | |||
Revenue | $ | 6,848,916 | |
Net loss | $ | (527,851 | ) |
BUSINESS COMBINATION
As discussed in Note 1, the Company completed the Cablevision Acquisition on June 21, 2016 and the Cequel Acquisition on December 21, 2015. The acquisitions were accounted for as a business combinations in accordance with ASC Topic 805. Accordingly, the Company recorded the fair value of the assets and liabilities assumed at the date of the acquisitions.
The following table provides the preliminary allocation of the total purchase price of $9,958,323 to the identifiable tangible and intangible assets and liabilities of Cablevision based on preliminary fair value information currently available, which is subject to change within the measurement period (up to one year from the acquisition date). The table also summarizes the allocation of the total purchase price of $3,973,528 to the identifiable tangible and intangible assets and liabilities based on fair value information in connection with the Cequel Acquisition. The remaining useful lives represent the period over which acquired tangible and intangible assets with a finite life are being depreciated or amortized.
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Cablevision |
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Cequel |
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Preliminary |
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Estimated |
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Fair Values |
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Estimated |
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Current assets |
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$ |
1,923,071 |
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|
|
$ |
161,874 |
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|
Accounts receivable |
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271,305 |
|
|
|
|
180,422 |
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Property, plant and equipment |
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|
4,864,621 |
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2 - 18 years |
|
|
2,107,220 |
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3 - 13 years |
Goodwill |
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|
5,838,959 |
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|
|
|
2,153,741 |
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Cable television franchise rights |
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8,113,575 |
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Indefinite-lived |
|
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4,906,506 |
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Indefinite-lived |
Customer relationships |
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4,850,000 |
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8 to 18 years |
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|
1,075,884 |
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8 years |
Trade names |
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|
1,010,000 |
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12 years |
|
|
56,782 |
|
2 years |
Amortizable intangible assets |
|
|
23,296 |
|
1 - 15 years |
|
|
3,356 |
|
11 years |
Other non-current assets |
|
|
748,998 |
|
|
|
|
73,811 |
|
|
Current liabilities |
|
|
(2,305,954 |
) |
|
|
|
(534,662 |
) |
|
Long-term debt |
|
|
(8,355,386 |
) |
|
|
|
(4,717,305 |
) |
|
Deferred income taxes |
|
|
(6,834,807 |
) |
|
|
|
(1,492,017 |
) |
|
Other non-current liabilities |
|
|
(189,355 |
) |
|
|
|
(2,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
9,958,323 |
|
|
|
$ |
3,973,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of customer relationships and cable television franchises were valued using derivations of the "income" approach. The future expected earnings from these assets were discounted to their present value equivalent.
Trade names were valued using the relief from royalty method, which is based on the present value of the royalty payments avoided as a result of the company owning the intangible asset.
The basis for the valuation methods was the Company's projections. These projections were based on management's assumptions including among others, penetration rates for video, high speed data, and voice; revenue growth rates; operating margins; and capital expenditures. The assumptions are derived based on the Company's and its peers' historical operating performance adjusted for current and expected competitive and economic factors surrounding the cable industry. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows generated by the respective intangible asset. The value is highly dependent on the achievement of the future financial results contemplated in the projections. The estimates and assumptions made in the valuation are inherently subject to significant uncertainties, many of which are beyond the Company's control, and there is no assurance that these results can be achieved. The primary assumptions for which there is a reasonable possibility of the occurrence of a variation that would have significantly affected the value include the assumptions regarding revenue growth, programming expense growth rates, the amount and timing of capital expenditures and the discount rate utilized.
In establishing fair value for the vast majority of the acquired property, plant and equipment, the cost approach was utilized. The cost approach considers the amount required to replace an asset by constructing or purchasing a new asset with similar utility, then adjusts the value in consideration of physical depreciation, and functional and economic obsolescence as of the appraisal date. The cost approach relies on management's assumptions regarding current material and labor costs required to rebuild and repurchase significant components of our property, plant and equipment along with assumptions regarding the age and estimated useful lives of our property, plant and equipment.
The estimates of expected useful lives take into consideration the effects of contractual relationships, customer attrition, eventual development of new technologies and market competition.
Long-term debt assumed was valued using quoted market prices (Level 2). The carrying value of most other assets and liabilities approximated fair value as of the acquisition dates.
As a result of applying business combination accounting, the Company recorded goodwill, which represented the excess of organization value over amounts assigned to the other identifiable tangible and intangible assets arising from expectations of future operational performance and cash generation.
The following table presents the unaudited pro forma revenue, loss from continuing operations and net loss for the year ended December 31, 2016 as if the Cablevision Acquisition had occurred on January 1, 2016:
Revenue |
|
$ |
9,154,816 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(721,257 |
) |
|
|
|
|
|
|
|
|
|
|
The pro forma results presented above include the impact of additional amortization expense related to the identifiable intangible assets recorded in connection with the Cablevision Acquisition, additional depreciation expense related to the fair value adjustment to property, plant and equipment and the incremental interest resulting from the issuance of debt to fund the acquisitions, net of the reversal of interest and amortization of deferred financing costs related to credit facilities that were repaid on the date of the Cablevision Acquisition, the accretion/ amortization of fair value adjustments associated with the long-term debt acquired and the remeasurement of deferred taxes associated with the acquisition of Cablevision.
|
UNAUDITED PRO FORMA NET LOSS PER SHARE
The pro forma net loss per share data for the year ended December 31, 2016 is based on our historical statement of operations after giving effect to the issuance and sale of the shares of common stock in connection with the Company's initial offering of equity securities to the public ("IPO"), as well as the common stock to be issued in the organizational transactions discussed below, as if they occurred at the beginning of the period.
|
|
Year Ended |
|
|
|
|
Basic and Diluted |
|
|
|
|
(Unaudited) |
|
|
Numerator: |
|
|
|
|
Net loss attributable to Altice USA, Inc. stockholders |
|
$ |
(832,030 |
) |
Denominator: |
|
|
|
|
Weighted average shares of common stock outstanding—basic and diluted (in thousands) |
|
|
0.1 |
|
Pro forma adjustment to reflect the issuance of common stock (in thousands) |
|
|
737,069 |
|
Weighted average shares of common stock outstanding used in computing the pro forma net income per share—basic and diluted (in thousands) |
|
|
737,069 |
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss per share—basic and diluted |
|
$ |
(1.13 |
) |
|
|
|
|
|
|
|
|
|
|
The following organizational transactions will be consummated in connection with the Company's IPO:
|
|
|
|
• |
the Company will amend and restate its certificate of incorporation to, among other things, provide for Class A common stock, Class B common stock and Class C common stock; |
|
• |
the Co-Investors and an entity controlled by Mr. Drahi will exchange their indirect ownership interest in the Company for shares of the Company's common stock; |
|
• |
Neptune Management LP ("Management LP") will redeem its Class B units for shares of the Company's common stock that it receives from the redemption of its Class B units in Neptune Holding US LP; |
|
• |
the Company will convert $525,000 aggregate principal amount of notes issued by the Company to the Co-Investors (together with accrued and unpaid interest and applicable premium) into shares of the Company's common stock at the initial public offering price; |
|
• |
$1,225 million aggregate principal amount of notes issued by the Company to a subsidiary of Altice N.V. (together with accrued and unpaid interest and applicable premium) will be transferred to CVC 3 and then the Company will convert such notes into shares of the Company's common stock at the initial public offering price; |
|
• |
the Co-Investors, Neptune Holding US LP, an entity controlled by the family of Mr. Drahi and former Class B unitholders of Management LP (including an entity controlled by Mr. Drahi) will exchange shares of the Company's common stock for new shares of the Company's Class A common stock; and |
|
• |
CVC 3 B.V., an indirect subsidiary of Altice N.V., and an entity controlled by the family of Mr. Drahi will exchange shares of the Company's common stock for new shares of the Company's Class B common stock. |
|
|
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Non-Cash Investing and Financing Activities: | |||||||
Continuing Operations: | |||||||
Conversion of notes payable to affiliates and related parties of $1,750,000 (together with accrued and unpaid interest and applicable premium) to common stock (See Note 9) | $ | 2,264,252 | $ | — | |||
Property and equipment accrued but unpaid | 84,847 | 83,722 | |||||
Leasehold improvements paid by landlord | 3,998 | — | |||||
Notes payable to vendor | 25,879 | — | |||||
Supplemental Data: | |||||||
Cash interest paid | 1,481,363 | 931,345 | |||||
Income taxes paid, net | 26,396 | 5,342 |
SUPPLEMENTAL CASH FLOW INFORMATION
During 2016, the Company's non-cash investing and financing activities and other supplemental data were as follows:
Non-Cash Investing and Financing Activities: |
|
|
|
|
Continuing Operations: |
|
|
|
|
Property and equipment accrued but unpaid |
|
$ |
155,653 |
|
Distributions declared but not paid |
|
|
79,617 |
|
Notes payable to vendor |
|
|
12,449 |
|
Deferred financing costs accrued but unpaid |
|
|
2,570 |
|
Supplemental Data: |
|
|
|
|
Cash interest paid |
|
|
1,092,114 |
|
Income taxes paid, net |
|
|
1,538 |
|
|
The following table summarizes the activity for the 2016 Restructuring Plan during 2017: | |||||||||||
Severance and Other Employee Related Costs | Facility Realignment and Other Costs | Total | |||||||||
Accrual balance at December 31, 2016 | $ | 102,119 | $ | 8,397 | $ | 110,516 | |||||
Restructuring charges | 140,071 | 1,007 | 141,078 | ||||||||
Payments and other | (92,905 | ) | (3,833 | ) | (96,738 | ) | |||||
Accrual balance at September 30, 2017 | $ | 149,285 | $ | 5,571 | $ | 154,856 |
RESTRUCTURING AND OTHER EXPENSE
Restructuring
During 2016, the Company commenced its restructuring initiatives (the "2016 Restructuring Plan") that are intended to simplify the Company's organizational structure. The 2016 Restructuring Plan resulted in charges of $215,420 associated with the elimination of positions primarily in corporate, administrative and infrastructure functions across the Optimum and Suddenlink business segments and estimated charges of $11,157 associated with facility realignment and other costs.
The following table summarizes the activity for the 2016 Restructuring Plan:
|
|
Severance and |
|
Facility |
|
Total |
|
|||
Restructuring charges |
|
$ |
215,420 |
|
$ |
11,157 |
|
$ |
226,577 |
|
Payments and other |
|
|
(113,301 |
) |
|
(2,760 |
) |
|
(116,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
Accrual balance at December 31, 2016 |
|
$ |
102,119 |
|
$ |
8,397 |
|
$ |
110,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to the charges included in the table above, the Company recorded net restructuring credits of $27 relating to changes to the Company's previous estimates recorded in connection with the Company's prior restructuring plans.
Other Expense
The Company incurred transaction costs of $13,845 for the year ended December 31, 2016 related to the Cablevision Acquisition and Cequel Acquisition which are reflected in restructuring and other expense in the consolidated statement of operations.
|
Amortizable Intangible Assets | |||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Estimated Useful Lives | ||||||||||
Customer relationships | $ | 5,970,884 | (1,207,217 | ) | $ | 4,763,667 | 8 to 18 years | ||||||
Trade names (a) | 1,067,083 | (432,402 | ) | 634,681 | 2 to 4 years | ||||||||
Other amortizable intangibles | 37,052 | (8,805 | ) | 28,247 | 1 to 15 years | ||||||||
$ | 7,075,019 | $ | (1,648,424 | ) | $ | 5,426,595 |
(a) | On May 23, 2017, Altice N.V. announced the adoption of a global brand which will replace the Company's brands in the future, reducing the remaining useful lives of these trade name intangibles. The Company has estimated the remaining useful lives to be 3 years from the date of the adoption, which reflects one year as an in-use asset and two years as a defensive asset. Amortization expense is calculated on an accelerated basis based on the Company's estimate of the intangible asset during the in-use period. The remaining estimated value of the defensive asset once it is no longer in use will be amortized over the defensive period. Estimated amortization expense related to the Optimum and Lightpath trade names are approximately $545,805 for 2017 (of which $334,312 has been expensed through September 30, 2017), $355,006 for 2018, $46,627 for 2019 and $18,140 through May 2020. |
Cablevision | Cequel | Total | |||||||||
Cable television franchises | $ | 8,113,575 | $ | 4,906,506 | $ | 13,020,081 | |||||
Goodwill | 5,839,757 | 2,153,742 | 7,993,499 | ||||||||
Total | $ | 13,953,332 | $ | 7,060,248 | $ | 21,013,580 |
Gross goodwill as of January 1, 2017 | $ | 7,992,700 | |
Goodwill recorded in connection with acquisition in first quarter 2017 (Cablevision Segment) | 20,687 | ||
Adjustments to purchase accounting relating to Cablevision Acquisition | 3,213 | ||
Transfer of Cablevision goodwill related to Altice Technical Services US Corp. (See Note 14 for further details) | (23,101 | ) | |
Net goodwill as of September 30, 2017 | $ | 7,993,499 |
INTANGIBLE ASSETS
The following table summarizes information relating to the Company's acquired intangible assets as of December 31, 2016:
|
|
Amortizable Intangible Assets |
|||||||||
|
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
|
Estimated Useful |
|||
Customer relationships |
|
$ |
5,925,884 |
|
$ |
(580,276 |
) |
$ |
5,345,608 |
|
8 to 18 years |
Trade names |
|
|
1,066,783 |
|
|
(83,397 |
) |
|
983,386 |
|
2 to 12 years |
Other amortizable intangibles |
|
|
26,743 |
|
|
(3,093 |
) |
|
23,650 |
|
1 to 15 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,019,410 |
|
$ |
(666,766 |
) |
$ |
6,352,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the year ended December 31, 2016 aggregated $653,410.
The following table sets forth the estimated amortization expense on intangible assets for the periods presented:
Estimated amortization expense |
||||
Year Ending December 31, 2017 |
|
$ |
928,597 |
|
Year Ending December 31, 2018 |
|
|
834,312 |
|
Year Ending December 31, 2019 |
|
|
758,189 |
|
Year Ending December 31, 2020 |
|
|
681,610 |
|
Year Ending December 31, 2021 |
|
|
604,456 |
|
The following table summarizes information relating to the Company's acquired indefinite-lived intangible assets as of December 31, 2016:
|
|
Optimum |
|
Suddenlink |
|
Total |
|
|||
Cable television franchises |
|
$ |
8,113,575 |
|
$ |
4,906,506 |
|
$ |
13,020,081 |
|
Goodwill |
|
|
5,838,959 |
|
|
2,153,741 |
|
|
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,952,534 |
|
$ |
7,060,247 |
|
$ |
21,012,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying amount of goodwill is presented below:
Gross goodwill as of January 1, 2016 |
|
$ |
2,040,402 |
|
Goodwill recorded in connection with Cablevision Acquisition |
|
|
5,838,959 |
|
Adjustments to purchase accounting relating to Cequel Acquisition |
|
|
113,339 |
|
|
|
|
|
|
Net goodwill as of December 31, 2016 |
|
$ |
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
|
• | in respect of the CVC Term Loans, (i) with respect to any alternate base rate loan, 1.25% per annum and (ii) with respect to any eurodollar loan, 2.25% per annum, and |
• | in respect of the CVC Revolving Credit Facility loans (i) with respect to any alternate base rate loan, 2.25% per annum and (ii) with respect to any eurodollar loan, 3.25% per annum. |
• | in respect of the Cequel Term Loans, (i) with respect to any alternate base rate loan, 1.25% per annum and (ii) with respect to any eurodollar loan, 2.25% per annum, and |
• | in respect of Cequel Revolving Credit Facility loans (i) with respect to any alternate base rate loan, 2.25% per annum and (ii) with respect to any eurodollar loan, 3.25% per annum. |
Carrying Amount (a) | |||||||||||||||
Maturity Date | Interest Rate | Principal | September 30, 2017 | December 31, 2016 | |||||||||||
CSC Holdings Restricted Group: | |||||||||||||||
Revolving Credit Facility (b) | $20,000 on October 9, 2020, remaining balance on November 30, 2021 | 4.49% | $ | 1,175,000 | $ | 1,149,024 | $ | 145,013 | |||||||
Term Loan Facility | July 17, 2025 | 3.48% | 2,992,500 | 2,974,768 | 2,486,874 | ||||||||||
Cequel: | |||||||||||||||
Revolving Credit Facility (c) | November 30, 2021 | — | — | — | — | ||||||||||
Term Loan Facility | July 28, 2025 | 3.49% | 1,261,838 | 1,253,110 | 812,903 | ||||||||||
$ | 5,429,338 | 5,376,902 | 3,444,790 | ||||||||||||
Less: Current portion | 92,650 | 33,150 | |||||||||||||
Long-term debt | $ | 5,284,252 | $ | 3,411,640 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | At September 30, 2017, $123,473 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $1,001,527 of the facility was undrawn and available, subject to covenant limitations. |
(c) | At September 30, 2017, $16,575 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $333,425 of the facility was undrawn and available, subject to covenant limitations. |
Interest Rate | Principal Amount | Carrying Amount (a) | ||||||||||||||||
Issuer | Date Issued | Maturity Date | September 30, 2017 | December 31, 2016 | ||||||||||||||
CSC Holdings (b)(f) | February 6, 1998 | February 15, 2018 | 7.875 | % | $ | 300,000 | $ | 303,531 | $ | 310,334 | ||||||||
CSC Holdings (b)(f) | July 21, 1998 | July 15, 2018 | 7.625 | % | 500,000 | 511,312 | 521,654 | |||||||||||
CSC Holdings (c)(f) | February 12, 2009 | February 15, 2019 | 8.625 | % | 526,000 | 544,422 | 553,804 | |||||||||||
CSC Holdings (c)(f) | November 15, 2011 | November 15, 2021 | 6.750 | % | 1,000,000 | 957,954 | 951,702 | |||||||||||
CSC Holdings (c)(f) | May 23, 2014 | June 1, 2024 | 5.250 | % | 750,000 | 657,903 | 650,193 | |||||||||||
CSC Holdings (e) | October 9, 2015 | January 15, 2023 | 10.125 | % | 1,800,000 | 1,777,085 | 1,774,750 | |||||||||||
CSC Holdings (e)(l) | October 9, 2015 | October 15, 2025 | 10.875 | % | 1,684,221 | 1,660,583 | 1,970,379 | |||||||||||
CSC Holdings (e) | October 9, 2015 | October 15, 2025 | 6.625 | % | 1,000,000 | 986,394 | 985,469 | |||||||||||
CSC Holdings (g) | September 23, 2016 | April 15, 2027 | 5.500 | % | 1,310,000 | 1,304,353 | 1,304,025 | |||||||||||
Cablevision (k) | September 23, 2009 | September 15, 2017 | 8.625 | % | — | — | 926,045 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2018 | 7.750 | % | 750,000 | 757,515 | 767,545 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2020 | 8.000 | % | 500,000 | 491,224 | 488,992 | |||||||||||
Cablevision (c)(f) | September 27, 2012 | September 15, 2022 | 5.875 | % | 649,024 | 568,796 | 559,500 | |||||||||||
Cequel and Cequel Capital Senior Notes (d)(m) | Oct. 25, 2012 Dec. 28, 2012 | September 15, 2020 | 6.375 | % | 1,050,000 | 1,025,616 | 1,457,439 | |||||||||||
Cequel and Cequel Capital Senior Notes (d) | May 16, 2013 Sept. 9, 2014 | December 15, 2021 | 5.125 | % | 1,250,000 | 1,132,926 | 1,115,767 | |||||||||||
Altice US Finance I Corporation Senior Secured Notes (h) | June 12, 2015 | July 15, 2023 | 5.375 | % | 1,100,000 | 1,081,815 | 1,079,869 | |||||||||||
Cequel and Cequel Capital Senior Secured Notes (i) | June 12, 2015 | July 15, 2025 | 7.750 | % | 620,000 | 604,001 | 602,925 | |||||||||||
Altice US Finance I Corporation Senior Notes (j) | April 26, 2016 | May 15, 2026 | 5.500 | % | 1,500,000 | 1,487,745 | 1,486,933 | |||||||||||
$ | 16,289,245 | 15,853,175 | 17,507,325 | |||||||||||||||
Less: Current portion | 1,572,358 | 926,045 | ||||||||||||||||
Long-term debt | $ | 14,280,817 | $ | 16,581,280 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | The debentures are not redeemable by CSC Holdings prior to maturity. |
(c) | Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
(d) | The Company may redeem some or more of all the notes at the redemption price set forth in the relevant indenture, plus accrued and unpaid interest. |
(e) | The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a “make whole” premium specified in the relevant indenture plus accrued and unpaid interest. |
(f) | The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
(g) | The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
(h) | Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
(i) | Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
(j) | Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
(k) | In April 2017, the Company redeemed $500,000 of the senior notes from proceeds from the CVC Term Loan facility. In September 2017, these senior notes matured and the Company repaid the remaining principal balance of $400,000. |
(l) | In July 2017, the Company used approximately $350,120 of the proceeds from the IPO to fund the redemption of $315,779 principal amount of CSC Holdings senior notes due October 2025 and the related call premium of approximately $34,341which was recorded as a loss on extinguishment of debt. The Company also recorded a write-off of deferred financings costs in connection with this redemption aggregating $4,516. |
(m) | In April 2017, the Company redeemed $450,000 of the senior notes from proceeds from the Cequel Term Loan facility. |
Years Ending December 31, | Cablevision | Cequel | Total | ||||||||
2017 | $ | 29,925 | $ | 5,256 | $ | 35,181 | |||||
2018 | 1,598,699 | 14,421 | 1,613,120 | ||||||||
2019 | 561,995 | 12,713 | 574,708 | ||||||||
2020 | 530,007 | 1,062,723 | 1,592,730 | ||||||||
2021 | 3,664,638 | 1,263,578 | 4,928,216 | ||||||||
Thereafter | 10,058,245 | 4,428,075 | 14,486,320 |
DEBT
CSC Holdings Credit Facilities
In connection with the Cablevision Acquisition, in October 2015, Neptune Finco Corp. ("Finco"), a wholly-owned subsidiary of the Company formed to complete the financing described herein and the merger with CSC Holdings, borrowed an aggregate principal amount of $3,800,000 under a term loan facility (the "Term Credit Facility") and entered into revolving loan commitments in an aggregate principal amount of $2,000,000 (the "Revolving Credit Facility" and, together with the Term Credit Facility, the "Credit Facilities"). The Term Credit Facility was to mature on October 9, 2022 and the Revolving Credit Facility was to mature on October 9, 2020 (see discussion below regarding the extension amendments). In addition, on June 21, 2016 and July 21, 2016, the Company entered into incremental loan assumption agreements whereby the Revolving Credit Facility was increased by $70,000 and $35,000, respectively, to $2,105,000.
Finco also issued $1,800,000 aggregate principal amount of 10.125% senior notes due 2023 (the "2023 Notes"), $2,000,000 aggregate principal amount of 10.875% senior notes due 2025 (the "2025 Notes"), and $1,000,000 aggregate principal amount of 6.625% senior guaranteed notes due 2025 (the "2025 Guaranteed Notes") (collectively the "Cablevision Acquisition Notes").
On June 21, 2016, immediately following the Cablevision Acquisition, Finco merged with and into CSC Holdings, with CSC Holdings surviving the merger (the "CSC Holdings Merger"), and the Cablevision Acquisition Notes and the Credit Facilities became obligations of CSC Holdings. The 2025 Guaranteed Notes are guaranteed on a senior basis by each restricted subsidiary of CSC Holdings (other than CSC TKR, LLC and its subsidiaries, which own and operate the New Jersey cable television systems, Cablevision Lightpath, Inc. and any subsidiaries of CSC Holdings that are "Excluded Subsidiaries" under the indenture governing the 2025 Guaranteed Notes) (such subsidiaries, the "Initial Guarantors") and the obligations under the Credit Facilities are (i) guaranteed on a senior basis by each Initial Guarantor and (ii) secured on a first priority basis by capital stock held by CSC Holdings and the guarantors in certain subsidiaries of CSC Holdings, subject to certain exclusions and limitations.
Altice USA used the proceeds from the Term Credit Facility and the Cablevision Acquisition Notes, together with an equity contribution from Altice N.V. and its Co-Investors and existing cash at Cablevision, to (a) finance the Cablevision Acquisition, (b) refinance the credit agreement, dated as of April 17, 2013 (the "Previous Credit Facility"), among CSC Holdings, certain subsidiaries of CSC Holdings and the lenders party thereto ($2,030,699 outstanding at the date of the Cablevision Acquisition), (c) repay the senior secured credit agreement, dated as of October 12, 2012, among Newsday LLC, CSC Holdings, and the lenders party thereto (the "Previous Newsday Credit Facility") of $480,000, and (d) pay related fees and expenses.
The Credit Facilities permit CSC Holdings to request revolving loans, swing line loans or letters of credit from the revolving lenders, swingline lenders or issuing banks, as applicable, thereunder, from time to time prior to October 9, 2020, unless the commitments under the Revolving Credit Facility have been previously terminated.
There is also a commitment fee of 0.375% on undrawn amounts under the revolving credit facility.
On September 9, 2016, CSC Holdings entered into an amendment (the "Extension Amendment") to the Credit Facilities and the incremental loan assumption agreements dated June 21, 2016 and July 21, 2016 between CSC Holdings and certain lenders party thereto (the "Extending Lenders") pursuant to which each Extending Lender agreed to extend the maturity of its Term Credit Facility under the Credit Facilities to October 11, 2024 and to certain other amendments to the Credit Facilities. In October 2016, CSC Holdings used the net proceeds from the sale of $1,310,000 aggregate principal amount of 5.5% senior guaranteed notes due 2027 (the "2027 Guaranteed Notes") (after the deduction of fees and expenses) to prepay outstanding loans under the CSC Holdings Term Credit Facility that were not extended pursuant to the Extension Amendment. The total aggregate principal amount of the Term Credit Facility, after giving effect to the use of proceeds of the 2027 Guaranteed Notes, is $2,500,000 (the "Extended Term Loan"). The Extended Term Loan was effective on October 11, 2016. In connection with the prepayment of the Term Credit Facility, the Company wrote-off the deferred financing costs and the unamortized discount related to the existing term loan aggregating $102,894. Additionally, the Company recorded deferred financing costs and an original issue discount of $7,249 and $6,250, respectively, which are both being amortized to interest expense over the term of the Extended Term Loan.
On December 9, 2016, the Credit Facilities were amended to increase the availability under the Revolving Credit Facility from $2,105,000 to $2,300,000 and extend the maturity on $2,280,000 of this facility to November 30, 2021. The remaining $20,000 will mature on October 9, 2020.
The Credit Facilities require CSC Holdings to prepay outstanding term loans, subject to certain exceptions and deductions, with (i) 100% of the net cash proceeds of certain asset sales, subject to reinvestment rights and certain other exceptions, and (ii) commencing with the first full fiscal year after the consummation of the Cablevision Acquisition, a ratable share (based on the outstanding principal amount of the Extended Term Loan divided by the sum of the outstanding principal amount of all pari passu indebtedness and the Extended Term Loan) of 50% of the annual excess cash flow of CSC Holdings and its restricted subsidiaries, which will be reduced to 0% if the Consolidated Net Senior Secured Leverage Ratio of CSC Holdings is less than or equal to 4.5 to 1.
Under the Term Credit Facility, CSC Holdings was required to make and made scheduled quarterly payment of $9,500 beginning with the fiscal quarter ending September 30, 2016. Under the Extended Term Loan, CSC Holdings is required to make scheduled quarterly payments equal to 0.25% of the principal amount of the Extended Term Loan, with the remaining balance scheduled to be paid on October 11, 2024, beginning with the fiscal quarter ending March 31, 2017.
The CSC Holdings Credit Facilities include negative covenants that are substantially similar to the negative covenants contained in the indentures under which the Cablevision Acquisition Notes were issued (see discussion below). The Credit Facilities include one financial maintenance covenant (solely for the benefit of the Revolving Credit Facility), consisting of a maximum Consolidated Net Senior Secured Leverage Ratio of 5.0 to 1, which will be tested on the last day of any fiscal quarter but only if on such day there are outstanding borrowings under the CSC Holdings Revolving Credit Facility (including swingline loans but excluding any cash collateralized letters of credit and undrawn letters of credit not to exceed $15,000). The CSC Holdings Credit Facilities contain customary representations, warranties and affirmative covenants. In addition, the CSC Holdings Credit Facilities contains restrictive covenants that limit, among other things, the ability of CSC Holdings and its subsidiaries to incur indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments or loans, engage in transactions with affiliates, pay dividends, and make acquisitions and dispose of assets. If an event of default occurs, the obligations under the CSC Holdings Credit Facilities may be accelerated.
CSC Holdings was in compliance with all of its financial covenants under the CSC Holdings Credit Facilities as of December 31, 2016.
Cequel Credit Facilities
In connection with the Cequel Acquisition, lenders holding (a) $290,000 of loans and commitments under the revolving credit facility under the old credit facility and (b) approximately $815,400 of loans under the term loan facility under the old credit facility consented to roll over, on a cashless basis, such lenders' loans and commitments under the old credit facility into loans and commitments of the same amount under a new credit facility (the "Cequel Credit Facility") made available to a subsidiary of Cequel effective upon the consummation of the Cequel Acquisition (the 'Cequel Credit Agreement"). Upon the closing of the Cequel Acquisition, the $290,000 of loans and commitments under the revolving credit facility under the old credit facility that lenders elected to rollover into the Cequel Credit Facility, plus $60,000 of new revolving commitments from other lenders, formed a new $350,000 revolving credit facility under the Cequel Credit Facility, and all remaining commitments under the then existing $500,000 revolving credit facility under the old credit facility were terminated.
The interest rate on the term loans outstanding under the Cequel Credit Facility equal the prime rate plus 2.25% or the LIBO rate plus 3.25%, with a LIBO rate floor of 1.00%, while the interest rate on the revolver loans equal the prime rate plus 2.25% or the LIBO rate plus 3.25%. The term loan facility requires quarterly repayments in annual amounts equal to 1.00% of the original principal amount, which commenced on March 31, 2016, with the remainder due at maturity. There is a commitment fee of 0.5% on undrawn amounts under the revolving credit facility.
The debt under the Cequel Credit Agreement is secured by a first priority security interest in the capital stock of Suddenlink, an indirect wholly-owned subsidiary of Cequel and substantially all of the present and future assets of Suddenlink and its restricted subsidiaries, and is guaranteed by the Cequel Communications Holdings II, LLC, an indirect wholly-owned subsidiary of Cequel (the "Parent Guarantor") as well as all of Suddenlink's existing and future direct and indirect subsidiaries, subject to certain exceptions set forth in the Cequel Credit Agreement.
The Cequel Credit Agreement contains customary representations, warranties and affirmative covenants. In addition, the Cequel Credit Agreement contains restrictive covenants that limit, among other things, the ability of Suddenlink and its subsidiaries to incur indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments or loans, engage in transactions with affiliates, pay dividends, and make acquisitions and dispose of assets. The Cequel Credit Agreement also contains a maximum senior secured leverage maintenance covenant of 5.0 times EBITDA as defined in the Cequel Credit Agreement. Additionally, the Cequel Credit Agreement contains customary events of default, including failure to make payments, breaches of covenants and representations, cross defaults to other indebtedness, unpaid judgments, changes of control and bankruptcy events. The lenders' commitments to fund amounts under the revolving credit facility are subject to certain customary conditions.
Amendments to Cequel Credit Agreement
On October 25, 2016, an indirect wholly-owned subsidiary of Cequel entered into the First Amendment to the Cequel Credit Agreement, amending the credit agreement dated June 12, 2015, between the Company and certain lenders party thereto pursuant to which the applicable margin for the term loans outstanding under the Cequel Credit Facility was lowered by 25 basis points, the LIBO rate floor for the term loans outstanding under the Cequel Credit Facility was lowered by 25 basis points to 0.75% and the maturity date for the term loans outstanding under the Cequel Credit Facility was extended to January 15, 2025. The proceeds of $815,000 from the new term loan were used to repay the amount outstanding under the existing term loan of $809,327 and related fees and expenses. In connection with the extinguishment of the existing term loan, the Company recorded a loss on extinguishment of debt of $4,807, representing primarily the write-off of deferred financing costs related to the term loan. In connection with the First Amendment to the Cequel Credit Agreement, the Company recorded deferred financing costs of $2,092, which are being amortized to interest expense over the term of the loan.
On December 9, 2016, the Company entered into the Second Amendment to the Cequel Credit Agreement which extended the maturity on the revolver to November 30, 2021.
As of December 31, 2016, Cequel was in compliance with all of its financial covenants under the Cequel Credit Agreement.
The following table provides details of the Company's outstanding credit facility debt (net of unamortized financing costs and unamortized discounts):
|
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying Value(a) |
|
|||
CSC Holdings Restricted Group: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(b) |
|
November 30, 2021 |
|
|
4.07 |
% |
$ |
175,256 |
|
$ |
145,013 |
|
Term Credit Facility(c) |
|
October 11, 2024 |
|
|
3.88 |
% |
|
2,500,000 |
|
|
2,486,874 |
|
Cequel: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(d) |
|
November 30, 2021 |
|
|
— |
|
|
— |
|
|
— |
|
Term Credit Facility |
|
January 15, 2025 |
|
|
3.88 |
% |
|
815,000 |
|
|
812,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,490,256 |
|
|
3,444,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
33,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
$ |
3,411,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The unamortized discounts and deferred financing costs amounted to $45,466 at December 31, 2016. |
|
(b) |
Includes $100,256 of credit facility debt incurred to finance the Cablevision Acquisition. See discussion above regarding the amendment to the revolving credit facility entered into December 2016. |
|
(c) |
Represents $3,800,000 principal amount of debt incurred to finance the Cablevision Acquisition, net of principal repayments made. See discussion above regarding the Extension Amendment entered into September 2016. |
|
(d) |
At December 31, 2016, $17,031 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $332,969 of the facility was undrawn and available, subject to covenant limitations. |
During the twelve months ending December 31, 2017, the Company is required to make principal payments aggregating $25,000 under the CSC Holdings Term Credit Facility and $8,150 under the Cequel Term Credit Facility.
Senior Guaranteed Notes and Senior Notes and Debentures
The following table summarizes the Company's senior guaranteed notes, senior secured notes and senior notes and debentures as of December 31, 2016:
Issuer |
|
Date Issued |
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying |
|
|||
CSC Holdings(b)(e) |
|
February 6, 1998 |
|
February 15, 2018 |
|
|
7.875 |
% |
$ |
300,000 |
|
$ |
310,334 |
|
CSC Holdings(b)(e) |
|
July 21, 1998 |
|
July 15, 2018 |
|
|
7.625 |
% |
|
500,000 |
|
|
521,654 |
|
CSC Holdings(c)(e) |
|
February 12, 2009 |
|
February 15, 2019 |
|
|
8.625 |
% |
|
526,000 |
|
|
553,804 |
|
CSC Holdings(c)(e) |
|
November 15, 2011 |
|
November 15, 2021 |
|
|
6.750 |
% |
|
1,000,000 |
|
|
951,702 |
|
CSC Holdings(c)(e) |
|
May 23, 2014 |
|
June 1, 2024 |
|
|
5.250 |
% |
|
750,000 |
|
|
650,193 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
January 15, 2023 |
|
|
10.125 |
% |
|
1,800,000 |
|
|
1,774,750 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
10.875 |
% |
|
2,000,000 |
|
|
1,970,379 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
6.625 |
% |
|
1,000,000 |
|
|
985,469 |
|
CSC Holdings(f) |
|
September 23, 2016 |
|
April 15, 2027 |
|
|
5.500 |
% |
|
1,310,000 |
|
|
1,304,025 |
|
Cablevision(c)(e) |
|
September 23, 2009 |
|
September 15, 2017 |
|
|
8.625 |
% |
|
900,000 |
|
|
926,045 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2018 |
|
|
7.750 |
% |
|
750,000 |
|
|
767,545 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2020 |
|
|
8.000 |
% |
|
500,000 |
|
|
488,992 |
|
Cablevision(c)(e) |
|
September 27, 2012 |
|
September 15, 2022 |
|
|
5.875 |
% |
|
649,024 |
|
|
559,500 |
|
Cequel Communications Holdings I LLC and Cequel |
|
October 25, 2012 |
|
September 15, 2020 |
|
|
6.375 |
% |
|
1,500,000 |
|
|
1,457,439 |
|
Cequel Communications Holdings I LLC and Cequel |
|
May 16, 2013 |
|
December 15, 2021 |
|
|
5.125 |
% |
|
1,250,000 |
|
|
1,115,767 |
|
Altice US Finance I Corporation(g) |
|
June 12, 2015 |
|
July 15, 2023 |
|
|
5.375 |
% |
|
1,100,000 |
|
|
1,079,869 |
|
Cequel Communications Holdings I LLC and Cequel Capital Corporation(h) |
|
June 12, 2015 |
|
July 15, 2025 |
|
|
7.750 |
% |
|
620,000 |
|
|
602,925 |
|
Altice US Finance I Corporation(i) |
|
April 26, 2016 |
|
May 15, 2026 |
|
|
5.500 |
% |
|
1,500,000 |
|
|
1,486,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,955,024 |
|
|
17,507,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
|
|
926,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
$ |
16,581,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The carrying amount of the notes is net of the unamortized deferred financing costs and/or discounts/premiums of $447,699. |
|
(b) |
The debentures are not redeemable by CSC Holdings prior to maturity. |
|
(c) |
Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
|
(d) |
The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a "make whole" premium specified in the relevant indenture plus accrued and unpaid interest. |
|
(e) |
The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
|
(f) |
The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
|
(g) |
Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
|
(h) |
Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
|
(i) |
Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
The indentures under which the senior notes and debentures were issued contain various covenants, which are generally less restrictive than those contained in the Credit Agreement. The Company was in compliance with all of its financial covenants under these indentures as of December 31, 2016.
CSC Holdings 5.5% Senior Guaranteed Notes due 2027
In September 2016, CSC Holdings issued $1,310,000 aggregate principal amount of 5.50% senior guaranteed notes due April 15, 2027. The 2027 Guaranteed Notes are senior unsecured obligations and rank pari passu in right of payment with all of the existing and future senior indebtedness, including the existing senior notes and the Credit Facilities and rank senior in right of payment to all of existing and future subordinated indebtedness.
As discussed above, in October 2016, CSC Holdings used the proceeds from the issuance of the 2027 Guaranteed Notes (after the deduction of fees and expenses) to prepay the outstanding loans under the Term Credit Facility that were not extended pursuant to the Extension Amendment. In connection with the issuance of the 2027 Guaranteed Notes, the Company incurred deferred financing costs of approximately $5,575, which are being amortized to interest expense over the term of the 2027 Guaranteed Notes.
Cablevision Acquisition Notes
The $1,000,000 principal amount of the 2025 Guaranteed Notes bear interest at a rate of 6.625% per annum and were issued at a price of 100.00%. Interest on the 2025 Guaranteed Notes is payable semi-annually on January 15 and July 15, commencing on July 15, 2016. These 2025 Guaranteed Notes are guaranteed on a senior basis by the Initial Guarantors.
The $1,800,000 principal amount of the 2023 Notes and $2,000,000 principal amount of the 2025 Notes, bear interest at a rate of 10.125% and 10.875%, respectively, per annum and were issued at prices of 100.00%. Interest on the 2023 Notes and 2025 Notes is payable semi-annually on January 15 and July 15, which began on July 15, 2016.
Deferred financing costs of approximately $76,579 incurred in connection with the issuance of the Cablevision Acquisition Notes are being amortized to interest expense over the term of the Cablevision Acquisition Notes.
The indentures under which the Cablevision and CSC Holdings Senior Guaranteed Notes and Senior Notes and Debentures were issued contain certain covenants and agreements with respect to investment grade debt securities, including limitations on the ability of CSC Holdings and its restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) make investments or other restricted payments, (iii) create liens, (iv) sell assets and subsidiary stock, (v) pay dividends or make other distributions or repurchase or redeem our capital stock or subordinated debt, (vi) engage in certain transactions with affiliates, (vii) enter into agreements that restrict the payment of dividends by subsidiaries or the repayment of intercompany loans and advances, and (viii) engage in mergers or consolidations, in each case subject to certain exceptions. The indentures also contain certain customary events of default. If an event of default occurs, the obligations under the Cablevision Acquisition Notes may be accelerated. As of December 31, 2016, Cablevision was in compliance with all of its financial covenants under the indentures under which the senior notes and debentures and guaranteed notes were issued.
Cequel Senior Secured Notes
On June 12, 2015, Altice US Finance I Corporation, an indirect subsidiary of Altice N.V., issued $1,100,000 principal amount of senior secured notes (the "2023 Senior Secured Notes"), the proceeds from which were placed in escrow to finance a portion of the purchase price for the Cequel Acquisition. The 2023 Senior Secured Notes bear interest at a rate of 5.375% per annum and were issued at a price of 100.00%. Interest on the 2023 Senior Secured Notes is payable semi-annually on January 15 and July 15 of each year. Following the consummation of the Cequel Acquisition and related transactions the equity interests in Altice US Finance I Corporation were contributed through one or more intermediary steps to Suddenlink, and the Senior Secured Notes were guaranteed by Cequel Communications Holdings II LLC, Suddenlink and certain of the subsidiaries of Suddenlink and are secured by certain assets of Cequel Communications Holdings II LLC, Suddenlink and its subsidiaries.
On April 26, 2016, Altice US Finance I Corporation issued $1,500,000 aggregate principal amount of senior secured notes (the "2026 Senior Secured Notes"). The proceeds from the sale were used to repay the $1,477,200 remaining balance under the Old Credit Facility and to pay related fees and expenses (see discussion above). The 2026 Senior Secured Notes mature on May 15, 2026 and bear interest at a rate of 5.50% annually. Interest on the 2026 Senior Secured Notes is payable semi-annually on May 15 and November 15 of each year, commencing on November 15, 2016. Deferred financing costs recorded in connection with the issuance of these notes amounted to $13,773 and are being amortized over the term of the notes.
Cequel Senior Notes
On June 12, 2015, Altice US Finance II Corporation, an indirect subsidiary of Altice N.V., issued $300,000 principal amount of the 2025 Senior Notes, the proceeds from which were placed in escrow, to finance a portion of the purchase price for the Cequel Acquisition. The 2025 Senior Notes were issued by the 2025 Senior Notes Issuer, an indirect subsidiary of Altice N.V., bear interest at a rate of 7.75% per annum and were issued at a price of 100.00%. Interest on the 2025 Senior Notes is payable semi-annually on January 15 and July 15 of each year. Following the consummation of the Cequel Acquisition and related transactions, the 2025 Senior Notes Issuer merged into Cequel, the 2025 Senior Notes became the obligations of Cequel and Cequel Capital Corporation became the co-issuer of the 2025 Senior Notes.
On June 12, 2015, Altice US Finance S.A., an indirect subsidiary of Altice N.V. issued $320,000 principal amount of the 7.75% Senior Notes due 2025 (the "Holdco Notes"), the proceeds from which were placed in escrow, to finance a portion of the purchase price for the Cequel Acquisition. The Holdco Notes bear interest at a rate of 7.75% per annum and were issued at a price of 98.275%. Interest on the Holdco Notes is payable semi-annually on January 15 and July 15 of each year. The Holdco Notes were automatically exchanged into an equal aggregate principal amount of 2025 Senior Notes at Cequel during the second quarter of 2016. The exchange resulted in a decrease to member's equity of approximately $315,352.
The Issuers have no ability to service interest or principal on the Notes, other than through any dividends or distributions received from Suddenlink. Suddenlink is restricted in certain circumstances, from paying dividends or distributions to the Issuers by the terms of the New Credit Agreement. However, the Cequel Credit Agreement permits Suddenlink to make dividends and distributions subject to satisfaction of certain conditions, including pro forma compliance with a maximum senior secured leverage ratio, and that no event of default has occurred and is continuing, or would be caused by the making of such dividends or other distributions, and based on, among other things, availability under a restricted payment basket. The 2020 Notes, the 2021 Notes and the 2025 Senior Notes are unsecured and are not guaranteed by any subsidiaries of the Original Issuers, including Suddenlink.
The Cequel Indentures contain certain covenants, agreements and events of default which are customary with respect to non-investment grade debt securities, including limitations on the Company's ability to incur additional indebtedness, pay dividends on or make other distributions or repurchase the Company's capital stock, make certain investments, enter into certain types of transactions with affiliates, create liens and sell certain assets or merge with or into other companies.
Notes Payable to Affiliates and Related Parties
On June 21, 2016, in connection with the Cablevision Acquisition, the Company issued notes payable to affiliates aggregating $1,750,000, of which $875,000 bear interest at 10.75% and are due on December 20, 2023 and $875,000 bear interest at 11% and are due on December 20, 2024. The Company may redeem all or, part of the notes at a redemption price equal to 100% of the principal amount thereof plus the applicable premium, as defined in the notes agreement, and accrued and unpaid interest. For the year ended December 31, 2016, the Company recognized interest expense of $102,557 related to these notes payable. As of December 31, 2016, the accrued interest related to these notes of $102,557 is reflected in accrued interest in the Company's balance sheet.
Summary of Debt Maturities
Total amounts payable by the Company under its various debt obligations outstanding as of December 31, 2016, including notes payable, collateralized indebtedness (see Note 10), and capital leases, during the next five years and thereafter, are as follows:
Years Ending December 31, |
|
Cablevision |
|
Cequel |
|
Altice USA |
|
Total |
|
||||
2017 |
|
$ |
1,719,180 |
|
$ |
9,113 |
|
$ |
— |
|
$ |
1,728,293 |
|
2018 |
|
|
2,103,441 |
|
|
8,652 |
|
|
— |
|
|
2,112,093 |
|
2019 |
|
|
557,348 |
|
|
8,330 |
|
|
— |
|
|
565,678 |
|
2020 |
|
|
526,340 |
|
|
1,508,213 |
|
|
— |
|
|
2,034,553 |
|
2021 |
|
|
1,200,256 |
|
|
1,258,223 |
|
|
— |
|
|
2,458,479 |
|
Thereafter |
|
|
9,884,024 |
|
|
3,995,280 |
|
|
1,750,000 |
|
|
15,629,304 |
|
|
Asset Derivatives | Liability Derivatives | |||||||||||||||||
Derivatives Not Designated as Hedging Instruments | Balance Sheet Location | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | |||||||||||||
Prepaid forward contracts | Derivative contracts, current | $ | 54,578 | $ | 352 | $ | (54,578 | ) | $ | (13,158 | ) | |||||||
Prepaid forward contracts | Derivative contracts, long-term | — | 10,604 | (52,488 | ) | — | ||||||||||||
Put/Call options | Liabilities under derivative contracts, current | — | — | (48,326 | ) | — | ||||||||||||
Interest rate swap contracts | Liabilities under derivative contracts, long-term | — | — | (69,271 | ) | (78,823 | ) | |||||||||||
$ | 54,578 | $ | 10,956 | $ | (224,663 | ) | $ | (91,981 | ) |
Number of shares (a) | 21,477,618 | ||
Collateralized indebtedness settled | $ | (617,151 | ) |
Derivatives contracts settled | (37,838 | ) | |
(654,989 | ) | ||
Proceeds from new monetization contracts | 662,724 | ||
Net cash proceeds | $ | 7,735 |
(a) | Share amounts are adjusted for the 2 for 1 stock split in February 2017. |
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 statement 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 December 31, 2016, 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 and it diversifies its equity derivative contracts among various counterparties to mitigate exposure to any single financial institution. All of the counterparties to such transactions carry investment grade credit ratings as of December 31, 2016.
Interest Rate Swap Contracts
In June 2016, the Company entered into two new fixed to floating interest rate swap contracts. One fixed to floating interest rate swap is converting $750,000 from a fixed rate of 1.6655% to six-month LIBO rate and a second tranche of $750,000 from a fixed rate of 1.68% to six-month LIBO rate. The objective of these swaps is to cover the exposure of the 2026 Senior Secured Notes to changes in the market interest rate. These swap contracts were not designated as hedges for accounting purposes. Accordingly, the changes in the fair value of these interest rate swap contracts are recorded through the statement of operations.
The Company does not hold or issue 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:
|
|
|
|
Asset |
|
Liability |
|
||
Derivatives Not Designated as Hedging Instruments |
|
Balance Sheet Location |
|
Fair Value at |
|
Fair Value at |
|
||
Prepaid forward contracts |
|
Derivative contracts, current |
|
$ |
352 |
|
$ |
13,158 |
|
Prepaid forward contracts |
|
Derivative contracts, long-term |
|
|
10,604 |
|
|
— |
|
Interest rate swap contracts |
|
Liabilities under derivative contracts, long-term |
|
|
— |
|
|
78,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,956 |
|
$ |
91,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized and realized losses related to Company's equity derivative contracts related to the Comcast common stock for the year ended December 31, 2016 of $53,696, are reflected in loss on equity derivative contracts, net in the Company's consolidated statement of operations.
For the year ended December 31, 2016, the Company recorded a gain on investments of $141,538, representing the net increase in the fair values of all investment securities pledged as collateral.
For the year ended December 31, 2016, the Company recorded a net loss on interest rate swap contracts of $72,961.
Settlements of Collateralized Indebtedness
The following table summarizes the settlement of the Company's collateralized indebtedness relating to Comcast shares that were settled by delivering cash equal to the collateralized loan value, net of the value of the related equity derivative contracts.
Number of shares(a) |
|
|
5,337,750 |
|
|
|
|
|
|
|
|
|
|
|
Collateralized indebtedness settled |
|
$ |
(143,102 |
) |
Derivative contracts settled |
|
|
— |
|
|
|
|
|
|
|
|
|
(143,102 |
) |
Proceeds from new monetization contracts |
|
|
179,388 |
|
|
|
|
|
|
Net cash receipt |
|
$ |
36,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Share amounts were adjusted for the 2 for 1 stock split in February 2017. |
The cash was obtained from the proceeds of new monetization contracts covering an equivalent number of Comcast shares. The terms of the new contracts allow the Company to retain upside participation in Comcast shares up to each respective contract's upside appreciation limit with downside exposure limited to the respective hedge price.
In January 2017, the Company settled collateralized indebtedness relating to 5,337,750 Comcast shares (adjusted for the 2 for 1 stock split in February 2017) by delivering cash equal to the collateralized loan value obtained from the proceeds of a new monetization contract covering an equivalent number of Comcast shares. Accordingly, the consolidated balance sheet of the Company as of December 31, 2016 reflect the reclassification of $184,286 of investment securities pledged as collateral from a current asset to a long-term asset and $150,036 of collateralized indebtedness from a current liability to a long-term liability.
|
• | 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. |
Fair Value Hierarchy | September 30, 2017 | December 31, 2016 | |||||||
Assets: | |||||||||
Money market funds (of which $14,700 is classified as restricted cash as of December 31, 2016) | Level I | $ | 65,801 | $ | 100,139 | ||||
Investment securities pledged as collateral | Level I | 1,652,917 | 1,483,030 | ||||||
Prepaid forward contracts | Level II | 54,578 | 10,956 | ||||||
Liabilities: | |||||||||
Prepaid forward contracts | Level II | 107,066 | 13,158 | ||||||
Put/Call Options | Level II | 48,326 | — | ||||||
Interest rate swap contracts | Level II | 69,271 | 78,823 | ||||||
Contingent consideration related to 2017 acquisition | Level III | 30,000 | — |
September 30, 2017 | December 31, 2016 | ||||||||||||||||
Fair Value Hierarchy | Carrying Amount (a) | Estimated Fair Value | Carrying Amount (a) | Estimated Fair Value | |||||||||||||
Altice USA debt instruments: | |||||||||||||||||
Notes payable to affiliates and related parties | Level II | $ | — | $ | — | $ | 1,750,000 | $ | 1,837,876 | ||||||||
CSC Holdings debt instruments: | |||||||||||||||||
Credit facility debt | Level II | 4,123,792 | 4,167,500 | 2,631,887 | 2,675,256 | ||||||||||||
Collateralized indebtedness | Level II | 1,314,788 | 1,286,557 | 1,286,069 | 1,280,048 | ||||||||||||
Senior guaranteed notes | Level II | 2,290,748 | 2,460,675 | 2,289,494 | 2,416,375 | ||||||||||||
Senior notes and debentures | Level II | 6,412,789 | 7,421,261 | 6,732,816 | 7,731,150 | ||||||||||||
Notes payable | Level II | 76,442 | 72,802 | 13,726 | 13,260 | ||||||||||||
Cablevision senior notes: | Level II | 1,817,536 | 1,998,340 | 2,742,082 | 2,920,056 | ||||||||||||
Cequel debt instruments: | |||||||||||||||||
Cequel credit facility | Level II | 1,253,110 | 1,261,838 | 812,903 | 815,000 | ||||||||||||
Senior secured notes | Level II | 2,569,559 | 2,745,750 | 2,566,802 | 2,689,750 | ||||||||||||
Senior notes | Level II | 2,762,543 | 3,036,850 | 3,176,131 | 3,517,275 | ||||||||||||
Notes payable | Level II | 3,083 | 3,083 | — | — | ||||||||||||
$ | 22,624,390 | $ | 24,454,656 | $ | 24,001,910 | $ | 25,896,046 |
(a) | Amounts are net of unamortized deferred financing costs and discounts. |
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:
|
|
At December 31, 2016 (Successor) |
|
||||||||||
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
100,139 |
|
$ |
— |
|
$ |
— |
|
$ |
100,139 |
|
Investment securities pledged as collateral |
|
|
1,483,030 |
|
|
— |
|
|
— |
|
|
1,483,030 |
|
Prepaid forward contracts |
|
|
— |
|
|
10,956 |
|
|
— |
|
|
10,956 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid forward contracts |
|
|
— |
|
|
13,158 |
|
|
— |
|
|
13,158 |
|
Interest rate swap contracts |
|
|
|
|
|
78,823 |
|
|
|
|
|
78,823 |
|
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 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.
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 Secured Notes, Senior Guaranteed Notes, Notes Payable to Affiliates and Related Parties, 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:
|
|
|
|
December 31, 2016 |
|
||||
|
|
Fair Value |
|
Carrying |
|
Estimated |
|
||
Altice USA debt instruments: |
|
|
|
|
|
|
|
|
|
Notes payable to affiliates and related parties |
|
Level II |
|
$ |
1,750,000 |
|
$ |
1,837,876 |
|
CSC Holdings debt instruments: |
|
|
|
|
|
|
|
|
|
Credit facility debt |
|
Level II |
|
|
2,631,887 |
|
|
2,675,256 |
|
Collateralized indebtedness(b) |
|
Level II |
|
|
1,286,069 |
|
|
1,280,048 |
|
Senior guaranteed notes |
|
Level II |
|
|
2,289,494 |
|
|
2,416,375 |
|
Senior notes and debentures(c) |
|
Level II |
|
|
6,732,816 |
|
|
7,731,150 |
|
Notes payable |
|
Level II |
|
|
13,726 |
|
|
13,260 |
|
Cablevision senior notes(d) |
|
Level II |
|
|
2,742,082 |
|
|
2,920,056 |
|
Cequel debt instruments: |
|
|
|
|
|
|
|
|
|
Cequel credit facility |
|
Level II |
|
|
812,903 |
|
|
815,000 |
|
Senior Secured Notes |
|
Level II |
|
|
1,079,869 |
|
|
1,152,250 |
|
Senior Notes |
|
Level II |
|
|
4,663,064 |
|
|
5,054,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,001,910 |
|
$ |
25,896,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Amounts are net of unamortized deferred financing costs and discounts. |
|
(b) |
The total carrying value of the collateralized debt was reduced by $9,142 to reflect its fair value on the Cablevision Acquisition Date. |
|
(c) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $39,713 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
|
(d) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $13,075 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
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.
|
INCOME TAXES
The Company files a federal consolidated and certain state combined income tax returns with its 80% or more owned subsidiaries. In connection with the contribution of common stock of Cequel to the Company, Cequel joined the Company's federal consolidated group. Cablevision joined the Company's federal consolidated group on the Cablevision Acquisition Date.
Income tax benefit attributable to the Company's continuing operations for the year ended December 31, 2016 consist of the following components:
Current expense (benefit): |
|
|
|
|
Federal |
|
$ |
(981 |
) |
State |
|
|
5,310 |
|
|
|
|
|
|
|
|
|
4,329 |
|
|
|
|
|
|
Deferred benefit: |
|
|
|
|
Federal |
|
|
(223,159 |
) |
State |
|
|
(40,830 |
) |
|
|
|
|
|
|
|
|
(263,989 |
) |
|
|
|
|
|
Tax benefit relating to uncertain tax positions |
|
|
(6 |
) |
|
|
|
|
|
Income tax benefit |
|
$ |
(259,666 |
) |
|
|
|
|
|
|
|
|
|
|
The income tax benefit attributable to the Company's continuing operations differs from the amount derived by applying the statutory federal rate to pretax income principally due to the effect of the following items:
|
|
December 31, |
|
|
Federal tax benefit at statutory rate |
|
$ |
(381,901 |
) |
State income taxes, net of federal impact |
|
|
(39,336 |
) |
Changes in the valuation allowance |
|
|
297 |
|
Changes in the state rates used to measure deferred taxes, net of federal impact |
|
|
153,239 |
|
Tax benefit relating to uncertain tax positions |
|
|
(120 |
) |
Non-deductible share-based compensation related to the carried unit plan |
|
|
5,029 |
|
Non-deductible Cablevision Acquisition transaction costs |
|
|
4,457 |
|
Other non-deductible expenses |
|
|
1,551 |
|
Research credit |
|
|
(400 |
) |
Other, net |
|
|
(2,482 |
) |
|
|
|
|
|
Income tax benefit |
|
$ |
(259,666 |
) |
|
|
|
|
|
|
|
|
|
|
As described in Note 1, in June, 2016, (i) Cequel was contributed to Altice USA and (ii) Altice USA completed the Cablevision Acquisition. Accordingly, in the second quarter of 2016, Cequel and Cablevision joined the federal consolidated and certain state combined income tax returns of Altice USA. As a result, the applicate tax rate used to measure deferred tax assets and liabilities of Cequel increased, resulting in a non-cash deferred income tax charge of $153,660.
In the fourth quarter of 2016, ASU 2015-17 was adopted with prospective application. Accordingly, all deferred tax assets and liabilities are presented as noncurrent in the consolidated balance sheet as of December 31, 2016.
The tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance at December 31, 2016 are as follows.
|
|
December 31, |
|
|
NOLs and tax credit carry forwards |
|
$ |
971,728 |
|
Compensation and benefit plans |
|
|
93,939 |
|
Partnership investments |
|
|
113,473 |
|
Restructuring liability |
|
|
37,393 |
|
Other liabilities |
|
|
45,561 |
|
Liabilities under derivative contracts |
|
|
31,529 |
|
Interest deferred for tax purposes |
|
|
39,633 |
|
Other |
|
|
6,615 |
|
|
|
|
|
|
Deferred tax asset |
|
|
1,339,871 |
|
Valuation allowance |
|
|
(3,125 |
) |
|
|
|
|
|
Net deferred tax asset, noncurrent |
|
|
1,336,746 |
|
|
|
|
|
|
Fixed assets and intangibles |
|
|
(9,065,635 |
) |
Investments |
|
|
(187,795 |
) |
Prepaid expenses |
|
|
(10,172 |
) |
Fair value adjustment- debt and deferred finance costs |
|
|
(30,535 |
) |
Other |
|
|
(9,424 |
) |
|
|
|
|
|
Deferred tax liability, noncurrent |
|
|
(9,303,561 |
) |
|
|
|
|
|
Total net deferred tax liability |
|
$ |
(7,966,815 |
) |
|
|
|
|
|
|
|
|
|
|
The Cablevision Acquisition resulted in an ownership change under Internal Revenue Code ("IRC") Section 382 and certain state taxing authorities whereby Cablevision's federal net operating losses ("NOLs") immediately prior to the Cablevision Acquisition of $877,975 will be subject to certain limitations. The Cequel Acquisition resulted in a third ownership change with regard to Cequel NOLs. Utilization of Cequel NOLs of $1,709,263 are limited under IRC Section 382. The utilization of the NOLs will be determined based on the ordering rules required by the applicable taxing jurisdiction. Since the limitation amounts accumulate for future use to the extent they are not utilized in any given year, the Company believes its loss carryforwards should become fully available to offset future taxable income.
At December 31, 2016, the Company had consolidated federal NOLs of $3,078,119 expiring on various dates from 2019 through 2036. The Company has recorded a deferred tax asset related to $2,302,619 of such NOLs. A deferred tax asset has not been recorded for the remaining NOL of $775,500 as this portion relates to 'windfall' deductions on share-based awards that have not yet been realized. In connection with the adoption of ASU 2016-09 in the first quarter of 2017, the deferred tax asset for such windfall deductions will be recorded to accumulated deficit in the amount of approximately $309,000.
As of December 31, 2016, the Company has $43,215 of federal alternative minimum tax credit carry forwards which do not expire and $18,672 of research credits, expiring in varying amounts from 2023 through 2036.
Deferred tax assets have resulted primarily from the Company's future deductible temporary differences and NOLs. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. In evaluating the need for a valuation allowance, management takes into account various factors, including the expected level of future taxable income, available tax planning strategies and reversals of existing taxable temporary differences. If such estimates and related assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company's consolidated statements of income. Management evaluates the realizability of the deferred tax assets and the need for additional valuation allowances quarterly. Pursuant to the Cablevision Acquisition and Cequel Acquisition, deferred tax liabilities resulting from the book fair value adjustment increased significantly and future taxable income that will result from the reversal of existing taxable temporary differences for which deferred tax liabilities are recognized is sufficient to conclude it is more likely than not that the Company will realize all of its gross deferred tax assets, except those deferred tax assets against which a valuation allowance has been recorded which relate to certain state NOLs.
In the normal course of business, the Company engages in transactions in which the income tax consequences may be uncertain. The Company's income tax returns are filed based on interpretation of tax laws and regulations. Such income tax returns are subject to examination by taxing authorities. For financial statement purposes, the Company only recognizes tax positions that it believes are more likely than not of being sustained. There is considerable judgment involved in determining whether positions taken or expected to be taken on the tax return are more likely than not of being sustained.
A reconciliation of the beginning and ending amount of unrecognized tax benefits associated with uncertain tax positions, excluding associated deferred tax benefits and accrued interest, is as follows:
Balance at January 1, 2016 |
|
$ |
— |
|
Increase to tax position in connection with the Cablevision Acquisition |
|
|
4,031 |
|
Decreases related to prior year tax positions |
|
|
(6 |
) |
|
|
|
|
|
Balance at December 31, 2016 |
|
$ |
4,025 |
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016, if all uncertain tax positions were sustained at the amounts reported or expected to be reported in the Company's tax returns, the elimination of the Company's unrecognized tax benefits, net of the deferred tax impact, would decrease income tax expense by $5,185.
In the second quarter of 2016, the Company changed its accounting policy on a prospective basis to present interest expense relating to uncertain tax positions as additional interest expense. In the period ended December 31, 2016, $309 of interest expense relating to uncertain tax position was recorded to interest expense.
The most significant jurisdictions in which the Company is required to file income tax returns include the states of New York, New Jersey and Connecticut and the City of New York, Texas and West Virginia. The State of New York is presently auditing income tax returns for years 2009 through 2011.
Management does not believe that the resolution of the ongoing income tax examination described above will have a material adverse impact on the financial position of the Company. Changes in the liabilities for uncertain tax positions will be recognized in the interim period in which the positions are effectively settled or there is a change in factual circumstances.
|
Number of Time Vesting Awards | Number of Performance Based Vesting Awards | Weighted Average Grant Date Fair Value | |||||||
Balance, December 31, 2016 | 192,800,000 | 10,000,000 | $ | 0.37 | |||||
Granted | 28,025,000 | — | 3.14 | ||||||
Forfeited | (4,229,166 | ) | — | 0.37 | |||||
Balance, September 30, 2017 | 216,595,834 | 10,000,000 | 0.71 | ||||||
Awards vested at September 30, 2017 | — | — |
EQUITY AND LONG-TERM INCENTIVE PLANS
Equity Plans
In July 2016, 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 awards generally will vest as follows: 50% on the second anniversary of June 21, 2016 for Cablevision employees or December 21, 2015 for Cequel employees ("Base Date"), 25% on the third anniversary of the Base Date, and 25% on the fourth anniversary of the Base Date. Neptune Holding US GP LLC, the general partner of Neptune Management LP, has the right to repurchase (or to assign to an affiliate, including the Company, the right to repurchase) vested awards held by employees for sixty days following their termination. For the performance-based awards, vesting occurs upon achievement or satisfaction of a specified performance condition. The Company considered the probability of achieving the established performance targets in determining the equity-based compensation with respect to these awards at the end of each reporting period. The carried unit plan has 259,442,785 units authorized for issuance, of which 147,700,000 have been issued to employees of the Company and 55,100,000 have been issued to employees of Altice N.V. and affiliated companies.
The Company measures the cost of employee services received in exchange for carry units based on the fair value of the award at grant date. An option pricing model was used which requires subjective assumptions for which changes in these assumptions could materially affect the fair value of the carry units outstanding. The time to liquidity event assumption was based on management's judgment. The equity volatility assumption of 60% was estimated using the historical weekly volatility of publicly traded comparable companies. The risk-free rate of 0.74% assumed in valuing the units was based on the U.S. Constant Maturity Treasury Rates for a period matching the expected time to liquidity event. The discount for lack of marketability of 20% was based on Finnerty's (2012) average-strike put option model. The weighted average grant date fair value of the outstanding units is $0.37 per unit and the fair value was $1.76 per unit as of December 31, 2016. For the year ended December 31, 2016, the Company recognized an expense of $14,368 related to the push down of share-based compensation related to the carry unit plan of which approximately $9,849 related to units granted to employees of the Company and $4,519 related to employees of Altice N.V. and affiliated companies allocated to the Company.
Beginning on the fourth anniversary of the Base Date, the holders of carry units have an annual opportunity (a sixty day period determined by the administrator of the plan) to sell their units back to Neptune Holding US GP LLC (or affiliate, including the Company, designated by Neptune Holding US GP). Accordingly, the carried units are presented as temporary equity on the consolidated balance sheet at fair value. Adjustments to fair value at each reporting period are recorded in paid in capital.
The right of Neptune Holding US GP LLC to assign to an affiliate, including the Company, the right to repurchase an employee's vested units during the sixty-day period following termination, or to satisfy its obligation to repurchase an employee's vested units during annual sixty-day periods following the fourth anniversary of the Base Date, may be exercised by Neptune Holding US GP LLC in its discretion at the time a repurchase right or obligation arises. The carry unit plan requires the purchase price payable to the employee or former employee, as the case may be, to be paid in cash, a promissory note (with a term of not more than 3 years and bearing interest at the long-term applicable federal rate under Section 1274(d) of the Internal Revenue Code) or combination thereof, in each case as determined by Neptune Holding US GP LLC in its discretion at the time of the repurchase. Neptune Holding US GP LLC expects that vested units will be redeemed for shares of Class A common stock upon vesting.
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | $ | 986 | $ | 720 | $ | 1,380 | $ | 720 | |||||||
Operating expenses: | |||||||||||||||
Programming and other direct costs | $ | (1,196 | ) | $ | (642 | ) | $ | (3,026 | ) | $ | (642 | ) | |||
Other operating expenses, net | (28,332 | ) | (8,056 | ) | (73,263 | ) | (13,056 | ) | |||||||
Operating expenses, net | (29,528 | ) | (8,698 | ) | (76,289 | ) | (13,698 | ) | |||||||
Interest expense (a) | — | (48,617 | ) | (90,405 | ) | (53,922 | ) | ||||||||
Loss on extinguishment of debt and write-off of deferred financing costs | — | — | (513,723 | ) | — | ||||||||||
Net charges | $ | (28,542 | ) | $ | (56,595 | ) | $ | (679,037 | ) | $ | (66,900 | ) | |||
Capital Expenditures | $ | 72,185 | $ | — | $ | 98,234 | $ | — |
(a) | See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $90,405 for the nine months ended September 30, 2017. |
September 30, 2017 | December 31, 2016 | ||||||
Due from: | |||||||
Altice US Finance S.A. (a) | $ | 12,951 | $ | 12,951 | |||
Newsday (b) | 4,177 | 6,114 | |||||
Altice Management Americas (b) | 615 | 3,117 | |||||
i24NEWS (b) | 3,373 | — | |||||
Other Altice N.V. subsidiaries (b) | 37 | — | |||||
$ | 21,153 | $ | 22,182 | ||||
Due to: | |||||||
CVC 3BV (c) | — | 71,655 | |||||
Neptune Holdings US LP (c) | — | 7,962 | |||||
Altice Management International (d) | — | 44,121 | |||||
ATS (b)(e) | 22,541 | — | |||||
Newsday (b) | 103 | 275 | |||||
Other Altice N.V. subsidiaries (f) | 6,358 | 3,350 | |||||
$ | 29,002 | $ | 127,363 |
(a) | Represents interest on senior notes paid by the Company on behalf of the affiliate. |
(b) | Represents amounts paid by the Company on behalf of the respective related party and for Newsday and ATS, the net amounts due from the related party also include charges for certain transition services provided. |
(c) | Represents distributions payable to stockholders. |
(d) | Amounts payable as of December 31, 2016 primarily represent amounts due for equipment purchases and software development services discussed above. |
(e) | Represents amounts due to ATS for construction, maintenance, and installation services, net of charges to ATS pursuant to the TSA. See discussion above. |
(f) | Represents amounts due to affiliates for services provided to the Company. |
AFFILIATE AND RELATED PARTY TRANSACTIONS
Equity Method Investments
In July 2016, the Company completed the sale of a 75% interest in Newsday LLC to an employee of the Company. The Company retained the remaining 25% ownership interest. Effective July 7, 2016, the operating results of Newsday are no longer consolidated with those of the Company and the Company's 25% interest in the operating results of Newsday is recorded on the equity basis.
At December 31, 2016, the Company's investment in Newsday was $3,640 and is included in investments in affiliates on our consolidated balance sheet. For the period July 8, 2016 to December 31, 2016, the Company recorded equity in net loss of Newsday of $1,132.
In December 2016, the Company made an investment of $1,966 in I24NEWS, Altice N.V.'s 24/7 international news and current affairs channel, representing a 25% ownership interest, which is included in investments in affiliates on our consolidated balance sheet at December 31, 2016. The 75% interest is owned by a subsidiary of Altice N.V. The operating results of I24NEWS will be recorded on an equity basis upon commencement of operations in 2017.
Affiliate and Related Party Transactions
As the transactions discussed below were conducted between subsidiaries under common control, amounts charged for certain services may not have represented amounts that might have been received or incurred if the transactions were based upon arm's length negotiations.
The following table summarizes the revenue and charges related to services provided to or received from subsidiaries of Altice N.V. and Newsday for the year ended December 31, 2016:
Revenue |
|
$ |
1,086 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Programming and other direct costs |
|
$ |
(1,947 |
) |
Other operating expenses |
|
|
(18,854 |
) |
|
|
|
|
|
Operating expenses, net |
|
|
(20,801 |
) |
|
|
|
|
|
Interest expense(a) |
|
|
(112,712 |
) |
|
|
|
|
|
Net charges |
|
$ |
(132,427 |
) |
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
45,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $102,557, as well as for interest expense of $10,155 related to the Holdco Notes prior to the exchange. |
Revenue
The Company recognized revenue in connection with sale of advertising to Newsday.
Programming and other direct costs
Programming and other direct costs includes costs incurred by the Company for the transport and termination of voice and data services provided by a subsidiary of Altice N.V.
Other operating expenses
A subsidiary of Altice N.V. provides certain executive services, including CEO, CFO and COO services, to the Company. Compensation under the terms of the agreement is an annual fee of $30,000 to be paid by the Company. Fees associated with this agreement recorded by the Company amounted to approximately $20,556 for the year ended December 31, 2016.
Other operating expenses includes advertising purchased from Newsday of $705 and IT consulting services of $182 provided by an Altice N.V. subsidiary, partially offset by a credit of $2,589 for transition services provided to Newsday.
Capital expenditures
The Company purchased equipment of $44,121 from Altice Management International and $1,025 from another Altice N.V. subsidiary. In addition, the Company acquired certain software development services that were capitalized from Altice Labs S.A. aggregating $740.
Aggregate amounts that were due from and due to related parties at December 31, 2016 is summarized below:
Due from: |
|
|
|
|
Altice US Finance S.A.(a) |
|
$ |
12,951 |
|
Newsday(b) |
|
|
6,114 |
|
Altice Management Americas(b) |
|
|
3,117 |
|
|
|
|
|
|
|
|
$ |
22,182 |
|
|
|
|
|
|
|
|
|
|
|
Due to: |
|
|
|
|
CVC 3BV(c) |
|
|
71,655 |
|
Neptune Holdings US LP(c) |
|
|
7,962 |
|
Altice Management International(d) |
|
|
44,121 |
|
Newsday(b) |
|
|
275 |
|
Other Altice subsidiaries(b) |
|
|
3,350 |
|
|
|
|
|
|
|
|
$ |
127,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Represents interest on senior notes paid by the Company on behalf of the affiliate. |
|
(b) |
Represents amounts paid by the Company on behalf of the respective related party and/or the net amounts due from the related party for services provided. |
|
(c) |
Represents distributions payable to shareholders. |
|
(d) |
Represents amounts due for equipment purchases and software development services discussed above. |
The table above does not include notes payable to affiliates and related parties of $1,750,000 and the related accrued interest of $102,557 as December 31, 2016 which is reflected in accrued interest in the Company's balance sheet. See discussion in Note 9.
|
COMMITMENTS AND CONTINGENCIES
Commitments
Future cash payments and commitments required under arrangements pursuant to contracts entered into by the Company in the normal course of business as of December 31, 2016 are as follows:
|
|
Payments Due by Period |
|
|||||||||||||
|
|
Total |
|
Year 1 |
|
Years 2 - 3 |
|
Years 4 - 5 |
|
More than |
|
|||||
Off balance sheet arrangements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase obligations(a) |
|
$ |
7,136,605 |
|
$ |
2,396,634 |
|
$ |
3,307,915 |
|
$ |
1,394,318 |
|
$ |
37,738 |
|
Guarantees(b) |
|
|
19,793 |
|
|
3,909 |
|
|
15,884 |
|
|
— |
|
|
— |
|
Letters of credit(c) |
|
|
114,251 |
|
|
220 |
|
|
14,297 |
|
|
99,734 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
7,270,649 |
|
$ |
2,400,763 |
|
$ |
3,338,096 |
|
$ |
1,494,052 |
|
$ |
37,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Purchase obligations primarily include contractual commitments with various programming vendors to provide video services to customers and minimum purchase obligations to purchase goods or services. Future fees payable under contracts with programming vendors are based on numerous factors, including the number of subscribers receiving the programming. Amounts reflected above related to programming agreements are based on the number of subscribers receiving the programming as of December 2016 multiplied by the per subscriber rates or the stated annual fee, as applicable, contained in the executed agreements in effect as of December 31, 2016. |
|
(b) |
Includes franchise and performance surety bonds primarily for the Company's cable television systems. |
|
(c) |
Represent letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Payments due by period for these arrangements represent the year in which the commitment expires although payments under these arrangements are required only in the event of nonperformance. |
The table above does not include obligations for payments required to be made under multi-year franchise agreements based on a percentage of revenues generated from video service per year.
Many of the Company's franchise agreements and utility pole leases require the Company to remove its cable wires and other equipment upon termination of the respective agreements. The Company has concluded that the fair value of these asset retirement obligations cannot be reasonably estimated since the range of potential settlement dates is not determinable.
Legal Matters
Cable Operations Litigation
Marchese, et al. v. Cablevision Systems Corporation and CSC Holdings, LLC:
The Company is a defendant in a lawsuit filed in the U.S. District Court for the District of New Jersey by several present and former Cablevision subscribers, purportedly on behalf of a class of iO video subscribers in New Jersey, Connecticut and New York. After three versions of the complaint were dismissed without prejudice by the District Court, plaintiffs filed their third amended complaint on August 22, 2011, alleging that the Company violated Section 1 of the Sherman Antitrust Act by allegedly tying the sale of interactive services offered as part of iO television packages to the rental and use of set-top boxes distributed by Cablevision, and violated Section 2 of the Sherman Antitrust Act by allegedly seeking to monopolize the distribution of Cablevision compatible set-top boxes. Plaintiffs seek unspecified treble monetary damages, attorney's fees, as well as injunctive and declaratory relief. On September 23, 2011, the Company filed a motion to dismiss the third amended complaint. On January 10, 2012, the District Court issued a decision dismissing with prejudice the Section 2 monopolization claim, but allowing the Section 1 tying claim and related state common law claims to proceed. Cablevision's answer to the third amended complaint was filed on February 13, 2012. On December 7, 2015, the parties entered into a settlement agreement, which is subject to approval by the Court. On December 11, 2015, plaintiffs filed a motion for preliminary approval of the settlement, conditional certification of the settlement class, and approval of a class notice distribution plan. On March 10, 2016 the Court granted preliminary approval of the settlement and approved the class notice distribution plan. Class notice distribution and the claims submission process have now concluded. The Court granted final approval of the settlement on September 12, 2016, and the effective date of the settlement was October 24, 2016. The Company recorded an expense of $15,600 in connection with settlement. As of December 31, 2016, the Company has an estimated liability associated with the settlement of $6,100 representing the cost of benefits to class members that are reasonably expected to be provided and has paid out $9,500 in attorneys' fees.
In re Cablevision Consumer Litigation:
Following expiration of the affiliation agreements for carriage of certain Fox broadcast stations and cable networks on October 16, 2010, News Corporation terminated delivery of the programming feeds to the Company, and as a result, those stations and networks were unavailable on the Company's cable television systems. On October 30, 2010, the Company and Fox reached an agreement on new affiliation agreements for these stations and networks, and carriage was restored. Several purported class action lawsuits were subsequently filed on behalf of the Company's customers seeking recovery for the lack of Fox programming. Those lawsuits were consolidated in an action before the U. S. District Court for the Eastern District of New York, and a consolidated complaint was filed in that court on February 22, 2011. Plaintiffs asserted claims for breach of contract, unjust enrichment, and consumer fraud, seeking unspecified compensatory damages, punitive damages and attorneys' fees. On March 28, 2012, the Court ruled on the Company's motion to dismiss, denying the motion with regard to plaintiffs' breach of contract claim, but granting it with regard to the remaining claims, which were dismissed. On April 16, 2012, plaintiffs filed a second consolidated amended complaint, which asserts a claim only for breach of contract. The Company's answer was filed on May 2, 2012. On October 10, 2012, plaintiffs filed a motion for class certification and on December 13, 2012, a motion for partial summary judgment. On March 31, 2014, the Court granted plaintiffs' motion for class certification, and denied without prejudice plaintiffs' motion for summary judgment. On May 30, 2014, the Court approved the form of class notice, and on October 7, 2014, approved the class notice distribution plan. The class notice distribution has been completed, and the opt-out period expired on February 27, 2015. Expert discovery commenced on May 5, 2014, and concluded on December 8 and 28, 2015, when the Court ruled on the pending expert discovery motions. On January 26, 2016, the Court approved a schedule for filing of summary judgment motions. Plaintiffs filed a motion for summary judgment on March 31, 2016. The Company filed its own summary judgment motion on June 13, 2016. The parties are actively engaged in settlement discussions although financial terms have not yet been finalized. The motions for summary judgment have been denied with leave to re-file in the event the discussions between the parties are not successful. In the period ended June 21, 2016 to December 31, 2016, the Company recorded an estimated liability associated with a potential settlement totaling $5,200. The amount ultimately paid in connection with a possible settlement could exceed the amount recorded.
Patent Litigation
Cablevision is named as a defendant in certain lawsuits claiming infringement of various patents relating to various aspects of the Company's businesses. In certain of these cases other industry participants are also defendants. In certain of these cases the Company expects that any potential liability would be the responsibility of the Company's equipment vendors pursuant to applicable contractual indemnification provisions. The Company believes that the claims are without merit and intends to defend the actions vigorously, but is unable to predict the outcome of these lawsuits or reasonably estimate a range of possible loss.
In addition to the matters discussed above, the Company is party to various lawsuits, some involving claims for substantial damages. Although the outcome of these other matters cannot be predicted and the impact of the final resolution of these other matters on the Company's results of operations in a particular subsequent reporting period is not known, management does not believe that the resolution of these other lawsuits will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due.
|
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||||||||||||
Cablevision | Cequel | Total | Cablevision (a) | Cequel | Total | ||||||||||||||||||
Operating income (loss) | $ | 11,185 | $ | 123,679 | $ | 134,864 | $ | 39,947 | $ | 102,832 | $ | 142,779 | |||||||||||
Share-based compensation | 11,555 | 3,450 | 15,005 | 1,091 | 579 | 1,670 | |||||||||||||||||
Restructuring and other expense | 35,364 | 18,084 | 53,448 | 45,176 | 2,640 | 47,816 | |||||||||||||||||
Depreciation and amortization (including impairments) | 656,102 | 167,163 | 823,265 | 481,497 | 189,432 | 670,929 | |||||||||||||||||
Adjusted EBITDA | $ | 714,206 | $ | 312,376 | $ | 1,026,582 | $ | 567,711 | $ | 295,483 | $ | 863,194 |
Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | ||||||||||||||||||||||
Cablevision | Cequel | Total | Cablevision (a) | Cequel | Total | ||||||||||||||||||
Operating income (loss) | $ | 244,667 | $ | 395,213 | $ | 639,880 | $ | (32,133 | ) | $ | 274,575 | $ | 242,442 | ||||||||||
Share-based compensation | 28,597 | 12,335 | 40,932 | 1,091 | 579 | 1,670 | |||||||||||||||||
Restructuring and other expense | 105,182 | 37,583 | 142,765 | 143,891 | 11,195 | 155,086 | |||||||||||||||||
Depreciation and amortization (including impairments) | 1,641,477 | 497,299 | 2,138,776 | 526,057 | 559,872 | 1,085,929 | |||||||||||||||||
Adjusted EBITDA | $ | 2,019,923 | $ | 942,430 | $ | 2,962,353 | $ | 638,906 | $ | 846,221 | $ | 1,485,127 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating income for reportable segments | $ | 134,864 | $ | 142,779 | $ | 639,880 | $ | 242,442 | |||||||
Items excluded from operating income: | |||||||||||||||
Interest expense | (379,064 | ) | (446,242 | ) | (1,232,730 | ) | (1,015,866 | ) | |||||||
Interest income | 961 | 404 | 1,373 | 12,787 | |||||||||||
Gain (loss) on investments, net | (18,900 | ) | 24,833 | 169,888 | 83,467 | ||||||||||
Gain (loss) on derivative contracts, net | (16,763 | ) | 773 | (154,270 | ) | (26,572 | ) | ||||||||
Gain (loss) on interest rate swap contracts | 1,051 | (15,861 | ) | 12,539 | 24,380 | ||||||||||
Loss on extinguishment of debt and write-off of deferred financing costs | (38,858 | ) | — | (600,240 | ) | (19,948 | ) | ||||||||
Other income (expense), net | (65 | ) | 2,531 | 832 | 2,548 | ||||||||||
Loss before income taxes | $ | (316,774 | ) | $ | (290,783 | ) | $ | (1,162,728 | ) | $ | (696,762 | ) |
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||||||||||||||||
Cablevision | Cequel | Eliminations | Total | Cablevision (a) | Cequel | Total | |||||||||||||||||||||
Residential: | |||||||||||||||||||||||||||
Pay TV | $ | 782,214 | $ | 272,178 | $ | — | $ | 1,054,392 | $ | 772,886 | $ | 279,109 | $ | 1,051,995 | |||||||||||||
Broadband | 404,153 | 241,941 | — | 646,094 | 366,166 | 212,439 | 578,605 | ||||||||||||||||||||
Telephony | 172,904 | 31,849 | — | 204,753 | 178,000 | 38,186 | 216,186 | ||||||||||||||||||||
Business services and wholesale | 230,274 | 94,486 | — | 324,760 | 220,352 | 89,014 | 309,366 | ||||||||||||||||||||
Advertising | 67,563 | 17,456 | (480 | ) | 84,539 | 67,815 | 20,944 | 88,759 | |||||||||||||||||||
Other | 7,211 | 5,426 | — | 12,637 | 9,480 | 5,830 | 15,310 | ||||||||||||||||||||
Total Revenue | $ | 1,664,319 | $ | 663,336 | $ | (480 | ) | $ | 2,327,175 | $ | 1,614,699 | $ | 645,522 | $ | 2,260,221 |
Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | ||||||||||||||||||||||||||
Cablevision (a) | Cequel | Eliminations | Total | Cablevision (a) | Cequel | Total | |||||||||||||||||||||
Residential: | |||||||||||||||||||||||||||
Pay TV | $ | 2,356,230 | $ | 829,380 | $ | — | $ | 3,185,610 | $ | 859,932 | $ | 840,354 | $ | 1,700,286 | |||||||||||||
Broadband | 1,177,731 | 709,548 | — | 1,887,279 | 406,057 | 613,012 | 1,019,069 | ||||||||||||||||||||
Telephony | 524,696 | 99,381 | — | 624,077 | 198,282 | 116,855 | 315,137 | ||||||||||||||||||||
Business services and wholesale | 690,168 | 278,123 | — | 968,291 | 244,685 | 260,278 | 504,963 | ||||||||||||||||||||
Advertising | 203,351 | 54,384 | (480 | ) | 257,255 | 75,458 | 63,476 | 138,934 | |||||||||||||||||||
Other | 21,366 | 17,314 | — | 38,680 | 14,145 | 18,777 | 32,922 | ||||||||||||||||||||
Total Revenue | $ | 4,973,542 | $ | 1,988,130 | $ | (480 | ) | $ | 6,961,192 | $ | 1,798,559 | $ | 1,912,752 | $ | 3,711,311 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Cablevision | $ | 228,594 | $ | 150,815 | $ | 550,231 | $ | 150,965 | |||||||
Cequel | 75,042 | 97,341 | 213,067 | 226,761 | |||||||||||
$ | 303,636 | $ | 248,156 | $ | 763,298 | $ | 377,726 |
SEGMENT INFORMATION
The Company classifies its operations into two reportable segments: Cablevision and Cequel. The Company's reportable segments are strategic business units that are managed separately. The Company evaluates segment performance based on several factors, of which the primary financial measure is business segment Adjusted EBITDA, a non-GAAP measure. The Company defines Adjusted EBITDA as net income (loss) excluding income taxes, income (loss) from discontinued operations, non-operating other income or expenses, loss on extinguishment of debt and write-off of deferred financing costs, gain (loss) on equity derivative contracts, gain (loss) on investments, interest expense (including cash interest expense), interest income, depreciation and amortization (including impairments), share-based compensation expense or benefit, restructuring expense or credits and transaction expenses. The Company has presented the components that reconcile Adjusted EBITDA to operating income, an accepted GAAP measure for the year ended December 31, 2016.
|
|
Cablevision |
|
Cequel |
|
Total |
|
|||
Operating income |
|
$ |
74,865 |
|
$ |
384,801 |
|
$ |
459,666 |
|
Share-based compensation |
|
|
9,164 |
|
|
5,204 |
|
|
14,368 |
|
Restructuring and other expense |
|
|
212,150 |
|
|
28,245 |
|
|
240,395 |
|
Depreciation and amortization (including impairments) |
|
|
963,665 |
|
|
736,641 |
|
|
1,700,306 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
1,259,844 |
|
$ |
1,154,891 |
|
$ |
2,414,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of reportable segment amounts to the Company's consolidated balances for the year ended December 31, 2016 is as follows:
Operating income for reportable segments |
|
$ |
459,666 |
|
Items excluded from operating income: |
|
|
|
|
Interest expense |
|
|
(1,456,541 |
) |
Interest income |
|
|
13,811 |
|
Gain on investments, net |
|
|
141,896 |
|
Loss on equity derivative contracts, net |
|
|
(53,696 |
) |
Loss on interest rate swap contracts |
|
|
(72,961 |
) |
Loss on extinguishment of debt and write-off of deferred financing costs |
|
|
(127,649 |
) |
Other income, net |
|
|
4,329 |
|
|
|
|
|
|
Loss before income taxes |
|
$ |
(1,091,145 |
) |
|
|
|
|
|
|
|
|
|
|
The following table presents the composition of revenue by segment for the year ended December 31, 2016:
|
|
Cablevision |
|
Cequel |
|
Total |
|
|||
Revenue: |
|
|
|
|
|
|
|
|
|
|
Residential: |
|
|
|
|
|
|
|
|
|
|
Video |
|
$ |
1,638,691 |
|
$ |
1,120,525 |
|
$ |
2,759,216 |
|
High-speed data |
|
|
782,615 |
|
|
834,414 |
|
|
1,617,029 |
|
Voice |
|
|
376,034 |
|
|
153,939 |
|
|
529,973 |
|
Business Services |
|
|
468,632 |
|
|
350,909 |
|
|
819,541 |
|
Advertising |
|
|
157,331 |
|
|
88,371 |
|
|
245,702 |
|
Other |
|
|
20,749 |
|
|
25,002 |
|
|
45,751 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
$ |
3,444,052 |
|
$ |
2,573,160 |
|
$ |
6,017,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for the year ended December 31, 2016 by reportable segment are presented below:
Cablevision |
|
$ |
298,357 |
|
Cequel |
|
|
327,184 |
|
|
|
|
|
|
|
|
$ |
625,541 |
|
|
|
|
|
|
|
|
|
|
|
All revenues and assets of the Company's reportable segments are attributed to or located in the United States.
Total assets by segment are not provided as such amounts are not regularly reviewed by the chief operating decision maker for purposes of decision making regarding resource allocations.
|
SUBSEQUENT EVENT
On October 31, 2017, CSC Holdings made a voluntary repayment under its revolving credit facility of $500,000.
SUBSEQUENT EVENTS
In January 2017, CSC Holdings borrowed $225,000 under its revolving credit facility and in February 2017, made a repayment of $175,000 with cash on hand.
On March 15, 2017, CSC Holdings priced $3,000,000 of 8.25-year senior secured term loans with institutional investors. The new senior secured term loans will bear interest at 2.25% over LIBO rate. The closing of the new financing is subject to closing conditions and the proceeds will be used to refinance the entire $2,500,000 principal amount of loans under CSC Holdings Term Credit Facility that matures in October 2024 and redeem $500,000 of the 8.625% Senior Notes due September 2017 issued by Cablevision.
On March 15, 2017, Altice US Finance I Corporation priced $1,265,000 of 8.25-year senior secured term loans with institutional investors. The new senior secured term loans will bear interest at 2.25% over LIBO rate. The closing of the new financing is subject to closing conditions and the proceeds will be used to refinance the $815,000 principal amount of loans under the term loan facility that matures in January 2025 and redeem $450,000 of the 2020 Notes.
In April 2017, the Company made a cash distribution of $169,950 to the Company's stockholders.
|
Recently Adopted Accounting Pronouncements
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that the statement of cash flows disclose the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. ASU No. 2016-18 provides specific guidance on the presentation of restricted cash in the statement of cash flows. The new guidance was adopted as of December 31, 2016.
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17 (Topic 740), Balance Sheet Classification of Deferred Taxes. This ASU amends existing guidance to require the presentation of deferred tax liabilities and assets as noncurrent within a classified statement of financial position. ASU No. 2015-17 was adopted by the Company in the fourth quarter 2016 and was applied prospectively to all deferred tax liabilities and assets.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Prior to the issuance of the standard, entities were required to retrospectively apply adjustments made to provisional amounts recognized in a business combination. ASU No. 2015-16 was adopted by the Company on January 1, 2016.
In April 2015, the FASB issued ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. ASU No. 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU No. 2015-05 was adopted by the Company on January 1, 2016 and did not have a material impact on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs from line-of-credit arrangements after adoption of ASU No. 2015-03. ASU No. 2015-15 clarifies that the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU No. 2015-03 was adopted by the Company on January 1, 2016.
In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU No. 2014-15 was adopted by the Company for the annual period ended December 31, 2016.
In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period. ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. ASU No. 2014-12 was adopted by the Company on January 1, 2016 on a prospective basis and did not have any impact on the Company's consolidated financial statements.
Recently Issued But Not Yet Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and allows the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14 that approved deferring the effective date by one year so that ASU No. 2014-09 would become effective for the Company on January 1, 2018. The FASB also approved, in July 2015, permitting the early adoption of ASU No. 2014-09, but not before the original effective date for the Company of January 1, 2017.
In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in order to clarify the Codification and to correct any unintended application of the guidance. These items are not expected to have a significant effect on the current accounting standard. The amendments in this update affect the guidance in ASU No. 2014-09, which is not yet effective. ASU No. 2014-09 will be effective, reflecting the one-year deferral, for interim and annual periods beginning after December 15, 2017 (January 1, 2018 for the Company). Early adoption of the standard is permitted but not before the original effective date. Companies can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact that the adoption of ASU No. 2014-09 will have on its consolidated financial statements and selecting the method of transition to the new standard. We currently expect the adoption to impact the timing of the recognition of residential installation revenue and the recognition of commission expenses.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU No. 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The new guidance becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2016-15 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which provides simplification of income tax accounting for share-based payment awards. The new guidance becomes effective for the Company on January 1, 2017 with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value will be applied using the modified retrospective transition method. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term will be applied prospectively. The Company may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. In connection with the adoption on January 1, 2017, a deferred tax asset of approximately $309,000 for previously unrealized excess tax benefits will be recognized with the offset recorded to accumulated deficit.
In February 2016, the FASB issued ASU 2016-02, Leases, which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019 with early adoption permitted and will be applied using the modified retrospective method. The Company has not yet completed the evaluation of the effect that ASU No. 2016-02 will have on its consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07 Compensation—Retirement Benefits (Topic 715). ASU No. 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. It also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and what component of net benefit cost is eligible for capitalization. ASU No. 2017-07 becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2017-07 will have on its consolidated financial statements.
Gross Versus Net Revenue Recognition
In the normal course of business, 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. The Company's policy is that, in instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities and amounts received from the customers are recorded on a gross basis. That is, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customer are recorded as revenue. For the year ended December 31, 2016, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $154,732.
|
Fair Values | Estimated Useful Lives | ||||
Current assets | $ | 1,923,071 | |||
Accounts receivable | 271,305 | ||||
Property, plant and equipment | 4,864,621 | 2-18 years | |||
Goodwill | 5,842,172 | ||||
Indefinite-lived cable television franchises | 8,113,575 | Indefinite-lived | |||
Customer relationships | 4,850,000 | 8 to 18 years | |||
Trade names (a) | 1,010,000 | 12 years | |||
Amortizable intangible assets | 23,296 | 1-15 years | |||
Other non-current assets | 748,998 | ||||
Current liabilities | (2,311,201 | ) | |||
Long-term debt | (8,355,386 | ) | |||
Deferred income taxes. | (6,832,773 | ) | |||
Other non-current liabilities | (189,355 | ) | |||
Total | $ | 9,958,323 |
(a) | See Note 8 for additional information regarding a change in the remaining estimated useful lives of the Company's trade names. |
|
|
Cablevision |
|
Cequel |
||||||
|
|
Preliminary |
|
Estimated |
|
Fair Values |
|
Estimated |
||
Current assets |
|
$ |
1,923,071 |
|
|
|
$ |
161,874 |
|
|
Accounts receivable |
|
|
271,305 |
|
|
|
|
180,422 |
|
|
Property, plant and equipment |
|
|
4,864,621 |
|
2 - 18 years |
|
|
2,107,220 |
|
3 - 13 years |
Goodwill |
|
|
5,838,959 |
|
|
|
|
2,153,741 |
|
|
Cable television franchise rights |
|
|
8,113,575 |
|
Indefinite-lived |
|
|
4,906,506 |
|
Indefinite-lived |
Customer relationships |
|
|
4,850,000 |
|
8 to 18 years |
|
|
1,075,884 |
|
8 years |
Trade names |
|
|
1,010,000 |
|
12 years |
|
|
56,782 |
|
2 years |
Amortizable intangible assets |
|
|
23,296 |
|
1 - 15 years |
|
|
3,356 |
|
11 years |
Other non-current assets |
|
|
748,998 |
|
|
|
|
73,811 |
|
|
Current liabilities |
|
|
(2,305,954 |
) |
|
|
|
(534,662 |
) |
|
Long-term debt |
|
|
(8,355,386 |
) |
|
|
|
(4,717,305 |
) |
|
Deferred income taxes |
|
|
(6,834,807 |
) |
|
|
|
(1,492,017 |
) |
|
Other non-current liabilities |
|
|
(189,355 |
) |
|
|
|
(2,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
9,958,323 |
|
|
|
$ |
3,973,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016 | |||
Revenue | $ | 6,848,916 | |
Net loss | $ | (527,851 | ) |
The following table presents the unaudited pro forma revenue, loss from continuing operations and net loss for the year ended December 31, 2016 as if the Cablevision Acquisition had occurred on January 1, 2016:
Revenue |
|
$ |
9,154,816 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(721,257 |
) |
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Non-Cash Investing and Financing Activities: | |||||||
Continuing Operations: | |||||||
Conversion of notes payable to affiliates and related parties of $1,750,000 (together with accrued and unpaid interest and applicable premium) to common stock (See Note 9) | $ | 2,264,252 | $ | — | |||
Property and equipment accrued but unpaid | 84,847 | 83,722 | |||||
Leasehold improvements paid by landlord | 3,998 | — | |||||
Notes payable to vendor | 25,879 | — | |||||
Supplemental Data: | |||||||
Cash interest paid | 1,481,363 | 931,345 | |||||
Income taxes paid, net | 26,396 | 5,342 |
During 2016, the Company's non-cash investing and financing activities and other supplemental data were as follows:
Non-Cash Investing and Financing Activities: |
|
|
|
|
Continuing Operations: |
|
|
|
|
Property and equipment accrued but unpaid |
|
$ |
155,653 |
|
Distributions declared but not paid |
|
|
79,617 |
|
Notes payable to vendor |
|
|
12,449 |
|
Deferred financing costs accrued but unpaid |
|
|
2,570 |
|
Supplemental Data: |
|
|
|
|
Cash interest paid |
|
|
1,092,114 |
|
Income taxes paid, net |
|
|
1,538 |
|
|
The following table summarizes the activity for the 2016 Restructuring Plan during 2017: | |||||||||||
Severance and Other Employee Related Costs | Facility Realignment and Other Costs | Total | |||||||||
Accrual balance at December 31, 2016 | $ | 102,119 | $ | 8,397 | $ | 110,516 | |||||
Restructuring charges | 140,071 | 1,007 | 141,078 | ||||||||
Payments and other | (92,905 | ) | (3,833 | ) | (96,738 | ) | |||||
Accrual balance at September 30, 2017 | $ | 149,285 | $ | 5,571 | $ | 154,856 |
The following table summarizes the activity for the 2016 Restructuring Plan:
|
|
Severance and |
|
Facility |
|
Total |
|
|||
Restructuring charges |
|
$ |
215,420 |
|
$ |
11,157 |
|
$ |
226,577 |
|
Payments and other |
|
|
(113,301 |
) |
|
(2,760 |
) |
|
(116,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
Accrual balance at December 31, 2016 |
|
$ |
102,119 |
|
$ |
8,397 |
|
$ |
110,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable Intangible Assets | |||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Estimated Useful Lives | ||||||||||
Customer relationships | $ | 5,970,884 | (1,207,217 | ) | $ | 4,763,667 | 8 to 18 years | ||||||
Trade names (a) | 1,067,083 | (432,402 | ) | 634,681 | 2 to 4 years | ||||||||
Other amortizable intangibles | 37,052 | (8,805 | ) | 28,247 | 1 to 15 years | ||||||||
$ | 7,075,019 | $ | (1,648,424 | ) | $ | 5,426,595 |
(a) | On May 23, 2017, Altice N.V. announced the adoption of a global brand which will replace the Company's brands in the future, reducing the remaining useful lives of these trade name intangibles. The Company has estimated the remaining useful lives to be 3 years from the date of the adoption, which reflects one year as an in-use asset and two years as a defensive asset. Amortization expense is calculated on an accelerated basis based on the Company's estimate of the intangible asset during the in-use period. The remaining estimated value of the defensive asset once it is no longer in use will be amortized over the defensive period. Estimated amortization expense related to the Optimum and Lightpath trade names are approximately $545,805 for 2017 (of which $334,312 has been expensed through September 30, 2017), $355,006 for 2018, $46,627 for 2019 and $18,140 through May 2020. |
The following table summarizes information relating to the Company's acquired intangible assets as of December 31, 2016:
|
|
Amortizable Intangible Assets |
|||||||||
|
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
|
Estimated Useful |
|||
Customer relationships |
|
$ |
5,925,884 |
|
$ |
(580,276 |
) |
$ |
5,345,608 |
|
8 to 18 years |
Trade names |
|
|
1,066,783 |
|
|
(83,397 |
) |
|
983,386 |
|
2 to 12 years |
Other amortizable intangibles |
|
|
26,743 |
|
|
(3,093 |
) |
|
23,650 |
|
1 to 15 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,019,410 |
|
$ |
(666,766 |
) |
$ |
6,352,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cablevision | Cequel | Total | |||||||||
Cable television franchises | $ | 8,113,575 | $ | 4,906,506 | $ | 13,020,081 | |||||
Goodwill | 5,839,757 | 2,153,742 | 7,993,499 | ||||||||
Total | $ | 13,953,332 | $ | 7,060,248 | $ | 21,013,580 |
The following table summarizes information relating to the Company's acquired indefinite-lived intangible assets as of December 31, 2016:
|
|
Optimum |
|
Suddenlink |
|
Total |
|
|||
Cable television franchises |
|
$ |
8,113,575 |
|
$ |
4,906,506 |
|
$ |
13,020,081 |
|
Goodwill |
|
|
5,838,959 |
|
|
2,153,741 |
|
|
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,952,534 |
|
$ |
7,060,247 |
|
$ |
21,012,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill as of January 1, 2017 | $ | 7,992,700 | |
Goodwill recorded in connection with acquisition in first quarter 2017 (Cablevision Segment) | 20,687 | ||
Adjustments to purchase accounting relating to Cablevision Acquisition | 3,213 | ||
Transfer of Cablevision goodwill related to Altice Technical Services US Corp. (See Note 14 for further details) | (23,101 | ) | |
Net goodwill as of September 30, 2017 | $ | 7,993,499 |
Gross goodwill as of January 1, 2016 |
|
$ |
2,040,402 |
|
Goodwill recorded in connection with Cablevision Acquisition |
|
|
5,838,959 |
|
Adjustments to purchase accounting relating to Cequel Acquisition |
|
|
113,339 |
|
|
|
|
|
|
Net goodwill as of December 31, 2016 |
|
$ |
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount (a) | |||||||||||||||
Maturity Date | Interest Rate | Principal | September 30, 2017 | December 31, 2016 | |||||||||||
CSC Holdings Restricted Group: | |||||||||||||||
Revolving Credit Facility (b) | $20,000 on October 9, 2020, remaining balance on November 30, 2021 | 4.49% | $ | 1,175,000 | $ | 1,149,024 | $ | 145,013 | |||||||
Term Loan Facility | July 17, 2025 | 3.48% | 2,992,500 | 2,974,768 | 2,486,874 | ||||||||||
Cequel: | |||||||||||||||
Revolving Credit Facility (c) | November 30, 2021 | — | — | — | — | ||||||||||
Term Loan Facility | July 28, 2025 | 3.49% | 1,261,838 | 1,253,110 | 812,903 | ||||||||||
$ | 5,429,338 | 5,376,902 | 3,444,790 | ||||||||||||
Less: Current portion | 92,650 | 33,150 | |||||||||||||
Long-term debt | $ | 5,284,252 | $ | 3,411,640 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | At September 30, 2017, $123,473 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $1,001,527 of the facility was undrawn and available, subject to covenant limitations. |
(c) | At September 30, 2017, $16,575 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $333,425 of the facility was undrawn and available, subject to covenant limitations. |
The following table provides details of the Company's outstanding credit facility debt (net of unamortized financing costs and unamortized discounts):
|
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying Value(a) |
|
|||
CSC Holdings Restricted Group: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(b) |
|
November 30, 2021 |
|
|
4.07 |
% |
$ |
175,256 |
|
$ |
145,013 |
|
Term Credit Facility(c) |
|
October 11, 2024 |
|
|
3.88 |
% |
|
2,500,000 |
|
|
2,486,874 |
|
Cequel: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(d) |
|
November 30, 2021 |
|
|
— |
|
|
— |
|
|
— |
|
Term Credit Facility |
|
January 15, 2025 |
|
|
3.88 |
% |
|
815,000 |
|
|
812,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,490,256 |
|
|
3,444,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
33,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
$ |
3,411,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The unamortized discounts and deferred financing costs amounted to $45,466 at December 31, 2016. |
|
(b) |
Includes $100,256 of credit facility debt incurred to finance the Cablevision Acquisition. See discussion above regarding the amendment to the revolving credit facility entered into December 2016. |
|
(c) |
Represents $3,800,000 principal amount of debt incurred to finance the Cablevision Acquisition, net of principal repayments made. See discussion above regarding the Extension Amendment entered into September 2016. |
|
(d) |
At December 31, 2016, $17,031 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $332,969 of the facility was undrawn and available, subject to covenant limitations. |
Interest Rate | Principal Amount | Carrying Amount (a) | ||||||||||||||||
Issuer | Date Issued | Maturity Date | September 30, 2017 | December 31, 2016 | ||||||||||||||
CSC Holdings (b)(f) | February 6, 1998 | February 15, 2018 | 7.875 | % | $ | 300,000 | $ | 303,531 | $ | 310,334 | ||||||||
CSC Holdings (b)(f) | July 21, 1998 | July 15, 2018 | 7.625 | % | 500,000 | 511,312 | 521,654 | |||||||||||
CSC Holdings (c)(f) | February 12, 2009 | February 15, 2019 | 8.625 | % | 526,000 | 544,422 | 553,804 | |||||||||||
CSC Holdings (c)(f) | November 15, 2011 | November 15, 2021 | 6.750 | % | 1,000,000 | 957,954 | 951,702 | |||||||||||
CSC Holdings (c)(f) | May 23, 2014 | June 1, 2024 | 5.250 | % | 750,000 | 657,903 | 650,193 | |||||||||||
CSC Holdings (e) | October 9, 2015 | January 15, 2023 | 10.125 | % | 1,800,000 | 1,777,085 | 1,774,750 | |||||||||||
CSC Holdings (e)(l) | October 9, 2015 | October 15, 2025 | 10.875 | % | 1,684,221 | 1,660,583 | 1,970,379 | |||||||||||
CSC Holdings (e) | October 9, 2015 | October 15, 2025 | 6.625 | % | 1,000,000 | 986,394 | 985,469 | |||||||||||
CSC Holdings (g) | September 23, 2016 | April 15, 2027 | 5.500 | % | 1,310,000 | 1,304,353 | 1,304,025 | |||||||||||
Cablevision (k) | September 23, 2009 | September 15, 2017 | 8.625 | % | — | — | 926,045 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2018 | 7.750 | % | 750,000 | 757,515 | 767,545 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2020 | 8.000 | % | 500,000 | 491,224 | 488,992 | |||||||||||
Cablevision (c)(f) | September 27, 2012 | September 15, 2022 | 5.875 | % | 649,024 | 568,796 | 559,500 | |||||||||||
Cequel and Cequel Capital Senior Notes (d)(m) | Oct. 25, 2012 Dec. 28, 2012 | September 15, 2020 | 6.375 | % | 1,050,000 | 1,025,616 | 1,457,439 | |||||||||||
Cequel and Cequel Capital Senior Notes (d) | May 16, 2013 Sept. 9, 2014 | December 15, 2021 | 5.125 | % | 1,250,000 | 1,132,926 | 1,115,767 | |||||||||||
Altice US Finance I Corporation Senior Secured Notes (h) | June 12, 2015 | July 15, 2023 | 5.375 | % | 1,100,000 | 1,081,815 | 1,079,869 | |||||||||||
Cequel and Cequel Capital Senior Secured Notes (i) | June 12, 2015 | July 15, 2025 | 7.750 | % | 620,000 | 604,001 | 602,925 | |||||||||||
Altice US Finance I Corporation Senior Notes (j) | April 26, 2016 | May 15, 2026 | 5.500 | % | 1,500,000 | 1,487,745 | 1,486,933 | |||||||||||
$ | 16,289,245 | 15,853,175 | 17,507,325 | |||||||||||||||
Less: Current portion | 1,572,358 | 926,045 | ||||||||||||||||
Long-term debt | $ | 14,280,817 | $ | 16,581,280 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | The debentures are not redeemable by CSC Holdings prior to maturity. |
(c) | Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
(d) | The Company may redeem some or more of all the notes at the redemption price set forth in the relevant indenture, plus accrued and unpaid interest. |
(e) | The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a “make whole” premium specified in the relevant indenture plus accrued and unpaid interest. |
(f) | The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
(g) | The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
(h) | Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
(i) | Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
(j) | Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
(k) | In April 2017, the Company redeemed $500,000 of the senior notes from proceeds from the CVC Term Loan facility. In September 2017, these senior notes matured and the Company repaid the remaining principal balance of $400,000. |
(l) | In July 2017, the Company used approximately $350,120 of the proceeds from the IPO to fund the redemption of $315,779 principal amount of CSC Holdings senior notes due October 2025 and the related call premium of approximately $34,341which was recorded as a loss on extinguishment of debt. The Company also recorded a write-off of deferred financings costs in connection with this redemption aggregating $4,516. |
(m) | In April 2017, the Company redeemed $450,000 of the senior notes from proceeds from the Cequel Term Loan facility. |
The following table summarizes the Company's senior guaranteed notes, senior secured notes and senior notes and debentures as of December 31, 2016:
Issuer |
|
Date Issued |
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying |
|
|||
CSC Holdings(b)(e) |
|
February 6, 1998 |
|
February 15, 2018 |
|
|
7.875 |
% |
$ |
300,000 |
|
$ |
310,334 |
|
CSC Holdings(b)(e) |
|
July 21, 1998 |
|
July 15, 2018 |
|
|
7.625 |
% |
|
500,000 |
|
|
521,654 |
|
CSC Holdings(c)(e) |
|
February 12, 2009 |
|
February 15, 2019 |
|
|
8.625 |
% |
|
526,000 |
|
|
553,804 |
|
CSC Holdings(c)(e) |
|
November 15, 2011 |
|
November 15, 2021 |
|
|
6.750 |
% |
|
1,000,000 |
|
|
951,702 |
|
CSC Holdings(c)(e) |
|
May 23, 2014 |
|
June 1, 2024 |
|
|
5.250 |
% |
|
750,000 |
|
|
650,193 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
January 15, 2023 |
|
|
10.125 |
% |
|
1,800,000 |
|
|
1,774,750 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
10.875 |
% |
|
2,000,000 |
|
|
1,970,379 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
6.625 |
% |
|
1,000,000 |
|
|
985,469 |
|
CSC Holdings(f) |
|
September 23, 2016 |
|
April 15, 2027 |
|
|
5.500 |
% |
|
1,310,000 |
|
|
1,304,025 |
|
Cablevision(c)(e) |
|
September 23, 2009 |
|
September 15, 2017 |
|
|
8.625 |
% |
|
900,000 |
|
|
926,045 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2018 |
|
|
7.750 |
% |
|
750,000 |
|
|
767,545 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2020 |
|
|
8.000 |
% |
|
500,000 |
|
|
488,992 |
|
Cablevision(c)(e) |
|
September 27, 2012 |
|
September 15, 2022 |
|
|
5.875 |
% |
|
649,024 |
|
|
559,500 |
|
Cequel Communications Holdings I LLC and Cequel |
|
October 25, 2012 |
|
September 15, 2020 |
|
|
6.375 |
% |
|
1,500,000 |
|
|
1,457,439 |
|
Cequel Communications Holdings I LLC and Cequel |
|
May 16, 2013 |
|
December 15, 2021 |
|
|
5.125 |
% |
|
1,250,000 |
|
|
1,115,767 |
|
Altice US Finance I Corporation(g) |
|
June 12, 2015 |
|
July 15, 2023 |
|
|
5.375 |
% |
|
1,100,000 |
|
|
1,079,869 |
|
Cequel Communications Holdings I LLC and Cequel Capital Corporation(h) |
|
June 12, 2015 |
|
July 15, 2025 |
|
|
7.750 |
% |
|
620,000 |
|
|
602,925 |
|
Altice US Finance I Corporation(i) |
|
April 26, 2016 |
|
May 15, 2026 |
|
|
5.500 |
% |
|
1,500,000 |
|
|
1,486,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,955,024 |
|
|
17,507,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
|
|
926,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
$ |
16,581,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The carrying amount of the notes is net of the unamortized deferred financing costs and/or discounts/premiums of $447,699. |
|
(b) |
The debentures are not redeemable by CSC Holdings prior to maturity. |
|
(c) |
Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
|
(d) |
The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a "make whole" premium specified in the relevant indenture plus accrued and unpaid interest. |
|
(e) |
The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
|
(f) |
The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
|
(g) |
Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
|
(h) |
Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
|
(i) |
Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
Years Ending December 31, | Cablevision | Cequel | Total | ||||||||
2017 | $ | 29,925 | $ | 5,256 | $ | 35,181 | |||||
2018 | 1,598,699 | 14,421 | 1,613,120 | ||||||||
2019 | 561,995 | 12,713 | 574,708 | ||||||||
2020 | 530,007 | 1,062,723 | 1,592,730 | ||||||||
2021 | 3,664,638 | 1,263,578 | 4,928,216 | ||||||||
Thereafter | 10,058,245 | 4,428,075 | 14,486,320 |
Total amounts payable by the Company under its various debt obligations outstanding as of December 31, 2016, including notes payable, collateralized indebtedness (see Note 10), and capital leases, during the next five years and thereafter, are as follows:
Years Ending December 31, |
|
Cablevision |
|
Cequel |
|
Altice USA |
|
Total |
|
||||
2017 |
|
$ |
1,719,180 |
|
$ |
9,113 |
|
$ |
— |
|
$ |
1,728,293 |
|
2018 |
|
|
2,103,441 |
|
|
8,652 |
|
|
— |
|
|
2,112,093 |
|
2019 |
|
|
557,348 |
|
|
8,330 |
|
|
— |
|
|
565,678 |
|
2020 |
|
|
526,340 |
|
|
1,508,213 |
|
|
— |
|
|
2,034,553 |
|
2021 |
|
|
1,200,256 |
|
|
1,258,223 |
|
|
— |
|
|
2,458,479 |
|
Thereafter |
|
|
9,884,024 |
|
|
3,995,280 |
|
|
1,750,000 |
|
|
15,629,304 |
|
|
Asset Derivatives | Liability Derivatives | |||||||||||||||||
Derivatives Not Designated as Hedging Instruments | Balance Sheet Location | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | |||||||||||||
Prepaid forward contracts | Derivative contracts, current | $ | 54,578 | $ | 352 | $ | (54,578 | ) | $ | (13,158 | ) | |||||||
Prepaid forward contracts | Derivative contracts, long-term | — | 10,604 | (52,488 | ) | — | ||||||||||||
Put/Call options | Liabilities under derivative contracts, current | — | — | (48,326 | ) | — | ||||||||||||
Interest rate swap contracts | Liabilities under derivative contracts, long-term | — | — | (69,271 | ) | (78,823 | ) | |||||||||||
$ | 54,578 | $ | 10,956 | $ | (224,663 | ) | $ | (91,981 | ) |
|
|
|
|
Asset |
|
Liability |
|
||
Derivatives Not Designated as Hedging Instruments |
|
Balance Sheet Location |
|
Fair Value at |
|
Fair Value at |
|
||
Prepaid forward contracts |
|
Derivative contracts, current |
|
$ |
352 |
|
$ |
13,158 |
|
Prepaid forward contracts |
|
Derivative contracts, long-term |
|
|
10,604 |
|
|
— |
|
Interest rate swap contracts |
|
Liabilities under derivative contracts, long-term |
|
|
— |
|
|
78,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,956 |
|
$ |
91,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares (a) | 21,477,618 | ||
Collateralized indebtedness settled | $ | (617,151 | ) |
Derivatives contracts settled | (37,838 | ) | |
(654,989 | ) | ||
Proceeds from new monetization contracts | 662,724 | ||
Net cash proceeds | $ | 7,735 |
(a) | Share amounts are adjusted for the 2 for 1 stock split in February 2017. |
Number of shares(a) |
|
|
5,337,750 |
|
|
|
|
|
|
|
|
|
|
|
Collateralized indebtedness settled |
|
$ |
(143,102 |
) |
Derivative contracts settled |
|
|
— |
|
|
|
|
|
|
|
|
|
(143,102 |
) |
Proceeds from new monetization contracts |
|
|
179,388 |
|
|
|
|
|
|
Net cash receipt |
|
$ |
36,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Share amounts were adjusted for the 2 for 1 stock split in February 2017. |
|
Fair Value Hierarchy | September 30, 2017 | December 31, 2016 | |||||||
Assets: | |||||||||
Money market funds (of which $14,700 is classified as restricted cash as of December 31, 2016) | Level I | $ | 65,801 | $ | 100,139 | ||||
Investment securities pledged as collateral | Level I | 1,652,917 | 1,483,030 | ||||||
Prepaid forward contracts | Level II | 54,578 | 10,956 | ||||||
Liabilities: | |||||||||
Prepaid forward contracts | Level II | 107,066 | 13,158 | ||||||
Put/Call Options | Level II | 48,326 | — | ||||||
Interest rate swap contracts | Level II | 69,271 | 78,823 | ||||||
Contingent consideration related to 2017 acquisition | Level III | 30,000 | — |
|
|
At December 31, 2016 (Successor) |
|
||||||||||
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
100,139 |
|
$ |
— |
|
$ |
— |
|
$ |
100,139 |
|
Investment securities pledged as collateral |
|
|
1,483,030 |
|
|
— |
|
|
— |
|
|
1,483,030 |
|
Prepaid forward contracts |
|
|
— |
|
|
10,956 |
|
|
— |
|
|
10,956 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid forward contracts |
|
|
— |
|
|
13,158 |
|
|
— |
|
|
13,158 |
|
Interest rate swap contracts |
|
|
|
|
|
78,823 |
|
|
|
|
|
78,823 |
|
September 30, 2017 | December 31, 2016 | ||||||||||||||||
Fair Value Hierarchy | Carrying Amount (a) | Estimated Fair Value | Carrying Amount (a) | Estimated Fair Value | |||||||||||||
Altice USA debt instruments: | |||||||||||||||||
Notes payable to affiliates and related parties | Level II | $ | — | $ | — | $ | 1,750,000 | $ | 1,837,876 | ||||||||
CSC Holdings debt instruments: | |||||||||||||||||
Credit facility debt | Level II | 4,123,792 | 4,167,500 | 2,631,887 | 2,675,256 | ||||||||||||
Collateralized indebtedness | Level II | 1,314,788 | 1,286,557 | 1,286,069 | 1,280,048 | ||||||||||||
Senior guaranteed notes | Level II | 2,290,748 | 2,460,675 | 2,289,494 | 2,416,375 | ||||||||||||
Senior notes and debentures | Level II | 6,412,789 | 7,421,261 | 6,732,816 | 7,731,150 | ||||||||||||
Notes payable | Level II | 76,442 | 72,802 | 13,726 | 13,260 | ||||||||||||
Cablevision senior notes: | Level II | 1,817,536 | 1,998,340 | 2,742,082 | 2,920,056 | ||||||||||||
Cequel debt instruments: | |||||||||||||||||
Cequel credit facility | Level II | 1,253,110 | 1,261,838 | 812,903 | 815,000 | ||||||||||||
Senior secured notes | Level II | 2,569,559 | 2,745,750 | 2,566,802 | 2,689,750 | ||||||||||||
Senior notes | Level II | 2,762,543 | 3,036,850 | 3,176,131 | 3,517,275 | ||||||||||||
Notes payable | Level II | 3,083 | 3,083 | — | — | ||||||||||||
$ | 22,624,390 | $ | 24,454,656 | $ | 24,001,910 | $ | 25,896,046 |
(a) | Amounts are net of unamortized deferred financing costs and discounts. |
|
|
|
|
December 31, 2016 |
|
||||
|
|
Fair Value |
|
Carrying |
|
Estimated |
|
||
Altice USA debt instruments: |
|
|
|
|
|
|
|
|
|
Notes payable to affiliates and related parties |
|
Level II |
|
$ |
1,750,000 |
|
$ |
1,837,876 |
|
CSC Holdings debt instruments: |
|
|
|
|
|
|
|
|
|
Credit facility debt |
|
Level II |
|
|
2,631,887 |
|
|
2,675,256 |
|
Collateralized indebtedness(b) |
|
Level II |
|
|
1,286,069 |
|
|
1,280,048 |
|
Senior guaranteed notes |
|
Level II |
|
|
2,289,494 |
|
|
2,416,375 |
|
Senior notes and debentures(c) |
|
Level II |
|
|
6,732,816 |
|
|
7,731,150 |
|
Notes payable |
|
Level II |
|
|
13,726 |
|
|
13,260 |
|
Cablevision senior notes(d) |
|
Level II |
|
|
2,742,082 |
|
|
2,920,056 |
|
Cequel debt instruments: |
|
|
|
|
|
|
|
|
|
Cequel credit facility |
|
Level II |
|
|
812,903 |
|
|
815,000 |
|
Senior Secured Notes |
|
Level II |
|
|
1,079,869 |
|
|
1,152,250 |
|
Senior Notes |
|
Level II |
|
|
4,663,064 |
|
|
5,054,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,001,910 |
|
$ |
25,896,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Amounts are net of unamortized deferred financing costs and discounts. |
|
(b) |
The total carrying value of the collateralized debt was reduced by $9,142 to reflect its fair value on the Cablevision Acquisition Date. |
|
(c) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $39,713 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
|
(d) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $13,075 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
|
Number of Time Vesting Awards | Number of Performance Based Vesting Awards | Weighted Average Grant Date Fair Value | |||||||
Balance, December 31, 2016 | 192,800,000 | 10,000,000 | $ | 0.37 | |||||
Granted | 28,025,000 | — | 3.14 | ||||||
Forfeited | (4,229,166 | ) | — | 0.37 | |||||
Balance, September 30, 2017 | 216,595,834 | 10,000,000 | 0.71 | ||||||
Awards vested at September 30, 2017 | — | — |
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | $ | 986 | $ | 720 | $ | 1,380 | $ | 720 | |||||||
Operating expenses: | |||||||||||||||
Programming and other direct costs | $ | (1,196 | ) | $ | (642 | ) | $ | (3,026 | ) | $ | (642 | ) | |||
Other operating expenses, net | (28,332 | ) | (8,056 | ) | (73,263 | ) | (13,056 | ) | |||||||
Operating expenses, net | (29,528 | ) | (8,698 | ) | (76,289 | ) | (13,698 | ) | |||||||
Interest expense (a) | — | (48,617 | ) | (90,405 | ) | (53,922 | ) | ||||||||
Loss on extinguishment of debt and write-off of deferred financing costs | — | — | (513,723 | ) | — | ||||||||||
Net charges | $ | (28,542 | ) | $ | (56,595 | ) | $ | (679,037 | ) | $ | (66,900 | ) | |||
Capital Expenditures | $ | 72,185 | $ | — | $ | 98,234 | $ | — |
(a) | See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $90,405 for the nine months ended September 30, 2017. |
September 30, 2017 | December 31, 2016 | ||||||
Due from: | |||||||
Altice US Finance S.A. (a) | $ | 12,951 | $ | 12,951 | |||
Newsday (b) | 4,177 | 6,114 | |||||
Altice Management Americas (b) | 615 | 3,117 | |||||
i24NEWS (b) | 3,373 | — | |||||
Other Altice N.V. subsidiaries (b) | 37 | — | |||||
$ | 21,153 | $ | 22,182 | ||||
Due to: | |||||||
CVC 3BV (c) | — | 71,655 | |||||
Neptune Holdings US LP (c) | — | 7,962 | |||||
Altice Management International (d) | — | 44,121 | |||||
ATS (b)(e) | 22,541 | — | |||||
Newsday (b) | 103 | 275 | |||||
Other Altice N.V. subsidiaries (f) | 6,358 | 3,350 | |||||
$ | 29,002 | $ | 127,363 |
(a) | Represents interest on senior notes paid by the Company on behalf of the affiliate. |
(b) | Represents amounts paid by the Company on behalf of the respective related party and for Newsday and ATS, the net amounts due from the related party also include charges for certain transition services provided. |
(c) | Represents distributions payable to stockholders. |
(d) | Amounts payable as of December 31, 2016 primarily represent amounts due for equipment purchases and software development services discussed above. |
(e) | Represents amounts due to ATS for construction, maintenance, and installation services, net of charges to ATS pursuant to the TSA. See discussion above. |
(f) | Represents amounts due to affiliates for services provided to the Company. |
The following table summarizes the revenue and charges related to services provided to or received from subsidiaries of Altice N.V. and Newsday for the year ended December 31, 2016:
Revenue |
|
$ |
1,086 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Programming and other direct costs |
|
$ |
(1,947 |
) |
Other operating expenses |
|
|
(18,854 |
) |
|
|
|
|
|
Operating expenses, net |
|
|
(20,801 |
) |
|
|
|
|
|
Interest expense(a) |
|
|
(112,712 |
) |
|
|
|
|
|
Net charges |
|
$ |
(132,427 |
) |
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
45,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $102,557, as well as for interest expense of $10,155 related to the Holdco Notes prior to the exchange. |
Aggregate amounts that were due from and due to related parties at December 31, 2016 is summarized below:
Due from: |
|
|
|
|
Altice US Finance S.A.(a) |
|
$ |
12,951 |
|
Newsday(b) |
|
|
6,114 |
|
Altice Management Americas(b) |
|
|
3,117 |
|
|
|
|
|
|
|
|
$ |
22,182 |
|
|
|
|
|
|
|
|
|
|
|
Due to: |
|
|
|
|
CVC 3BV(c) |
|
|
71,655 |
|
Neptune Holdings US LP(c) |
|
|
7,962 |
|
Altice Management International(d) |
|
|
44,121 |
|
Newsday(b) |
|
|
275 |
|
Other Altice subsidiaries(b) |
|
|
3,350 |
|
|
|
|
|
|
|
|
$ |
127,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Represents interest on senior notes paid by the Company on behalf of the affiliate. |
|
(b) |
Represents amounts paid by the Company on behalf of the respective related party and/or the net amounts due from the related party for services provided. |
|
(c) |
Represents distributions payable to shareholders. |
|
(d) |
Represents amounts due for equipment purchases and software development services discussed above. |
|
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||||||||||||
Cablevision | Cequel | Total | Cablevision (a) | Cequel | Total | ||||||||||||||||||
Operating income (loss) | $ | 11,185 | $ | 123,679 | $ | 134,864 | $ | 39,947 | $ | 102,832 | $ | 142,779 | |||||||||||
Share-based compensation | 11,555 | 3,450 | 15,005 | 1,091 | 579 | 1,670 | |||||||||||||||||
Restructuring and other expense | 35,364 | 18,084 | 53,448 | 45,176 | 2,640 | 47,816 | |||||||||||||||||
Depreciation and amortization (including impairments) | 656,102 | 167,163 | 823,265 | 481,497 | 189,432 | 670,929 | |||||||||||||||||
Adjusted EBITDA | $ | 714,206 | $ | 312,376 | $ | 1,026,582 | $ | 567,711 | $ | 295,483 | $ | 863,194 |
Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | ||||||||||||||||||||||
Cablevision | Cequel | Total | Cablevision (a) | Cequel | Total | ||||||||||||||||||
Operating income (loss) | $ | 244,667 | $ | 395,213 | $ | 639,880 | $ | (32,133 | ) | $ | 274,575 | $ | 242,442 | ||||||||||
Share-based compensation | 28,597 | 12,335 | 40,932 | 1,091 | 579 | 1,670 | |||||||||||||||||
Restructuring and other expense | 105,182 | 37,583 | 142,765 | 143,891 | 11,195 | 155,086 | |||||||||||||||||
Depreciation and amortization (including impairments) | 1,641,477 | 497,299 | 2,138,776 | 526,057 | 559,872 | 1,085,929 | |||||||||||||||||
Adjusted EBITDA | $ | 2,019,923 | $ | 942,430 | $ | 2,962,353 | $ | 638,906 | $ | 846,221 | $ | 1,485,127 |
The Company has presented the components that reconcile Adjusted EBITDA to operating income, an accepted GAAP measure for the year ended December 31, 2016.
|
|
Cablevision |
|
Cequel |
|
Total |
|
|||
Operating income |
|
$ |
74,865 |
|
$ |
384,801 |
|
$ |
459,666 |
|
Share-based compensation |
|
|
9,164 |
|
|
5,204 |
|
|
14,368 |
|
Restructuring and other expense |
|
|
212,150 |
|
|
28,245 |
|
|
240,395 |
|
Depreciation and amortization (including impairments) |
|
|
963,665 |
|
|
736,641 |
|
|
1,700,306 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
1,259,844 |
|
$ |
1,154,891 |
|
$ |
2,414,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating income for reportable segments | $ | 134,864 | $ | 142,779 | $ | 639,880 | $ | 242,442 | |||||||
Items excluded from operating income: | |||||||||||||||
Interest expense | (379,064 | ) | (446,242 | ) | (1,232,730 | ) | (1,015,866 | ) | |||||||
Interest income | 961 | 404 | 1,373 | 12,787 | |||||||||||
Gain (loss) on investments, net | (18,900 | ) | 24,833 | 169,888 | 83,467 | ||||||||||
Gain (loss) on derivative contracts, net | (16,763 | ) | 773 | (154,270 | ) | (26,572 | ) | ||||||||
Gain (loss) on interest rate swap contracts | 1,051 | (15,861 | ) | 12,539 | 24,380 | ||||||||||
Loss on extinguishment of debt and write-off of deferred financing costs | (38,858 | ) | — | (600,240 | ) | (19,948 | ) | ||||||||
Other income (expense), net | (65 | ) | 2,531 | 832 | 2,548 | ||||||||||
Loss before income taxes | $ | (316,774 | ) | $ | (290,783 | ) | $ | (1,162,728 | ) | $ | (696,762 | ) |
A reconciliation of reportable segment amounts to the Company's consolidated balances for the year ended December 31, 2016 is as follows:
Operating income for reportable segments |
|
$ |
459,666 |
|
Items excluded from operating income: |
|
|
|
|
Interest expense |
|
|
(1,456,541 |
) |
Interest income |
|
|
13,811 |
|
Gain on investments, net |
|
|
141,896 |
|
Loss on equity derivative contracts, net |
|
|
(53,696 |
) |
Loss on interest rate swap contracts |
|
|
(72,961 |
) |
Loss on extinguishment of debt and write-off of deferred financing costs |
|
|
(127,649 |
) |
Other income, net |
|
|
4,329 |
|
|
|
|
|
|
Loss before income taxes |
|
$ |
(1,091,145 |
) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||||||||||||||||
Cablevision | Cequel | Eliminations | Total | Cablevision (a) | Cequel | Total | |||||||||||||||||||||
Residential: | |||||||||||||||||||||||||||
Pay TV | $ | 782,214 | $ | 272,178 | $ | — | $ | 1,054,392 | $ | 772,886 | $ | 279,109 | $ | 1,051,995 | |||||||||||||
Broadband | 404,153 | 241,941 | — | 646,094 | 366,166 | 212,439 | 578,605 | ||||||||||||||||||||
Telephony | 172,904 | 31,849 | — | 204,753 | 178,000 | 38,186 | 216,186 | ||||||||||||||||||||
Business services and wholesale | 230,274 | 94,486 | — | 324,760 | 220,352 | 89,014 | 309,366 | ||||||||||||||||||||
Advertising | 67,563 | 17,456 | (480 | ) | 84,539 | 67,815 | 20,944 | 88,759 | |||||||||||||||||||
Other | 7,211 | 5,426 | — | 12,637 | 9,480 | 5,830 | 15,310 | ||||||||||||||||||||
Total Revenue | $ | 1,664,319 | $ | 663,336 | $ | (480 | ) | $ | 2,327,175 | $ | 1,614,699 | $ | 645,522 | $ | 2,260,221 |
Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | ||||||||||||||||||||||||||
Cablevision (a) | Cequel | Eliminations | Total | Cablevision (a) | Cequel | Total | |||||||||||||||||||||
Residential: | |||||||||||||||||||||||||||
Pay TV | $ | 2,356,230 | $ | 829,380 | $ | — | $ | 3,185,610 | $ | 859,932 | $ | 840,354 | $ | 1,700,286 | |||||||||||||
Broadband | 1,177,731 | 709,548 | — | 1,887,279 | 406,057 | 613,012 | 1,019,069 | ||||||||||||||||||||
Telephony | 524,696 | 99,381 | — | 624,077 | 198,282 | 116,855 | 315,137 | ||||||||||||||||||||
Business services and wholesale | 690,168 | 278,123 | — | 968,291 | 244,685 | 260,278 | 504,963 | ||||||||||||||||||||
Advertising | 203,351 | 54,384 | (480 | ) | 257,255 | 75,458 | 63,476 | 138,934 | |||||||||||||||||||
Other | 21,366 | 17,314 | — | 38,680 | 14,145 | 18,777 | 32,922 | ||||||||||||||||||||
Total Revenue | $ | 4,973,542 | $ | 1,988,130 | $ | (480 | ) | $ | 6,961,192 | $ | 1,798,559 | $ | 1,912,752 | $ | 3,711,311 |
The following table presents the composition of revenue by segment for the year ended December 31, 2016:
|
|
Cablevision |
|
Cequel |
|
Total |
|
|||
Revenue: |
|
|
|
|
|
|
|
|
|
|
Residential: |
|
|
|
|
|
|
|
|
|
|
Video |
|
$ |
1,638,691 |
|
$ |
1,120,525 |
|
$ |
2,759,216 |
|
High-speed data |
|
|
782,615 |
|
|
834,414 |
|
|
1,617,029 |
|
Voice |
|
|
376,034 |
|
|
153,939 |
|
|
529,973 |
|
Business Services |
|
|
468,632 |
|
|
350,909 |
|
|
819,541 |
|
Advertising |
|
|
157,331 |
|
|
88,371 |
|
|
245,702 |
|
Other |
|
|
20,749 |
|
|
25,002 |
|
|
45,751 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
$ |
3,444,052 |
|
$ |
2,573,160 |
|
$ |
6,017,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Cablevision | $ | 228,594 | $ | 150,815 | $ | 550,231 | $ | 150,965 | |||||||
Cequel | 75,042 | 97,341 | 213,067 | 226,761 | |||||||||||
$ | 303,636 | $ | 248,156 | $ | 763,298 | $ | 377,726 |
Capital expenditures for the year ended December 31, 2016 by reportable segment are presented below:
Cablevision |
|
$ |
298,357 |
|
Cequel |
|
|
327,184 |
|
|
|
|
|
|
|
|
$ |
625,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
the Company amended and restated its certificate of incorporation to, among other things, provide for Class A common stock, Class B common stock and Class C common stock;
|
•
|
BC Partners LLP ("BCP") and Canada Pension Plan Investment Board (‘‘CPPIB" and together with BCP, the‘‘Co-Investors’’) and Uppernext S.C.S.p. ("Uppernext"), an entity controlled by Mr. Patrick Drahi (founder and controlling stockholder of Altice N.V.), exchanged their indirect ownership interest in the Company for shares of the Company’s common stock;
|
•
|
Neptune Management LP (‘‘Management LP’’) redeemed its Class B units for shares of the Company’s common stock that it received from the redemption of its Class B units in Neptune Holding US LP;
|
•
|
the Company converted $525,000 aggregate principal amount of notes issued by the Company to the Co-Investors (together with accrued and unpaid interest and applicable premium) into shares of the Company’s common stock at the IPO price (see Note 9 for further details);
|
•
|
$1,225,000 aggregate principal amount of notes issued by the Company to a subsidiary of Altice N.V. (together with accrued and unpaid interest and applicable premium) was transferred to CVC 3 B.V., an indirect subsidiary of Altice N.V. ("CVC 3") and then the Company converted such notes into shares of the Company’s common stock at the IPO price (see Note 9 for further details);
|
•
|
the Co-Investors, Neptune Holding US LP, A4 S.A. (an entity controlled by the family of Mr. Drahi), and former Class B unitholders of Management LP (including Uppernext) exchanged shares of the Company’s common stock for new shares of the Company’s Class A common stock; and
|
•
|
CVC 3 and A4 S.A. exchanged shares of the Company’s common stock for new shares of the Company’s Class B common stock.
|
DESCRIPTION OF BUSINESS, RELATED MATTERS AND BASIS OF PRESENTATION
The Company and Related Matters
Altice USA, Inc. ("Altice USA" or the "Company") was incorporated in Delaware on September 14, 2015. As of December 31, 2016, Altice USA is majority-owned by Altice N.V., a public company with limited liability (naamloze vennootshcap) under Dutch law ("Altice N.V.").
Altice N.V. acquired Cequel Corporation ("Cequel" or "Suddenlink") on December 21, 2015 and Cequel was contributed to Altice USA on June 9, 2016. Altice USA had no operations of its own other than the issuance of debt prior to the contribution of Cequel on June 9, 2016 by Altice N.V. The results of operations of Cequel for the year ended December 31, 2016 have been included in the results of operations of Altice USA for the same period, as Cequel was under common control with Altice USA throughout 2016. Altice USA acquired Cablevision Systems Corporation ("Cablevision" or "Optimum") on June 21, 2016.
In addition to the operating results of Cequel for the year ended December 31, 2016, the operating results of Altice USA include the operating results of Cablevision for the period from the date of acquisition, June 21, 2016 through December 31, 2016. In addition to the operating results of Cequel and Cablevision described above, Altice USA incurred net interest expense of $419,456. For the period from inception of Altice USA through December 31, 2015, the operating results of Altice USA include $157,192 of interest expense related to the indebtedness issued to fund the acquisition of Cablevision, discussed below, and the operating results of Cequel for the 10 day period, December 21, 2015 through December 31, 2015. The Company classifies its operations into two reportable segments: Cablevision, which operates in the New York metropolitan area, and Cequel, which principally operates in markets in the south-central United States.
Acquisition of Cablevision Systems Corporation
On June 21, 2016 (the "Cablevision Acquisition Date"), pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 16, 2015, by and among Cablevision, Altice N.V., Neptune Merger Sub Corp., a wholly-owned subsidiary of Altice N.V. ("Merger Sub"), Merger Sub merged with and into Cablevision, with Cablevision surviving the merger (the "Cablevision Acquisition").
In connection with the Cablevision Acquisition, each outstanding share of the Cablevision NY Group Class A common stock, par value $0.01 per share, and Cablevision NY Group Class B common stock, par value $0.01 per share, and together with the Cablevision NY Group Class A common stock, the "Shares") other than (i) Shares owned by Cablevision, Altice N.V. or any of their respective wholly-owned subsidiaries, in each case not held on behalf of third parties in a fiduciary capacity, received $34.90 in cash without interest, less applicable tax withholdings (the "Cablevision Acquisition Consideration").
Pursuant to an agreement, dated December 21, 2015, by and among CVC 2 B.V., CIE Management IX Limited, for and on behalf of the limited partnerships BC European Capital IX-1 through 11 and Canada Pension Plan Investment Board, certain affiliates of BCP and CPPIB (the "Co-Investors") funded approximately $1,000,000 toward the payment of the aggregate Per Share Cablevision Acquisition Consideration, and indirectly acquired approximately 30% of the Shares of Cablevision.
Also in connection with the Cablevision Acquisition, outstanding equity-based awards granted under Cablevision's equity plans were cancelled and converted into cash based upon the $34.90 per Share Cablevision Acquisition price in accordance with the original terms of the awards. The total consideration for the outstanding CNYG Class A Shares, the outstanding CNYG Class B Shares, and the equity-based awards amounted to $9,958,323.
In connection with the Cablevision Acquisition, in October 2015, Neptune Finco Corp. ("Finco"), an indirect wholly-owned subsidiary of Altice N.V. formed to complete the financing described herein and the merger with CSC Holdings, LLC ("CSC Holdings"), a wholly-owned subsidiary of Cablevision, borrowed an aggregate principal amount of $3,800,000 under a term loan facility (the "Term Credit Facility") and entered into revolving loan commitments in an aggregate principal amount of $2,000,000 (the "Revolving Credit Facility" and, together with the Term Credit Facility, the "Credit Facilities").
Finco also issued $1,800,000 aggregate principal amount of 10.125% senior notes due 2023 (the "2023 Notes"), $2,000,000 aggregate principal amount of 10.875% senior notes due 2025 (the "2025 Notes"), and $1,000,000 aggregate principal amount of 6.625% senior guaranteed notes due 2025 (the "2025 Guaranteed Notes") (collectively the "Cablevision Acquisition Notes").
On June 21, 2016, immediately following the Cablevision Acquisition, Finco merged with and into CSC Holdings, with CSC Holdings surviving the merger (the "CSC Holdings Merger"), and the Cablevision Acquisition Notes and the Credit Facilities became obligations of CSC Holdings.
On June 21, 2016, in connection with the Cablevision Acquisition, the Company issued notes payable to affiliates and related parties aggregating $1,750,000, of which $875,000 bear interest at 10.75% and $875,000 bear interest at 11%.
The Cablevision Acquisition was accounted for as a business combination in accordance with ASC Topic 805. Accordingly, the Company stepped up 100% of the assets and liabilities assumed to their fair value at the Cablevision Acquisition Date. See Note 3 for further details.
Acquisition of Cequel Corporation
On December 21, 2015, Altice N.V. acquired approximately 70% of the total outstanding equity interests in Cequel Corporation (the "Cequel Acquisition") from the direct and indirect stockholders of Cequel Corporation (the "Sellers"). The consideration for the acquired equity interests was based on a total equity valuation for 100% of the capital and voting rights of Cequel of $3,973,528 which includes $2,797,928 of cash consideration, $675,600 of retained equity held by entities affiliated with BC Partners and CPPIB and $500,000 funded by the issuance by an affiliate of Altice N.V. of a senior vendor note that was subscribed by entities affiliated with BC Partners and CPPIB. Following the closing of the Cequel Acquisition, entities affiliated with BC Partners and CPPIB retained a 30% equity interest in a parent entity of the Company. In addition, the carried interest plans of the Stockholders were cashed out whereby payments were made to participants in such carried interest plans, including certain officers and directors of Cequel.
The Cequel Acquisition was accounted for as a business combination in accordance with ASC Topic 805. Accordingly, the Company stepped up 100% of the assets and liabilities assumed to their fair value at the Cequel Acquisition Date. See Note 3 for further details.
In June 2016, Cequel was contributed to Altice USA. The accompanying consolidated financial statements include the operating results of Cequel from January 1, 2016 through December 31, 2016 and the operating results of Cablevision from the Cablevision Acquisition Date through December 31, 2016.
Basis of Presentation
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("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 revenues and expenses during the reporting period. Actual results could differ from those estimates. See Note 11 for a discussion of fair value estimates.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes video, high-speed data, and voice services revenues as the services are provided to customers. Revenue received from customers who purchase bundled services at a discounted rate is allocated to each product in a pro-rata manner based on the individual product's selling price (generally, the price at which the product is regularly sold on a standalone basis). Installation revenue for the Company's video, consumer high-speed data and VoIP services is recognized as installations are completed, as direct selling costs have exceeded this revenue in all periods reported. Advertising revenues are recognized when commercials are aired.
Revenues derived from other sources are recognized when services are provided or events occur.
Multiple-Element Transactions
In the normal course of business, the Company may enter into multiple-element transactions where it is simultaneously both a customer and a vendor with the same counterparty or in which it purchases multiple products and/or services, or settles outstanding items contemporaneous with the purchase of a product or service from a single counterparty. The Company's policy for accounting for each transaction negotiated contemporaneously is to record each deliverable of the transaction based on its best estimate of selling price in a manner consistent with that used to determine the price to sell each deliverable on a standalone basis. In determining the fair value of the respective deliverable, the Company will utilize quoted market prices (as available), historical transactions or comparable transactions.
Gross Versus Net Revenue Recognition
In the normal course of business, 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. The Company's policy is that, in instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities and amounts received from the customers are recorded on a gross basis. That is, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customer are recorded as revenue. For the year ended December 31, 2016, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $154,732.
Technical and Operating Expenses
Costs of revenue related to sales of services are classified as "programming and other direct costs" in the accompanying consolidated statement of operations.
Programming Costs
Programming expenses related to the Company's video service represent fees paid to programming distributors to license the programming distributed to subscribers. This programming is acquired generally under multi-year distribution agreements, with rates usually based on the number of subscribers that receive the programming. If there are periods when an existing distribution agreement has expired and the parties have not finalized negotiations of either a renewal of that agreement or a new agreement for certain periods of time, the Company continues to carry and pay for these services until execution of definitive replacement agreements or renewals. The amount of programming expense recorded during the interim period is based on the Company's estimates of the ultimate contractual agreement expected to be reached, which is based on several factors, including previous contractual rates, customary rate increases and the current status of negotiations. Such estimates are adjusted as negotiations progress until new programming terms are finalized.
In addition, the Company has received, or may receive, incentives from programming distributors for carriage of the distributors' programming. The Company generally recognizes these incentives as a reduction of programming costs in "programming and other direct costs", generally over the term of the distribution agreement.
Advertising Expenses
Advertising costs are charged to expense when incurred and are reflected in "other operating expenses" in the accompanying consolidated statement of operations. Advertising costs amounted to $135,513 for the year ended December 31, 2016.
Share-Based Compensation
Share-based compensation cost relates to awards of units in a carried unit plan. For carried interest units, the Company measures share-based compensation cost at the grant date fair value and recognizes the expense over the requisite service period or when it is probable any related performance condition will be met. For carried interest units with graded vesting requirement, compensation cost is recognized on an accelerated method under the graded vesting method over the requisite service period for the carried interest unit. Carried interest units that vest entirely at the end of the vesting requirement are expensed on a straight-line basis.
The Company estimates the fair value of carried interest units using an option pricing model. Key inputs that are used in applying the option pricing method are total equity value, equity volatility, risk free rate and time to liquidity event. The estimate of total equity value is determined using a combination of the income approach, which incorporates cash flow projections that are discounted at an appropriate rate, and the market approach, which involves applying a market multiple to the Company's projected operating results. The Company estimates volatility based on the historical equity volatility of comparable publicly-traded companies. Because there has been no public market for our equity prior to this offering, the estimates and assumptions the Company uses in the share-based compensation valuations are highly complex and subjective. Following the offering, such subjective valuations and estimates will no longer be necessary because we will rely on the market price of the Company's common stock to determine the fair value of share-based compensation awards. See Note 14 to the consolidated financial statements for additional information about our share-based compensation.
Income Taxes
The Company's provision for income taxes is based on current period income, changes in deferred tax assets and liabilities and changes in estimates with regard to uncertain tax positions. Deferred tax assets are subject to an ongoing assessment of realizability. The Company provides deferred taxes for the outside basis difference of its investment in partnerships.
Cash and Cash Equivalents
The Company's cash investments are placed with money market funds and financial institutions that are investment grade as rated by Standard & Poor's and Moody's Investors Service. The Company selects money market funds that predominantly invest in marketable, direct obligations issued or guaranteed by the United States government or its agencies, commercial paper, fully collateralized repurchase agreements, certificates of deposit, and time deposits.
The Company considers the balance of its investment in funds that substantially hold securities that mature within three months or less from the date the fund purchases these securities to be cash equivalents. The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.
Accounts Receivable
Accounts receivable are recorded at net realizable value. The Company periodically assesses the adequacy of valuation allowances for uncollectible accounts receivable by evaluating the collectability of outstanding receivables and general factors such as historical collection experience, length of time individual receivables are past due, and the economic and competitive environment.
Investments
Investment securities and investment securities pledged as collateral are classified as trading securities and are stated at fair value with realized and unrealized holding gains and losses included in net income.
Long-Lived Assets and Amortizable Intangible Assets
Property, plant and equipment, including construction materials, are carried at cost, and include all direct costs and certain indirect costs associated with the construction of cable systems, and the costs of new equipment installations. Equipment under capital leases is recorded at the present value of the total minimum lease payments. Depreciation on equipment is calculated on the straight-line basis over the estimated useful lives of the assets or, with respect to equipment under capital leases and leasehold improvements, amortized over the shorter of the lease term or the assets' useful lives and reported in depreciation and amortization (including impairments) in the consolidated statements of operations.
The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized over the estimated useful life of the software and reported in depreciation and amortization (including impairments).
Customer relationships, trade names and other intangibles established in connection with acquisitions that are finite-lived are amortized in a manner that reflects the pattern in which the projected net cash inflows to the Company are expected to occur, such as the sum of the years' digits method, or when such pattern does not exist, using the straight-line basis over their respective estimated useful lives.
The Company reviews its long-lived assets (property, plant and equipment, and intangible assets subject to amortization that arose from acquisitions) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and the value of franchises, trademarks, and certain other intangibles acquired in purchase business combinations which have indefinite useful lives are not amortized. Rather, such assets are tested for impairment annually or upon the occurrence of a triggering event.
The Company assesses qualitative factors for its reporting units that carry goodwill. If the qualitative assessment results in a conclusion that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting unit.
When the qualitative assessment is not used, or if the qualitative assessment is not conclusive and it is necessary to calculate the fair value of a reporting unit, then the impairment analysis for goodwill is performed at the reporting unit level using a two-step approach. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill utilizing an enterprise-value based premise approach. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of goodwill impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill which would be recognized in a business combination.
The Company assesses qualitative factors to determine whether it is necessary to perform the one-step quantitative identifiable indefinite-lived intangible assets impairment test. This quantitative test is required only if the Company concludes that it is more likely than not that a unit of accounting's fair value is less than its carrying amount. When the qualitative assessment is not used, or if the qualitative assessment is not conclusive, the impairment test for other intangible assets not subject to amortization requires a comparison of the fair value of the intangible asset with its carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Deferred Financing Costs
Deferred financing costs are being amortized to interest expense using the effective interest method over the terms of the related debt.
Derivative Financial Instruments
The Company accounts for derivative financial instruments as either assets or liabilities measured at fair value. The Company uses derivative instruments to manage its exposure to market risks from changes in certain equity prices and interest rates and does not hold or issue derivative instruments for speculative or trading purposes. These derivative instruments are not designated as hedges, and changes in the fair values of these derivatives are recognized in the statement of operations as gains (losses) on derivative contracts.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when the Company believes it is probable that a liability has been incurred and the amount of the contingency can be reasonably estimated.
Recently Adopted Accounting Pronouncements
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that the statement of cash flows disclose the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. ASU No. 2016-18 provides specific guidance on the presentation of restricted cash in the statement of cash flows. The new guidance was adopted as of December 31, 2016.
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17 (Topic 740), Balance Sheet Classification of Deferred Taxes. This ASU amends existing guidance to require the presentation of deferred tax liabilities and assets as noncurrent within a classified statement of financial position. ASU No. 2015-17 was adopted by the Company in the fourth quarter 2016 and was applied prospectively to all deferred tax liabilities and assets.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Prior to the issuance of the standard, entities were required to retrospectively apply adjustments made to provisional amounts recognized in a business combination. ASU No. 2015-16 was adopted by the Company on January 1, 2016.
In April 2015, the FASB issued ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. ASU No. 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU No. 2015-05 was adopted by the Company on January 1, 2016 and did not have a material impact on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs from line-of-credit arrangements after adoption of ASU No. 2015-03. ASU No. 2015-15 clarifies that the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU No. 2015-03 was adopted by the Company on January 1, 2016.
In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU No. 2014-15 was adopted by the Company for the annual period ended December 31, 2016.
In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period. ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. ASU No. 2014-12 was adopted by the Company on January 1, 2016 on a prospective basis and did not have any impact on the Company's consolidated financial statements.
Recently Issued But Not Yet Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and allows the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14 that approved deferring the effective date by one year so that ASU No. 2014-09 would become effective for the Company on January 1, 2018. The FASB also approved, in July 2015, permitting the early adoption of ASU No. 2014-09, but not before the original effective date for the Company of January 1, 2017.
In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in order to clarify the Codification and to correct any unintended application of the guidance. These items are not expected to have a significant effect on the current accounting standard. The amendments in this update affect the guidance in ASU No. 2014-09, which is not yet effective. ASU No. 2014-09 will be effective, reflecting the one-year deferral, for interim and annual periods beginning after December 15, 2017 (January 1, 2018 for the Company). Early adoption of the standard is permitted but not before the original effective date. Companies can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact that the adoption of ASU No. 2014-09 will have on its consolidated financial statements and selecting the method of transition to the new standard. We currently expect the adoption to impact the timing of the recognition of residential installation revenue and the recognition of commission expenses.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU No. 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The new guidance becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2016-15 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which provides simplification of income tax accounting for share-based payment awards. The new guidance becomes effective for the Company on January 1, 2017 with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value will be applied using the modified retrospective transition method. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term will be applied prospectively. The Company may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. In connection with the adoption on January 1, 2017, a deferred tax asset of approximately $309,000 for previously unrealized excess tax benefits will be recognized with the offset recorded to accumulated deficit.
In February 2016, the FASB issued ASU 2016-02, Leases, which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019 with early adoption permitted and will be applied using the modified retrospective method. The Company has not yet completed the evaluation of the effect that ASU No. 2016-02 will have on its consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07 Compensation—Retirement Benefits (Topic 715). ASU No. 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. It also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and what component of net benefit cost is eligible for capitalization. ASU No. 2017-07 becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2017-07 will have on its consolidated financial statements.
Common Stock
At December 31, 2016, the Company had 100 shares of common stock with a par value of $.01 issued and outstanding.
Net Loss Per Share
Basic and diluted net loss per share have been computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share excludes the effects of common stock equivalents as they are anti-dilutive.
Concentrations of Credit Risk
Financial instruments that may potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents and trade account receivables. The Company monitors the financial institutions and money market funds where it invests its cash and cash equivalents with diversification among counterparties to mitigate exposure to any single financial institution. The Company's emphasis is primarily on safety of principal and liquidity and secondarily on maximizing the yield on its investments. Management believes that no significant concentration of credit risk exists with respect to its cash and cash equivalents balances because of its assessment of the creditworthiness and financial viability of the respective financial institutions.
The Company did not have a single customer that represented 10% or more of its consolidated revenues for the year ended December 31, 2016, or 10% or more of its consolidated net trade receivables at December 31, 2016.
|
Fair Values | Estimated Useful Lives | ||||
Current assets | $ | 1,923,071 | |||
Accounts receivable | 271,305 | ||||
Property, plant and equipment | 4,864,621 | 2-18 years | |||
Goodwill | 5,842,172 | ||||
Indefinite-lived cable television franchises | 8,113,575 | Indefinite-lived | |||
Customer relationships | 4,850,000 | 8 to 18 years | |||
Trade names (a) | 1,010,000 | 12 years | |||
Amortizable intangible assets | 23,296 | 1-15 years | |||
Other non-current assets | 748,998 | ||||
Current liabilities | (2,311,201 | ) | |||
Long-term debt | (8,355,386 | ) | |||
Deferred income taxes. | (6,832,773 | ) | |||
Other non-current liabilities | (189,355 | ) | |||
Total | $ | 9,958,323 |
(a) | See Note 8 for additional information regarding a change in the remaining estimated useful lives of the Company's trade names. |
Nine Months Ended September 30, 2016 | |||
Revenue | $ | 6,848,916 | |
Net loss | $ | (527,851 | ) |
BUSINESS COMBINATION
As discussed in Note 1, the Company completed the Cablevision Acquisition on June 21, 2016 and the Cequel Acquisition on December 21, 2015. The acquisitions were accounted for as a business combinations in accordance with ASC Topic 805. Accordingly, the Company recorded the fair value of the assets and liabilities assumed at the date of the acquisitions.
The following table provides the preliminary allocation of the total purchase price of $9,958,323 to the identifiable tangible and intangible assets and liabilities of Cablevision based on preliminary fair value information currently available, which is subject to change within the measurement period (up to one year from the acquisition date). The table also summarizes the allocation of the total purchase price of $3,973,528 to the identifiable tangible and intangible assets and liabilities based on fair value information in connection with the Cequel Acquisition. The remaining useful lives represent the period over which acquired tangible and intangible assets with a finite life are being depreciated or amortized.
|
|
Cablevision |
|
Cequel |
||||||
|
|
Preliminary |
|
Estimated |
|
Fair Values |
|
Estimated |
||
Current assets |
|
$ |
1,923,071 |
|
|
|
$ |
161,874 |
|
|
Accounts receivable |
|
|
271,305 |
|
|
|
|
180,422 |
|
|
Property, plant and equipment |
|
|
4,864,621 |
|
2 - 18 years |
|
|
2,107,220 |
|
3 - 13 years |
Goodwill |
|
|
5,838,959 |
|
|
|
|
2,153,741 |
|
|
Cable television franchise rights |
|
|
8,113,575 |
|
Indefinite-lived |
|
|
4,906,506 |
|
Indefinite-lived |
Customer relationships |
|
|
4,850,000 |
|
8 to 18 years |
|
|
1,075,884 |
|
8 years |
Trade names |
|
|
1,010,000 |
|
12 years |
|
|
56,782 |
|
2 years |
Amortizable intangible assets |
|
|
23,296 |
|
1 - 15 years |
|
|
3,356 |
|
11 years |
Other non-current assets |
|
|
748,998 |
|
|
|
|
73,811 |
|
|
Current liabilities |
|
|
(2,305,954 |
) |
|
|
|
(534,662 |
) |
|
Long-term debt |
|
|
(8,355,386 |
) |
|
|
|
(4,717,305 |
) |
|
Deferred income taxes |
|
|
(6,834,807 |
) |
|
|
|
(1,492,017 |
) |
|
Other non-current liabilities |
|
|
(189,355 |
) |
|
|
|
(2,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
9,958,323 |
|
|
|
$ |
3,973,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of customer relationships and cable television franchises were valued using derivations of the "income" approach. The future expected earnings from these assets were discounted to their present value equivalent.
Trade names were valued using the relief from royalty method, which is based on the present value of the royalty payments avoided as a result of the company owning the intangible asset.
The basis for the valuation methods was the Company's projections. These projections were based on management's assumptions including among others, penetration rates for video, high speed data, and voice; revenue growth rates; operating margins; and capital expenditures. The assumptions are derived based on the Company's and its peers' historical operating performance adjusted for current and expected competitive and economic factors surrounding the cable industry. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows generated by the respective intangible asset. The value is highly dependent on the achievement of the future financial results contemplated in the projections. The estimates and assumptions made in the valuation are inherently subject to significant uncertainties, many of which are beyond the Company's control, and there is no assurance that these results can be achieved. The primary assumptions for which there is a reasonable possibility of the occurrence of a variation that would have significantly affected the value include the assumptions regarding revenue growth, programming expense growth rates, the amount and timing of capital expenditures and the discount rate utilized.
In establishing fair value for the vast majority of the acquired property, plant and equipment, the cost approach was utilized. The cost approach considers the amount required to replace an asset by constructing or purchasing a new asset with similar utility, then adjusts the value in consideration of physical depreciation, and functional and economic obsolescence as of the appraisal date. The cost approach relies on management's assumptions regarding current material and labor costs required to rebuild and repurchase significant components of our property, plant and equipment along with assumptions regarding the age and estimated useful lives of our property, plant and equipment.
The estimates of expected useful lives take into consideration the effects of contractual relationships, customer attrition, eventual development of new technologies and market competition.
Long-term debt assumed was valued using quoted market prices (Level 2). The carrying value of most other assets and liabilities approximated fair value as of the acquisition dates.
As a result of applying business combination accounting, the Company recorded goodwill, which represented the excess of organization value over amounts assigned to the other identifiable tangible and intangible assets arising from expectations of future operational performance and cash generation.
The following table presents the unaudited pro forma revenue, loss from continuing operations and net loss for the year ended December 31, 2016 as if the Cablevision Acquisition had occurred on January 1, 2016:
Revenue |
|
$ |
9,154,816 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(721,257 |
) |
|
|
|
|
|
|
|
|
|
|
The pro forma results presented above include the impact of additional amortization expense related to the identifiable intangible assets recorded in connection with the Cablevision Acquisition, additional depreciation expense related to the fair value adjustment to property, plant and equipment and the incremental interest resulting from the issuance of debt to fund the acquisitions, net of the reversal of interest and amortization of deferred financing costs related to credit facilities that were repaid on the date of the Cablevision Acquisition, the accretion/ amortization of fair value adjustments associated with the long-term debt acquired and the remeasurement of deferred taxes associated with the acquisition of Cablevision.
|
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Non-Cash Investing and Financing Activities: | |||||||
Continuing Operations: | |||||||
Conversion of notes payable to affiliates and related parties of $1,750,000 (together with accrued and unpaid interest and applicable premium) to common stock (See Note 9) | $ | 2,264,252 | $ | — | |||
Property and equipment accrued but unpaid | 84,847 | 83,722 | |||||
Leasehold improvements paid by landlord | 3,998 | — | |||||
Notes payable to vendor | 25,879 | — | |||||
Supplemental Data: | |||||||
Cash interest paid | 1,481,363 | 931,345 | |||||
Income taxes paid, net | 26,396 | 5,342 |
SUPPLEMENTAL CASH FLOW INFORMATION
During 2016, the Company's non-cash investing and financing activities and other supplemental data were as follows:
Non-Cash Investing and Financing Activities: |
|
|
|
|
Continuing Operations: |
|
|
|
|
Property and equipment accrued but unpaid |
|
$ |
155,653 |
|
Distributions declared but not paid |
|
|
79,617 |
|
Notes payable to vendor |
|
|
12,449 |
|
Deferred financing costs accrued but unpaid |
|
|
2,570 |
|
Supplemental Data: |
|
|
|
|
Cash interest paid |
|
|
1,092,114 |
|
Income taxes paid, net |
|
|
1,538 |
|
|
The following table summarizes the activity for the 2016 Restructuring Plan during 2017: | |||||||||||
Severance and Other Employee Related Costs | Facility Realignment and Other Costs | Total | |||||||||
Accrual balance at December 31, 2016 | $ | 102,119 | $ | 8,397 | $ | 110,516 | |||||
Restructuring charges | 140,071 | 1,007 | 141,078 | ||||||||
Payments and other | (92,905 | ) | (3,833 | ) | (96,738 | ) | |||||
Accrual balance at September 30, 2017 | $ | 149,285 | $ | 5,571 | $ | 154,856 |
RESTRUCTURING AND OTHER EXPENSE
Restructuring
During 2016, the Company commenced its restructuring initiatives (the "2016 Restructuring Plan") that are intended to simplify the Company's organizational structure. The 2016 Restructuring Plan resulted in charges of $215,420 associated with the elimination of positions primarily in corporate, administrative and infrastructure functions across the Optimum and Suddenlink business segments and estimated charges of $11,157 associated with facility realignment and other costs.
The following table summarizes the activity for the 2016 Restructuring Plan:
|
|
Severance and |
|
Facility |
|
Total |
|
|||
Restructuring charges |
|
$ |
215,420 |
|
$ |
11,157 |
|
$ |
226,577 |
|
Payments and other |
|
|
(113,301 |
) |
|
(2,760 |
) |
|
(116,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
Accrual balance at December 31, 2016 |
|
$ |
102,119 |
|
$ |
8,397 |
|
$ |
110,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to the charges included in the table above, the Company recorded net restructuring credits of $27 relating to changes to the Company's previous estimates recorded in connection with the Company's prior restructuring plans.
Other Expense
The Company incurred transaction costs of $13,845 for the year ended December 31, 2016 related to the Cablevision Acquisition and Cequel Acquisition which are reflected in restructuring and other expense in the consolidated statement of operations.
|
PROPERTY, PLANT AND EQUIPMENT
Costs incurred in the construction of the Company's cable systems, including line extensions to, and upgrade of, the Company's hybrid fiber/coaxial infrastructure, initial placement of the feeder cable to connect a customer that had not been previously connected, and headend facilities are capitalized. These costs consist of materials, subcontractor labor, direct consulting fees, and internal labor and related costs associated with the construction activities. The internal costs that are capitalized consist of salaries and benefits of the Company's employees and the portion of facility costs, including rent, taxes, insurance and utilities, that supports the construction activities. These costs are depreciated over the estimated life of the plant (10 to 25 years) and headend facilities (4 to 25 years). Costs of operating the plant and the technical facilities, including repairs and maintenance, are expensed as incurred.
Installation costs associated with the initial deployment of new customer premise equipment ("CPE") necessary to provide video, high-speed data or voice services are also capitalized. These costs include materials, subcontractor labor, internal labor, and other related costs associated with the connection activities. The departmental activities supporting the connection process are tracked through specific metrics, and the portion of departmental costs that is capitalized is determined through a time weighted activity allocation of costs incurred based on time studies used to estimate the average time spent on each activity. These installation costs are amortized over the estimated useful lives of the CPE necessary to provide video, high-speed data or voice services. In circumstances where CPE tracking is not available, the Company estimates the amount of capitalized installation costs based on whether or not the business or residence had been previously connected to the network. These installation costs are depreciated over their estimated useful life of 4-8 years. The portion of departmental costs related to disconnecting services and removing CPE from a customer, costs related to connecting CPE that has been previously connected to the network and repair and maintenance are expensed as incurred.
The estimated useful lives assigned to our property, plant and equipment are reviewed on an annual basis or more frequently if circumstances warrant and such lives are revised to the extent necessary due to changing facts and circumstances. Any changes in estimated useful lives are reflected prospectively.
Property, plant and equipment (including equipment under capital leases) as of December 31, 2016 consist of the following assets, which are depreciated or amortized on a straight-line basis over their estimated useful lives.
|
|
|
|
Estimated |
|
Customer equipment |
|
$ |
871,049 |
|
3 to 5 years |
Headends and related equipment |
|
|
1,482,631 |
|
4 to 25 years |
Infrastructure |
|
|
3,740,494 |
|
3 to 25 years |
Equipment and software |
|
|
735,012 |
|
3 to 10 years |
Construction in progress (including materials and supplies) |
|
|
84,321 |
|
|
Furniture and fixtures |
|
|
45,576 |
|
5 to 12 years |
Transportation equipment |
|
|
135,488 |
|
5 to 10 years |
Buildings and building improvements |
|
|
390,337 |
|
10 to 40 years |
Leasehold improvements |
|
|
104,309 |
|
Term of lease |
Land |
|
|
47,715 |
|
|
|
|
|
|
|
|
|
|
|
7,636,932 |
|
|
Less accumulated depreciation and amortization |
|
|
(1,039,297 |
) |
|
|
|
|
|
|
|
|
|
$ |
6,597,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The estimated useful lives presented reflect the period of depreciation and amortization for the purchase of assets in new condition and do not reflect the remaining useful lives of the assets at December 31, 2016. |
For the year ended December 31, 2016, the Company capitalized certain costs aggregating $75,804, related to the acquisition and development of internal use software, which are included in the table above.
Depreciation expense on property, plant and equipment (including capital leases) for the year ended December 31, 2016 amounted to $1,046,896.
At December 31, 2016, the gross amount of buildings and equipment and related accumulated amortization recorded under capital leases were as follows:
Buildings and equipment |
|
$ |
53,833 |
|
Less accumulated amortization |
|
|
(6,306 |
) |
|
|
|
|
|
|
|
$ |
47,527 |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING LEASES
The Company leases certain office, production, and transmission facilities under terms of leases expiring at various dates through 2035. The leases generally provide for escalating rentals over the term of the lease plus certain real estate taxes and other costs or credits. Costs associated with such operating leases are recognized on a straight-line basis over the initial lease term. The difference between rent expense and rent paid is recorded as deferred rent. In addition, the Company rents space on utility poles for its operations. The Company's pole rental agreements are for varying terms, and management anticipates renewals as they expire. Rent expense, including pole rentals, for the year ended December 31, 2016 amounted to $65,881.
The minimum future annual payments for all operating leases (with initial or remaining terms in excess of one year) during the next five years and thereafter, including pole rentals from January 1, 2017 through December 31, 2021, at rates now in force are as follows:
2017 |
|
$ |
76,513 |
|
2018 |
|
|
70,242 |
|
2019 |
|
|
61,986 |
|
2020 |
|
|
56,953 |
|
2021 |
|
|
53,658 |
|
Thereafter |
|
|
142,655 |
|
|
Amortizable Intangible Assets | |||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Estimated Useful Lives | ||||||||||
Customer relationships | $ | 5,970,884 | (1,207,217 | ) | $ | 4,763,667 | 8 to 18 years | ||||||
Trade names (a) | 1,067,083 | (432,402 | ) | 634,681 | 2 to 4 years | ||||||||
Other amortizable intangibles | 37,052 | (8,805 | ) | 28,247 | 1 to 15 years | ||||||||
$ | 7,075,019 | $ | (1,648,424 | ) | $ | 5,426,595 |
(a) | On May 23, 2017, Altice N.V. announced the adoption of a global brand which will replace the Company's brands in the future, reducing the remaining useful lives of these trade name intangibles. The Company has estimated the remaining useful lives to be 3 years from the date of the adoption, which reflects one year as an in-use asset and two years as a defensive asset. Amortization expense is calculated on an accelerated basis based on the Company's estimate of the intangible asset during the in-use period. The remaining estimated value of the defensive asset once it is no longer in use will be amortized over the defensive period. Estimated amortization expense related to the Optimum and Lightpath trade names are approximately $545,805 for 2017 (of which $334,312 has been expensed through September 30, 2017), $355,006 for 2018, $46,627 for 2019 and $18,140 through May 2020. |
Cablevision | Cequel | Total | |||||||||
Cable television franchises | $ | 8,113,575 | $ | 4,906,506 | $ | 13,020,081 | |||||
Goodwill | 5,839,757 | 2,153,742 | 7,993,499 | ||||||||
Total | $ | 13,953,332 | $ | 7,060,248 | $ | 21,013,580 |
Gross goodwill as of January 1, 2017 | $ | 7,992,700 | |
Goodwill recorded in connection with acquisition in first quarter 2017 (Cablevision Segment) | 20,687 | ||
Adjustments to purchase accounting relating to Cablevision Acquisition | 3,213 | ||
Transfer of Cablevision goodwill related to Altice Technical Services US Corp. (See Note 14 for further details) | (23,101 | ) | |
Net goodwill as of September 30, 2017 | $ | 7,993,499 |
INTANGIBLE ASSETS
The following table summarizes information relating to the Company's acquired intangible assets as of December 31, 2016:
|
|
Amortizable Intangible Assets |
|||||||||
|
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
|
Estimated Useful |
|||
Customer relationships |
|
$ |
5,925,884 |
|
$ |
(580,276 |
) |
$ |
5,345,608 |
|
8 to 18 years |
Trade names |
|
|
1,066,783 |
|
|
(83,397 |
) |
|
983,386 |
|
2 to 12 years |
Other amortizable intangibles |
|
|
26,743 |
|
|
(3,093 |
) |
|
23,650 |
|
1 to 15 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,019,410 |
|
$ |
(666,766 |
) |
$ |
6,352,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the year ended December 31, 2016 aggregated $653,410.
The following table sets forth the estimated amortization expense on intangible assets for the periods presented:
Estimated amortization expense |
||||
Year Ending December 31, 2017 |
|
$ |
928,597 |
|
Year Ending December 31, 2018 |
|
|
834,312 |
|
Year Ending December 31, 2019 |
|
|
758,189 |
|
Year Ending December 31, 2020 |
|
|
681,610 |
|
Year Ending December 31, 2021 |
|
|
604,456 |
|
The following table summarizes information relating to the Company's acquired indefinite-lived intangible assets as of December 31, 2016:
|
|
Optimum |
|
Suddenlink |
|
Total |
|
|||
Cable television franchises |
|
$ |
8,113,575 |
|
$ |
4,906,506 |
|
$ |
13,020,081 |
|
Goodwill |
|
|
5,838,959 |
|
|
2,153,741 |
|
|
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,952,534 |
|
$ |
7,060,247 |
|
$ |
21,012,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying amount of goodwill is presented below:
Gross goodwill as of January 1, 2016 |
|
$ |
2,040,402 |
|
Goodwill recorded in connection with Cablevision Acquisition |
|
|
5,838,959 |
|
Adjustments to purchase accounting relating to Cequel Acquisition |
|
|
113,339 |
|
|
|
|
|
|
Net goodwill as of December 31, 2016 |
|
$ |
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
|
• | in respect of the CVC Term Loans, (i) with respect to any alternate base rate loan, 1.25% per annum and (ii) with respect to any eurodollar loan, 2.25% per annum, and |
• | in respect of the CVC Revolving Credit Facility loans (i) with respect to any alternate base rate loan, 2.25% per annum and (ii) with respect to any eurodollar loan, 3.25% per annum. |
• | in respect of the Cequel Term Loans, (i) with respect to any alternate base rate loan, 1.25% per annum and (ii) with respect to any eurodollar loan, 2.25% per annum, and |
• | in respect of Cequel Revolving Credit Facility loans (i) with respect to any alternate base rate loan, 2.25% per annum and (ii) with respect to any eurodollar loan, 3.25% per annum. |
Carrying Amount (a) | |||||||||||||||
Maturity Date | Interest Rate | Principal | September 30, 2017 | December 31, 2016 | |||||||||||
CSC Holdings Restricted Group: | |||||||||||||||
Revolving Credit Facility (b) | $20,000 on October 9, 2020, remaining balance on November 30, 2021 | 4.49% | $ | 1,175,000 | $ | 1,149,024 | $ | 145,013 | |||||||
Term Loan Facility | July 17, 2025 | 3.48% | 2,992,500 | 2,974,768 | 2,486,874 | ||||||||||
Cequel: | |||||||||||||||
Revolving Credit Facility (c) | November 30, 2021 | — | — | — | — | ||||||||||
Term Loan Facility | July 28, 2025 | 3.49% | 1,261,838 | 1,253,110 | 812,903 | ||||||||||
$ | 5,429,338 | 5,376,902 | 3,444,790 | ||||||||||||
Less: Current portion | 92,650 | 33,150 | |||||||||||||
Long-term debt | $ | 5,284,252 | $ | 3,411,640 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | At September 30, 2017, $123,473 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $1,001,527 of the facility was undrawn and available, subject to covenant limitations. |
(c) | At September 30, 2017, $16,575 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $333,425 of the facility was undrawn and available, subject to covenant limitations. |
Interest Rate | Principal Amount | Carrying Amount (a) | ||||||||||||||||
Issuer | Date Issued | Maturity Date | September 30, 2017 | December 31, 2016 | ||||||||||||||
CSC Holdings (b)(f) | February 6, 1998 | February 15, 2018 | 7.875 | % | $ | 300,000 | $ | 303,531 | $ | 310,334 | ||||||||
CSC Holdings (b)(f) | July 21, 1998 | July 15, 2018 | 7.625 | % | 500,000 | 511,312 | 521,654 | |||||||||||
CSC Holdings (c)(f) | February 12, 2009 | February 15, 2019 | 8.625 | % | 526,000 | 544,422 | 553,804 | |||||||||||
CSC Holdings (c)(f) | November 15, 2011 | November 15, 2021 | 6.750 | % | 1,000,000 | 957,954 | 951,702 | |||||||||||
CSC Holdings (c)(f) | May 23, 2014 | June 1, 2024 | 5.250 | % | 750,000 | 657,903 | 650,193 | |||||||||||
CSC Holdings (e) | October 9, 2015 | January 15, 2023 | 10.125 | % | 1,800,000 | 1,777,085 | 1,774,750 | |||||||||||
CSC Holdings (e)(l) | October 9, 2015 | October 15, 2025 | 10.875 | % | 1,684,221 | 1,660,583 | 1,970,379 | |||||||||||
CSC Holdings (e) | October 9, 2015 | October 15, 2025 | 6.625 | % | 1,000,000 | 986,394 | 985,469 | |||||||||||
CSC Holdings (g) | September 23, 2016 | April 15, 2027 | 5.500 | % | 1,310,000 | 1,304,353 | 1,304,025 | |||||||||||
Cablevision (k) | September 23, 2009 | September 15, 2017 | 8.625 | % | — | — | 926,045 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2018 | 7.750 | % | 750,000 | 757,515 | 767,545 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2020 | 8.000 | % | 500,000 | 491,224 | 488,992 | |||||||||||
Cablevision (c)(f) | September 27, 2012 | September 15, 2022 | 5.875 | % | 649,024 | 568,796 | 559,500 | |||||||||||
Cequel and Cequel Capital Senior Notes (d)(m) | Oct. 25, 2012 Dec. 28, 2012 | September 15, 2020 | 6.375 | % | 1,050,000 | 1,025,616 | 1,457,439 | |||||||||||
Cequel and Cequel Capital Senior Notes (d) | May 16, 2013 Sept. 9, 2014 | December 15, 2021 | 5.125 | % | 1,250,000 | 1,132,926 | 1,115,767 | |||||||||||
Altice US Finance I Corporation Senior Secured Notes (h) | June 12, 2015 | July 15, 2023 | 5.375 | % | 1,100,000 | 1,081,815 | 1,079,869 | |||||||||||
Cequel and Cequel Capital Senior Secured Notes (i) | June 12, 2015 | July 15, 2025 | 7.750 | % | 620,000 | 604,001 | 602,925 | |||||||||||
Altice US Finance I Corporation Senior Notes (j) | April 26, 2016 | May 15, 2026 | 5.500 | % | 1,500,000 | 1,487,745 | 1,486,933 | |||||||||||
$ | 16,289,245 | 15,853,175 | 17,507,325 | |||||||||||||||
Less: Current portion | 1,572,358 | 926,045 | ||||||||||||||||
Long-term debt | $ | 14,280,817 | $ | 16,581,280 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | The debentures are not redeemable by CSC Holdings prior to maturity. |
(c) | Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
(d) | The Company may redeem some or more of all the notes at the redemption price set forth in the relevant indenture, plus accrued and unpaid interest. |
(e) | The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a “make whole” premium specified in the relevant indenture plus accrued and unpaid interest. |
(f) | The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
(g) | The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
(h) | Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
(i) | Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
(j) | Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
(k) | In April 2017, the Company redeemed $500,000 of the senior notes from proceeds from the CVC Term Loan facility. In September 2017, these senior notes matured and the Company repaid the remaining principal balance of $400,000. |
(l) | In July 2017, the Company used approximately $350,120 of the proceeds from the IPO to fund the redemption of $315,779 principal amount of CSC Holdings senior notes due October 2025 and the related call premium of approximately $34,341which was recorded as a loss on extinguishment of debt. The Company also recorded a write-off of deferred financings costs in connection with this redemption aggregating $4,516. |
(m) | In April 2017, the Company redeemed $450,000 of the senior notes from proceeds from the Cequel Term Loan facility. |
Years Ending December 31, | Cablevision | Cequel | Total | ||||||||
2017 | $ | 29,925 | $ | 5,256 | $ | 35,181 | |||||
2018 | 1,598,699 | 14,421 | 1,613,120 | ||||||||
2019 | 561,995 | 12,713 | 574,708 | ||||||||
2020 | 530,007 | 1,062,723 | 1,592,730 | ||||||||
2021 | 3,664,638 | 1,263,578 | 4,928,216 | ||||||||
Thereafter | 10,058,245 | 4,428,075 | 14,486,320 |
DEBT
CSC Holdings Credit Facilities
In connection with the Cablevision Acquisition, in October 2015, Neptune Finco Corp. ("Finco"), a wholly-owned subsidiary of the Company formed to complete the financing described herein and the merger with CSC Holdings, borrowed an aggregate principal amount of $3,800,000 under a term loan facility (the "Term Credit Facility") and entered into revolving loan commitments in an aggregate principal amount of $2,000,000 (the "Revolving Credit Facility" and, together with the Term Credit Facility, the "Credit Facilities"). The Term Credit Facility was to mature on October 9, 2022 and the Revolving Credit Facility was to mature on October 9, 2020 (see discussion below regarding the extension amendments). In addition, on June 21, 2016 and July 21, 2016, the Company entered into incremental loan assumption agreements whereby the Revolving Credit Facility was increased by $70,000 and $35,000, respectively, to $2,105,000.
Finco also issued $1,800,000 aggregate principal amount of 10.125% senior notes due 2023 (the "2023 Notes"), $2,000,000 aggregate principal amount of 10.875% senior notes due 2025 (the "2025 Notes"), and $1,000,000 aggregate principal amount of 6.625% senior guaranteed notes due 2025 (the "2025 Guaranteed Notes") (collectively the "Cablevision Acquisition Notes").
On June 21, 2016, immediately following the Cablevision Acquisition, Finco merged with and into CSC Holdings, with CSC Holdings surviving the merger (the "CSC Holdings Merger"), and the Cablevision Acquisition Notes and the Credit Facilities became obligations of CSC Holdings. The 2025 Guaranteed Notes are guaranteed on a senior basis by each restricted subsidiary of CSC Holdings (other than CSC TKR, LLC and its subsidiaries, which own and operate the New Jersey cable television systems, Cablevision Lightpath, Inc. and any subsidiaries of CSC Holdings that are "Excluded Subsidiaries" under the indenture governing the 2025 Guaranteed Notes) (such subsidiaries, the "Initial Guarantors") and the obligations under the Credit Facilities are (i) guaranteed on a senior basis by each Initial Guarantor and (ii) secured on a first priority basis by capital stock held by CSC Holdings and the guarantors in certain subsidiaries of CSC Holdings, subject to certain exclusions and limitations.
Altice USA used the proceeds from the Term Credit Facility and the Cablevision Acquisition Notes, together with an equity contribution from Altice N.V. and its Co-Investors and existing cash at Cablevision, to (a) finance the Cablevision Acquisition, (b) refinance the credit agreement, dated as of April 17, 2013 (the "Previous Credit Facility"), among CSC Holdings, certain subsidiaries of CSC Holdings and the lenders party thereto ($2,030,699 outstanding at the date of the Cablevision Acquisition), (c) repay the senior secured credit agreement, dated as of October 12, 2012, among Newsday LLC, CSC Holdings, and the lenders party thereto (the "Previous Newsday Credit Facility") of $480,000, and (d) pay related fees and expenses.
The Credit Facilities permit CSC Holdings to request revolving loans, swing line loans or letters of credit from the revolving lenders, swingline lenders or issuing banks, as applicable, thereunder, from time to time prior to October 9, 2020, unless the commitments under the Revolving Credit Facility have been previously terminated.
There is also a commitment fee of 0.375% on undrawn amounts under the revolving credit facility.
On September 9, 2016, CSC Holdings entered into an amendment (the "Extension Amendment") to the Credit Facilities and the incremental loan assumption agreements dated June 21, 2016 and July 21, 2016 between CSC Holdings and certain lenders party thereto (the "Extending Lenders") pursuant to which each Extending Lender agreed to extend the maturity of its Term Credit Facility under the Credit Facilities to October 11, 2024 and to certain other amendments to the Credit Facilities. In October 2016, CSC Holdings used the net proceeds from the sale of $1,310,000 aggregate principal amount of 5.5% senior guaranteed notes due 2027 (the "2027 Guaranteed Notes") (after the deduction of fees and expenses) to prepay outstanding loans under the CSC Holdings Term Credit Facility that were not extended pursuant to the Extension Amendment. The total aggregate principal amount of the Term Credit Facility, after giving effect to the use of proceeds of the 2027 Guaranteed Notes, is $2,500,000 (the "Extended Term Loan"). The Extended Term Loan was effective on October 11, 2016. In connection with the prepayment of the Term Credit Facility, the Company wrote-off the deferred financing costs and the unamortized discount related to the existing term loan aggregating $102,894. Additionally, the Company recorded deferred financing costs and an original issue discount of $7,249 and $6,250, respectively, which are both being amortized to interest expense over the term of the Extended Term Loan.
On December 9, 2016, the Credit Facilities were amended to increase the availability under the Revolving Credit Facility from $2,105,000 to $2,300,000 and extend the maturity on $2,280,000 of this facility to November 30, 2021. The remaining $20,000 will mature on October 9, 2020.
The Credit Facilities require CSC Holdings to prepay outstanding term loans, subject to certain exceptions and deductions, with (i) 100% of the net cash proceeds of certain asset sales, subject to reinvestment rights and certain other exceptions, and (ii) commencing with the first full fiscal year after the consummation of the Cablevision Acquisition, a ratable share (based on the outstanding principal amount of the Extended Term Loan divided by the sum of the outstanding principal amount of all pari passu indebtedness and the Extended Term Loan) of 50% of the annual excess cash flow of CSC Holdings and its restricted subsidiaries, which will be reduced to 0% if the Consolidated Net Senior Secured Leverage Ratio of CSC Holdings is less than or equal to 4.5 to 1.
Under the Term Credit Facility, CSC Holdings was required to make and made scheduled quarterly payment of $9,500 beginning with the fiscal quarter ending September 30, 2016. Under the Extended Term Loan, CSC Holdings is required to make scheduled quarterly payments equal to 0.25% of the principal amount of the Extended Term Loan, with the remaining balance scheduled to be paid on October 11, 2024, beginning with the fiscal quarter ending March 31, 2017.
The CSC Holdings Credit Facilities include negative covenants that are substantially similar to the negative covenants contained in the indentures under which the Cablevision Acquisition Notes were issued (see discussion below). The Credit Facilities include one financial maintenance covenant (solely for the benefit of the Revolving Credit Facility), consisting of a maximum Consolidated Net Senior Secured Leverage Ratio of 5.0 to 1, which will be tested on the last day of any fiscal quarter but only if on such day there are outstanding borrowings under the CSC Holdings Revolving Credit Facility (including swingline loans but excluding any cash collateralized letters of credit and undrawn letters of credit not to exceed $15,000). The CSC Holdings Credit Facilities contain customary representations, warranties and affirmative covenants. In addition, the CSC Holdings Credit Facilities contains restrictive covenants that limit, among other things, the ability of CSC Holdings and its subsidiaries to incur indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments or loans, engage in transactions with affiliates, pay dividends, and make acquisitions and dispose of assets. If an event of default occurs, the obligations under the CSC Holdings Credit Facilities may be accelerated.
CSC Holdings was in compliance with all of its financial covenants under the CSC Holdings Credit Facilities as of December 31, 2016.
Cequel Credit Facilities
In connection with the Cequel Acquisition, lenders holding (a) $290,000 of loans and commitments under the revolving credit facility under the old credit facility and (b) approximately $815,400 of loans under the term loan facility under the old credit facility consented to roll over, on a cashless basis, such lenders' loans and commitments under the old credit facility into loans and commitments of the same amount under a new credit facility (the "Cequel Credit Facility") made available to a subsidiary of Cequel effective upon the consummation of the Cequel Acquisition (the 'Cequel Credit Agreement"). Upon the closing of the Cequel Acquisition, the $290,000 of loans and commitments under the revolving credit facility under the old credit facility that lenders elected to rollover into the Cequel Credit Facility, plus $60,000 of new revolving commitments from other lenders, formed a new $350,000 revolving credit facility under the Cequel Credit Facility, and all remaining commitments under the then existing $500,000 revolving credit facility under the old credit facility were terminated.
The interest rate on the term loans outstanding under the Cequel Credit Facility equal the prime rate plus 2.25% or the LIBO rate plus 3.25%, with a LIBO rate floor of 1.00%, while the interest rate on the revolver loans equal the prime rate plus 2.25% or the LIBO rate plus 3.25%. The term loan facility requires quarterly repayments in annual amounts equal to 1.00% of the original principal amount, which commenced on March 31, 2016, with the remainder due at maturity. There is a commitment fee of 0.5% on undrawn amounts under the revolving credit facility.
The debt under the Cequel Credit Agreement is secured by a first priority security interest in the capital stock of Suddenlink, an indirect wholly-owned subsidiary of Cequel and substantially all of the present and future assets of Suddenlink and its restricted subsidiaries, and is guaranteed by the Cequel Communications Holdings II, LLC, an indirect wholly-owned subsidiary of Cequel (the "Parent Guarantor") as well as all of Suddenlink's existing and future direct and indirect subsidiaries, subject to certain exceptions set forth in the Cequel Credit Agreement.
The Cequel Credit Agreement contains customary representations, warranties and affirmative covenants. In addition, the Cequel Credit Agreement contains restrictive covenants that limit, among other things, the ability of Suddenlink and its subsidiaries to incur indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments or loans, engage in transactions with affiliates, pay dividends, and make acquisitions and dispose of assets. The Cequel Credit Agreement also contains a maximum senior secured leverage maintenance covenant of 5.0 times EBITDA as defined in the Cequel Credit Agreement. Additionally, the Cequel Credit Agreement contains customary events of default, including failure to make payments, breaches of covenants and representations, cross defaults to other indebtedness, unpaid judgments, changes of control and bankruptcy events. The lenders' commitments to fund amounts under the revolving credit facility are subject to certain customary conditions.
Amendments to Cequel Credit Agreement
On October 25, 2016, an indirect wholly-owned subsidiary of Cequel entered into the First Amendment to the Cequel Credit Agreement, amending the credit agreement dated June 12, 2015, between the Company and certain lenders party thereto pursuant to which the applicable margin for the term loans outstanding under the Cequel Credit Facility was lowered by 25 basis points, the LIBO rate floor for the term loans outstanding under the Cequel Credit Facility was lowered by 25 basis points to 0.75% and the maturity date for the term loans outstanding under the Cequel Credit Facility was extended to January 15, 2025. The proceeds of $815,000 from the new term loan were used to repay the amount outstanding under the existing term loan of $809,327 and related fees and expenses. In connection with the extinguishment of the existing term loan, the Company recorded a loss on extinguishment of debt of $4,807, representing primarily the write-off of deferred financing costs related to the term loan. In connection with the First Amendment to the Cequel Credit Agreement, the Company recorded deferred financing costs of $2,092, which are being amortized to interest expense over the term of the loan.
On December 9, 2016, the Company entered into the Second Amendment to the Cequel Credit Agreement which extended the maturity on the revolver to November 30, 2021.
As of December 31, 2016, Cequel was in compliance with all of its financial covenants under the Cequel Credit Agreement.
The following table provides details of the Company's outstanding credit facility debt (net of unamortized financing costs and unamortized discounts):
|
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying Value(a) |
|
|||
CSC Holdings Restricted Group: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(b) |
|
November 30, 2021 |
|
|
4.07 |
% |
$ |
175,256 |
|
$ |
145,013 |
|
Term Credit Facility(c) |
|
October 11, 2024 |
|
|
3.88 |
% |
|
2,500,000 |
|
|
2,486,874 |
|
Cequel: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(d) |
|
November 30, 2021 |
|
|
— |
|
|
— |
|
|
— |
|
Term Credit Facility |
|
January 15, 2025 |
|
|
3.88 |
% |
|
815,000 |
|
|
812,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,490,256 |
|
|
3,444,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
33,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
$ |
3,411,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The unamortized discounts and deferred financing costs amounted to $45,466 at December 31, 2016. |
|
(b) |
Includes $100,256 of credit facility debt incurred to finance the Cablevision Acquisition. See discussion above regarding the amendment to the revolving credit facility entered into December 2016. |
|
(c) |
Represents $3,800,000 principal amount of debt incurred to finance the Cablevision Acquisition, net of principal repayments made. See discussion above regarding the Extension Amendment entered into September 2016. |
|
(d) |
At December 31, 2016, $17,031 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $332,969 of the facility was undrawn and available, subject to covenant limitations. |
During the twelve months ending December 31, 2017, the Company is required to make principal payments aggregating $25,000 under the CSC Holdings Term Credit Facility and $8,150 under the Cequel Term Credit Facility.
Senior Guaranteed Notes and Senior Notes and Debentures
The following table summarizes the Company's senior guaranteed notes, senior secured notes and senior notes and debentures as of December 31, 2016:
Issuer |
|
Date Issued |
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying |
|
|||
CSC Holdings(b)(e) |
|
February 6, 1998 |
|
February 15, 2018 |
|
|
7.875 |
% |
$ |
300,000 |
|
$ |
310,334 |
|
CSC Holdings(b)(e) |
|
July 21, 1998 |
|
July 15, 2018 |
|
|
7.625 |
% |
|
500,000 |
|
|
521,654 |
|
CSC Holdings(c)(e) |
|
February 12, 2009 |
|
February 15, 2019 |
|
|
8.625 |
% |
|
526,000 |
|
|
553,804 |
|
CSC Holdings(c)(e) |
|
November 15, 2011 |
|
November 15, 2021 |
|
|
6.750 |
% |
|
1,000,000 |
|
|
951,702 |
|
CSC Holdings(c)(e) |
|
May 23, 2014 |
|
June 1, 2024 |
|
|
5.250 |
% |
|
750,000 |
|
|
650,193 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
January 15, 2023 |
|
|
10.125 |
% |
|
1,800,000 |
|
|
1,774,750 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
10.875 |
% |
|
2,000,000 |
|
|
1,970,379 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
6.625 |
% |
|
1,000,000 |
|
|
985,469 |
|
CSC Holdings(f) |
|
September 23, 2016 |
|
April 15, 2027 |
|
|
5.500 |
% |
|
1,310,000 |
|
|
1,304,025 |
|
Cablevision(c)(e) |
|
September 23, 2009 |
|
September 15, 2017 |
|
|
8.625 |
% |
|
900,000 |
|
|
926,045 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2018 |
|
|
7.750 |
% |
|
750,000 |
|
|
767,545 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2020 |
|
|
8.000 |
% |
|
500,000 |
|
|
488,992 |
|
Cablevision(c)(e) |
|
September 27, 2012 |
|
September 15, 2022 |
|
|
5.875 |
% |
|
649,024 |
|
|
559,500 |
|
Cequel Communications Holdings I LLC and Cequel |
|
October 25, 2012 |
|
September 15, 2020 |
|
|
6.375 |
% |
|
1,500,000 |
|
|
1,457,439 |
|
Cequel Communications Holdings I LLC and Cequel |
|
May 16, 2013 |
|
December 15, 2021 |
|
|
5.125 |
% |
|
1,250,000 |
|
|
1,115,767 |
|
Altice US Finance I Corporation(g) |
|
June 12, 2015 |
|
July 15, 2023 |
|
|
5.375 |
% |
|
1,100,000 |
|
|
1,079,869 |
|
Cequel Communications Holdings I LLC and Cequel Capital Corporation(h) |
|
June 12, 2015 |
|
July 15, 2025 |
|
|
7.750 |
% |
|
620,000 |
|
|
602,925 |
|
Altice US Finance I Corporation(i) |
|
April 26, 2016 |
|
May 15, 2026 |
|
|
5.500 |
% |
|
1,500,000 |
|
|
1,486,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,955,024 |
|
|
17,507,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
|
|
926,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
$ |
16,581,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The carrying amount of the notes is net of the unamortized deferred financing costs and/or discounts/premiums of $447,699. |
|
(b) |
The debentures are not redeemable by CSC Holdings prior to maturity. |
|
(c) |
Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
|
(d) |
The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a "make whole" premium specified in the relevant indenture plus accrued and unpaid interest. |
|
(e) |
The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
|
(f) |
The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
|
(g) |
Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
|
(h) |
Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
|
(i) |
Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
The indentures under which the senior notes and debentures were issued contain various covenants, which are generally less restrictive than those contained in the Credit Agreement. The Company was in compliance with all of its financial covenants under these indentures as of December 31, 2016.
CSC Holdings 5.5% Senior Guaranteed Notes due 2027
In September 2016, CSC Holdings issued $1,310,000 aggregate principal amount of 5.50% senior guaranteed notes due April 15, 2027. The 2027 Guaranteed Notes are senior unsecured obligations and rank pari passu in right of payment with all of the existing and future senior indebtedness, including the existing senior notes and the Credit Facilities and rank senior in right of payment to all of existing and future subordinated indebtedness.
As discussed above, in October 2016, CSC Holdings used the proceeds from the issuance of the 2027 Guaranteed Notes (after the deduction of fees and expenses) to prepay the outstanding loans under the Term Credit Facility that were not extended pursuant to the Extension Amendment. In connection with the issuance of the 2027 Guaranteed Notes, the Company incurred deferred financing costs of approximately $5,575, which are being amortized to interest expense over the term of the 2027 Guaranteed Notes.
Cablevision Acquisition Notes
The $1,000,000 principal amount of the 2025 Guaranteed Notes bear interest at a rate of 6.625% per annum and were issued at a price of 100.00%. Interest on the 2025 Guaranteed Notes is payable semi-annually on January 15 and July 15, commencing on July 15, 2016. These 2025 Guaranteed Notes are guaranteed on a senior basis by the Initial Guarantors.
The $1,800,000 principal amount of the 2023 Notes and $2,000,000 principal amount of the 2025 Notes, bear interest at a rate of 10.125% and 10.875%, respectively, per annum and were issued at prices of 100.00%. Interest on the 2023 Notes and 2025 Notes is payable semi-annually on January 15 and July 15, which began on July 15, 2016.
Deferred financing costs of approximately $76,579 incurred in connection with the issuance of the Cablevision Acquisition Notes are being amortized to interest expense over the term of the Cablevision Acquisition Notes.
The indentures under which the Cablevision and CSC Holdings Senior Guaranteed Notes and Senior Notes and Debentures were issued contain certain covenants and agreements with respect to investment grade debt securities, including limitations on the ability of CSC Holdings and its restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) make investments or other restricted payments, (iii) create liens, (iv) sell assets and subsidiary stock, (v) pay dividends or make other distributions or repurchase or redeem our capital stock or subordinated debt, (vi) engage in certain transactions with affiliates, (vii) enter into agreements that restrict the payment of dividends by subsidiaries or the repayment of intercompany loans and advances, and (viii) engage in mergers or consolidations, in each case subject to certain exceptions. The indentures also contain certain customary events of default. If an event of default occurs, the obligations under the Cablevision Acquisition Notes may be accelerated. As of December 31, 2016, Cablevision was in compliance with all of its financial covenants under the indentures under which the senior notes and debentures and guaranteed notes were issued.
Cequel Senior Secured Notes
On June 12, 2015, Altice US Finance I Corporation, an indirect subsidiary of Altice N.V., issued $1,100,000 principal amount of senior secured notes (the "2023 Senior Secured Notes"), the proceeds from which were placed in escrow to finance a portion of the purchase price for the Cequel Acquisition. The 2023 Senior Secured Notes bear interest at a rate of 5.375% per annum and were issued at a price of 100.00%. Interest on the 2023 Senior Secured Notes is payable semi-annually on January 15 and July 15 of each year. Following the consummation of the Cequel Acquisition and related transactions the equity interests in Altice US Finance I Corporation were contributed through one or more intermediary steps to Suddenlink, and the Senior Secured Notes were guaranteed by Cequel Communications Holdings II LLC, Suddenlink and certain of the subsidiaries of Suddenlink and are secured by certain assets of Cequel Communications Holdings II LLC, Suddenlink and its subsidiaries.
On April 26, 2016, Altice US Finance I Corporation issued $1,500,000 aggregate principal amount of senior secured notes (the "2026 Senior Secured Notes"). The proceeds from the sale were used to repay the $1,477,200 remaining balance under the Old Credit Facility and to pay related fees and expenses (see discussion above). The 2026 Senior Secured Notes mature on May 15, 2026 and bear interest at a rate of 5.50% annually. Interest on the 2026 Senior Secured Notes is payable semi-annually on May 15 and November 15 of each year, commencing on November 15, 2016. Deferred financing costs recorded in connection with the issuance of these notes amounted to $13,773 and are being amortized over the term of the notes.
Cequel Senior Notes
On June 12, 2015, Altice US Finance II Corporation, an indirect subsidiary of Altice N.V., issued $300,000 principal amount of the 2025 Senior Notes, the proceeds from which were placed in escrow, to finance a portion of the purchase price for the Cequel Acquisition. The 2025 Senior Notes were issued by the 2025 Senior Notes Issuer, an indirect subsidiary of Altice N.V., bear interest at a rate of 7.75% per annum and were issued at a price of 100.00%. Interest on the 2025 Senior Notes is payable semi-annually on January 15 and July 15 of each year. Following the consummation of the Cequel Acquisition and related transactions, the 2025 Senior Notes Issuer merged into Cequel, the 2025 Senior Notes became the obligations of Cequel and Cequel Capital Corporation became the co-issuer of the 2025 Senior Notes.
On June 12, 2015, Altice US Finance S.A., an indirect subsidiary of Altice N.V. issued $320,000 principal amount of the 7.75% Senior Notes due 2025 (the "Holdco Notes"), the proceeds from which were placed in escrow, to finance a portion of the purchase price for the Cequel Acquisition. The Holdco Notes bear interest at a rate of 7.75% per annum and were issued at a price of 98.275%. Interest on the Holdco Notes is payable semi-annually on January 15 and July 15 of each year. The Holdco Notes were automatically exchanged into an equal aggregate principal amount of 2025 Senior Notes at Cequel during the second quarter of 2016. The exchange resulted in a decrease to member's equity of approximately $315,352.
The Issuers have no ability to service interest or principal on the Notes, other than through any dividends or distributions received from Suddenlink. Suddenlink is restricted in certain circumstances, from paying dividends or distributions to the Issuers by the terms of the New Credit Agreement. However, the Cequel Credit Agreement permits Suddenlink to make dividends and distributions subject to satisfaction of certain conditions, including pro forma compliance with a maximum senior secured leverage ratio, and that no event of default has occurred and is continuing, or would be caused by the making of such dividends or other distributions, and based on, among other things, availability under a restricted payment basket. The 2020 Notes, the 2021 Notes and the 2025 Senior Notes are unsecured and are not guaranteed by any subsidiaries of the Original Issuers, including Suddenlink.
The Cequel Indentures contain certain covenants, agreements and events of default which are customary with respect to non-investment grade debt securities, including limitations on the Company's ability to incur additional indebtedness, pay dividends on or make other distributions or repurchase the Company's capital stock, make certain investments, enter into certain types of transactions with affiliates, create liens and sell certain assets or merge with or into other companies.
Notes Payable to Affiliates and Related Parties
On June 21, 2016, in connection with the Cablevision Acquisition, the Company issued notes payable to affiliates aggregating $1,750,000, of which $875,000 bear interest at 10.75% and are due on December 20, 2023 and $875,000 bear interest at 11% and are due on December 20, 2024. The Company may redeem all or, part of the notes at a redemption price equal to 100% of the principal amount thereof plus the applicable premium, as defined in the notes agreement, and accrued and unpaid interest. For the year ended December 31, 2016, the Company recognized interest expense of $102,557 related to these notes payable. As of December 31, 2016, the accrued interest related to these notes of $102,557 is reflected in accrued interest in the Company's balance sheet.
Summary of Debt Maturities
Total amounts payable by the Company under its various debt obligations outstanding as of December 31, 2016, including notes payable, collateralized indebtedness (see Note 10), and capital leases, during the next five years and thereafter, are as follows:
Years Ending December 31, |
|
Cablevision |
|
Cequel |
|
Altice USA |
|
Total |
|
||||
2017 |
|
$ |
1,719,180 |
|
$ |
9,113 |
|
$ |
— |
|
$ |
1,728,293 |
|
2018 |
|
|
2,103,441 |
|
|
8,652 |
|
|
— |
|
|
2,112,093 |
|
2019 |
|
|
557,348 |
|
|
8,330 |
|
|
— |
|
|
565,678 |
|
2020 |
|
|
526,340 |
|
|
1,508,213 |
|
|
— |
|
|
2,034,553 |
|
2021 |
|
|
1,200,256 |
|
|
1,258,223 |
|
|
— |
|
|
2,458,479 |
|
Thereafter |
|
|
9,884,024 |
|
|
3,995,280 |
|
|
1,750,000 |
|
|
15,629,304 |
|
|
Asset Derivatives | Liability Derivatives | |||||||||||||||||
Derivatives Not Designated as Hedging Instruments | Balance Sheet Location | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | |||||||||||||
Prepaid forward contracts | Derivative contracts, current | $ | 54,578 | $ | 352 | $ | (54,578 | ) | $ | (13,158 | ) | |||||||
Prepaid forward contracts | Derivative contracts, long-term | — | 10,604 | (52,488 | ) | — | ||||||||||||
Put/Call options | Liabilities under derivative contracts, current | — | — | (48,326 | ) | — | ||||||||||||
Interest rate swap contracts | Liabilities under derivative contracts, long-term | — | — | (69,271 | ) | (78,823 | ) | |||||||||||
$ | 54,578 | $ | 10,956 | $ | (224,663 | ) | $ | (91,981 | ) |
Number of shares (a) | 21,477,618 | ||
Collateralized indebtedness settled | $ | (617,151 | ) |
Derivatives contracts settled | (37,838 | ) | |
(654,989 | ) | ||
Proceeds from new monetization contracts | 662,724 | ||
Net cash proceeds | $ | 7,735 |
(a) | Share amounts are adjusted for the 2 for 1 stock split in February 2017. |
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 statement 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 December 31, 2016, 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 and it diversifies its equity derivative contracts among various counterparties to mitigate exposure to any single financial institution. All of the counterparties to such transactions carry investment grade credit ratings as of December 31, 2016.
Interest Rate Swap Contracts
In June 2016, the Company entered into two new fixed to floating interest rate swap contracts. One fixed to floating interest rate swap is converting $750,000 from a fixed rate of 1.6655% to six-month LIBO rate and a second tranche of $750,000 from a fixed rate of 1.68% to six-month LIBO rate. The objective of these swaps is to cover the exposure of the 2026 Senior Secured Notes to changes in the market interest rate. These swap contracts were not designated as hedges for accounting purposes. Accordingly, the changes in the fair value of these interest rate swap contracts are recorded through the statement of operations.
The Company does not hold or issue 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:
|
|
|
|
Asset |
|
Liability |
|
||
Derivatives Not Designated as Hedging Instruments |
|
Balance Sheet Location |
|
Fair Value at |
|
Fair Value at |
|
||
Prepaid forward contracts |
|
Derivative contracts, current |
|
$ |
352 |
|
$ |
13,158 |
|
Prepaid forward contracts |
|
Derivative contracts, long-term |
|
|
10,604 |
|
|
— |
|
Interest rate swap contracts |
|
Liabilities under derivative contracts, long-term |
|
|
— |
|
|
78,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,956 |
|
$ |
91,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized and realized losses related to Company's equity derivative contracts related to the Comcast common stock for the year ended December 31, 2016 of $53,696, are reflected in loss on equity derivative contracts, net in the Company's consolidated statement of operations.
For the year ended December 31, 2016, the Company recorded a gain on investments of $141,538, representing the net increase in the fair values of all investment securities pledged as collateral.
For the year ended December 31, 2016, the Company recorded a net loss on interest rate swap contracts of $72,961.
Settlements of Collateralized Indebtedness
The following table summarizes the settlement of the Company's collateralized indebtedness relating to Comcast shares that were settled by delivering cash equal to the collateralized loan value, net of the value of the related equity derivative contracts.
Number of shares(a) |
|
|
5,337,750 |
|
|
|
|
|
|
|
|
|
|
|
Collateralized indebtedness settled |
|
$ |
(143,102 |
) |
Derivative contracts settled |
|
|
— |
|
|
|
|
|
|
|
|
|
(143,102 |
) |
Proceeds from new monetization contracts |
|
|
179,388 |
|
|
|
|
|
|
Net cash receipt |
|
$ |
36,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Share amounts were adjusted for the 2 for 1 stock split in February 2017. |
The cash was obtained from the proceeds of new monetization contracts covering an equivalent number of Comcast shares. The terms of the new contracts allow the Company to retain upside participation in Comcast shares up to each respective contract's upside appreciation limit with downside exposure limited to the respective hedge price.
In January 2017, the Company settled collateralized indebtedness relating to 5,337,750 Comcast shares (adjusted for the 2 for 1 stock split in February 2017) by delivering cash equal to the collateralized loan value obtained from the proceeds of a new monetization contract covering an equivalent number of Comcast shares. Accordingly, the consolidated balance sheet of the Company as of December 31, 2016 reflect the reclassification of $184,286 of investment securities pledged as collateral from a current asset to a long-term asset and $150,036 of collateralized indebtedness from a current liability to a long-term liability.
|
• | 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. |
Fair Value Hierarchy | September 30, 2017 | December 31, 2016 | |||||||
Assets: | |||||||||
Money market funds (of which $14,700 is classified as restricted cash as of December 31, 2016) | Level I | $ | 65,801 | $ | 100,139 | ||||
Investment securities pledged as collateral | Level I | 1,652,917 | 1,483,030 | ||||||
Prepaid forward contracts | Level II | 54,578 | 10,956 | ||||||
Liabilities: | |||||||||
Prepaid forward contracts | Level II | 107,066 | 13,158 | ||||||
Put/Call Options | Level II | 48,326 | — | ||||||
Interest rate swap contracts | Level II | 69,271 | 78,823 | ||||||
Contingent consideration related to 2017 acquisition | Level III | 30,000 | — |
September 30, 2017 | December 31, 2016 | ||||||||||||||||
Fair Value Hierarchy | Carrying Amount (a) | Estimated Fair Value | Carrying Amount (a) | Estimated Fair Value | |||||||||||||
Altice USA debt instruments: | |||||||||||||||||
Notes payable to affiliates and related parties | Level II | $ | — | $ | — | $ | 1,750,000 | $ | 1,837,876 | ||||||||
CSC Holdings debt instruments: | |||||||||||||||||
Credit facility debt | Level II | 4,123,792 | 4,167,500 | 2,631,887 | 2,675,256 | ||||||||||||
Collateralized indebtedness | Level II | 1,314,788 | 1,286,557 | 1,286,069 | 1,280,048 | ||||||||||||
Senior guaranteed notes | Level II | 2,290,748 | 2,460,675 | 2,289,494 | 2,416,375 | ||||||||||||
Senior notes and debentures | Level II | 6,412,789 | 7,421,261 | 6,732,816 | 7,731,150 | ||||||||||||
Notes payable | Level II | 76,442 | 72,802 | 13,726 | 13,260 | ||||||||||||
Cablevision senior notes: | Level II | 1,817,536 | 1,998,340 | 2,742,082 | 2,920,056 | ||||||||||||
Cequel debt instruments: | |||||||||||||||||
Cequel credit facility | Level II | 1,253,110 | 1,261,838 | 812,903 | 815,000 | ||||||||||||
Senior secured notes | Level II | 2,569,559 | 2,745,750 | 2,566,802 | 2,689,750 | ||||||||||||
Senior notes | Level II | 2,762,543 | 3,036,850 | 3,176,131 | 3,517,275 | ||||||||||||
Notes payable | Level II | 3,083 | 3,083 | — | — | ||||||||||||
$ | 22,624,390 | $ | 24,454,656 | $ | 24,001,910 | $ | 25,896,046 |
(a) | Amounts are net of unamortized deferred financing costs and discounts. |
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:
|
|
At December 31, 2016 (Successor) |
|
||||||||||
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
100,139 |
|
$ |
— |
|
$ |
— |
|
$ |
100,139 |
|
Investment securities pledged as collateral |
|
|
1,483,030 |
|
|
— |
|
|
— |
|
|
1,483,030 |
|
Prepaid forward contracts |
|
|
— |
|
|
10,956 |
|
|
— |
|
|
10,956 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid forward contracts |
|
|
— |
|
|
13,158 |
|
|
— |
|
|
13,158 |
|
Interest rate swap contracts |
|
|
|
|
|
78,823 |
|
|
|
|
|
78,823 |
|
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 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.
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 Secured Notes, Senior Guaranteed Notes, Notes Payable to Affiliates and Related Parties, 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:
|
|
|
|
December 31, 2016 |
|
||||
|
|
Fair Value |
|
Carrying |
|
Estimated |
|
||
Altice USA debt instruments: |
|
|
|
|
|
|
|
|
|
Notes payable to affiliates and related parties |
|
Level II |
|
$ |
1,750,000 |
|
$ |
1,837,876 |
|
CSC Holdings debt instruments: |
|
|
|
|
|
|
|
|
|
Credit facility debt |
|
Level II |
|
|
2,631,887 |
|
|
2,675,256 |
|
Collateralized indebtedness(b) |
|
Level II |
|
|
1,286,069 |
|
|
1,280,048 |
|
Senior guaranteed notes |
|
Level II |
|
|
2,289,494 |
|
|
2,416,375 |
|
Senior notes and debentures(c) |
|
Level II |
|
|
6,732,816 |
|
|
7,731,150 |
|
Notes payable |
|
Level II |
|
|
13,726 |
|
|
13,260 |
|
Cablevision senior notes(d) |
|
Level II |
|
|
2,742,082 |
|
|
2,920,056 |
|
Cequel debt instruments: |
|
|
|
|
|
|
|
|
|
Cequel credit facility |
|
Level II |
|
|
812,903 |
|
|
815,000 |
|
Senior Secured Notes |
|
Level II |
|
|
1,079,869 |
|
|
1,152,250 |
|
Senior Notes |
|
Level II |
|
|
4,663,064 |
|
|
5,054,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,001,910 |
|
$ |
25,896,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Amounts are net of unamortized deferred financing costs and discounts. |
|
(b) |
The total carrying value of the collateralized debt was reduced by $9,142 to reflect its fair value on the Cablevision Acquisition Date. |
|
(c) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $39,713 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
|
(d) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $13,075 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
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.
|
INCOME TAXES
The Company files a federal consolidated and certain state combined income tax returns with its 80% or more owned subsidiaries. In connection with the contribution of common stock of Cequel to the Company, Cequel joined the Company's federal consolidated group. Cablevision joined the Company's federal consolidated group on the Cablevision Acquisition Date.
Income tax benefit attributable to the Company's continuing operations for the year ended December 31, 2016 consist of the following components:
Current expense (benefit): |
|
|
|
|
Federal |
|
$ |
(981 |
) |
State |
|
|
5,310 |
|
|
|
|
|
|
|
|
|
4,329 |
|
|
|
|
|
|
Deferred benefit: |
|
|
|
|
Federal |
|
|
(223,159 |
) |
State |
|
|
(40,830 |
) |
|
|
|
|
|
|
|
|
(263,989 |
) |
|
|
|
|
|
Tax benefit relating to uncertain tax positions |
|
|
(6 |
) |
|
|
|
|
|
Income tax benefit |
|
$ |
(259,666 |
) |
|
|
|
|
|
|
|
|
|
|
The income tax benefit attributable to the Company's continuing operations differs from the amount derived by applying the statutory federal rate to pretax income principally due to the effect of the following items:
|
|
December 31, |
|
|
Federal tax benefit at statutory rate |
|
$ |
(381,901 |
) |
State income taxes, net of federal impact |
|
|
(39,336 |
) |
Changes in the valuation allowance |
|
|
297 |
|
Changes in the state rates used to measure deferred taxes, net of federal impact |
|
|
153,239 |
|
Tax benefit relating to uncertain tax positions |
|
|
(120 |
) |
Non-deductible share-based compensation related to the carried unit plan |
|
|
5,029 |
|
Non-deductible Cablevision Acquisition transaction costs |
|
|
4,457 |
|
Other non-deductible expenses |
|
|
1,551 |
|
Research credit |
|
|
(400 |
) |
Other, net |
|
|
(2,482 |
) |
|
|
|
|
|
Income tax benefit |
|
$ |
(259,666 |
) |
|
|
|
|
|
|
|
|
|
|
As described in Note 1, in June, 2016, (i) Cequel was contributed to Altice USA and (ii) Altice USA completed the Cablevision Acquisition. Accordingly, in the second quarter of 2016, Cequel and Cablevision joined the federal consolidated and certain state combined income tax returns of Altice USA. As a result, the applicate tax rate used to measure deferred tax assets and liabilities of Cequel increased, resulting in a non-cash deferred income tax charge of $153,660.
In the fourth quarter of 2016, ASU 2015-17 was adopted with prospective application. Accordingly, all deferred tax assets and liabilities are presented as noncurrent in the consolidated balance sheet as of December 31, 2016.
The tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance at December 31, 2016 are as follows.
|
|
December 31, |
|
|
NOLs and tax credit carry forwards |
|
$ |
971,728 |
|
Compensation and benefit plans |
|
|
93,939 |
|
Partnership investments |
|
|
113,473 |
|
Restructuring liability |
|
|
37,393 |
|
Other liabilities |
|
|
45,561 |
|
Liabilities under derivative contracts |
|
|
31,529 |
|
Interest deferred for tax purposes |
|
|
39,633 |
|
Other |
|
|
6,615 |
|
|
|
|
|
|
Deferred tax asset |
|
|
1,339,871 |
|
Valuation allowance |
|
|
(3,125 |
) |
|
|
|
|
|
Net deferred tax asset, noncurrent |
|
|
1,336,746 |
|
|
|
|
|
|
Fixed assets and intangibles |
|
|
(9,065,635 |
) |
Investments |
|
|
(187,795 |
) |
Prepaid expenses |
|
|
(10,172 |
) |
Fair value adjustment- debt and deferred finance costs |
|
|
(30,535 |
) |
Other |
|
|
(9,424 |
) |
|
|
|
|
|
Deferred tax liability, noncurrent |
|
|
(9,303,561 |
) |
|
|
|
|
|
Total net deferred tax liability |
|
$ |
(7,966,815 |
) |
|
|
|
|
|
|
|
|
|
|
The Cablevision Acquisition resulted in an ownership change under Internal Revenue Code ("IRC") Section 382 and certain state taxing authorities whereby Cablevision's federal net operating losses ("NOLs") immediately prior to the Cablevision Acquisition of $877,975 will be subject to certain limitations. The Cequel Acquisition resulted in a third ownership change with regard to Cequel NOLs. Utilization of Cequel NOLs of $1,709,263 are limited under IRC Section 382. The utilization of the NOLs will be determined based on the ordering rules required by the applicable taxing jurisdiction. Since the limitation amounts accumulate for future use to the extent they are not utilized in any given year, the Company believes its loss carryforwards should become fully available to offset future taxable income.
At December 31, 2016, the Company had consolidated federal NOLs of $3,078,119 expiring on various dates from 2019 through 2036. The Company has recorded a deferred tax asset related to $2,302,619 of such NOLs. A deferred tax asset has not been recorded for the remaining NOL of $775,500 as this portion relates to 'windfall' deductions on share-based awards that have not yet been realized. In connection with the adoption of ASU 2016-09 in the first quarter of 2017, the deferred tax asset for such windfall deductions will be recorded to accumulated deficit in the amount of approximately $309,000.
As of December 31, 2016, the Company has $43,215 of federal alternative minimum tax credit carry forwards which do not expire and $18,672 of research credits, expiring in varying amounts from 2023 through 2036.
Deferred tax assets have resulted primarily from the Company's future deductible temporary differences and NOLs. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. In evaluating the need for a valuation allowance, management takes into account various factors, including the expected level of future taxable income, available tax planning strategies and reversals of existing taxable temporary differences. If such estimates and related assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company's consolidated statements of income. Management evaluates the realizability of the deferred tax assets and the need for additional valuation allowances quarterly. Pursuant to the Cablevision Acquisition and Cequel Acquisition, deferred tax liabilities resulting from the book fair value adjustment increased significantly and future taxable income that will result from the reversal of existing taxable temporary differences for which deferred tax liabilities are recognized is sufficient to conclude it is more likely than not that the Company will realize all of its gross deferred tax assets, except those deferred tax assets against which a valuation allowance has been recorded which relate to certain state NOLs.
In the normal course of business, the Company engages in transactions in which the income tax consequences may be uncertain. The Company's income tax returns are filed based on interpretation of tax laws and regulations. Such income tax returns are subject to examination by taxing authorities. For financial statement purposes, the Company only recognizes tax positions that it believes are more likely than not of being sustained. There is considerable judgment involved in determining whether positions taken or expected to be taken on the tax return are more likely than not of being sustained.
A reconciliation of the beginning and ending amount of unrecognized tax benefits associated with uncertain tax positions, excluding associated deferred tax benefits and accrued interest, is as follows:
Balance at January 1, 2016 |
|
$ |
— |
|
Increase to tax position in connection with the Cablevision Acquisition |
|
|
4,031 |
|
Decreases related to prior year tax positions |
|
|
(6 |
) |
|
|
|
|
|
Balance at December 31, 2016 |
|
$ |
4,025 |
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016, if all uncertain tax positions were sustained at the amounts reported or expected to be reported in the Company's tax returns, the elimination of the Company's unrecognized tax benefits, net of the deferred tax impact, would decrease income tax expense by $5,185.
In the second quarter of 2016, the Company changed its accounting policy on a prospective basis to present interest expense relating to uncertain tax positions as additional interest expense. In the period ended December 31, 2016, $309 of interest expense relating to uncertain tax position was recorded to interest expense.
The most significant jurisdictions in which the Company is required to file income tax returns include the states of New York, New Jersey and Connecticut and the City of New York, Texas and West Virginia. The State of New York is presently auditing income tax returns for years 2009 through 2011.
Management does not believe that the resolution of the ongoing income tax examination described above will have a material adverse impact on the financial position of the Company. Changes in the liabilities for uncertain tax positions will be recognized in the interim period in which the positions are effectively settled or there is a change in factual circumstances.
|
BENEFIT PLANS
Qualified and Non-qualified Defined Benefit Plans
Retirement Plans (collectively, the "Defined Benefit Plans")
The Company sponsors a non-contributory qualified defined benefit cash balance retirement plan (the "Pension Plan") for the benefit of non-union employees of Cablevision, as well as certain employees covered by a collective bargaining agreement in Brooklyn.
The Company maintains an unfunded non-contributory non-qualified defined benefit excess cash balance plan ("Excess Cash Balance Plan") covering certain current and former employees of Cablevision who participate in the Pension Plan, as well as an additional unfunded non-contributory, non-qualified defined benefit plan ("CSC Supplemental Benefit Plan") for the benefit of certain former officers and employees of Cablevision which provided that, upon retiring on or after normal retirement age, a participant receives a benefit equal to a specified percentage of the participant's average compensation, as defined. All participants were 100% vested in the CSC Supplemental Benefit Plan. The benefits related to the CSC Supplemental Plan were paid to participants in January 2017 and the plan was terminated.
Cablevision's Pension Plan and the Excess Cash Balance Plan are frozen and no employee of Cablevision who was not already a participant could participate in the plans and no further annual Pay Credits (a certain percentage of employees' eligible pay) are made. Existing account balances under the plans continue to be credited with monthly interest in accordance with the terms of the plans.
Plan Results for Defined Benefit Plans
Summarized below is the funded status and the amounts recorded on the Company's consolidated balance sheets for all of the Company's Defined Benefit Plans at December 31, 2016:
Change in projected benefit obligation: |
|
|
|
|
Projected benefit obligation at beginning of year |
|
$ |
403,963 |
|
Service cost |
|
|
— |
|
Interest cost |
|
|
14,077 |
|
Actuarial gain |
|
|
(11,429 |
) |
Curtailments |
|
|
3,968 |
|
Benefits paid |
|
|
(28,062 |
) |
|
|
|
|
|
Projected benefit obligation at end of year |
|
|
382,517 |
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
Fair value of plan assets at beginning of year |
|
|
297,846 |
|
Actual return on plan assets, net |
|
|
5,829 |
|
Employer contributions |
|
|
8,505 |
|
Benefits paid |
|
|
(28,062 |
) |
|
|
|
|
|
Fair value of plan assets at end of year |
|
|
284,118 |
|
|
|
|
|
|
Unfunded status at end of year |
|
$ |
(98,399 |
) |
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation for the Company's Defined Benefit Plans aggregated $382,517 at December 31, 2016.
The Company's net funded status relating to its Defined Benefit Plans at December 31, 2016, is as follows:
Defined Benefit Plans |
|
$ |
(98,399 |
) |
Less: Current portion related to nonqualified plans |
|
|
14,293 |
|
|
|
|
|
|
Long-term defined benefit plan obligations |
|
$ |
(84,106 |
) |
|
|
|
|
|
|
|
|
|
|
Components of the net periodic benefit cost, recorded in other operating expenses, for the Defined Benefit Plans for the year ended December 31, 2016, is as follows:
Service cost |
|
$ |
— |
|
Interest cost |
|
|
6,946 |
|
Expected return on plan assets, net |
|
|
(4,022 |
) |
Curtailment loss |
|
|
231 |
|
Settlement income (reclassified from accumulated other comprehensive loss)(a) |
|
|
(154 |
) |
|
|
|
|
|
Net periodic benefit cost |
|
$ |
3,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
As a result of benefit payments to terminated or retired individuals exceeding the service and interest costs for the Pension Plan and the Excess Cash Balance Pension Plan during the period June 21, 2016 through December 31, 2016, the Company recognized a non-cash settlement loss that represented the acceleration of the recognition of a portion of the previously unrecognized actuarial losses recorded in accumulated other comprehensive loss on the Company's consolidated balance sheet relating to these plans. |
Plan Assumptions for Defined Benefit Plans
Weighted-average assumptions used to determine net periodic cost (made at the beginning of the year) and benefit obligations (made at the end of the year) for the Defined Benefit Plans are as follows:
|
|
Net Periodic |
|
Benefit Obligations |
|
||
|
|
June 21, 2016 to |
|
December 31, 2016 |
|
||
Discount rate(a) |
|
|
3.53 |
% |
|
3.81 |
% |
Rate of increase in future compensation levels |
|
|
— |
% |
|
— |
% |
Expected rate of return on plan assets (Pension Plan only) |
|
|
3.97 |
% |
|
N/A |
|
|
|
|
(a) |
The discount rate of 3.53% for the period June 21, 2016 through December 31, 2016, represents the average of the quarterly discount rates used to remeasure the Company's projected benefit obligation and net periodic benefit cost in connection with the recognition of settlement losses discussed above. |
The discount rate used by the Company in calculating the net periodic benefit cost for the Cash Balance Plan and the Excess Cash Balance Plan was determined based on the expected future benefit payments for the plans and from the Towers Watson U.S. Rate Link: 40-90 Discount Rate Model. The model was developed by examining the yields on selected highly rated corporate bonds.
The Company's expected long-term return on Pension Plan assets is based on a periodic review and modeling of the plan's asset allocation structure over a long-term horizon. Expectations of returns and risk for each asset class are the most important of the assumptions used in the review and modeling and are based on comprehensive reviews of historical data, forward looking economic outlook, and economic/financial market theory. The expected long-term rate of return was chosen as a best estimate and was determined by (a) historical real returns, net of inflation, for the asset classes covered by the investment policy, and (b) projections of inflation over the long-term period during which benefits are payable to plan participants.
Pension Plan Assets and Investment Policy
The weighted average asset allocations of the Pension Plan at December 31, 2016 is as follows:
|
|
Plan Assets |
|
|
Asset Class: |
|
|
|
|
Mutual funds |
|
|
43 |
% |
Fixed income securities |
|
|
55 |
|
Cash equivalents and other |
|
|
2 |
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
The Pension Plan's investment objectives reflect an overall low risk tolerance to stock market volatility. This strategy allows for the Pension Plan to invest in portfolios that would obtain a rate of return throughout economic cycles, commensurate with the investment risk and cash flow needs of the Pension Plan. The investments held in the Pension Plan are readily marketable and can be sold to fund benefit payment obligations of the plan as they become payable.
Investment allocation decisions are formally made by the Company's Benefit Committee, which takes into account investment advice provided by its external investment consultant. The investment consultant takes into account expected long-term risk, return, correlation, and other prudent investment assumptions when recommending asset classes and investment managers to the Company's Investment and Benefit Committee. The major categories of the Pension Plan assets are cash equivalents and bonds which are marked-to-market on a daily basis. Due to the Pension Plan's significant holdings in long-term government and non-government fixed income securities, the Pension Plan's assets are subjected to interest rate risk; specifically, a rising interest rate environment. Consequently, an increase in interest rates may cause a decrease to the overall liability of the Pension Plan thus creating a hedge against rising interest rates. In addition, a portion of the Pension Plan's bond portfolio is invested in foreign debt securities where there could be foreign currency risks associated with them, as well as in non-government securities which are subject to credit risk of the bond issuer defaulting on interest and/or principal payments.
Investments at Estimated Fair Value
The fair values of the assets of the Pension Plan at December 31, 2016 by asset class are as follows:
Asset Class |
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Mutual funds |
|
$ |
121,356 |
|
$ |
— |
|
$ |
— |
|
$ |
121,356 |
|
Fixed income securities held in a portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign issued corporate debt |
|
|
— |
|
|
13,583 |
|
|
— |
|
|
13,583 |
|
U.S. corporate debt |
|
|
— |
|
|
48,046 |
|
|
— |
|
|
48,046 |
|
Government debt |
|
|
— |
|
|
4,810 |
|
|
— |
|
|
4,810 |
|
U.S. Treasury securities |
|
|
— |
|
|
77,285 |
|
|
— |
|
|
77,285 |
|
Asset-backed securities |
|
|
— |
|
|
14,065 |
|
|
— |
|
|
14,065 |
|
Other |
|
|
— |
|
|
247 |
|
|
— |
|
|
247 |
|
Cash equivalents(a) |
|
|
2,593 |
|
|
3,089 |
|
|
— |
|
|
5,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(b) |
|
$ |
123,949 |
|
$ |
161,125 |
|
$ |
— |
|
$ |
285,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
A significant portion represents an investment in a short-term investment fund that invests primarily in securities of high quality and low risk. |
|
(b) |
Excludes cash and net payables relating to the purchase of securities that were not settled as of December 31, 2016. |
The fair values of mutual funds and cash equivalents were derived from quoted market prices that the Pension Plan administrator has the ability to access.
The fair values of corporate and government debt, treasury securities and asset-back securities were derived from bids received from a vendor or broker not available in an active market that the Pension Plan administrator has the ability to access.
Benefit Payments and Contributions for Defined Benefit Plans
The following benefit payments are expected to be paid:
2017 |
|
$ |
45,899 |
|
2018 |
|
|
28,812 |
|
2019 |
|
|
27,565 |
|
2020 |
|
|
28,399 |
|
2021 |
|
|
25,692 |
|
2022 - 2026 |
|
|
120,664 |
|
The Company currently expects to contribute approximately $12,700 to the Pension Plan in 2017.
Defined Contribution Plans
The Company maintains the Cablevision 401(k) Savings Plan, a contributory qualified defined contribution plan for the benefit of non-union employees of Cablevision. Participants can contribute a percentage of eligible annual compensation and the Company will make a matching cash contribution or discretionary contribution, as defined in the plan. In addition, the Company maintains an unfunded non-qualified excess savings plan for which the Company provides a matching contribution similar to the Cablevision 401(k) Savings Plan. Applicable employees of the Company are eligible for an enhanced employer matching contribution, as well as a year-end employer discretionary contribution to the Cablevision 401(k) Savings Plan and the Cablevision Excess Savings Plan.
The Company also maintains a 401(k) plan for employees of Cequel. Cequel employees that qualify for participation can contribute a percentage of eligible annual compensation and the Company will make a matching cash contribution, as defined in the plan.
The cost associated with these plans (including the enhanced employer matching and discretionary contributions) was $28,501 for the year ended December 31, 2016.
|
Number of Time Vesting Awards | Number of Performance Based Vesting Awards | Weighted Average Grant Date Fair Value | |||||||
Balance, December 31, 2016 | 192,800,000 | 10,000,000 | $ | 0.37 | |||||
Granted | 28,025,000 | — | 3.14 | ||||||
Forfeited | (4,229,166 | ) | — | 0.37 | |||||
Balance, September 30, 2017 | 216,595,834 | 10,000,000 | 0.71 | ||||||
Awards vested at September 30, 2017 | — | — |
EQUITY AND LONG-TERM INCENTIVE PLANS
Equity Plans
In July 2016, 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 awards generally will vest as follows: 50% on the second anniversary of June 21, 2016 for Cablevision employees or December 21, 2015 for Cequel employees ("Base Date"), 25% on the third anniversary of the Base Date, and 25% on the fourth anniversary of the Base Date. Neptune Holding US GP LLC, the general partner of Neptune Management LP, has the right to repurchase (or to assign to an affiliate, including the Company, the right to repurchase) vested awards held by employees for sixty days following their termination. For the performance-based awards, vesting occurs upon achievement or satisfaction of a specified performance condition. The Company considered the probability of achieving the established performance targets in determining the equity-based compensation with respect to these awards at the end of each reporting period. The carried unit plan has 259,442,785 units authorized for issuance, of which 147,700,000 have been issued to employees of the Company and 55,100,000 have been issued to employees of Altice N.V. and affiliated companies.
The Company measures the cost of employee services received in exchange for carry units based on the fair value of the award at grant date. An option pricing model was used which requires subjective assumptions for which changes in these assumptions could materially affect the fair value of the carry units outstanding. The time to liquidity event assumption was based on management's judgment. The equity volatility assumption of 60% was estimated using the historical weekly volatility of publicly traded comparable companies. The risk-free rate of 0.74% assumed in valuing the units was based on the U.S. Constant Maturity Treasury Rates for a period matching the expected time to liquidity event. The discount for lack of marketability of 20% was based on Finnerty's (2012) average-strike put option model. The weighted average grant date fair value of the outstanding units is $0.37 per unit and the fair value was $1.76 per unit as of December 31, 2016. For the year ended December 31, 2016, the Company recognized an expense of $14,368 related to the push down of share-based compensation related to the carry unit plan of which approximately $9,849 related to units granted to employees of the Company and $4,519 related to employees of Altice N.V. and affiliated companies allocated to the Company.
Beginning on the fourth anniversary of the Base Date, the holders of carry units have an annual opportunity (a sixty day period determined by the administrator of the plan) to sell their units back to Neptune Holding US GP LLC (or affiliate, including the Company, designated by Neptune Holding US GP). Accordingly, the carried units are presented as temporary equity on the consolidated balance sheet at fair value. Adjustments to fair value at each reporting period are recorded in paid in capital.
The right of Neptune Holding US GP LLC to assign to an affiliate, including the Company, the right to repurchase an employee's vested units during the sixty-day period following termination, or to satisfy its obligation to repurchase an employee's vested units during annual sixty-day periods following the fourth anniversary of the Base Date, may be exercised by Neptune Holding US GP LLC in its discretion at the time a repurchase right or obligation arises. The carry unit plan requires the purchase price payable to the employee or former employee, as the case may be, to be paid in cash, a promissory note (with a term of not more than 3 years and bearing interest at the long-term applicable federal rate under Section 1274(d) of the Internal Revenue Code) or combination thereof, in each case as determined by Neptune Holding US GP LLC in its discretion at the time of the repurchase. Neptune Holding US GP LLC expects that vested units will be redeemed for shares of Class A common stock upon vesting.
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | $ | 986 | $ | 720 | $ | 1,380 | $ | 720 | |||||||
Operating expenses: | |||||||||||||||
Programming and other direct costs | $ | (1,196 | ) | $ | (642 | ) | $ | (3,026 | ) | $ | (642 | ) | |||
Other operating expenses, net | (28,332 | ) | (8,056 | ) | (73,263 | ) | (13,056 | ) | |||||||
Operating expenses, net | (29,528 | ) | (8,698 | ) | (76,289 | ) | (13,698 | ) | |||||||
Interest expense (a) | — | (48,617 | ) | (90,405 | ) | (53,922 | ) | ||||||||
Loss on extinguishment of debt and write-off of deferred financing costs | — | — | (513,723 | ) | — | ||||||||||
Net charges | $ | (28,542 | ) | $ | (56,595 | ) | $ | (679,037 | ) | $ | (66,900 | ) | |||
Capital Expenditures | $ | 72,185 | $ | — | $ | 98,234 | $ | — |
(a) | See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $90,405 for the nine months ended September 30, 2017. |
September 30, 2017 | December 31, 2016 | ||||||
Due from: | |||||||
Altice US Finance S.A. (a) | $ | 12,951 | $ | 12,951 | |||
Newsday (b) | 4,177 | 6,114 | |||||
Altice Management Americas (b) | 615 | 3,117 | |||||
i24NEWS (b) | 3,373 | — | |||||
Other Altice N.V. subsidiaries (b) | 37 | — | |||||
$ | 21,153 | $ | 22,182 | ||||
Due to: | |||||||
CVC 3BV (c) | — | 71,655 | |||||
Neptune Holdings US LP (c) | — | 7,962 | |||||
Altice Management International (d) | — | 44,121 | |||||
ATS (b)(e) | 22,541 | — | |||||
Newsday (b) | 103 | 275 | |||||
Other Altice N.V. subsidiaries (f) | 6,358 | 3,350 | |||||
$ | 29,002 | $ | 127,363 |
(a) | Represents interest on senior notes paid by the Company on behalf of the affiliate. |
(b) | Represents amounts paid by the Company on behalf of the respective related party and for Newsday and ATS, the net amounts due from the related party also include charges for certain transition services provided. |
(c) | Represents distributions payable to stockholders. |
(d) | Amounts payable as of December 31, 2016 primarily represent amounts due for equipment purchases and software development services discussed above. |
(e) | Represents amounts due to ATS for construction, maintenance, and installation services, net of charges to ATS pursuant to the TSA. See discussion above. |
(f) | Represents amounts due to affiliates for services provided to the Company. |
AFFILIATE AND RELATED PARTY TRANSACTIONS
Equity Method Investments
In July 2016, the Company completed the sale of a 75% interest in Newsday LLC to an employee of the Company. The Company retained the remaining 25% ownership interest. Effective July 7, 2016, the operating results of Newsday are no longer consolidated with those of the Company and the Company's 25% interest in the operating results of Newsday is recorded on the equity basis.
At December 31, 2016, the Company's investment in Newsday was $3,640 and is included in investments in affiliates on our consolidated balance sheet. For the period July 8, 2016 to December 31, 2016, the Company recorded equity in net loss of Newsday of $1,132.
In December 2016, the Company made an investment of $1,966 in I24NEWS, Altice N.V.'s 24/7 international news and current affairs channel, representing a 25% ownership interest, which is included in investments in affiliates on our consolidated balance sheet at December 31, 2016. The 75% interest is owned by a subsidiary of Altice N.V. The operating results of I24NEWS will be recorded on an equity basis upon commencement of operations in 2017.
Affiliate and Related Party Transactions
As the transactions discussed below were conducted between subsidiaries under common control, amounts charged for certain services may not have represented amounts that might have been received or incurred if the transactions were based upon arm's length negotiations.
The following table summarizes the revenue and charges related to services provided to or received from subsidiaries of Altice N.V. and Newsday for the year ended December 31, 2016:
Revenue |
|
$ |
1,086 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Programming and other direct costs |
|
$ |
(1,947 |
) |
Other operating expenses |
|
|
(18,854 |
) |
|
|
|
|
|
Operating expenses, net |
|
|
(20,801 |
) |
|
|
|
|
|
Interest expense(a) |
|
|
(112,712 |
) |
|
|
|
|
|
Net charges |
|
$ |
(132,427 |
) |
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
45,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $102,557, as well as for interest expense of $10,155 related to the Holdco Notes prior to the exchange. |
Revenue
The Company recognized revenue in connection with sale of advertising to Newsday.
Programming and other direct costs
Programming and other direct costs includes costs incurred by the Company for the transport and termination of voice and data services provided by a subsidiary of Altice N.V.
Other operating expenses
A subsidiary of Altice N.V. provides certain executive services, including CEO, CFO and COO services, to the Company. Compensation under the terms of the agreement is an annual fee of $30,000 to be paid by the Company. Fees associated with this agreement recorded by the Company amounted to approximately $20,556 for the year ended December 31, 2016.
Other operating expenses includes advertising purchased from Newsday of $705 and IT consulting services of $182 provided by an Altice N.V. subsidiary, partially offset by a credit of $2,589 for transition services provided to Newsday.
Capital expenditures
The Company purchased equipment of $44,121 from Altice Management International and $1,025 from another Altice N.V. subsidiary. In addition, the Company acquired certain software development services that were capitalized from Altice Labs S.A. aggregating $740.
Aggregate amounts that were due from and due to related parties at December 31, 2016 is summarized below:
Due from: |
|
|
|
|
Altice US Finance S.A.(a) |
|
$ |
12,951 |
|
Newsday(b) |
|
|
6,114 |
|
Altice Management Americas(b) |
|
|
3,117 |
|
|
|
|
|
|
|
|
$ |
22,182 |
|
|
|
|
|
|
|
|
|
|
|
Due to: |
|
|
|
|
CVC 3BV(c) |
|
|
71,655 |
|
Neptune Holdings US LP(c) |
|
|
7,962 |
|
Altice Management International(d) |
|
|
44,121 |
|
Newsday(b) |
|
|
275 |
|
Other Altice subsidiaries(b) |
|
|
3,350 |
|
|
|
|
|
|
|
|
$ |
127,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Represents interest on senior notes paid by the Company on behalf of the affiliate. |
|
(b) |
Represents amounts paid by the Company on behalf of the respective related party and/or the net amounts due from the related party for services provided. |
|
(c) |
Represents distributions payable to shareholders. |
|
(d) |
Represents amounts due for equipment purchases and software development services discussed above. |
The table above does not include notes payable to affiliates and related parties of $1,750,000 and the related accrued interest of $102,557 as December 31, 2016 which is reflected in accrued interest in the Company's balance sheet. See discussion in Note 9.
|
COMMITMENTS AND CONTINGENCIES
Commitments
Future cash payments and commitments required under arrangements pursuant to contracts entered into by the Company in the normal course of business as of December 31, 2016 are as follows:
|
|
Payments Due by Period |
|
|||||||||||||
|
|
Total |
|
Year 1 |
|
Years 2 - 3 |
|
Years 4 - 5 |
|
More than |
|
|||||
Off balance sheet arrangements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase obligations(a) |
|
$ |
7,136,605 |
|
$ |
2,396,634 |
|
$ |
3,307,915 |
|
$ |
1,394,318 |
|
$ |
37,738 |
|
Guarantees(b) |
|
|
19,793 |
|
|
3,909 |
|
|
15,884 |
|
|
— |
|
|
— |
|
Letters of credit(c) |
|
|
114,251 |
|
|
220 |
|
|
14,297 |
|
|
99,734 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
7,270,649 |
|
$ |
2,400,763 |
|
$ |
3,338,096 |
|
$ |
1,494,052 |
|
$ |
37,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Purchase obligations primarily include contractual commitments with various programming vendors to provide video services to customers and minimum purchase obligations to purchase goods or services. Future fees payable under contracts with programming vendors are based on numerous factors, including the number of subscribers receiving the programming. Amounts reflected above related to programming agreements are based on the number of subscribers receiving the programming as of December 2016 multiplied by the per subscriber rates or the stated annual fee, as applicable, contained in the executed agreements in effect as of December 31, 2016. |
|
(b) |
Includes franchise and performance surety bonds primarily for the Company's cable television systems. |
|
(c) |
Represent letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Payments due by period for these arrangements represent the year in which the commitment expires although payments under these arrangements are required only in the event of nonperformance. |
The table above does not include obligations for payments required to be made under multi-year franchise agreements based on a percentage of revenues generated from video service per year.
Many of the Company's franchise agreements and utility pole leases require the Company to remove its cable wires and other equipment upon termination of the respective agreements. The Company has concluded that the fair value of these asset retirement obligations cannot be reasonably estimated since the range of potential settlement dates is not determinable.
Legal Matters
Cable Operations Litigation
Marchese, et al. v. Cablevision Systems Corporation and CSC Holdings, LLC:
The Company is a defendant in a lawsuit filed in the U.S. District Court for the District of New Jersey by several present and former Cablevision subscribers, purportedly on behalf of a class of iO video subscribers in New Jersey, Connecticut and New York. After three versions of the complaint were dismissed without prejudice by the District Court, plaintiffs filed their third amended complaint on August 22, 2011, alleging that the Company violated Section 1 of the Sherman Antitrust Act by allegedly tying the sale of interactive services offered as part of iO television packages to the rental and use of set-top boxes distributed by Cablevision, and violated Section 2 of the Sherman Antitrust Act by allegedly seeking to monopolize the distribution of Cablevision compatible set-top boxes. Plaintiffs seek unspecified treble monetary damages, attorney's fees, as well as injunctive and declaratory relief. On September 23, 2011, the Company filed a motion to dismiss the third amended complaint. On January 10, 2012, the District Court issued a decision dismissing with prejudice the Section 2 monopolization claim, but allowing the Section 1 tying claim and related state common law claims to proceed. Cablevision's answer to the third amended complaint was filed on February 13, 2012. On December 7, 2015, the parties entered into a settlement agreement, which is subject to approval by the Court. On December 11, 2015, plaintiffs filed a motion for preliminary approval of the settlement, conditional certification of the settlement class, and approval of a class notice distribution plan. On March 10, 2016 the Court granted preliminary approval of the settlement and approved the class notice distribution plan. Class notice distribution and the claims submission process have now concluded. The Court granted final approval of the settlement on September 12, 2016, and the effective date of the settlement was October 24, 2016. The Company recorded an expense of $15,600 in connection with settlement. As of December 31, 2016, the Company has an estimated liability associated with the settlement of $6,100 representing the cost of benefits to class members that are reasonably expected to be provided and has paid out $9,500 in attorneys' fees.
In re Cablevision Consumer Litigation:
Following expiration of the affiliation agreements for carriage of certain Fox broadcast stations and cable networks on October 16, 2010, News Corporation terminated delivery of the programming feeds to the Company, and as a result, those stations and networks were unavailable on the Company's cable television systems. On October 30, 2010, the Company and Fox reached an agreement on new affiliation agreements for these stations and networks, and carriage was restored. Several purported class action lawsuits were subsequently filed on behalf of the Company's customers seeking recovery for the lack of Fox programming. Those lawsuits were consolidated in an action before the U. S. District Court for the Eastern District of New York, and a consolidated complaint was filed in that court on February 22, 2011. Plaintiffs asserted claims for breach of contract, unjust enrichment, and consumer fraud, seeking unspecified compensatory damages, punitive damages and attorneys' fees. On March 28, 2012, the Court ruled on the Company's motion to dismiss, denying the motion with regard to plaintiffs' breach of contract claim, but granting it with regard to the remaining claims, which were dismissed. On April 16, 2012, plaintiffs filed a second consolidated amended complaint, which asserts a claim only for breach of contract. The Company's answer was filed on May 2, 2012. On October 10, 2012, plaintiffs filed a motion for class certification and on December 13, 2012, a motion for partial summary judgment. On March 31, 2014, the Court granted plaintiffs' motion for class certification, and denied without prejudice plaintiffs' motion for summary judgment. On May 30, 2014, the Court approved the form of class notice, and on October 7, 2014, approved the class notice distribution plan. The class notice distribution has been completed, and the opt-out period expired on February 27, 2015. Expert discovery commenced on May 5, 2014, and concluded on December 8 and 28, 2015, when the Court ruled on the pending expert discovery motions. On January 26, 2016, the Court approved a schedule for filing of summary judgment motions. Plaintiffs filed a motion for summary judgment on March 31, 2016. The Company filed its own summary judgment motion on June 13, 2016. The parties are actively engaged in settlement discussions although financial terms have not yet been finalized. The motions for summary judgment have been denied with leave to re-file in the event the discussions between the parties are not successful. In the period ended June 21, 2016 to December 31, 2016, the Company recorded an estimated liability associated with a potential settlement totaling $5,200. The amount ultimately paid in connection with a possible settlement could exceed the amount recorded.
Patent Litigation
Cablevision is named as a defendant in certain lawsuits claiming infringement of various patents relating to various aspects of the Company's businesses. In certain of these cases other industry participants are also defendants. In certain of these cases the Company expects that any potential liability would be the responsibility of the Company's equipment vendors pursuant to applicable contractual indemnification provisions. The Company believes that the claims are without merit and intends to defend the actions vigorously, but is unable to predict the outcome of these lawsuits or reasonably estimate a range of possible loss.
In addition to the matters discussed above, the Company is party to various lawsuits, some involving claims for substantial damages. Although the outcome of these other matters cannot be predicted and the impact of the final resolution of these other matters on the Company's results of operations in a particular subsequent reporting period is not known, management does not believe that the resolution of these other lawsuits will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due.
|
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Activity related to the allowance for doubtful accounts for the year ended December 31, 2016:
|
|
Balance at |
|
Provision for |
|
Deductions/ |
|
Balance |
|
||||
Allowance for doubtful accounts |
|
$ |
1,051 |
|
$ |
53,249 |
|
$ |
(42,623 |
) |
$ |
11,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||||||||||||
Cablevision | Cequel | Total | Cablevision (a) | Cequel | Total | ||||||||||||||||||
Operating income (loss) | $ | 11,185 | $ | 123,679 | $ | 134,864 | $ | 39,947 | $ | 102,832 | $ | 142,779 | |||||||||||
Share-based compensation | 11,555 | 3,450 | 15,005 | 1,091 | 579 | 1,670 | |||||||||||||||||
Restructuring and other expense | 35,364 | 18,084 | 53,448 | 45,176 | 2,640 | 47,816 | |||||||||||||||||
Depreciation and amortization (including impairments) | 656,102 | 167,163 | 823,265 | 481,497 | 189,432 | 670,929 | |||||||||||||||||
Adjusted EBITDA | $ | 714,206 | $ | 312,376 | $ | 1,026,582 | $ | 567,711 | $ | 295,483 | $ | 863,194 |
Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | ||||||||||||||||||||||
Cablevision | Cequel | Total | Cablevision (a) | Cequel | Total | ||||||||||||||||||
Operating income (loss) | $ | 244,667 | $ | 395,213 | $ | 639,880 | $ | (32,133 | ) | $ | 274,575 | $ | 242,442 | ||||||||||
Share-based compensation | 28,597 | 12,335 | 40,932 | 1,091 | 579 | 1,670 | |||||||||||||||||
Restructuring and other expense | 105,182 | 37,583 | 142,765 | 143,891 | 11,195 | 155,086 | |||||||||||||||||
Depreciation and amortization (including impairments) | 1,641,477 | 497,299 | 2,138,776 | 526,057 | 559,872 | 1,085,929 | |||||||||||||||||
Adjusted EBITDA | $ | 2,019,923 | $ | 942,430 | $ | 2,962,353 | $ | 638,906 | $ | 846,221 | $ | 1,485,127 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating income for reportable segments | $ | 134,864 | $ | 142,779 | $ | 639,880 | $ | 242,442 | |||||||
Items excluded from operating income: | |||||||||||||||
Interest expense | (379,064 | ) | (446,242 | ) | (1,232,730 | ) | (1,015,866 | ) | |||||||
Interest income | 961 | 404 | 1,373 | 12,787 | |||||||||||
Gain (loss) on investments, net | (18,900 | ) | 24,833 | 169,888 | 83,467 | ||||||||||
Gain (loss) on derivative contracts, net | (16,763 | ) | 773 | (154,270 | ) | (26,572 | ) | ||||||||
Gain (loss) on interest rate swap contracts | 1,051 | (15,861 | ) | 12,539 | 24,380 | ||||||||||
Loss on extinguishment of debt and write-off of deferred financing costs | (38,858 | ) | — | (600,240 | ) | (19,948 | ) | ||||||||
Other income (expense), net | (65 | ) | 2,531 | 832 | 2,548 | ||||||||||
Loss before income taxes | $ | (316,774 | ) | $ | (290,783 | ) | $ | (1,162,728 | ) | $ | (696,762 | ) |
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||||||||||||||||
Cablevision | Cequel | Eliminations | Total | Cablevision (a) | Cequel | Total | |||||||||||||||||||||
Residential: | |||||||||||||||||||||||||||
Pay TV | $ | 782,214 | $ | 272,178 | $ | — | $ | 1,054,392 | $ | 772,886 | $ | 279,109 | $ | 1,051,995 | |||||||||||||
Broadband | 404,153 | 241,941 | — | 646,094 | 366,166 | 212,439 | 578,605 | ||||||||||||||||||||
Telephony | 172,904 | 31,849 | — | 204,753 | 178,000 | 38,186 | 216,186 | ||||||||||||||||||||
Business services and wholesale | 230,274 | 94,486 | — | 324,760 | 220,352 | 89,014 | 309,366 | ||||||||||||||||||||
Advertising | 67,563 | 17,456 | (480 | ) | 84,539 | 67,815 | 20,944 | 88,759 | |||||||||||||||||||
Other | 7,211 | 5,426 | — | 12,637 | 9,480 | 5,830 | 15,310 | ||||||||||||||||||||
Total Revenue | $ | 1,664,319 | $ | 663,336 | $ | (480 | ) | $ | 2,327,175 | $ | 1,614,699 | $ | 645,522 | $ | 2,260,221 |
Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | ||||||||||||||||||||||||||
Cablevision (a) | Cequel | Eliminations | Total | Cablevision (a) | Cequel | Total | |||||||||||||||||||||
Residential: | |||||||||||||||||||||||||||
Pay TV | $ | 2,356,230 | $ | 829,380 | $ | — | $ | 3,185,610 | $ | 859,932 | $ | 840,354 | $ | 1,700,286 | |||||||||||||
Broadband | 1,177,731 | 709,548 | — | 1,887,279 | 406,057 | 613,012 | 1,019,069 | ||||||||||||||||||||
Telephony | 524,696 | 99,381 | — | 624,077 | 198,282 | 116,855 | 315,137 | ||||||||||||||||||||
Business services and wholesale | 690,168 | 278,123 | — | 968,291 | 244,685 | 260,278 | 504,963 | ||||||||||||||||||||
Advertising | 203,351 | 54,384 | (480 | ) | 257,255 | 75,458 | 63,476 | 138,934 | |||||||||||||||||||
Other | 21,366 | 17,314 | — | 38,680 | 14,145 | 18,777 | 32,922 | ||||||||||||||||||||
Total Revenue | $ | 4,973,542 | $ | 1,988,130 | $ | (480 | ) | $ | 6,961,192 | $ | 1,798,559 | $ | 1,912,752 | $ | 3,711,311 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Cablevision | $ | 228,594 | $ | 150,815 | $ | 550,231 | $ | 150,965 | |||||||
Cequel | 75,042 | 97,341 | 213,067 | 226,761 | |||||||||||
$ | 303,636 | $ | 248,156 | $ | 763,298 | $ | 377,726 |
SEGMENT INFORMATION
The Company classifies its operations into two reportable segments: Cablevision and Cequel. The Company's reportable segments are strategic business units that are managed separately. The Company evaluates segment performance based on several factors, of which the primary financial measure is business segment Adjusted EBITDA, a non-GAAP measure. The Company defines Adjusted EBITDA as net income (loss) excluding income taxes, income (loss) from discontinued operations, non-operating other income or expenses, loss on extinguishment of debt and write-off of deferred financing costs, gain (loss) on equity derivative contracts, gain (loss) on investments, interest expense (including cash interest expense), interest income, depreciation and amortization (including impairments), share-based compensation expense or benefit, restructuring expense or credits and transaction expenses. The Company has presented the components that reconcile Adjusted EBITDA to operating income, an accepted GAAP measure for the year ended December 31, 2016.
|
|
Cablevision |
|
Cequel |
|
Total |
|
|||
Operating income |
|
$ |
74,865 |
|
$ |
384,801 |
|
$ |
459,666 |
|
Share-based compensation |
|
|
9,164 |
|
|
5,204 |
|
|
14,368 |
|
Restructuring and other expense |
|
|
212,150 |
|
|
28,245 |
|
|
240,395 |
|
Depreciation and amortization (including impairments) |
|
|
963,665 |
|
|
736,641 |
|
|
1,700,306 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
1,259,844 |
|
$ |
1,154,891 |
|
$ |
2,414,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of reportable segment amounts to the Company's consolidated balances for the year ended December 31, 2016 is as follows:
Operating income for reportable segments |
|
$ |
459,666 |
|
Items excluded from operating income: |
|
|
|
|
Interest expense |
|
|
(1,456,541 |
) |
Interest income |
|
|
13,811 |
|
Gain on investments, net |
|
|
141,896 |
|
Loss on equity derivative contracts, net |
|
|
(53,696 |
) |
Loss on interest rate swap contracts |
|
|
(72,961 |
) |
Loss on extinguishment of debt and write-off of deferred financing costs |
|
|
(127,649 |
) |
Other income, net |
|
|
4,329 |
|
|
|
|
|
|
Loss before income taxes |
|
$ |
(1,091,145 |
) |
|
|
|
|
|
|
|
|
|
|
The following table presents the composition of revenue by segment for the year ended December 31, 2016:
|
|
Cablevision |
|
Cequel |
|
Total |
|
|||
Revenue: |
|
|
|
|
|
|
|
|
|
|
Residential: |
|
|
|
|
|
|
|
|
|
|
Video |
|
$ |
1,638,691 |
|
$ |
1,120,525 |
|
$ |
2,759,216 |
|
High-speed data |
|
|
782,615 |
|
|
834,414 |
|
|
1,617,029 |
|
Voice |
|
|
376,034 |
|
|
153,939 |
|
|
529,973 |
|
Business Services |
|
|
468,632 |
|
|
350,909 |
|
|
819,541 |
|
Advertising |
|
|
157,331 |
|
|
88,371 |
|
|
245,702 |
|
Other |
|
|
20,749 |
|
|
25,002 |
|
|
45,751 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
$ |
3,444,052 |
|
$ |
2,573,160 |
|
$ |
6,017,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for the year ended December 31, 2016 by reportable segment are presented below:
Cablevision |
|
$ |
298,357 |
|
Cequel |
|
|
327,184 |
|
|
|
|
|
|
|
|
$ |
625,541 |
|
|
|
|
|
|
|
|
|
|
|
All revenues and assets of the Company's reportable segments are attributed to or located in the United States.
Total assets by segment are not provided as such amounts are not regularly reviewed by the chief operating decision maker for purposes of decision making regarding resource allocations.
|
UNAUDITED PRO FORMA NET LOSS PER SHARE
The pro forma net loss per share data for the year ended December 31, 2016 is based on our historical statement of operations after giving effect to the issuance and sale of the shares of common stock in connection with the Company's initial offering of equity securities to the public ("IPO"), as well as the common stock to be issued in the organizational transactions discussed below, as if they occurred at the beginning of the period.
|
|
Year Ended |
|
|
|
|
Basic and Diluted |
|
|
|
|
(Unaudited) |
|
|
Numerator: |
|
|
|
|
Net loss attributable to Altice USA, Inc. stockholders |
|
$ |
(832,030 |
) |
Denominator: |
|
|
|
|
Weighted average shares of common stock outstanding—basic and diluted (in thousands) |
|
|
0.1 |
|
Pro forma adjustment to reflect the issuance of common stock (in thousands) |
|
|
737,069 |
|
Weighted average shares of common stock outstanding used in computing the pro forma net income per share—basic and diluted (in thousands) |
|
|
737,069 |
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss per share—basic and diluted |
|
$ |
(1.13 |
) |
|
|
|
|
|
|
|
|
|
|
The following organizational transactions will be consummated in connection with the Company's IPO:
|
|
|
|
• |
the Company will amend and restate its certificate of incorporation to, among other things, provide for Class A common stock, Class B common stock and Class C common stock; |
|
• |
the Co-Investors and an entity controlled by Mr. Drahi will exchange their indirect ownership interest in the Company for shares of the Company's common stock; |
|
• |
Neptune Management LP ("Management LP") will redeem its Class B units for shares of the Company's common stock that it receives from the redemption of its Class B units in Neptune Holding US LP; |
|
• |
the Company will convert $525,000 aggregate principal amount of notes issued by the Company to the Co-Investors (together with accrued and unpaid interest and applicable premium) into shares of the Company's common stock at the initial public offering price; |
|
• |
$1,225 million aggregate principal amount of notes issued by the Company to a subsidiary of Altice N.V. (together with accrued and unpaid interest and applicable premium) will be transferred to CVC 3 and then the Company will convert such notes into shares of the Company's common stock at the initial public offering price; |
|
• |
the Co-Investors, Neptune Holding US LP, an entity controlled by the family of Mr. Drahi and former Class B unitholders of Management LP (including an entity controlled by Mr. Drahi) will exchange shares of the Company's common stock for new shares of the Company's Class A common stock; and |
|
• |
CVC 3 B.V., an indirect subsidiary of Altice N.V., and an entity controlled by the family of Mr. Drahi will exchange shares of the Company's common stock for new shares of the Company's Class B common stock. |
|
SUBSEQUENT EVENT
On October 31, 2017, CSC Holdings made a voluntary repayment under its revolving credit facility of $500,000.
SUBSEQUENT EVENTS
In January 2017, CSC Holdings borrowed $225,000 under its revolving credit facility and in February 2017, made a repayment of $175,000 with cash on hand.
On March 15, 2017, CSC Holdings priced $3,000,000 of 8.25-year senior secured term loans with institutional investors. The new senior secured term loans will bear interest at 2.25% over LIBO rate. The closing of the new financing is subject to closing conditions and the proceeds will be used to refinance the entire $2,500,000 principal amount of loans under CSC Holdings Term Credit Facility that matures in October 2024 and redeem $500,000 of the 8.625% Senior Notes due September 2017 issued by Cablevision.
On March 15, 2017, Altice US Finance I Corporation priced $1,265,000 of 8.25-year senior secured term loans with institutional investors. The new senior secured term loans will bear interest at 2.25% over LIBO rate. The closing of the new financing is subject to closing conditions and the proceeds will be used to refinance the $815,000 principal amount of loans under the term loan facility that matures in January 2025 and redeem $450,000 of the 2020 Notes.
In April 2017, the Company made a cash distribution of $169,950 to the Company's stockholders.
|
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("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 revenues and expenses during the reporting period. Actual results could differ from those estimates. See Note 11 for a discussion of fair value estimates.
Revenue Recognition
The Company recognizes video, high-speed data, and voice services revenues as the services are provided to customers. Revenue received from customers who purchase bundled services at a discounted rate is allocated to each product in a pro-rata manner based on the individual product's selling price (generally, the price at which the product is regularly sold on a standalone basis). Installation revenue for the Company's video, consumer high-speed data and VoIP services is recognized as installations are completed, as direct selling costs have exceeded this revenue in all periods reported. Advertising revenues are recognized when commercials are aired.
Revenues derived from other sources are recognized when services are provided or events occur.
Multiple-Element Transactions
In the normal course of business, the Company may enter into multiple-element transactions where it is simultaneously both a customer and a vendor with the same counterparty or in which it purchases multiple products and/or services, or settles outstanding items contemporaneous with the purchase of a product or service from a single counterparty. The Company's policy for accounting for each transaction negotiated contemporaneously is to record each deliverable of the transaction based on its best estimate of selling price in a manner consistent with that used to determine the price to sell each deliverable on a standalone basis. In determining the fair value of the respective deliverable, the Company will utilize quoted market prices (as available), historical transactions or comparable transactions.
Gross Versus Net Revenue Recognition
In the normal course of business, 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. The Company's policy is that, in instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities and amounts received from the customers are recorded on a gross basis. That is, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customer are recorded as revenue. For the year ended December 31, 2016, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $154,732.
Technical and Operating Expenses
Costs of revenue related to sales of services are classified as "programming and other direct costs" in the accompanying consolidated statement of operations.
Programming Costs
Programming expenses related to the Company's video service represent fees paid to programming distributors to license the programming distributed to subscribers. This programming is acquired generally under multi-year distribution agreements, with rates usually based on the number of subscribers that receive the programming. If there are periods when an existing distribution agreement has expired and the parties have not finalized negotiations of either a renewal of that agreement or a new agreement for certain periods of time, the Company continues to carry and pay for these services until execution of definitive replacement agreements or renewals. The amount of programming expense recorded during the interim period is based on the Company's estimates of the ultimate contractual agreement expected to be reached, which is based on several factors, including previous contractual rates, customary rate increases and the current status of negotiations. Such estimates are adjusted as negotiations progress until new programming terms are finalized.
In addition, the Company has received, or may receive, incentives from programming distributors for carriage of the distributors' programming. The Company generally recognizes these incentives as a reduction of programming costs in "programming and other direct costs", generally over the term of the distribution agreement.
Advertising Expenses
Advertising costs are charged to expense when incurred and are reflected in "other operating expenses" in the accompanying consolidated statement of operations. Advertising costs amounted to $135,513 for the year ended December 31, 2016.
Share-Based Compensation
Share-based compensation cost relates to awards of units in a carried unit plan. For carried interest units, the Company measures share-based compensation cost at the grant date fair value and recognizes the expense over the requisite service period or when it is probable any related performance condition will be met. For carried interest units with graded vesting requirement, compensation cost is recognized on an accelerated method under the graded vesting method over the requisite service period for the carried interest unit. Carried interest units that vest entirely at the end of the vesting requirement are expensed on a straight-line basis.
The Company estimates the fair value of carried interest units using an option pricing model. Key inputs that are used in applying the option pricing method are total equity value, equity volatility, risk free rate and time to liquidity event. The estimate of total equity value is determined using a combination of the income approach, which incorporates cash flow projections that are discounted at an appropriate rate, and the market approach, which involves applying a market multiple to the Company's projected operating results. The Company estimates volatility based on the historical equity volatility of comparable publicly-traded companies. Because there has been no public market for our equity prior to this offering, the estimates and assumptions the Company uses in the share-based compensation valuations are highly complex and subjective. Following the offering, such subjective valuations and estimates will no longer be necessary because we will rely on the market price of the Company's common stock to determine the fair value of share-based compensation awards. See Note 14 to the consolidated financial statements for additional information about our share-based compensation.
Income Taxes
The Company's provision for income taxes is based on current period income, changes in deferred tax assets and liabilities and changes in estimates with regard to uncertain tax positions. Deferred tax assets are subject to an ongoing assessment of realizability. The Company provides deferred taxes for the outside basis difference of its investment in partnerships.
Cash and Cash Equivalents
The Company's cash investments are placed with money market funds and financial institutions that are investment grade as rated by Standard & Poor's and Moody's Investors Service. The Company selects money market funds that predominantly invest in marketable, direct obligations issued or guaranteed by the United States government or its agencies, commercial paper, fully collateralized repurchase agreements, certificates of deposit, and time deposits.
The Company considers the balance of its investment in funds that substantially hold securities that mature within three months or less from the date the fund purchases these securities to be cash equivalents. The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.
Accounts Receivable
Accounts receivable are recorded at net realizable value. The Company periodically assesses the adequacy of valuation allowances for uncollectible accounts receivable by evaluating the collectability of outstanding receivables and general factors such as historical collection experience, length of time individual receivables are past due, and the economic and competitive environment.
Investments
Investment securities and investment securities pledged as collateral are classified as trading securities and are stated at fair value with realized and unrealized holding gains and losses included in net income.
Long-Lived Assets and Amortizable Intangible Assets
Property, plant and equipment, including construction materials, are carried at cost, and include all direct costs and certain indirect costs associated with the construction of cable systems, and the costs of new equipment installations. Equipment under capital leases is recorded at the present value of the total minimum lease payments. Depreciation on equipment is calculated on the straight-line basis over the estimated useful lives of the assets or, with respect to equipment under capital leases and leasehold improvements, amortized over the shorter of the lease term or the assets' useful lives and reported in depreciation and amortization (including impairments) in the consolidated statements of operations.
The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized over the estimated useful life of the software and reported in depreciation and amortization (including impairments).
Customer relationships, trade names and other intangibles established in connection with acquisitions that are finite-lived are amortized in a manner that reflects the pattern in which the projected net cash inflows to the Company are expected to occur, such as the sum of the years' digits method, or when such pattern does not exist, using the straight-line basis over their respective estimated useful lives.
The Company reviews its long-lived assets (property, plant and equipment, and intangible assets subject to amortization that arose from acquisitions) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and the value of franchises, trademarks, and certain other intangibles acquired in purchase business combinations which have indefinite useful lives are not amortized. Rather, such assets are tested for impairment annually or upon the occurrence of a triggering event.
The Company assesses qualitative factors for its reporting units that carry goodwill. If the qualitative assessment results in a conclusion that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting unit.
When the qualitative assessment is not used, or if the qualitative assessment is not conclusive and it is necessary to calculate the fair value of a reporting unit, then the impairment analysis for goodwill is performed at the reporting unit level using a two-step approach. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill utilizing an enterprise-value based premise approach. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of goodwill impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill which would be recognized in a business combination.
The Company assesses qualitative factors to determine whether it is necessary to perform the one-step quantitative identifiable indefinite-lived intangible assets impairment test. This quantitative test is required only if the Company concludes that it is more likely than not that a unit of accounting's fair value is less than its carrying amount. When the qualitative assessment is not used, or if the qualitative assessment is not conclusive, the impairment test for other intangible assets not subject to amortization requires a comparison of the fair value of the intangible asset with its carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Deferred Financing Costs
Deferred financing costs are being amortized to interest expense using the effective interest method over the terms of the related debt.
Derivative Financial Instruments
The Company accounts for derivative financial instruments as either assets or liabilities measured at fair value. The Company uses derivative instruments to manage its exposure to market risks from changes in certain equity prices and interest rates and does not hold or issue derivative instruments for speculative or trading purposes. These derivative instruments are not designated as hedges, and changes in the fair values of these derivatives are recognized in the statement of operations as gains (losses) on derivative contracts.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when the Company believes it is probable that a liability has been incurred and the amount of the contingency can be reasonably estimated.
Recently Adopted Accounting Pronouncements
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that the statement of cash flows disclose the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. ASU No. 2016-18 provides specific guidance on the presentation of restricted cash in the statement of cash flows. The new guidance was adopted as of December 31, 2016.
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17 (Topic 740), Balance Sheet Classification of Deferred Taxes. This ASU amends existing guidance to require the presentation of deferred tax liabilities and assets as noncurrent within a classified statement of financial position. ASU No. 2015-17 was adopted by the Company in the fourth quarter 2016 and was applied prospectively to all deferred tax liabilities and assets.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Prior to the issuance of the standard, entities were required to retrospectively apply adjustments made to provisional amounts recognized in a business combination. ASU No. 2015-16 was adopted by the Company on January 1, 2016.
In April 2015, the FASB issued ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. ASU No. 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU No. 2015-05 was adopted by the Company on January 1, 2016 and did not have a material impact on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs from line-of-credit arrangements after adoption of ASU No. 2015-03. ASU No. 2015-15 clarifies that the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU No. 2015-03 was adopted by the Company on January 1, 2016.
In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU No. 2014-15 was adopted by the Company for the annual period ended December 31, 2016.
In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period. ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. ASU No. 2014-12 was adopted by the Company on January 1, 2016 on a prospective basis and did not have any impact on the Company's consolidated financial statements.
Recently Issued But Not Yet Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and allows the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14 that approved deferring the effective date by one year so that ASU No. 2014-09 would become effective for the Company on January 1, 2018. The FASB also approved, in July 2015, permitting the early adoption of ASU No. 2014-09, but not before the original effective date for the Company of January 1, 2017.
In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in order to clarify the Codification and to correct any unintended application of the guidance. These items are not expected to have a significant effect on the current accounting standard. The amendments in this update affect the guidance in ASU No. 2014-09, which is not yet effective. ASU No. 2014-09 will be effective, reflecting the one-year deferral, for interim and annual periods beginning after December 15, 2017 (January 1, 2018 for the Company). Early adoption of the standard is permitted but not before the original effective date. Companies can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact that the adoption of ASU No. 2014-09 will have on its consolidated financial statements and selecting the method of transition to the new standard. We currently expect the adoption to impact the timing of the recognition of residential installation revenue and the recognition of commission expenses.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU No. 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The new guidance becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2016-15 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which provides simplification of income tax accounting for share-based payment awards. The new guidance becomes effective for the Company on January 1, 2017 with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value will be applied using the modified retrospective transition method. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term will be applied prospectively. The Company may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. In connection with the adoption on January 1, 2017, a deferred tax asset of approximately $309,000 for previously unrealized excess tax benefits will be recognized with the offset recorded to accumulated deficit.
In February 2016, the FASB issued ASU 2016-02, Leases, which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019 with early adoption permitted and will be applied using the modified retrospective method. The Company has not yet completed the evaluation of the effect that ASU No. 2016-02 will have on its consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07 Compensation—Retirement Benefits (Topic 715). ASU No. 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. It also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and what component of net benefit cost is eligible for capitalization. ASU No. 2017-07 becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2017-07 will have on its consolidated financial statements.
Common Stock
At December 31, 2016, the Company had 100 shares of common stock with a par value of $.01 issued and outstanding.
Net Loss Per Share
Basic and diluted net loss per share have been computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share excludes the effects of common stock equivalents as they are anti-dilutive.
Financial instruments that may potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents and trade account receivables. The Company monitors the financial institutions and money market funds where it invests its cash and cash equivalents with diversification among counterparties to mitigate exposure to any single financial institution. The Company's emphasis is primarily on safety of principal and liquidity and secondarily on maximizing the yield on its investments. Management believes that no significant concentration of credit risk exists with respect to its cash and cash equivalents balances because of its assessment of the creditworthiness and financial viability of the respective financial institutions.
The Company did not have a single customer that represented 10% or more of its consolidated revenues for the year ended December 31, 2016, or 10% or more of its consolidated net trade receivables at December 31, 2016.
|
Fair Values | Estimated Useful Lives | ||||
Current assets | $ | 1,923,071 | |||
Accounts receivable | 271,305 | ||||
Property, plant and equipment | 4,864,621 | 2-18 years | |||
Goodwill | 5,842,172 | ||||
Indefinite-lived cable television franchises | 8,113,575 | Indefinite-lived | |||
Customer relationships | 4,850,000 | 8 to 18 years | |||
Trade names (a) | 1,010,000 | 12 years | |||
Amortizable intangible assets | 23,296 | 1-15 years | |||
Other non-current assets | 748,998 | ||||
Current liabilities | (2,311,201 | ) | |||
Long-term debt | (8,355,386 | ) | |||
Deferred income taxes. | (6,832,773 | ) | |||
Other non-current liabilities | (189,355 | ) | |||
Total | $ | 9,958,323 |
(a) | See Note 8 for additional information regarding a change in the remaining estimated useful lives of the Company's trade names. |
|
|
Cablevision |
|
Cequel |
||||||
|
|
Preliminary |
|
Estimated |
|
Fair Values |
|
Estimated |
||
Current assets |
|
$ |
1,923,071 |
|
|
|
$ |
161,874 |
|
|
Accounts receivable |
|
|
271,305 |
|
|
|
|
180,422 |
|
|
Property, plant and equipment |
|
|
4,864,621 |
|
2 - 18 years |
|
|
2,107,220 |
|
3 - 13 years |
Goodwill |
|
|
5,838,959 |
|
|
|
|
2,153,741 |
|
|
Cable television franchise rights |
|
|
8,113,575 |
|
Indefinite-lived |
|
|
4,906,506 |
|
Indefinite-lived |
Customer relationships |
|
|
4,850,000 |
|
8 to 18 years |
|
|
1,075,884 |
|
8 years |
Trade names |
|
|
1,010,000 |
|
12 years |
|
|
56,782 |
|
2 years |
Amortizable intangible assets |
|
|
23,296 |
|
1 - 15 years |
|
|
3,356 |
|
11 years |
Other non-current assets |
|
|
748,998 |
|
|
|
|
73,811 |
|
|
Current liabilities |
|
|
(2,305,954 |
) |
|
|
|
(534,662 |
) |
|
Long-term debt |
|
|
(8,355,386 |
) |
|
|
|
(4,717,305 |
) |
|
Deferred income taxes |
|
|
(6,834,807 |
) |
|
|
|
(1,492,017 |
) |
|
Other non-current liabilities |
|
|
(189,355 |
) |
|
|
|
(2,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
9,958,323 |
|
|
|
$ |
3,973,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016 | |||
Revenue | $ | 6,848,916 | |
Net loss | $ | (527,851 | ) |
The following table presents the unaudited pro forma revenue, loss from continuing operations and net loss for the year ended December 31, 2016 as if the Cablevision Acquisition had occurred on January 1, 2016:
Revenue |
|
$ |
9,154,816 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(721,257 |
) |
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Non-Cash Investing and Financing Activities: | |||||||
Continuing Operations: | |||||||
Conversion of notes payable to affiliates and related parties of $1,750,000 (together with accrued and unpaid interest and applicable premium) to common stock (See Note 9) | $ | 2,264,252 | $ | — | |||
Property and equipment accrued but unpaid | 84,847 | 83,722 | |||||
Leasehold improvements paid by landlord | 3,998 | — | |||||
Notes payable to vendor | 25,879 | — | |||||
Supplemental Data: | |||||||
Cash interest paid | 1,481,363 | 931,345 | |||||
Income taxes paid, net | 26,396 | 5,342 |
During 2016, the Company's non-cash investing and financing activities and other supplemental data were as follows:
Non-Cash Investing and Financing Activities: |
|
|
|
|
Continuing Operations: |
|
|
|
|
Property and equipment accrued but unpaid |
|
$ |
155,653 |
|
Distributions declared but not paid |
|
|
79,617 |
|
Notes payable to vendor |
|
|
12,449 |
|
Deferred financing costs accrued but unpaid |
|
|
2,570 |
|
Supplemental Data: |
|
|
|
|
Cash interest paid |
|
|
1,092,114 |
|
Income taxes paid, net |
|
|
1,538 |
|
|
The following table summarizes the activity for the 2016 Restructuring Plan during 2017: | |||||||||||
Severance and Other Employee Related Costs | Facility Realignment and Other Costs | Total | |||||||||
Accrual balance at December 31, 2016 | $ | 102,119 | $ | 8,397 | $ | 110,516 | |||||
Restructuring charges | 140,071 | 1,007 | 141,078 | ||||||||
Payments and other | (92,905 | ) | (3,833 | ) | (96,738 | ) | |||||
Accrual balance at September 30, 2017 | $ | 149,285 | $ | 5,571 | $ | 154,856 |
The following table summarizes the activity for the 2016 Restructuring Plan:
|
|
Severance and |
|
Facility |
|
Total |
|
|||
Restructuring charges |
|
$ |
215,420 |
|
$ |
11,157 |
|
$ |
226,577 |
|
Payments and other |
|
|
(113,301 |
) |
|
(2,760 |
) |
|
(116,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
Accrual balance at December 31, 2016 |
|
$ |
102,119 |
|
$ |
8,397 |
|
$ |
110,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment (including equipment under capital leases) as of December 31, 2016 consist of the following assets, which are depreciated or amortized on a straight-line basis over their estimated useful lives.
|
|
|
|
Estimated |
|
Customer equipment |
|
$ |
871,049 |
|
3 to 5 years |
Headends and related equipment |
|
|
1,482,631 |
|
4 to 25 years |
Infrastructure |
|
|
3,740,494 |
|
3 to 25 years |
Equipment and software |
|
|
735,012 |
|
3 to 10 years |
Construction in progress (including materials and supplies) |
|
|
84,321 |
|
|
Furniture and fixtures |
|
|
45,576 |
|
5 to 12 years |
Transportation equipment |
|
|
135,488 |
|
5 to 10 years |
Buildings and building improvements |
|
|
390,337 |
|
10 to 40 years |
Leasehold improvements |
|
|
104,309 |
|
Term of lease |
Land |
|
|
47,715 |
|
|
|
|
|
|
|
|
|
|
|
7,636,932 |
|
|
Less accumulated depreciation and amortization |
|
|
(1,039,297 |
) |
|
|
|
|
|
|
|
|
|
$ |
6,597,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The estimated useful lives presented reflect the period of depreciation and amortization for the purchase of assets in new condition and do not reflect the remaining useful lives of the assets at December 31, 2016. |
At December 31, 2016, the gross amount of buildings and equipment and related accumulated amortization recorded under capital leases were as follows:
Buildings and equipment |
|
$ |
53,833 |
|
Less accumulated amortization |
|
|
(6,306 |
) |
|
|
|
|
|
|
|
$ |
47,527 |
|
|
|
|
|
|
|
|
|
|
|
|
The minimum future annual payments for all operating leases (with initial or remaining terms in excess of one year) during the next five years and thereafter, including pole rentals from January 1, 2017 through December 31, 2021, at rates now in force are as follows:
2017 |
|
$ |
76,513 |
|
2018 |
|
|
70,242 |
|
2019 |
|
|
61,986 |
|
2020 |
|
|
56,953 |
|
2021 |
|
|
53,658 |
|
Thereafter |
|
|
142,655 |
|
|
Amortizable Intangible Assets | |||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Estimated Useful Lives | ||||||||||
Customer relationships | $ | 5,970,884 | (1,207,217 | ) | $ | 4,763,667 | 8 to 18 years | ||||||
Trade names (a) | 1,067,083 | (432,402 | ) | 634,681 | 2 to 4 years | ||||||||
Other amortizable intangibles | 37,052 | (8,805 | ) | 28,247 | 1 to 15 years | ||||||||
$ | 7,075,019 | $ | (1,648,424 | ) | $ | 5,426,595 |
(a) | On May 23, 2017, Altice N.V. announced the adoption of a global brand which will replace the Company's brands in the future, reducing the remaining useful lives of these trade name intangibles. The Company has estimated the remaining useful lives to be 3 years from the date of the adoption, which reflects one year as an in-use asset and two years as a defensive asset. Amortization expense is calculated on an accelerated basis based on the Company's estimate of the intangible asset during the in-use period. The remaining estimated value of the defensive asset once it is no longer in use will be amortized over the defensive period. Estimated amortization expense related to the Optimum and Lightpath trade names are approximately $545,805 for 2017 (of which $334,312 has been expensed through September 30, 2017), $355,006 for 2018, $46,627 for 2019 and $18,140 through May 2020. |
The following table summarizes information relating to the Company's acquired intangible assets as of December 31, 2016:
|
|
Amortizable Intangible Assets |
|||||||||
|
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
|
Estimated Useful |
|||
Customer relationships |
|
$ |
5,925,884 |
|
$ |
(580,276 |
) |
$ |
5,345,608 |
|
8 to 18 years |
Trade names |
|
|
1,066,783 |
|
|
(83,397 |
) |
|
983,386 |
|
2 to 12 years |
Other amortizable intangibles |
|
|
26,743 |
|
|
(3,093 |
) |
|
23,650 |
|
1 to 15 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,019,410 |
|
$ |
(666,766 |
) |
$ |
6,352,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated amortization expense |
|
|
|
|
Year Ending December 31, 2017 |
|
$ |
928,597 |
|
Year Ending December 31, 2018 |
|
|
834,312 |
|
Year Ending December 31, 2019 |
|
|
758,189 |
|
Year Ending December 31, 2020 |
|
|
681,610 |
|
Year Ending December 31, 2021 |
|
|
604,456 |
|
Cablevision | Cequel | Total | |||||||||
Cable television franchises | $ | 8,113,575 | $ | 4,906,506 | $ | 13,020,081 | |||||
Goodwill | 5,839,757 | 2,153,742 | 7,993,499 | ||||||||
Total | $ | 13,953,332 | $ | 7,060,248 | $ | 21,013,580 |
The following table summarizes information relating to the Company's acquired indefinite-lived intangible assets as of December 31, 2016:
|
|
Optimum |
|
Suddenlink |
|
Total |
|
|||
Cable television franchises |
|
$ |
8,113,575 |
|
$ |
4,906,506 |
|
$ |
13,020,081 |
|
Goodwill |
|
|
5,838,959 |
|
|
2,153,741 |
|
|
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,952,534 |
|
$ |
7,060,247 |
|
$ |
21,012,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill as of January 1, 2017 | $ | 7,992,700 | |
Goodwill recorded in connection with acquisition in first quarter 2017 (Cablevision Segment) | 20,687 | ||
Adjustments to purchase accounting relating to Cablevision Acquisition | 3,213 | ||
Transfer of Cablevision goodwill related to Altice Technical Services US Corp. (See Note 14 for further details) | (23,101 | ) | |
Net goodwill as of September 30, 2017 | $ | 7,993,499 |
Gross goodwill as of January 1, 2016 |
|
$ |
2,040,402 |
|
Goodwill recorded in connection with Cablevision Acquisition |
|
|
5,838,959 |
|
Adjustments to purchase accounting relating to Cequel Acquisition |
|
|
113,339 |
|
|
|
|
|
|
Net goodwill as of December 31, 2016 |
|
$ |
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount (a) | |||||||||||||||
Maturity Date | Interest Rate | Principal | September 30, 2017 | December 31, 2016 | |||||||||||
CSC Holdings Restricted Group: | |||||||||||||||
Revolving Credit Facility (b) | $20,000 on October 9, 2020, remaining balance on November 30, 2021 | 4.49% | $ | 1,175,000 | $ | 1,149,024 | $ | 145,013 | |||||||
Term Loan Facility | July 17, 2025 | 3.48% | 2,992,500 | 2,974,768 | 2,486,874 | ||||||||||
Cequel: | |||||||||||||||
Revolving Credit Facility (c) | November 30, 2021 | — | — | — | — | ||||||||||
Term Loan Facility | July 28, 2025 | 3.49% | 1,261,838 | 1,253,110 | 812,903 | ||||||||||
$ | 5,429,338 | 5,376,902 | 3,444,790 | ||||||||||||
Less: Current portion | 92,650 | 33,150 | |||||||||||||
Long-term debt | $ | 5,284,252 | $ | 3,411,640 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | At September 30, 2017, $123,473 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $1,001,527 of the facility was undrawn and available, subject to covenant limitations. |
(c) | At September 30, 2017, $16,575 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $333,425 of the facility was undrawn and available, subject to covenant limitations. |
The following table provides details of the Company's outstanding credit facility debt (net of unamortized financing costs and unamortized discounts):
|
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying Value(a) |
|
|||
CSC Holdings Restricted Group: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(b) |
|
November 30, 2021 |
|
|
4.07 |
% |
$ |
175,256 |
|
$ |
145,013 |
|
Term Credit Facility(c) |
|
October 11, 2024 |
|
|
3.88 |
% |
|
2,500,000 |
|
|
2,486,874 |
|
Cequel: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(d) |
|
November 30, 2021 |
|
|
— |
|
|
— |
|
|
— |
|
Term Credit Facility |
|
January 15, 2025 |
|
|
3.88 |
% |
|
815,000 |
|
|
812,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,490,256 |
|
|
3,444,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
33,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
$ |
3,411,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The unamortized discounts and deferred financing costs amounted to $45,466 at December 31, 2016. |
|
(b) |
Includes $100,256 of credit facility debt incurred to finance the Cablevision Acquisition. See discussion above regarding the amendment to the revolving credit facility entered into December 2016. |
|
(c) |
Represents $3,800,000 principal amount of debt incurred to finance the Cablevision Acquisition, net of principal repayments made. See discussion above regarding the Extension Amendment entered into September 2016. |
|
(d) |
At December 31, 2016, $17,031 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $332,969 of the facility was undrawn and available, subject to covenant limitations. |
Interest Rate | Principal Amount | Carrying Amount (a) | ||||||||||||||||
Issuer | Date Issued | Maturity Date | September 30, 2017 | December 31, 2016 | ||||||||||||||
CSC Holdings (b)(f) | February 6, 1998 | February 15, 2018 | 7.875 | % | $ | 300,000 | $ | 303,531 | $ | 310,334 | ||||||||
CSC Holdings (b)(f) | July 21, 1998 | July 15, 2018 | 7.625 | % | 500,000 | 511,312 | 521,654 | |||||||||||
CSC Holdings (c)(f) | February 12, 2009 | February 15, 2019 | 8.625 | % | 526,000 | 544,422 | 553,804 | |||||||||||
CSC Holdings (c)(f) | November 15, 2011 | November 15, 2021 | 6.750 | % | 1,000,000 | 957,954 | 951,702 | |||||||||||
CSC Holdings (c)(f) | May 23, 2014 | June 1, 2024 | 5.250 | % | 750,000 | 657,903 | 650,193 | |||||||||||
CSC Holdings (e) | October 9, 2015 | January 15, 2023 | 10.125 | % | 1,800,000 | 1,777,085 | 1,774,750 | |||||||||||
CSC Holdings (e)(l) | October 9, 2015 | October 15, 2025 | 10.875 | % | 1,684,221 | 1,660,583 | 1,970,379 | |||||||||||
CSC Holdings (e) | October 9, 2015 | October 15, 2025 | 6.625 | % | 1,000,000 | 986,394 | 985,469 | |||||||||||
CSC Holdings (g) | September 23, 2016 | April 15, 2027 | 5.500 | % | 1,310,000 | 1,304,353 | 1,304,025 | |||||||||||
Cablevision (k) | September 23, 2009 | September 15, 2017 | 8.625 | % | — | — | 926,045 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2018 | 7.750 | % | 750,000 | 757,515 | 767,545 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2020 | 8.000 | % | 500,000 | 491,224 | 488,992 | |||||||||||
Cablevision (c)(f) | September 27, 2012 | September 15, 2022 | 5.875 | % | 649,024 | 568,796 | 559,500 | |||||||||||
Cequel and Cequel Capital Senior Notes (d)(m) | Oct. 25, 2012 Dec. 28, 2012 | September 15, 2020 | 6.375 | % | 1,050,000 | 1,025,616 | 1,457,439 | |||||||||||
Cequel and Cequel Capital Senior Notes (d) | May 16, 2013 Sept. 9, 2014 | December 15, 2021 | 5.125 | % | 1,250,000 | 1,132,926 | 1,115,767 | |||||||||||
Altice US Finance I Corporation Senior Secured Notes (h) | June 12, 2015 | July 15, 2023 | 5.375 | % | 1,100,000 | 1,081,815 | 1,079,869 | |||||||||||
Cequel and Cequel Capital Senior Secured Notes (i) | June 12, 2015 | July 15, 2025 | 7.750 | % | 620,000 | 604,001 | 602,925 | |||||||||||
Altice US Finance I Corporation Senior Notes (j) | April 26, 2016 | May 15, 2026 | 5.500 | % | 1,500,000 | 1,487,745 | 1,486,933 | |||||||||||
$ | 16,289,245 | 15,853,175 | 17,507,325 | |||||||||||||||
Less: Current portion | 1,572,358 | 926,045 | ||||||||||||||||
Long-term debt | $ | 14,280,817 | $ | 16,581,280 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | The debentures are not redeemable by CSC Holdings prior to maturity. |
(c) | Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
(d) | The Company may redeem some or more of all the notes at the redemption price set forth in the relevant indenture, plus accrued and unpaid interest. |
(e) | The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a “make whole” premium specified in the relevant indenture plus accrued and unpaid interest. |
(f) | The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
(g) | The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
(h) | Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
(i) | Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
(j) | Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
(k) | In April 2017, the Company redeemed $500,000 of the senior notes from proceeds from the CVC Term Loan facility. In September 2017, these senior notes matured and the Company repaid the remaining principal balance of $400,000. |
(l) | In July 2017, the Company used approximately $350,120 of the proceeds from the IPO to fund the redemption of $315,779 principal amount of CSC Holdings senior notes due October 2025 and the related call premium of approximately $34,341which was recorded as a loss on extinguishment of debt. The Company also recorded a write-off of deferred financings costs in connection with this redemption aggregating $4,516. |
(m) | In April 2017, the Company redeemed $450,000 of the senior notes from proceeds from the Cequel Term Loan facility. |
The following table summarizes the Company's senior guaranteed notes, senior secured notes and senior notes and debentures as of December 31, 2016:
Issuer |
|
Date Issued |
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying |
|
|||
CSC Holdings(b)(e) |
|
February 6, 1998 |
|
February 15, 2018 |
|
|
7.875 |
% |
$ |
300,000 |
|
$ |
310,334 |
|
CSC Holdings(b)(e) |
|
July 21, 1998 |
|
July 15, 2018 |
|
|
7.625 |
% |
|
500,000 |
|
|
521,654 |
|
CSC Holdings(c)(e) |
|
February 12, 2009 |
|
February 15, 2019 |
|
|
8.625 |
% |
|
526,000 |
|
|
553,804 |
|
CSC Holdings(c)(e) |
|
November 15, 2011 |
|
November 15, 2021 |
|
|
6.750 |
% |
|
1,000,000 |
|
|
951,702 |
|
CSC Holdings(c)(e) |
|
May 23, 2014 |
|
June 1, 2024 |
|
|
5.250 |
% |
|
750,000 |
|
|
650,193 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
January 15, 2023 |
|
|
10.125 |
% |
|
1,800,000 |
|
|
1,774,750 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
10.875 |
% |
|
2,000,000 |
|
|
1,970,379 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
6.625 |
% |
|
1,000,000 |
|
|
985,469 |
|
CSC Holdings(f) |
|
September 23, 2016 |
|
April 15, 2027 |
|
|
5.500 |
% |
|
1,310,000 |
|
|
1,304,025 |
|
Cablevision(c)(e) |
|
September 23, 2009 |
|
September 15, 2017 |
|
|
8.625 |
% |
|
900,000 |
|
|
926,045 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2018 |
|
|
7.750 |
% |
|
750,000 |
|
|
767,545 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2020 |
|
|
8.000 |
% |
|
500,000 |
|
|
488,992 |
|
Cablevision(c)(e) |
|
September 27, 2012 |
|
September 15, 2022 |
|
|
5.875 |
% |
|
649,024 |
|
|
559,500 |
|
Cequel Communications Holdings I LLC and Cequel |
|
October 25, 2012 |
|
September 15, 2020 |
|
|
6.375 |
% |
|
1,500,000 |
|
|
1,457,439 |
|
Cequel Communications Holdings I LLC and Cequel |
|
May 16, 2013 |
|
December 15, 2021 |
|
|
5.125 |
% |
|
1,250,000 |
|
|
1,115,767 |
|
Altice US Finance I Corporation(g) |
|
June 12, 2015 |
|
July 15, 2023 |
|
|
5.375 |
% |
|
1,100,000 |
|
|
1,079,869 |
|
Cequel Communications Holdings I LLC and Cequel Capital Corporation(h) |
|
June 12, 2015 |
|
July 15, 2025 |
|
|
7.750 |
% |
|
620,000 |
|
|
602,925 |
|
Altice US Finance I Corporation(i) |
|
April 26, 2016 |
|
May 15, 2026 |
|
|
5.500 |
% |
|
1,500,000 |
|
|
1,486,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,955,024 |
|
|
17,507,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
|
|
926,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
$ |
16,581,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The carrying amount of the notes is net of the unamortized deferred financing costs and/or discounts/premiums of $447,699. |
|
(b) |
The debentures are not redeemable by CSC Holdings prior to maturity. |
|
(c) |
Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
|
(d) |
The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a "make whole" premium specified in the relevant indenture plus accrued and unpaid interest. |
|
(e) |
The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
|
(f) |
The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
|
(g) |
Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
|
(h) |
Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
|
(i) |
Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
Years Ending December 31, | Cablevision | Cequel | Total | ||||||||
2017 | $ | 29,925 | $ | 5,256 | $ | 35,181 | |||||
2018 | 1,598,699 | 14,421 | 1,613,120 | ||||||||
2019 | 561,995 | 12,713 | 574,708 | ||||||||
2020 | 530,007 | 1,062,723 | 1,592,730 | ||||||||
2021 | 3,664,638 | 1,263,578 | 4,928,216 | ||||||||
Thereafter | 10,058,245 | 4,428,075 | 14,486,320 |
Total amounts payable by the Company under its various debt obligations outstanding as of December 31, 2016, including notes payable, collateralized indebtedness (see Note 10), and capital leases, during the next five years and thereafter, are as follows:
Years Ending December 31, |
|
Cablevision |
|
Cequel |
|
Altice USA |
|
Total |
|
||||
2017 |
|
$ |
1,719,180 |
|
$ |
9,113 |
|
$ |
— |
|
$ |
1,728,293 |
|
2018 |
|
|
2,103,441 |
|
|
8,652 |
|
|
— |
|
|
2,112,093 |
|
2019 |
|
|
557,348 |
|
|
8,330 |
|
|
— |
|
|
565,678 |
|
2020 |
|
|
526,340 |
|
|
1,508,213 |
|
|
— |
|
|
2,034,553 |
|
2021 |
|
|
1,200,256 |
|
|
1,258,223 |
|
|
— |
|
|
2,458,479 |
|
Thereafter |
|
|
9,884,024 |
|
|
3,995,280 |
|
|
1,750,000 |
|
|
15,629,304 |
|
|
Asset Derivatives | Liability Derivatives | |||||||||||||||||
Derivatives Not Designated as Hedging Instruments | Balance Sheet Location | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | |||||||||||||
Prepaid forward contracts | Derivative contracts, current | $ | 54,578 | $ | 352 | $ | (54,578 | ) | $ | (13,158 | ) | |||||||
Prepaid forward contracts | Derivative contracts, long-term | — | 10,604 | (52,488 | ) | — | ||||||||||||
Put/Call options | Liabilities under derivative contracts, current | — | — | (48,326 | ) | — | ||||||||||||
Interest rate swap contracts | Liabilities under derivative contracts, long-term | — | — | (69,271 | ) | (78,823 | ) | |||||||||||
$ | 54,578 | $ | 10,956 | $ | (224,663 | ) | $ | (91,981 | ) |
|
|
|
|
Asset |
|
Liability |
|
||
Derivatives Not Designated as Hedging Instruments |
|
Balance Sheet Location |
|
Fair Value at |
|
Fair Value at |
|
||
Prepaid forward contracts |
|
Derivative contracts, current |
|
$ |
352 |
|
$ |
13,158 |
|
Prepaid forward contracts |
|
Derivative contracts, long-term |
|
|
10,604 |
|
|
— |
|
Interest rate swap contracts |
|
Liabilities under derivative contracts, long-term |
|
|
— |
|
|
78,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,956 |
|
$ |
91,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares (a) | 21,477,618 | ||
Collateralized indebtedness settled | $ | (617,151 | ) |
Derivatives contracts settled | (37,838 | ) | |
(654,989 | ) | ||
Proceeds from new monetization contracts | 662,724 | ||
Net cash proceeds | $ | 7,735 |
(a) | Share amounts are adjusted for the 2 for 1 stock split in February 2017. |
Number of shares(a) |
|
|
5,337,750 |
|
|
|
|
|
|
|
|
|
|
|
Collateralized indebtedness settled |
|
$ |
(143,102 |
) |
Derivative contracts settled |
|
|
— |
|
|
|
|
|
|
|
|
|
(143,102 |
) |
Proceeds from new monetization contracts |
|
|
179,388 |
|
|
|
|
|
|
Net cash receipt |
|
$ |
36,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Share amounts were adjusted for the 2 for 1 stock split in February 2017. |
|
Fair Value Hierarchy | September 30, 2017 | December 31, 2016 | |||||||
Assets: | |||||||||
Money market funds (of which $14,700 is classified as restricted cash as of December 31, 2016) | Level I | $ | 65,801 | $ | 100,139 | ||||
Investment securities pledged as collateral | Level I | 1,652,917 | 1,483,030 | ||||||
Prepaid forward contracts | Level II | 54,578 | 10,956 | ||||||
Liabilities: | |||||||||
Prepaid forward contracts | Level II | 107,066 | 13,158 | ||||||
Put/Call Options | Level II | 48,326 | — | ||||||
Interest rate swap contracts | Level II | 69,271 | 78,823 | ||||||
Contingent consideration related to 2017 acquisition | Level III | 30,000 | — |
|
|
At December 31, 2016 (Successor) |
|
||||||||||
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
100,139 |
|
$ |
— |
|
$ |
— |
|
$ |
100,139 |
|
Investment securities pledged as collateral |
|
|
1,483,030 |
|
|
— |
|
|
— |
|
|
1,483,030 |
|
Prepaid forward contracts |
|
|
— |
|
|
10,956 |
|
|
— |
|
|
10,956 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid forward contracts |
|
|
— |
|
|
13,158 |
|
|
— |
|
|
13,158 |
|
Interest rate swap contracts |
|
|
|
|
|
78,823 |
|
|
|
|
|
78,823 |
|
September 30, 2017 | December 31, 2016 | ||||||||||||||||
Fair Value Hierarchy | Carrying Amount (a) | Estimated Fair Value | Carrying Amount (a) | Estimated Fair Value | |||||||||||||
Altice USA debt instruments: | |||||||||||||||||
Notes payable to affiliates and related parties | Level II | $ | — | $ | — | $ | 1,750,000 | $ | 1,837,876 | ||||||||
CSC Holdings debt instruments: | |||||||||||||||||
Credit facility debt | Level II | 4,123,792 | 4,167,500 | 2,631,887 | 2,675,256 | ||||||||||||
Collateralized indebtedness | Level II | 1,314,788 | 1,286,557 | 1,286,069 | 1,280,048 | ||||||||||||
Senior guaranteed notes | Level II | 2,290,748 | 2,460,675 | 2,289,494 | 2,416,375 | ||||||||||||
Senior notes and debentures | Level II | 6,412,789 | 7,421,261 | 6,732,816 | 7,731,150 | ||||||||||||
Notes payable | Level II | 76,442 | 72,802 | 13,726 | 13,260 | ||||||||||||
Cablevision senior notes: | Level II | 1,817,536 | 1,998,340 | 2,742,082 | 2,920,056 | ||||||||||||
Cequel debt instruments: | |||||||||||||||||
Cequel credit facility | Level II | 1,253,110 | 1,261,838 | 812,903 | 815,000 | ||||||||||||
Senior secured notes | Level II | 2,569,559 | 2,745,750 | 2,566,802 | 2,689,750 | ||||||||||||
Senior notes | Level II | 2,762,543 | 3,036,850 | 3,176,131 | 3,517,275 | ||||||||||||
Notes payable | Level II | 3,083 | 3,083 | — | — | ||||||||||||
$ | 22,624,390 | $ | 24,454,656 | $ | 24,001,910 | $ | 25,896,046 |
(a) | Amounts are net of unamortized deferred financing costs and discounts. |
|
|
|
|
December 31, 2016 |
|
||||
|
|
Fair Value |
|
Carrying |
|
Estimated |
|
||
Altice USA debt instruments: |
|
|
|
|
|
|
|
|
|
Notes payable to affiliates and related parties |
|
Level II |
|
$ |
1,750,000 |
|
$ |
1,837,876 |
|
CSC Holdings debt instruments: |
|
|
|
|
|
|
|
|
|
Credit facility debt |
|
Level II |
|
|
2,631,887 |
|
|
2,675,256 |
|
Collateralized indebtedness(b) |
|
Level II |
|
|
1,286,069 |
|
|
1,280,048 |
|
Senior guaranteed notes |
|
Level II |
|
|
2,289,494 |
|
|
2,416,375 |
|
Senior notes and debentures(c) |
|
Level II |
|
|
6,732,816 |
|
|
7,731,150 |
|
Notes payable |
|
Level II |
|
|
13,726 |
|
|
13,260 |
|
Cablevision senior notes(d) |
|
Level II |
|
|
2,742,082 |
|
|
2,920,056 |
|
Cequel debt instruments: |
|
|
|
|
|
|
|
|
|
Cequel credit facility |
|
Level II |
|
|
812,903 |
|
|
815,000 |
|
Senior Secured Notes |
|
Level II |
|
|
1,079,869 |
|
|
1,152,250 |
|
Senior Notes |
|
Level II |
|
|
4,663,064 |
|
|
5,054,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,001,910 |
|
$ |
25,896,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Amounts are net of unamortized deferred financing costs and discounts. |
|
(b) |
The total carrying value of the collateralized debt was reduced by $9,142 to reflect its fair value on the Cablevision Acquisition Date. |
|
(c) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $39,713 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
|
(d) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $13,075 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
|
Income tax benefit attributable to the Company's continuing operations for the year ended December 31, 2016 consist of the following components:
Current expense (benefit): |
|
|
|
|
Federal |
|
$ |
(981 |
) |
State |
|
|
5,310 |
|
|
|
|
|
|
|
|
|
4,329 |
|
|
|
|
|
|
Deferred benefit: |
|
|
|
|
Federal |
|
|
(223,159 |
) |
State |
|
|
(40,830 |
) |
|
|
|
|
|
|
|
|
(263,989 |
) |
|
|
|
|
|
Tax benefit relating to uncertain tax positions |
|
|
(6 |
) |
|
|
|
|
|
Income tax benefit |
|
$ |
(259,666 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
Federal tax benefit at statutory rate |
|
$ |
(381,901 |
) |
State income taxes, net of federal impact |
|
|
(39,336 |
) |
Changes in the valuation allowance |
|
|
297 |
|
Changes in the state rates used to measure deferred taxes, net of federal impact |
|
|
153,239 |
|
Tax benefit relating to uncertain tax positions |
|
|
(120 |
) |
Non-deductible share-based compensation related to the carried unit plan |
|
|
5,029 |
|
Non-deductible Cablevision Acquisition transaction costs |
|
|
4,457 |
|
Other non-deductible expenses |
|
|
1,551 |
|
Research credit |
|
|
(400 |
) |
Other, net |
|
|
(2,482 |
) |
|
|
|
|
|
Income tax benefit |
|
$ |
(259,666 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
NOLs and tax credit carry forwards |
|
$ |
971,728 |
|
Compensation and benefit plans |
|
|
93,939 |
|
Partnership investments |
|
|
113,473 |
|
Restructuring liability |
|
|
37,393 |
|
Other liabilities |
|
|
45,561 |
|
Liabilities under derivative contracts |
|
|
31,529 |
|
Interest deferred for tax purposes |
|
|
39,633 |
|
Other |
|
|
6,615 |
|
|
|
|
|
|
Deferred tax asset |
|
|
1,339,871 |
|
Valuation allowance |
|
|
(3,125 |
) |
|
|
|
|
|
Net deferred tax asset, noncurrent |
|
|
1,336,746 |
|
|
|
|
|
|
Fixed assets and intangibles |
|
|
(9,065,635 |
) |
Investments |
|
|
(187,795 |
) |
Prepaid expenses |
|
|
(10,172 |
) |
Fair value adjustment- debt and deferred finance costs |
|
|
(30,535 |
) |
Other |
|
|
(9,424 |
) |
|
|
|
|
|
Deferred tax liability, noncurrent |
|
|
(9,303,561 |
) |
|
|
|
|
|
Total net deferred tax liability |
|
$ |
(7,966,815 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2016 |
|
$ |
— |
|
Increase to tax position in connection with the Cablevision Acquisition |
|
|
4,031 |
|
Decreases related to prior year tax positions |
|
|
(6 |
) |
|
|
|
|
|
Balance at December 31, 2016 |
|
$ |
4,025 |
|
|
|
|
|
|
|
|
|
|
|
|
Summarized below is the funded status and the amounts recorded on the Company's consolidated balance sheets for all of the Company's Defined Benefit Plans at December 31, 2016:
Change in projected benefit obligation: |
|
|
|
|
Projected benefit obligation at beginning of year |
|
$ |
403,963 |
|
Service cost |
|
|
— |
|
Interest cost |
|
|
14,077 |
|
Actuarial gain |
|
|
(11,429 |
) |
Curtailments |
|
|
3,968 |
|
Benefits paid |
|
|
(28,062 |
) |
|
|
|
|
|
Projected benefit obligation at end of year |
|
|
382,517 |
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
Fair value of plan assets at beginning of year |
|
|
297,846 |
|
Actual return on plan assets, net |
|
|
5,829 |
|
Employer contributions |
|
|
8,505 |
|
Benefits paid |
|
|
(28,062 |
) |
|
|
|
|
|
Fair value of plan assets at end of year |
|
|
284,118 |
|
|
|
|
|
|
Unfunded status at end of year |
|
$ |
(98,399 |
) |
|
|
|
|
|
|
|
|
|
|
The Company's net funded status relating to its Defined Benefit Plans at December 31, 2016, is as follows:
Defined Benefit Plans |
|
$ |
(98,399 |
) |
Less: Current portion related to nonqualified plans |
|
|
14,293 |
|
|
|
|
|
|
Long-term defined benefit plan obligations |
|
$ |
(84,106 |
) |
|
|
|
|
|
|
|
|
|
|
Components of the net periodic benefit cost, recorded in other operating expenses, for the Defined Benefit Plans for the year ended December 31, 2016, is as follows:
Service cost |
|
$ |
— |
|
Interest cost |
|
|
6,946 |
|
Expected return on plan assets, net |
|
|
(4,022 |
) |
Curtailment loss |
|
|
231 |
|
Settlement income (reclassified from accumulated other comprehensive loss)(a) |
|
|
(154 |
) |
|
|
|
|
|
Net periodic benefit cost |
|
$ |
3,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
As a result of benefit payments to terminated or retired individuals exceeding the service and interest costs for the Pension Plan and the Excess Cash Balance Pension Plan during the period June 21, 2016 through December 31, 2016, the Company recognized a non-cash settlement loss that represented the acceleration of the recognition of a portion of the previously unrecognized actuarial losses recorded in accumulated other comprehensive loss on the Company's consolidated balance sheet relating to these plans. |
|
|
Net Periodic |
|
Benefit Obligations |
|
||
|
|
June 21, 2016 to |
|
December 31, 2016 |
|
||
Discount rate(a) |
|
|
3.53 |
% |
|
3.81 |
% |
Rate of increase in future compensation levels |
|
|
— |
% |
|
— |
% |
Expected rate of return on plan assets (Pension Plan only) |
|
|
3.97 |
% |
|
N/A |
|
|
|
|
(a) |
The discount rate of 3.53% for the period June 21, 2016 through December 31, 2016, represents the average of the quarterly discount rates used to remeasure the Company's projected benefit obligation and net periodic benefit cost in connection with the recognition of settlement losses discussed above. |
The weighted average asset allocations of the Pension Plan at December 31, 2016 is as follows:
|
|
Plan Assets |
|
|
Asset Class: |
|
|
|
|
Mutual funds |
|
|
43 |
% |
Fixed income securities |
|
|
55 |
|
Cash equivalents and other |
|
|
2 |
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
The fair values of the assets of the Pension Plan at December 31, 2016 by asset class are as follows:
Asset Class |
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Mutual funds |
|
$ |
121,356 |
|
$ |
— |
|
$ |
— |
|
$ |
121,356 |
|
Fixed income securities held in a portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign issued corporate debt |
|
|
— |
|
|
13,583 |
|
|
— |
|
|
13,583 |
|
U.S. corporate debt |
|
|
— |
|
|
48,046 |
|
|
— |
|
|
48,046 |
|
Government debt |
|
|
— |
|
|
4,810 |
|
|
— |
|
|
4,810 |
|
U.S. Treasury securities |
|
|
— |
|
|
77,285 |
|
|
— |
|
|
77,285 |
|
Asset-backed securities |
|
|
— |
|
|
14,065 |
|
|
— |
|
|
14,065 |
|
Other |
|
|
— |
|
|
247 |
|
|
— |
|
|
247 |
|
Cash equivalents(a) |
|
|
2,593 |
|
|
3,089 |
|
|
— |
|
|
5,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(b) |
|
$ |
123,949 |
|
$ |
161,125 |
|
$ |
— |
|
$ |
285,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
A significant portion represents an investment in a short-term investment fund that invests primarily in securities of high quality and low risk. |
|
(b) |
Excludes cash and net payables relating to the purchase of securities that were not settled as of December 31, 2016. |
2017 |
|
$ |
45,899 |
|
2018 |
|
|
28,812 |
|
2019 |
|
|
27,565 |
|
2020 |
|
|
28,399 |
|
2021 |
|
|
25,692 |
|
2022 - 2026 |
|
|
120,664 |
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | $ | 986 | $ | 720 | $ | 1,380 | $ | 720 | |||||||
Operating expenses: | |||||||||||||||
Programming and other direct costs | $ | (1,196 | ) | $ | (642 | ) | $ | (3,026 | ) | $ | (642 | ) | |||
Other operating expenses, net | (28,332 | ) | (8,056 | ) | (73,263 | ) | (13,056 | ) | |||||||
Operating expenses, net | (29,528 | ) | (8,698 | ) | (76,289 | ) | (13,698 | ) | |||||||
Interest expense (a) | — | (48,617 | ) | (90,405 | ) | (53,922 | ) | ||||||||
Loss on extinguishment of debt and write-off of deferred financing costs | — | — | (513,723 | ) | — | ||||||||||
Net charges | $ | (28,542 | ) | $ | (56,595 | ) | $ | (679,037 | ) | $ | (66,900 | ) | |||
Capital Expenditures | $ | 72,185 | $ | — | $ | 98,234 | $ | — |
(a) | See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $90,405 for the nine months ended September 30, 2017. |
September 30, 2017 | December 31, 2016 | ||||||
Due from: | |||||||
Altice US Finance S.A. (a) | $ | 12,951 | $ | 12,951 | |||
Newsday (b) | 4,177 | 6,114 | |||||
Altice Management Americas (b) | 615 | 3,117 | |||||
i24NEWS (b) | 3,373 | — | |||||
Other Altice N.V. subsidiaries (b) | 37 | — | |||||
$ | 21,153 | $ | 22,182 | ||||
Due to: | |||||||
CVC 3BV (c) | — | 71,655 | |||||
Neptune Holdings US LP (c) | — | 7,962 | |||||
Altice Management International (d) | — | 44,121 | |||||
ATS (b)(e) | 22,541 | — | |||||
Newsday (b) | 103 | 275 | |||||
Other Altice N.V. subsidiaries (f) | 6,358 | 3,350 | |||||
$ | 29,002 | $ | 127,363 |
(a) | Represents interest on senior notes paid by the Company on behalf of the affiliate. |
(b) | Represents amounts paid by the Company on behalf of the respective related party and for Newsday and ATS, the net amounts due from the related party also include charges for certain transition services provided. |
(c) | Represents distributions payable to stockholders. |
(d) | Amounts payable as of December 31, 2016 primarily represent amounts due for equipment purchases and software development services discussed above. |
(e) | Represents amounts due to ATS for construction, maintenance, and installation services, net of charges to ATS pursuant to the TSA. See discussion above. |
(f) | Represents amounts due to affiliates for services provided to the Company. |
The following table summarizes the revenue and charges related to services provided to or received from subsidiaries of Altice N.V. and Newsday for the year ended December 31, 2016:
Revenue |
|
$ |
1,086 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Programming and other direct costs |
|
$ |
(1,947 |
) |
Other operating expenses |
|
|
(18,854 |
) |
|
|
|
|
|
Operating expenses, net |
|
|
(20,801 |
) |
|
|
|
|
|
Interest expense(a) |
|
|
(112,712 |
) |
|
|
|
|
|
Net charges |
|
$ |
(132,427 |
) |
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
45,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $102,557, as well as for interest expense of $10,155 related to the Holdco Notes prior to the exchange. |
Aggregate amounts that were due from and due to related parties at December 31, 2016 is summarized below:
Due from: |
|
|
|
|
Altice US Finance S.A.(a) |
|
$ |
12,951 |
|
Newsday(b) |
|
|
6,114 |
|
Altice Management Americas(b) |
|
|
3,117 |
|
|
|
|
|
|
|
|
$ |
22,182 |
|
|
|
|
|
|
|
|
|
|
|
Due to: |
|
|
|
|
CVC 3BV(c) |
|
|
71,655 |
|
Neptune Holdings US LP(c) |
|
|
7,962 |
|
Altice Management International(d) |
|
|
44,121 |
|
Newsday(b) |
|
|
275 |
|
Other Altice subsidiaries(b) |
|
|
3,350 |
|
|
|
|
|
|
|
|
$ |
127,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Represents interest on senior notes paid by the Company on behalf of the affiliate. |
|
(b) |
Represents amounts paid by the Company on behalf of the respective related party and/or the net amounts due from the related party for services provided. |
|
(c) |
Represents distributions payable to shareholders. |
|
(d) |
Represents amounts due for equipment purchases and software development services discussed above. |
|
Future cash payments and commitments required under arrangements pursuant to contracts entered into by the Company in the normal course of business as of December 31, 2016 are as follows:
|
|
Payments Due by Period |
|
|||||||||||||
|
|
Total |
|
Year 1 |
|
Years 2 - 3 |
|
Years 4 - 5 |
|
More than |
|
|||||
Off balance sheet arrangements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase obligations(a) |
|
$ |
7,136,605 |
|
$ |
2,396,634 |
|
$ |
3,307,915 |
|
$ |
1,394,318 |
|
$ |
37,738 |
|
Guarantees(b) |
|
|
19,793 |
|
|
3,909 |
|
|
15,884 |
|
|
— |
|
|
— |
|
Letters of credit(c) |
|
|
114,251 |
|
|
220 |
|
|
14,297 |
|
|
99,734 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
7,270,649 |
|
$ |
2,400,763 |
|
$ |
3,338,096 |
|
$ |
1,494,052 |
|
$ |
37,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Purchase obligations primarily include contractual commitments with various programming vendors to provide video services to customers and minimum purchase obligations to purchase goods or services. Future fees payable under contracts with programming vendors are based on numerous factors, including the number of subscribers receiving the programming. Amounts reflected above related to programming agreements are based on the number of subscribers receiving the programming as of December 2016 multiplied by the per subscriber rates or the stated annual fee, as applicable, contained in the executed agreements in effect as of December 31, 2016. |
|
(b) |
Includes franchise and performance surety bonds primarily for the Company's cable television systems. |
|
(c) |
Represent letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Payments due by period for these arrangements represent the year in which the commitment expires although payments under these arrangements are required only in the event of nonperformance. |
|
Activity related to the allowance for doubtful accounts for the year ended December 31, 2016:
|
|
Balance at |
|
Provision for |
|
Deductions/ |
|
Balance |
|
||||
Allowance for doubtful accounts |
|
$ |
1,051 |
|
$ |
53,249 |
|
$ |
(42,623 |
) |
$ |
11,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||||||||||||
Cablevision | Cequel | Total | Cablevision (a) | Cequel | Total | ||||||||||||||||||
Operating income (loss) | $ | 11,185 | $ | 123,679 | $ | 134,864 | $ | 39,947 | $ | 102,832 | $ | 142,779 | |||||||||||
Share-based compensation | 11,555 | 3,450 | 15,005 | 1,091 | 579 | 1,670 | |||||||||||||||||
Restructuring and other expense | 35,364 | 18,084 | 53,448 | 45,176 | 2,640 | 47,816 | |||||||||||||||||
Depreciation and amortization (including impairments) | 656,102 | 167,163 | 823,265 | 481,497 | 189,432 | 670,929 | |||||||||||||||||
Adjusted EBITDA | $ | 714,206 | $ | 312,376 | $ | 1,026,582 | $ | 567,711 | $ | 295,483 | $ | 863,194 |
Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | ||||||||||||||||||||||
Cablevision | Cequel | Total | Cablevision (a) | Cequel | Total | ||||||||||||||||||
Operating income (loss) | $ | 244,667 | $ | 395,213 | $ | 639,880 | $ | (32,133 | ) | $ | 274,575 | $ | 242,442 | ||||||||||
Share-based compensation | 28,597 | 12,335 | 40,932 | 1,091 | 579 | 1,670 | |||||||||||||||||
Restructuring and other expense | 105,182 | 37,583 | 142,765 | 143,891 | 11,195 | 155,086 | |||||||||||||||||
Depreciation and amortization (including impairments) | 1,641,477 | 497,299 | 2,138,776 | 526,057 | 559,872 | 1,085,929 | |||||||||||||||||
Adjusted EBITDA | $ | 2,019,923 | $ | 942,430 | $ | 2,962,353 | $ | 638,906 | $ | 846,221 | $ | 1,485,127 |
The Company has presented the components that reconcile Adjusted EBITDA to operating income, an accepted GAAP measure for the year ended December 31, 2016.
|
|
Cablevision |
|
Cequel |
|
Total |
|
|||
Operating income |
|
$ |
74,865 |
|
$ |
384,801 |
|
$ |
459,666 |
|
Share-based compensation |
|
|
9,164 |
|
|
5,204 |
|
|
14,368 |
|
Restructuring and other expense |
|
|
212,150 |
|
|
28,245 |
|
|
240,395 |
|
Depreciation and amortization (including impairments) |
|
|
963,665 |
|
|
736,641 |
|
|
1,700,306 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
1,259,844 |
|
$ |
1,154,891 |
|
$ |
2,414,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating income for reportable segments | $ | 134,864 | $ | 142,779 | $ | 639,880 | $ | 242,442 | |||||||
Items excluded from operating income: | |||||||||||||||
Interest expense | (379,064 | ) | (446,242 | ) | (1,232,730 | ) | (1,015,866 | ) | |||||||
Interest income | 961 | 404 | 1,373 | 12,787 | |||||||||||
Gain (loss) on investments, net | (18,900 | ) | 24,833 | 169,888 | 83,467 | ||||||||||
Gain (loss) on derivative contracts, net | (16,763 | ) | 773 | (154,270 | ) | (26,572 | ) | ||||||||
Gain (loss) on interest rate swap contracts | 1,051 | (15,861 | ) | 12,539 | 24,380 | ||||||||||
Loss on extinguishment of debt and write-off of deferred financing costs | (38,858 | ) | — | (600,240 | ) | (19,948 | ) | ||||||||
Other income (expense), net | (65 | ) | 2,531 | 832 | 2,548 | ||||||||||
Loss before income taxes | $ | (316,774 | ) | $ | (290,783 | ) | $ | (1,162,728 | ) | $ | (696,762 | ) |
A reconciliation of reportable segment amounts to the Company's consolidated balances for the year ended December 31, 2016 is as follows:
Operating income for reportable segments |
|
$ |
459,666 |
|
Items excluded from operating income: |
|
|
|
|
Interest expense |
|
|
(1,456,541 |
) |
Interest income |
|
|
13,811 |
|
Gain on investments, net |
|
|
141,896 |
|
Loss on equity derivative contracts, net |
|
|
(53,696 |
) |
Loss on interest rate swap contracts |
|
|
(72,961 |
) |
Loss on extinguishment of debt and write-off of deferred financing costs |
|
|
(127,649 |
) |
Other income, net |
|
|
4,329 |
|
|
|
|
|
|
Loss before income taxes |
|
$ |
(1,091,145 |
) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||||||||||||||||
Cablevision | Cequel | Eliminations | Total | Cablevision (a) | Cequel | Total | |||||||||||||||||||||
Residential: | |||||||||||||||||||||||||||
Pay TV | $ | 782,214 | $ | 272,178 | $ | — | $ | 1,054,392 | $ | 772,886 | $ | 279,109 | $ | 1,051,995 | |||||||||||||
Broadband | 404,153 | 241,941 | — | 646,094 | 366,166 | 212,439 | 578,605 | ||||||||||||||||||||
Telephony | 172,904 | 31,849 | — | 204,753 | 178,000 | 38,186 | 216,186 | ||||||||||||||||||||
Business services and wholesale | 230,274 | 94,486 | — | 324,760 | 220,352 | 89,014 | 309,366 | ||||||||||||||||||||
Advertising | 67,563 | 17,456 | (480 | ) | 84,539 | 67,815 | 20,944 | 88,759 | |||||||||||||||||||
Other | 7,211 | 5,426 | — | 12,637 | 9,480 | 5,830 | 15,310 | ||||||||||||||||||||
Total Revenue | $ | 1,664,319 | $ | 663,336 | $ | (480 | ) | $ | 2,327,175 | $ | 1,614,699 | $ | 645,522 | $ | 2,260,221 |
Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | ||||||||||||||||||||||||||
Cablevision (a) | Cequel | Eliminations | Total | Cablevision (a) | Cequel | Total | |||||||||||||||||||||
Residential: | |||||||||||||||||||||||||||
Pay TV | $ | 2,356,230 | $ | 829,380 | $ | — | $ | 3,185,610 | $ | 859,932 | $ | 840,354 | $ | 1,700,286 | |||||||||||||
Broadband | 1,177,731 | 709,548 | — | 1,887,279 | 406,057 | 613,012 | 1,019,069 | ||||||||||||||||||||
Telephony | 524,696 | 99,381 | — | 624,077 | 198,282 | 116,855 | 315,137 | ||||||||||||||||||||
Business services and wholesale | 690,168 | 278,123 | — | 968,291 | 244,685 | 260,278 | 504,963 | ||||||||||||||||||||
Advertising | 203,351 | 54,384 | (480 | ) | 257,255 | 75,458 | 63,476 | 138,934 | |||||||||||||||||||
Other | 21,366 | 17,314 | — | 38,680 | 14,145 | 18,777 | 32,922 | ||||||||||||||||||||
Total Revenue | $ | 4,973,542 | $ | 1,988,130 | $ | (480 | ) | $ | 6,961,192 | $ | 1,798,559 | $ | 1,912,752 | $ | 3,711,311 |
The following table presents the composition of revenue by segment for the year ended December 31, 2016:
|
|
Cablevision |
|
Cequel |
|
Total |
|
|||
Revenue: |
|
|
|
|
|
|
|
|
|
|
Residential: |
|
|
|
|
|
|
|
|
|
|
Video |
|
$ |
1,638,691 |
|
$ |
1,120,525 |
|
$ |
2,759,216 |
|
High-speed data |
|
|
782,615 |
|
|
834,414 |
|
|
1,617,029 |
|
Voice |
|
|
376,034 |
|
|
153,939 |
|
|
529,973 |
|
Business Services |
|
|
468,632 |
|
|
350,909 |
|
|
819,541 |
|
Advertising |
|
|
157,331 |
|
|
88,371 |
|
|
245,702 |
|
Other |
|
|
20,749 |
|
|
25,002 |
|
|
45,751 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
$ |
3,444,052 |
|
$ |
2,573,160 |
|
$ |
6,017,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Cablevision | $ | 228,594 | $ | 150,815 | $ | 550,231 | $ | 150,965 | |||||||
Cequel | 75,042 | 97,341 | 213,067 | 226,761 | |||||||||||
$ | 303,636 | $ | 248,156 | $ | 763,298 | $ | 377,726 |
Capital expenditures for the year ended December 31, 2016 by reportable segment are presented below:
Cablevision |
|
$ |
298,357 |
|
Cequel |
|
|
327,184 |
|
|
|
|
|
|
|
|
$ |
625,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
|
Basic and Diluted |
|
|
|
|
(Unaudited) |
|
|
Numerator: |
|
|
|
|
Net loss attributable to Altice USA, Inc. stockholders |
|
$ |
(832,030 |
) |
Denominator: |
|
|
|
|
Weighted average shares of common stock outstanding—basic and diluted (in thousands) |
|
|
0.1 |
|
Pro forma adjustment to reflect the issuance of common stock (in thousands) |
|
|
737,069 |
|
Weighted average shares of common stock outstanding used in computing the pro forma net income per share—basic and diluted (in thousands) |
|
|
737,069 |
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss per share—basic and diluted |
|
$ |
(1.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
the Company amended and restated its certificate of incorporation to, among other things, provide for Class A common stock, Class B common stock and Class C common stock;
|
•
|
BC Partners LLP ("BCP") and Canada Pension Plan Investment Board (‘‘CPPIB" and together with BCP, the‘‘Co-Investors’’) and Uppernext S.C.S.p. ("Uppernext"), an entity controlled by Mr. Patrick Drahi (founder and controlling stockholder of Altice N.V.), exchanged their indirect ownership interest in the Company for shares of the Company’s common stock;
|
•
|
Neptune Management LP (‘‘Management LP’’) redeemed its Class B units for shares of the Company’s common stock that it received from the redemption of its Class B units in Neptune Holding US LP;
|
•
|
the Company converted $525,000 aggregate principal amount of notes issued by the Company to the Co-Investors (together with accrued and unpaid interest and applicable premium) into shares of the Company’s common stock at the IPO price (see Note 9 for further details);
|
•
|
$1,225,000 aggregate principal amount of notes issued by the Company to a subsidiary of Altice N.V. (together with accrued and unpaid interest and applicable premium) was transferred to CVC 3 B.V., an indirect subsidiary of Altice N.V. ("CVC 3") and then the Company converted such notes into shares of the Company’s common stock at the IPO price (see Note 9 for further details);
|
•
|
the Co-Investors, Neptune Holding US LP, A4 S.A. (an entity controlled by the family of Mr. Drahi), and former Class B unitholders of Management LP (including Uppernext) exchanged shares of the Company’s common stock for new shares of the Company’s Class A common stock; and
|
•
|
CVC 3 and A4 S.A. exchanged shares of the Company’s common stock for new shares of the Company’s Class B common stock.
|
DESCRIPTION OF BUSINESS, RELATED MATTERS AND BASIS OF PRESENTATION
The Company and Related Matters
Altice USA, Inc. ("Altice USA" or the "Company") was incorporated in Delaware on September 14, 2015. As of December 31, 2016, Altice USA is majority-owned by Altice N.V., a public company with limited liability (naamloze vennootshcap) under Dutch law ("Altice N.V.").
Altice N.V. acquired Cequel Corporation ("Cequel" or "Suddenlink") on December 21, 2015 and Cequel was contributed to Altice USA on June 9, 2016. Altice USA had no operations of its own other than the issuance of debt prior to the contribution of Cequel on June 9, 2016 by Altice N.V. The results of operations of Cequel for the year ended December 31, 2016 have been included in the results of operations of Altice USA for the same period, as Cequel was under common control with Altice USA throughout 2016. Altice USA acquired Cablevision Systems Corporation ("Cablevision" or "Optimum") on June 21, 2016.
In addition to the operating results of Cequel for the year ended December 31, 2016, the operating results of Altice USA include the operating results of Cablevision for the period from the date of acquisition, June 21, 2016 through December 31, 2016. In addition to the operating results of Cequel and Cablevision described above, Altice USA incurred net interest expense of $419,456. For the period from inception of Altice USA through December 31, 2015, the operating results of Altice USA include $157,192 of interest expense related to the indebtedness issued to fund the acquisition of Cablevision, discussed below, and the operating results of Cequel for the 10 day period, December 21, 2015 through December 31, 2015. The Company classifies its operations into two reportable segments: Cablevision, which operates in the New York metropolitan area, and Cequel, which principally operates in markets in the south-central United States.
Acquisition of Cablevision Systems Corporation
On June 21, 2016 (the "Cablevision Acquisition Date"), pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 16, 2015, by and among Cablevision, Altice N.V., Neptune Merger Sub Corp., a wholly-owned subsidiary of Altice N.V. ("Merger Sub"), Merger Sub merged with and into Cablevision, with Cablevision surviving the merger (the "Cablevision Acquisition").
In connection with the Cablevision Acquisition, each outstanding share of the Cablevision NY Group Class A common stock, par value $0.01 per share, and Cablevision NY Group Class B common stock, par value $0.01 per share, and together with the Cablevision NY Group Class A common stock, the "Shares") other than (i) Shares owned by Cablevision, Altice N.V. or any of their respective wholly-owned subsidiaries, in each case not held on behalf of third parties in a fiduciary capacity, received $34.90 in cash without interest, less applicable tax withholdings (the "Cablevision Acquisition Consideration").
Pursuant to an agreement, dated December 21, 2015, by and among CVC 2 B.V., CIE Management IX Limited, for and on behalf of the limited partnerships BC European Capital IX-1 through 11 and Canada Pension Plan Investment Board, certain affiliates of BCP and CPPIB (the "Co-Investors") funded approximately $1,000,000 toward the payment of the aggregate Per Share Cablevision Acquisition Consideration, and indirectly acquired approximately 30% of the Shares of Cablevision.
Also in connection with the Cablevision Acquisition, outstanding equity-based awards granted under Cablevision's equity plans were cancelled and converted into cash based upon the $34.90 per Share Cablevision Acquisition price in accordance with the original terms of the awards. The total consideration for the outstanding CNYG Class A Shares, the outstanding CNYG Class B Shares, and the equity-based awards amounted to $9,958,323.
In connection with the Cablevision Acquisition, in October 2015, Neptune Finco Corp. ("Finco"), an indirect wholly-owned subsidiary of Altice N.V. formed to complete the financing described herein and the merger with CSC Holdings, LLC ("CSC Holdings"), a wholly-owned subsidiary of Cablevision, borrowed an aggregate principal amount of $3,800,000 under a term loan facility (the "Term Credit Facility") and entered into revolving loan commitments in an aggregate principal amount of $2,000,000 (the "Revolving Credit Facility" and, together with the Term Credit Facility, the "Credit Facilities").
Finco also issued $1,800,000 aggregate principal amount of 10.125% senior notes due 2023 (the "2023 Notes"), $2,000,000 aggregate principal amount of 10.875% senior notes due 2025 (the "2025 Notes"), and $1,000,000 aggregate principal amount of 6.625% senior guaranteed notes due 2025 (the "2025 Guaranteed Notes") (collectively the "Cablevision Acquisition Notes").
On June 21, 2016, immediately following the Cablevision Acquisition, Finco merged with and into CSC Holdings, with CSC Holdings surviving the merger (the "CSC Holdings Merger"), and the Cablevision Acquisition Notes and the Credit Facilities became obligations of CSC Holdings.
On June 21, 2016, in connection with the Cablevision Acquisition, the Company issued notes payable to affiliates and related parties aggregating $1,750,000, of which $875,000 bear interest at 10.75% and $875,000 bear interest at 11%.
The Cablevision Acquisition was accounted for as a business combination in accordance with ASC Topic 805. Accordingly, the Company stepped up 100% of the assets and liabilities assumed to their fair value at the Cablevision Acquisition Date. See Note 3 for further details.
Acquisition of Cequel Corporation
On December 21, 2015, Altice N.V. acquired approximately 70% of the total outstanding equity interests in Cequel Corporation (the "Cequel Acquisition") from the direct and indirect stockholders of Cequel Corporation (the "Sellers"). The consideration for the acquired equity interests was based on a total equity valuation for 100% of the capital and voting rights of Cequel of $3,973,528 which includes $2,797,928 of cash consideration, $675,600 of retained equity held by entities affiliated with BC Partners and CPPIB and $500,000 funded by the issuance by an affiliate of Altice N.V. of a senior vendor note that was subscribed by entities affiliated with BC Partners and CPPIB. Following the closing of the Cequel Acquisition, entities affiliated with BC Partners and CPPIB retained a 30% equity interest in a parent entity of the Company. In addition, the carried interest plans of the Stockholders were cashed out whereby payments were made to participants in such carried interest plans, including certain officers and directors of Cequel.
The Cequel Acquisition was accounted for as a business combination in accordance with ASC Topic 805. Accordingly, the Company stepped up 100% of the assets and liabilities assumed to their fair value at the Cequel Acquisition Date. See Note 3 for further details.
In June 2016, Cequel was contributed to Altice USA. The accompanying consolidated financial statements include the operating results of Cequel from January 1, 2016 through December 31, 2016 and the operating results of Cablevision from the Cablevision Acquisition Date through December 31, 2016.
Basis of Presentation
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("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 revenues and expenses during the reporting period. Actual results could differ from those estimates. See Note 11 for a discussion of fair value estimates.
DESCRIPTION OF BUSINESS, RELATED MATTERS AND BASIS OF PRESENTATION
The Company and Related Matters
Cablevision Systems Corporation ("Cablevision"), through its wholly-owned subsidiary CSC Holdings, LLC ("CSC Holdings,") and collectively with Cablevision, the "Company"), owns and operates cable systems and owns companies that provide regional news, local programming and advertising sales services for the cable television industry and Ethernet-based data, Internet, voice and video transport and managed services to the business market. The Company operates and reports financial information in one segment. Prior to the sale of a 75% interest in Newsday LLC on July 7, 2016, the Company consolidating the operating results of Newsday. Effective July 7, 2016, the operating results of Newsday are no longer consolidated with those of the Company and the Company's 25% interest in the operating results of Newsday is recorded on the equity basis (see Note 16).
Altice Merger
On June 21, 2016 (the "Merger Date"), pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 16, 2015, by and among Cablevision, Altice N.V. ("Altice"), Neptune Merger Sub Corp., a wholly-owned subsidiary of Altice ("Merger Sub"), Merger Sub merged with and into Cablevision, with Cablevision surviving the merger (the "Merger").
In connection with the Merger, each outstanding share of the Cablevision NY Group Class A common stock, par value $0.01 per share ("CNYG Class A Shares"), and Cablevision NY Group Class B common stock, par value $0.01 per share ("CNYG Class B Shares", and together with the CNYG Class A Shares, the "Shares") other than (i) Shares owned by Cablevision, Altice or any of their respective wholly-owned subsidiaries, in each case not held on behalf of third parties in a fiduciary capacity, received $34.90 in cash without interest, less applicable tax withholdings (the "Merger Consideration").
Pursuant to an agreement, dated December 21, 2015, by and among CVC 2 B.V., CIE Management IX Limited, for and on behalf of the limited partnerships BC European Capital IX-1 through 11 and Canada Pension Plan Investment Board, certain affiliates of BCP and CPPIB (the "Co-Investors") funded approximately $1,000,000 toward the payment of the aggregate Merger Consideration, and indirectly acquired approximately 30% of the Shares of Cablevision.
Also in connection with the Merger, outstanding equity-based awards granted under Cablevision's equity plans were cancelled and converted into cash based upon the $34.90 per Share merger price in accordance with the original terms of the awards. The total consideration for the outstanding CNYG Class A Shares, the outstanding CNYG Class B Shares, and the equity-based awards amounted to $9,958,323.
In connection with the Merger, in October 2015, Neptune Finco Corp. ("Finco"), an indirect wholly-owned subsidiary of Altice formed to complete the financing described herein and the merger with CSC Holdings, borrowed an aggregate principal amount of $3,800,000 under a term loan facility (the "Term Credit Facility") and entered into revolving loan commitments in an aggregate principal amount of $2,000,000 (the "Revolving Credit Facility" and, together with the Term Credit Facility, the "Credit Facilities").
Finco also issued $1,800,000 aggregate principal amount of 10.125% senior notes due 2023 (the "2023 Notes"), $2,000,000 aggregate principal amount of 10.875% senior notes due 2025 (the "2025 Notes"), and $1,000,000 aggregate principal amount of 6.625% senior guaranteed notes due 2025 (the "2025 Guaranteed Notes") (collectively the "Merger Notes").
On June 21, 2016, immediately following the Merger, Finco merged with and into CSC Holdings, with CSC Holdings surviving the merger (the "CSC Holdings Merger"), and the Merger Notes and the Credit Facilities became obligations of CSC Holdings.
The accompanying financial statements represent the operating results and cash flows of the Company for the period January 1, 2016 to June 20, 2016 (Predecessor) and for the years ended December 31, 2015 and 2014. The operating results of the Company for the period June 21, 2016 to December 31, 2016 (Successor) are incorporated in the consolidated financial statements of Altice USA, Inc.
Basis of Presentation
Principles of Consolidation
The accompanying consolidated financial statements of Cablevision include the accounts of Cablevision and its majority-owned subsidiaries. Cablevision has no business operations independent of CSC Holdings, whose operating results and financial position are consolidated into Cablevision. All significant intercompany transactions and balances between Cablevision and CSC Holdings and their respective consolidated subsidiaries are eliminated in consolidation.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("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 revenues and expenses during the reporting period. Actual results could differ from those estimates. See Note 12 for a discussion of fair value estimates.
Reclassifications
Certain reclassifications have been made in the consolidated financial statements in the 2014 and 2015 financial statements to conform to the 2016 presentation.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes video, high-speed data, and voice services revenues as the services are provided to customers. Revenue received from customers who purchase bundled services at a discounted rate is allocated to each product in a pro-rata manner based on the individual product's selling price (generally, the price at which the product is regularly sold on a standalone basis). Installation revenue for the Company's video, consumer high-speed data and VoIP services is recognized as installations are completed, as direct selling costs have exceeded this revenue in all periods reported. Advertising revenues are recognized when commercials are aired.
Revenues derived from other sources are recognized when services are provided or events occur.
Multiple-Element Transactions
In the normal course of business, the Company may enter into multiple-element transactions where it is simultaneously both a customer and a vendor with the same counterparty or in which it purchases multiple products and/or services, or settles outstanding items contemporaneous with the purchase of a product or service from a single counterparty. The Company's policy for accounting for each transaction negotiated contemporaneously is to record each deliverable of the transaction based on its best estimate of selling price in a manner consistent with that used to determine the price to sell each deliverable on a standalone basis. In determining the fair value of the respective deliverable, the Company will utilize quoted market prices (as available), historical transactions or comparable transactions.
Gross Versus Net Revenue Recognition
In the normal course of business, 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. The Company's policy is that, in instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities and amounts received from the customers are recorded on a gross basis. That is, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customer are recorded as revenue. For the year ended December 31, 2016, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $154,732.
Technical and Operating Expenses
Costs of revenue related to sales of services are classified as "programming and other direct costs" in the accompanying consolidated statement of operations.
Programming Costs
Programming expenses related to the Company's video service represent fees paid to programming distributors to license the programming distributed to subscribers. This programming is acquired generally under multi-year distribution agreements, with rates usually based on the number of subscribers that receive the programming. If there are periods when an existing distribution agreement has expired and the parties have not finalized negotiations of either a renewal of that agreement or a new agreement for certain periods of time, the Company continues to carry and pay for these services until execution of definitive replacement agreements or renewals. The amount of programming expense recorded during the interim period is based on the Company's estimates of the ultimate contractual agreement expected to be reached, which is based on several factors, including previous contractual rates, customary rate increases and the current status of negotiations. Such estimates are adjusted as negotiations progress until new programming terms are finalized.
In addition, the Company has received, or may receive, incentives from programming distributors for carriage of the distributors' programming. The Company generally recognizes these incentives as a reduction of programming costs in "programming and other direct costs", generally over the term of the distribution agreement.
Advertising Expenses
Advertising costs are charged to expense when incurred and are reflected in "other operating expenses" in the accompanying consolidated statement of operations. Advertising costs amounted to $135,513 for the year ended December 31, 2016.
Share-Based Compensation
Share-based compensation cost relates to awards of units in a carried unit plan. For carried interest units, the Company measures share-based compensation cost at the grant date fair value and recognizes the expense over the requisite service period or when it is probable any related performance condition will be met. For carried interest units with graded vesting requirement, compensation cost is recognized on an accelerated method under the graded vesting method over the requisite service period for the carried interest unit. Carried interest units that vest entirely at the end of the vesting requirement are expensed on a straight-line basis.
The Company estimates the fair value of carried interest units using an option pricing model. Key inputs that are used in applying the option pricing method are total equity value, equity volatility, risk free rate and time to liquidity event. The estimate of total equity value is determined using a combination of the income approach, which incorporates cash flow projections that are discounted at an appropriate rate, and the market approach, which involves applying a market multiple to the Company's projected operating results. The Company estimates volatility based on the historical equity volatility of comparable publicly-traded companies. Because there has been no public market for our equity prior to this offering, the estimates and assumptions the Company uses in the share-based compensation valuations are highly complex and subjective. Following the offering, such subjective valuations and estimates will no longer be necessary because we will rely on the market price of the Company's common stock to determine the fair value of share-based compensation awards. See Note 14 to the consolidated financial statements for additional information about our share-based compensation.
Income Taxes
The Company's provision for income taxes is based on current period income, changes in deferred tax assets and liabilities and changes in estimates with regard to uncertain tax positions. Deferred tax assets are subject to an ongoing assessment of realizability. The Company provides deferred taxes for the outside basis difference of its investment in partnerships.
Cash and Cash Equivalents
The Company's cash investments are placed with money market funds and financial institutions that are investment grade as rated by Standard & Poor's and Moody's Investors Service. The Company selects money market funds that predominantly invest in marketable, direct obligations issued or guaranteed by the United States government or its agencies, commercial paper, fully collateralized repurchase agreements, certificates of deposit, and time deposits.
The Company considers the balance of its investment in funds that substantially hold securities that mature within three months or less from the date the fund purchases these securities to be cash equivalents. The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.
Accounts Receivable
Accounts receivable are recorded at net realizable value. The Company periodically assesses the adequacy of valuation allowances for uncollectible accounts receivable by evaluating the collectability of outstanding receivables and general factors such as historical collection experience, length of time individual receivables are past due, and the economic and competitive environment.
Investments
Investment securities and investment securities pledged as collateral are classified as trading securities and are stated at fair value with realized and unrealized holding gains and losses included in net income.
Long-Lived Assets and Amortizable Intangible Assets
Property, plant and equipment, including construction materials, are carried at cost, and include all direct costs and certain indirect costs associated with the construction of cable systems, and the costs of new equipment installations. Equipment under capital leases is recorded at the present value of the total minimum lease payments. Depreciation on equipment is calculated on the straight-line basis over the estimated useful lives of the assets or, with respect to equipment under capital leases and leasehold improvements, amortized over the shorter of the lease term or the assets' useful lives and reported in depreciation and amortization (including impairments) in the consolidated statements of operations.
The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized over the estimated useful life of the software and reported in depreciation and amortization (including impairments).
Customer relationships, trade names and other intangibles established in connection with acquisitions that are finite-lived are amortized in a manner that reflects the pattern in which the projected net cash inflows to the Company are expected to occur, such as the sum of the years' digits method, or when such pattern does not exist, using the straight-line basis over their respective estimated useful lives.
The Company reviews its long-lived assets (property, plant and equipment, and intangible assets subject to amortization that arose from acquisitions) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and the value of franchises, trademarks, and certain other intangibles acquired in purchase business combinations which have indefinite useful lives are not amortized. Rather, such assets are tested for impairment annually or upon the occurrence of a triggering event.
The Company assesses qualitative factors for its reporting units that carry goodwill. If the qualitative assessment results in a conclusion that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting unit.
When the qualitative assessment is not used, or if the qualitative assessment is not conclusive and it is necessary to calculate the fair value of a reporting unit, then the impairment analysis for goodwill is performed at the reporting unit level using a two-step approach. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill utilizing an enterprise-value based premise approach. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of goodwill impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill which would be recognized in a business combination.
The Company assesses qualitative factors to determine whether it is necessary to perform the one-step quantitative identifiable indefinite-lived intangible assets impairment test. This quantitative test is required only if the Company concludes that it is more likely than not that a unit of accounting's fair value is less than its carrying amount. When the qualitative assessment is not used, or if the qualitative assessment is not conclusive, the impairment test for other intangible assets not subject to amortization requires a comparison of the fair value of the intangible asset with its carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Deferred Financing Costs
Deferred financing costs are being amortized to interest expense using the effective interest method over the terms of the related debt.
Derivative Financial Instruments
The Company accounts for derivative financial instruments as either assets or liabilities measured at fair value. The Company uses derivative instruments to manage its exposure to market risks from changes in certain equity prices and interest rates and does not hold or issue derivative instruments for speculative or trading purposes. These derivative instruments are not designated as hedges, and changes in the fair values of these derivatives are recognized in the statement of operations as gains (losses) on derivative contracts.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when the Company believes it is probable that a liability has been incurred and the amount of the contingency can be reasonably estimated.
Recently Adopted Accounting Pronouncements
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that the statement of cash flows disclose the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. ASU No. 2016-18 provides specific guidance on the presentation of restricted cash in the statement of cash flows. The new guidance was adopted as of December 31, 2016.
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17 (Topic 740), Balance Sheet Classification of Deferred Taxes. This ASU amends existing guidance to require the presentation of deferred tax liabilities and assets as noncurrent within a classified statement of financial position. ASU No. 2015-17 was adopted by the Company in the fourth quarter 2016 and was applied prospectively to all deferred tax liabilities and assets.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Prior to the issuance of the standard, entities were required to retrospectively apply adjustments made to provisional amounts recognized in a business combination. ASU No. 2015-16 was adopted by the Company on January 1, 2016.
In April 2015, the FASB issued ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. ASU No. 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU No. 2015-05 was adopted by the Company on January 1, 2016 and did not have a material impact on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs from line-of-credit arrangements after adoption of ASU No. 2015-03. ASU No. 2015-15 clarifies that the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU No. 2015-03 was adopted by the Company on January 1, 2016.
In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU No. 2014-15 was adopted by the Company for the annual period ended December 31, 2016.
In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period. ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. ASU No. 2014-12 was adopted by the Company on January 1, 2016 on a prospective basis and did not have any impact on the Company's consolidated financial statements.
Recently Issued But Not Yet Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and allows the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14 that approved deferring the effective date by one year so that ASU No. 2014-09 would become effective for the Company on January 1, 2018. The FASB also approved, in July 2015, permitting the early adoption of ASU No. 2014-09, but not before the original effective date for the Company of January 1, 2017.
In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in order to clarify the Codification and to correct any unintended application of the guidance. These items are not expected to have a significant effect on the current accounting standard. The amendments in this update affect the guidance in ASU No. 2014-09, which is not yet effective. ASU No. 2014-09 will be effective, reflecting the one-year deferral, for interim and annual periods beginning after December 15, 2017 (January 1, 2018 for the Company). Early adoption of the standard is permitted but not before the original effective date. Companies can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact that the adoption of ASU No. 2014-09 will have on its consolidated financial statements and selecting the method of transition to the new standard. We currently expect the adoption to impact the timing of the recognition of residential installation revenue and the recognition of commission expenses.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU No. 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The new guidance becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2016-15 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which provides simplification of income tax accounting for share-based payment awards. The new guidance becomes effective for the Company on January 1, 2017 with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value will be applied using the modified retrospective transition method. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term will be applied prospectively. The Company may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. In connection with the adoption on January 1, 2017, a deferred tax asset of approximately $309,000 for previously unrealized excess tax benefits will be recognized with the offset recorded to accumulated deficit.
In February 2016, the FASB issued ASU 2016-02, Leases, which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019 with early adoption permitted and will be applied using the modified retrospective method. The Company has not yet completed the evaluation of the effect that ASU No. 2016-02 will have on its consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07 Compensation—Retirement Benefits (Topic 715). ASU No. 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. It also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and what component of net benefit cost is eligible for capitalization. ASU No. 2017-07 becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2017-07 will have on its consolidated financial statements.
Common Stock
At December 31, 2016, the Company had 100 shares of common stock with a par value of $.01 issued and outstanding.
Net Loss Per Share
Basic and diluted net loss per share have been computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share excludes the effects of common stock equivalents as they are anti-dilutive.
Concentrations of Credit Risk
Financial instruments that may potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents and trade account receivables. The Company monitors the financial institutions and money market funds where it invests its cash and cash equivalents with diversification among counterparties to mitigate exposure to any single financial institution. The Company's emphasis is primarily on safety of principal and liquidity and secondarily on maximizing the yield on its investments. Management believes that no significant concentration of credit risk exists with respect to its cash and cash equivalents balances because of its assessment of the creditworthiness and financial viability of the respective financial institutions.
The Company did not have a single customer that represented 10% or more of its consolidated revenues for the year ended December 31, 2016, or 10% or more of its consolidated net trade receivables at December 31, 2016.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes video, high-speed data, and voice services revenues as the services are provided to customers. Revenue received from customers who purchase bundled services at a discounted rate is allocated to each product in a pro-rata manner based on the individual product's selling price (generally, the price at which the product is regularly sold on a standalone basis). Installation revenue for the Company's video, consumer high-speed data and VoIP services is recognized as installations are completed, as direct selling costs have exceeded this revenue in all periods reported. Advertising revenues are recognized when commercials are aired.
Revenues derived from other sources are recognized when services are provided or events occur.
Multiple-Element Transactions
In the normal course of business, the Company may enter into multiple-element transactions where it is simultaneously both a customer and a vendor with the same counterparty or in which it purchases multiple products and/or services, or settles outstanding items contemporaneous with the purchase of a product or service from a single counterparty. The Company's policy for accounting for each transaction negotiated contemporaneously is to record each deliverable of the transaction based on its best estimate of selling price in a manner consistent with that used to determine the price to sell each deliverable on a standalone basis. In determining the fair value of the respective deliverable, the Company will utilize quoted market prices (as available), historical transactions or comparable transactions.
Gross Versus Net Revenue Recognition
In the normal course of business, 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. The Company's policy is that, in instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities and amounts received from the customers are recorded on a gross basis. That is, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customer are recorded as revenue. For the period January 1, 2016 through June 20, 2016 and for the years ended December 31, 2015 and 2014, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $95,432, $199,701 and $178,630, respectively.
Technical and Operating Expenses
Costs of revenue related to sales of services are classified as "programming and other direct costs" in the accompanying consolidated statements of operations.
Programming Costs
Programming expenses related to the Company's video service represent fees paid to programming distributors to license the programming distributed to subscribers. This programming is acquired generally under multi-year distribution agreements, with rates usually based on the number of subscribers that receive the programming. There have been periods when an existing distribution agreement has expired and the parties have not finalized negotiations of either a renewal of that agreement or a new agreement for certain periods of time. In substantially all these instances, the Company continues to carry and pay for these services until execution of definitive replacement agreements or renewals. The amount of programming expense recorded during the interim period is based on the Company's estimates of the ultimate contractual agreement expected to be reached, which is based on several factors, including previous contractual rates, customary rate increases and the current status of negotiations. Such estimates are adjusted as negotiations progress until new programming terms are finalized.
In addition, the Company has received, or may receive, incentives from programming distributors for carriage of the distributors' programming. The Company generally recognizes these incentives as a reduction of programming costs in "programming and other direct costs", generally over the term of the distribution agreement.
Advertising Expenses
Advertising costs are charged to expense when incurred and are reflected in "other operating expenses" in the accompanying consolidated statements of operations. Advertising costs amounted to $62,760, $160,671, and $156,228 for the period January 1, 2016 through June 20, 2016 and for the years ended December 31, 2015 and 2014, respectively.
Share-Based Compensation
Share-based compensation expense is based on the fair value of the portion of share-based payment awards that are ultimately expected to vest. For share-based compensation awards that can be settled in cash, the Company recognizes compensation expense based on the estimated fair value of the award at each reporting period.
For options and performance based option awards, Cablevision recognized compensation expense based on the estimated grant date fair value using the Black-Scholes valuation model. For options not subject to performance based vesting conditions, Cablevision recognized the compensation expense using a straight-line amortization method. For options subject to performance based vesting conditions, Cablevision recognized compensation expense based on the probable outcome of the performance criteria over the requisite service period for each tranche of awards.
For restricted shares, Cablevision recognized compensation expense using a straight-line amortization method based on the grant date price of CNYG Class A common stock over the vesting period. For restricted stock units granted to non-employee director which vested 100% on the date of grant, compensation expense was recognized on the date of grant based on the grant date price of CNYG Class A common stock.
For performance based restricted stock units ("PSUs") which cliff vested in three years, Cablevision recognized compensation expense on a straight-line basis over the vesting period based on the estimated number of shares of CNYG Class A common stock expected to be issued.
Income Taxes
The Company's provision for income taxes is based on current period income, changes in deferred tax assets and liabilities and changes in estimates with regard to uncertain tax positions. Deferred tax assets are subject to an ongoing assessment of realizability. The Company provides deferred taxes for the outside basis difference of its investment in partnerships. In the second quarter of 2016, the Company changed its accounting policy on a prospective basis to present interest expense relating to uncertain tax position as additional interest expense.
Cash and Cash Equivalents
The Company's cash investments are placed with money market funds and financial institutions that are investment grade as rated by Standard & Poor's and Moody's Investors Service. The Company selects money market funds that predominantly invest in marketable, direct obligations issued or guaranteed by the United States government or its agencies, commercial paper, fully collateralized repurchase agreements, certificates of deposit, and time deposits.
The Company considers the balance of its investment in funds that substantially hold securities that mature within three months or less from the date the fund purchases these securities to be cash equivalents. The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.
Accounts Receivable
Accounts receivable are recorded at net realizable value. The Company periodically assesses the adequacy of valuation allowances for uncollectible accounts receivable by evaluating the collectability of outstanding receivables and general factors such as historical collection experience, length of time individual receivables are past due, and the economic and competitive environment.
Investments
Investment securities and investment securities pledged as collateral are classified as trading securities and are stated at fair value with realized and unrealized holding gains and losses included in net income.
Long-Lived Assets and Amortizable Intangible Assets
Property, plant and equipment, including construction materials, are carried at cost, and include all direct costs and certain indirect costs associated with the construction of cable systems, and the costs of new equipment installations. Equipment under capital leases is recorded at the present value of the total minimum lease payments. Depreciation on equipment is calculated on the straight-line basis over the estimated useful lives of the assets or, with respect to equipment under capital leases and leasehold improvements, amortized over the shorter of the lease term or the assets' useful lives and reported in depreciation and amortization (including impairments) in the consolidated statements of operations.
The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized over the estimated useful life of the software and reported in depreciation and amortization (including impairments).
Customer relationships, trade names and other intangibles established in connection with acquisitions that are finite-lived are amortized in a manner that reflects the pattern in which the projected net cash inflows to the Company are expected to occur, such as the sum of the years' digits method, or when such pattern does not exist, using the straight-line basis over their respective estimated useful lives.
The Company reviews its long-lived assets (property, plant and equipment, and intangible assets subject to amortization that arose from acquisitions) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and the value of franchises, trademarks, and certain other intangibles acquired in purchase business combinations which have indefinite useful lives are not amortized. Rather, such assets are tested for impairment annually or upon the occurrence of a triggering event.
The Company assesses qualitative factors for its reporting units that carry goodwill. If the qualitative assessment results in a conclusion that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting unit.
When the qualitative assessment is not used, or if the qualitative assessment is not conclusive and it is necessary to calculate the fair value of a reporting unit, then the impairment analysis for goodwill is performed at the reporting unit level using a two-step approach. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill utilizing an enterprise-value based premise approach. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of goodwill impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill which would be recognized in a business combination.
The Company assesses qualitative factors to determine whether it is necessary to perform the one-step quantitative identifiable indefinite-lived intangible assets impairment test. This quantitative test is required only if the Company concludes that it is more likely than not that a unit of accounting's fair value is less than its carrying amount. When the qualitative assessment is not used, or if the qualitative assessment is not conclusive, the impairment test for other intangible assets not subject to amortization requires a comparison of the fair value of the intangible asset with its carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Deferred Financing Costs
Deferred financing costs are being amortized to interest expense using the effective interest method over the terms of the related debt.
Derivative Financial Instruments
The Company accounts for derivative financial instruments as either assets or liabilities measured at fair value. The Company uses derivative instruments to manage its exposure to market risks from changes in certain equity prices and interest rates and does not hold or issue derivative instruments for speculative or trading purposes. These derivative instruments are not designated as hedges, and changes in the fair values of these derivatives are recognized in the statements of income as gains (losses) on derivative contracts.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when the Company believes it is probable that a liability has been incurred and the amount of the contingency can be reasonably estimated.
Recently Adopted Accounting Pronouncements
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17 (Topic 740), Balance Sheet Classification of Deferred Taxes. This ASU amends existing guidance to require the presentation of deferred tax liabilities and assets as noncurrent within a classified statement of financial position. ASU No. 2015-17 was adopted by the Company as of June 30, 2016 and was applied prospectively to all deferred tax liabilities and assets.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Prior to the issuance of the standard, entities were required to retrospectively apply adjustments made to provisional amounts recognized in a business combination. ASU No. 2015-16 was adopted by the Company on January 1, 2016.
In April 2015, the FASB issued ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. ASU No. 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU No. 2015-05 was adopted by the Company on January 1, 2016 and did not have a material impact on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs from line-of-credit arrangements after adoption of ASU No. 2015-03. ASU No. 2015-15 clarifies that the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU No. 2015-03 was adopted by the Company on January 1, 2016 representing a change in accounting principle and was applied retrospectively to all periods presented. Debt issuance costs, net for the Company of $67,119, as of December 31, 2015 were reclassified from deferred financing costs and presented as a reduction to debt in the consolidated balance sheets.
Debt issuance costs, net for the Company of $7,588 as of December 31, 2015 relating to its revolving credit facility were not impacted by the adoption of ASU No. 2015-03 and are reflected as long-term assets in the accompanying consolidated balance sheets.
In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU No. 2014-15 was adopted by the Company on January 1, 2016.
In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period. ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. ASU No. 2014-12 was adopted by the Company on January 1, 2016 on a prospective basis and did not have any impact on the Company's consolidated financial statements.
Recently Issued But Not Yet Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and allows the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14 that approved deferring the effective date by one year so that ASU No. 2014-09 would become effective for the Company on January 1, 2018. The FASB also approved, in July 2015, permitting the early adoption of ASU No. 2014-09, but not before the original effective date for the Company of January 1, 2017.
In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in order to clarify the Codification and to correct any unintended application of the guidance. These items are not expected to have a significant effect on the current accounting standard. The amendments in this update affect the guidance in ASU No. 2014-09, which is not yet effective. ASU No. 2014-09 will be effective, reflecting the one-year deferral, for interim and annual periods beginning after December 15, 2017 (January 1, 2018 for the Company). Early adoption of the standard is permitted but not before the original effective date. Companies can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact that the adoption of ASU No. 2014-09 will have on its consolidated financial statements and selecting the method of transition to the new standard. We currently expect the adoption to impact the timing of the recognition of residential installation revenue and the recognition of commission expenses.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that the statement of cash flows disclose the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. ASU No. 2016-18 provides specific guidance on the presentation of restricted cash in the statement of cash flows. The new guidance becomes effective for the Company on January 1, 2019 with early adoption permitted and will be applied retrospectively.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU No. 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The new guidance becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2016-15 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which provides simplification of income tax accounting for share-based payment awards. The new guidance becomes effective for the Company on January 1, 2017 with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value will be applied using the modified retrospective transition method. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term will be applied prospectively. The Company may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. In connection with the adoption on January 1, 2017, a deferred tax asset of approximately $309,000 for previously unrealized excess tax benefits will be recognized with the offset recorded to accumulated deficit.
In February 2016, the FASB issued ASU 2016-02, Leases, which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019 with early adoption permitted and will be applied using the modified retrospective method. The Company has not yet completed the evaluation of the effect that ASU No. 2016-02 will have on its consolidated financial statements.
Common Stock of Cablevision
Prior to the Merger, each holder of CNYG Class A common stock had one vote per share while holders of CNYG Class B common stock had ten votes per share. CNYG Class B shares could be converted to CNYG Class A common stock at anytime with a conversion ratio of one CNYG Class A common share for one CNYG Class B common share. CNYG Class A stockholders were entitled to elect 25% of Cablevision's Board of Directors. CNYG Class B stockholders had the right to elect the remaining members of Cablevision's Board of Directors. In addition, CNYG Class B stockholders were parties to an agreement which had the effect of causing the voting power of these CNYG Class B stockholders to be cast as a block.
The following table provides details of Cablevision's shares of common stock through the Merger Date:
|
|
Shares of Common Stock |
|
||||
|
|
Class A |
|
Class B |
|
||
Balance at December 31, 2013 |
|
|
213,598,590 |
|
|
54,137,673 |
|
|
|
|
|
|
|
|
|
Employee and non-employee director stock transactions(a) |
|
|
6,621,345 |
|
|
— |
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014 |
|
|
220,219,935 |
|
|
54,137,673 |
|
|
|
|
|
|
|
|
|
Employee and non-employee director stock transactions(a) |
|
|
2,352,275 |
|
|
— |
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015 |
|
|
222,572,210 |
|
|
54,137,673 |
|
|
|
|
|
|
|
|
|
Employee and non-employee director stock transactions(a) |
|
|
(185,276 |
) |
|
— |
|
|
|
|
|
|
|
|
|
Balance at June 20, 2016 |
|
|
222,386,934 |
|
|
54,137,673 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Primarily included issuances of common stock in connection with employee and non-employee director exercises of stock options and restricted shares granted to employees, offset by shares acquired by the Company in connection with the fulfillment of employees' statutory tax withholding obligation for applicable income and other employment taxes and forfeited employee restricted shares. |
Dividends
Pursuant to the terms of the Merger Agreement, Cablevision was not permitted to declare and pay dividends or repurchase stock, in each case, without the prior written consent of Altice. In accordance with these terms, Cablevision did not declare dividends during the period January 1, 2016 through June 20, 2016.
During the period January 1, 2016 through June 20, 2016, Cablevision paid $4,066 related to restricted shares that vested in respect of dividends declared and accrued on the CNYG common stock in prior periods.
Prior to the Merger, the Board of Directors of Cablevision had declared and paid the following cash dividends to stockholders of record on both its CNYG Class A common stock and CNYG Class B common stock:
Declaration Date |
|
Dividend |
|
Record Date |
|
Payment Date |
|
August 6, 2015 |
|
$ |
0.15 |
|
August 21, 2015 |
|
September 10, 2015 |
May 1, 2015 |
|
$ |
0.15 |
|
May 22, 2015 |
|
June 12, 2015 |
February 24, 2015 |
|
$ |
0.15 |
|
March 16, 2015 |
|
April 3, 2015 |
November 5, 2014 |
|
$ |
0.15 |
|
November 21, 2014 |
|
December 12, 2014 |
July 29, 2014 |
|
$ |
0.15 |
|
August 15, 2014 |
|
September 5, 2014 |
May 6, 2014 |
|
$ |
0.15 |
|
May 23, 2014 |
|
June 13, 2014 |
February 25, 2014 |
|
$ |
0.15 |
|
March 14, 2014 |
|
April 3, 2014 |
Cablevision paid dividends aggregating $125,170 and $160,545 during the years ended December 31, 2015 and 2014, respectively, including accrued dividends on vested restricted shares of $3,935 and $1,548, respectively.
Cablevision's and CSC Holdings' indentures and CSC Holdings' credit agreement restrict the amount of dividends and distributions in respect of any equity interest that can be made.
Income (Loss) Per Share
Basic income per common share attributable to Cablevision stockholders was computed by dividing net income attributable to Cablevision stockholders by the weighted average number of common shares outstanding during the period. Diluted income per common share attributable to Cablevision stockholders reflected the dilutive effects of stock options, restricted stock and restricted stock units. For such awards that were performance based, the diluted effect was reflected upon the achievement of the performance criteria.
The following table presents a reconciliation of weighted average shares used in the calculations of the basic and diluted net income per share attributable to Cablevision stockholders:
|
|
|
|
Years Ended |
|
|||||
|
|
January 1, 2016 |
|
|||||||
|
|
2015 |
|
2014 |
|
|||||
Basic weighted average shares outstanding |
|
|
272,035 |
|
|
269,388 |
|
|
264,623 |
|
Effect of dilution: |
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
4,444 |
|
|
3,532 |
|
|
3,247 |
|
Restricted stock |
|
|
3,720 |
|
|
3,419 |
|
|
2,833 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding |
|
|
280,199 |
|
|
276,339 |
|
|
270,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares (options whose exercise price exceeds the average market price of Cablevision's common stock during the period and certain restricted shares) totaling approximately 1,160,000, and 1,760,000 shares, were excluded from diluted weighted average shares outstanding for the years ended 2015 and 2014, respectively. There were no anti-dilutive shares excluded from diluted weighted average shares outstanding for the period January 1, 2016 to June 20, 2016. In addition, approximately 1,772,000 performance based restricted stock units for the year ended December 31, 2015, and approximately 45,000 restricted shares for the year ended December 31, 2014, issued pursuant to the Company's former employee stock plan were also excluded from the diluted weighted average shares outstanding as the performance criteria on these awards had not yet been satisfied for the respective period.
Net income (loss) per share for Cablevision subsequent to the merger is not presented since Cablevision's common stock is no longer publicly traded.
Concentrations of Credit Risk
Financial instruments that may potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents and trade account receivables. The Company monitors the financial institutions and money market funds where it invests its cash and cash equivalents with diversification among counterparties to mitigate exposure to any single financial institution. The Company's emphasis is primarily on safety of principal and liquidity and secondarily on maximizing the yield on its investments. Management believes that no significant concentration of credit risk exists with respect to its cash and cash equivalents balances because of its assessment of the creditworthiness and financial viability of the respective financial institutions.
The Company did not have a single customer that represented 10% or more of its consolidated revenues for the period January 1, 2016 through June 20, 2016 and the years ended December 31, 2015 and 2014, or 10% or more of its consolidated net trade receivables at December 31, 2015.
|
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Activity related to the allowance for doubtful accounts for the year ended December 31, 2016:
|
|
Balance at |
|
Provision for |
|
Deductions/ |
|
Balance |
|
||||
Allowance for doubtful accounts |
|
$ |
1,051 |
|
$ |
53,249 |
|
$ |
(42,623 |
) |
$ |
11,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Activity related to the allowance for doubtful accounts:
|
|
Balance at |
|
Provision for |
|
Deductions/ Write- |
|
Balance at End |
|
||||
Period from January 1, 2016 through June 20, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
6,039 |
|
$ |
13,240 |
|
$ |
(12,378 |
) |
$ |
6,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
12,112 |
|
$ |
35,802 |
|
$ |
(41,875 |
) |
$ |
6,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
14,614 |
|
$ |
47,611 |
|
$ |
(50,113 |
) |
$ |
12,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Non-Cash Investing and Financing Activities: | |||||||
Continuing Operations: | |||||||
Conversion of notes payable to affiliates and related parties of $1,750,000 (together with accrued and unpaid interest and applicable premium) to common stock (See Note 9) | $ | 2,264,252 | $ | — | |||
Property and equipment accrued but unpaid | 84,847 | 83,722 | |||||
Leasehold improvements paid by landlord | 3,998 | — | |||||
Notes payable to vendor | 25,879 | — | |||||
Supplemental Data: | |||||||
Cash interest paid | 1,481,363 | 931,345 | |||||
Income taxes paid, net | 26,396 | 5,342 |
SUPPLEMENTAL CASH FLOW INFORMATION
During 2016, the Company's non-cash investing and financing activities and other supplemental data were as follows:
Non-Cash Investing and Financing Activities: |
|
|
|
|
Continuing Operations: |
|
|
|
|
Property and equipment accrued but unpaid |
|
$ |
155,653 |
|
Distributions declared but not paid |
|
|
79,617 |
|
Notes payable to vendor |
|
|
12,449 |
|
Deferred financing costs accrued but unpaid |
|
|
2,570 |
|
Supplemental Data: |
|
|
|
|
Cash interest paid |
|
|
1,092,114 |
|
Income taxes paid, net |
|
|
1,538 |
|
SUPPLEMENTAL CASH FLOW INFORMATION
The Company's non-cash investing and financing activities and other supplemental data were as follows:
|
|
|
|
Years Ended |
|
|||||
|
|
January 1, 2016 |
|
|||||||
|
|
2015 |
|
2014 |
|
|||||
Non-Cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
|
|
Continuing Operations: |
|
|
|
|
|
|
|
|
|
|
Property and equipment accrued but unpaid |
|
$ |
68,356 |
|
$ |
63,843 |
|
$ |
48,824 |
|
Notes payable to vendor |
|
|
— |
|
|
8,318 |
|
|
34,522 |
|
Capital lease obligations |
|
|
— |
|
|
19,987 |
|
|
30,603 |
|
Intangible asset obligations |
|
|
290 |
|
|
1,121 |
|
|
525 |
|
Non-Cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
|
|
Dividends payable on unvested restricted share awards |
|
|
— |
|
|
3,517 |
|
|
3,809 |
|
Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
Continuing Operations: |
|
|
|
|
|
|
|
|
|
|
Cash interest paid |
|
|
258,940 |
|
|
560,361 |
|
|
550,241 |
|
Income taxes paid, net |
|
|
7,082 |
|
|
3,849 |
|
|
10,598 |
|
|
The following table summarizes the activity for the 2016 Restructuring Plan during 2017: | |||||||||||
Severance and Other Employee Related Costs | Facility Realignment and Other Costs | Total | |||||||||
Accrual balance at December 31, 2016 | $ | 102,119 | $ | 8,397 | $ | 110,516 | |||||
Restructuring charges | 140,071 | 1,007 | 141,078 | ||||||||
Payments and other | (92,905 | ) | (3,833 | ) | (96,738 | ) | |||||
Accrual balance at September 30, 2017 | $ | 149,285 | $ | 5,571 | $ | 154,856 |
RESTRUCTURING AND OTHER EXPENSE
Restructuring
During 2016, the Company commenced its restructuring initiatives (the "2016 Restructuring Plan") that are intended to simplify the Company's organizational structure. The 2016 Restructuring Plan resulted in charges of $215,420 associated with the elimination of positions primarily in corporate, administrative and infrastructure functions across the Optimum and Suddenlink business segments and estimated charges of $11,157 associated with facility realignment and other costs.
The following table summarizes the activity for the 2016 Restructuring Plan:
|
|
Severance and |
|
Facility |
|
Total |
|
|||
Restructuring charges |
|
$ |
215,420 |
|
$ |
11,157 |
|
$ |
226,577 |
|
Payments and other |
|
|
(113,301 |
) |
|
(2,760 |
) |
|
(116,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
Accrual balance at December 31, 2016 |
|
$ |
102,119 |
|
$ |
8,397 |
|
$ |
110,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to the charges included in the table above, the Company recorded net restructuring credits of $27 relating to changes to the Company's previous estimates recorded in connection with the Company's prior restructuring plans.
Other Expense
The Company incurred transaction costs of $13,845 for the year ended December 31, 2016 related to the Cablevision Acquisition and Cequel Acquisition which are reflected in restructuring and other expense in the consolidated statement of operations.
RESTRUCTURING AND OTHER EXPENSE
Restructuring
The Company recorded net restructuring charges (credits) of $2,299, $(1,649), and $2,480, for the period January 1, 2016 through June 20, 2016 and for the years ended December 31, 2015 and 2014, respectively. The 2014 restructuring expense included a $3,280 charge relating to the elimination of certain positions at Newsday. The 2016 and 2015 restructuring expense (credit) primarily related to changes to the Company's previous estimates recorded in connection with the Company's prior restructuring plans.
Subsequent to the Altice Merger, the Company commenced its restructuring initiatives (the "2016 Restructuring Plan") that are intended to simplify the Company's organizational structure. The 2016 Restructuring Plan resulted in charges of $188,847 associated with the elimination of positions primarily in corporate, administrative and infrastructure functions across the Company and estimated charges of $10,410 associated with facility realignment and other costs.
Other Expense
In connection with the Altice Merger, the Company incurred transaction costs of $19,924 and $17,862 for the period January 1, 2016 through June 20, 2016 and for the year ended December 31, 2015, respectively, which are reflected in restructuring and other expense in the consolidated statements of operations. Subsequent to the Altice Merger, the Company incurred transaction costs of $12,920.
|
DISCONTINUED OPERATIONS
Loss from discontinued operations for the year ended December 31, 2015 amounted to $21,272 ($12,541, net of income taxes) and primarily reflects an expense of $21,000 ($12,380, net of income taxes) related to the settlement of a legal matter relating to Rainbow Media Holdings LLC, a business whose operations were previously discontinued (see Note 17).
Income from discontinued operations for the year ended December 31, 2014 amounted to $5,028 ($2,822, net of income taxes) and resulted primarily from the settlement of a contingency related to Montana property taxes related to Bresnan Cable, a business which was sold in 2013.
|
PROPERTY, PLANT AND EQUIPMENT
Costs incurred in the construction of the Company's cable systems, including line extensions to, and upgrade of, the Company's hybrid fiber/coaxial infrastructure, initial placement of the feeder cable to connect a customer that had not been previously connected, and headend facilities are capitalized. These costs consist of materials, subcontractor labor, direct consulting fees, and internal labor and related costs associated with the construction activities. The internal costs that are capitalized consist of salaries and benefits of the Company's employees and the portion of facility costs, including rent, taxes, insurance and utilities, that supports the construction activities. These costs are depreciated over the estimated life of the plant (10 to 25 years) and headend facilities (4 to 25 years). Costs of operating the plant and the technical facilities, including repairs and maintenance, are expensed as incurred.
Installation costs associated with the initial deployment of new customer premise equipment ("CPE") necessary to provide video, high-speed data or voice services are also capitalized. These costs include materials, subcontractor labor, internal labor, and other related costs associated with the connection activities. The departmental activities supporting the connection process are tracked through specific metrics, and the portion of departmental costs that is capitalized is determined through a time weighted activity allocation of costs incurred based on time studies used to estimate the average time spent on each activity. These installation costs are amortized over the estimated useful lives of the CPE necessary to provide video, high-speed data or voice services. In circumstances where CPE tracking is not available, the Company estimates the amount of capitalized installation costs based on whether or not the business or residence had been previously connected to the network. These installation costs are depreciated over their estimated useful life of 4-8 years. The portion of departmental costs related to disconnecting services and removing CPE from a customer, costs related to connecting CPE that has been previously connected to the network and repair and maintenance are expensed as incurred.
The estimated useful lives assigned to our property, plant and equipment are reviewed on an annual basis or more frequently if circumstances warrant and such lives are revised to the extent necessary due to changing facts and circumstances. Any changes in estimated useful lives are reflected prospectively.
Property, plant and equipment (including equipment under capital leases) as of December 31, 2016 consist of the following assets, which are depreciated or amortized on a straight-line basis over their estimated useful lives.
|
|
|
|
Estimated |
|
Customer equipment |
|
$ |
871,049 |
|
3 to 5 years |
Headends and related equipment |
|
|
1,482,631 |
|
4 to 25 years |
Infrastructure |
|
|
3,740,494 |
|
3 to 25 years |
Equipment and software |
|
|
735,012 |
|
3 to 10 years |
Construction in progress (including materials and supplies) |
|
|
84,321 |
|
|
Furniture and fixtures |
|
|
45,576 |
|
5 to 12 years |
Transportation equipment |
|
|
135,488 |
|
5 to 10 years |
Buildings and building improvements |
|
|
390,337 |
|
10 to 40 years |
Leasehold improvements |
|
|
104,309 |
|
Term of lease |
Land |
|
|
47,715 |
|
|
|
|
|
|
|
|
|
|
|
7,636,932 |
|
|
Less accumulated depreciation and amortization |
|
|
(1,039,297 |
) |
|
|
|
|
|
|
|
|
|
$ |
6,597,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The estimated useful lives presented reflect the period of depreciation and amortization for the purchase of assets in new condition and do not reflect the remaining useful lives of the assets at December 31, 2016. |
For the year ended December 31, 2016, the Company capitalized certain costs aggregating $75,804, related to the acquisition and development of internal use software, which are included in the table above.
Depreciation expense on property, plant and equipment (including capital leases) for the year ended December 31, 2016 amounted to $1,046,896.
At December 31, 2016, the gross amount of buildings and equipment and related accumulated amortization recorded under capital leases were as follows:
Buildings and equipment |
|
$ |
53,833 |
|
Less accumulated amortization |
|
|
(6,306 |
) |
|
|
|
|
|
|
|
$ |
47,527 |
|
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT
Costs incurred in the construction of the Company's cable systems, including line extensions to, and upgrade of, the Company's hybrid fiber/coaxial infrastructure, initial placement of the feeder cable to connect a customer that had not been previously connected, and headend facilities are capitalized. These costs consist of materials, subcontractor labor, direct consulting fees, and internal labor and related costs associated with the construction activities. The internal costs that are capitalized consist of salaries and benefits of the Company's employees and the portion of facility costs, including rent, taxes, insurance and utilities, that supports the construction activities. These costs are depreciated over the estimated life of the plant (10 to 25 years) and headend facilities (4 to 25 years). Costs of operating the plant and the technical facilities, including repairs and maintenance, are expensed as incurred.
Costs associated with initial customer installations and the additions of network equipment necessary to enable advanced services are also capitalized. Costs capitalized as part of new customer installations include materials, subcontractor costs and internal direct labor costs, including service technicians and internal overhead costs incurred to connect the customer to the plant from the time of installation scheduling through the time service is activated and functioning. The internal direct labor cost capitalized is based on a combination of the actual and estimated time to complete the installation. Overhead capitalized consists mainly of employee benefits, such as payroll taxes and health insurance, directly associated with that portion of the capitalized labor and vehicle operating costs related to capitalizable activities. New connections are amortized over the estimated useful life of 5 years for customer wiring and feeder cable to the home. The portion of departmental costs related to disconnecting services, reconnection of a customer, and repair and maintenance are expensed as incurred.
The estimated useful lives assigned to our property, plant and equipment are reviewed on an annual basis or more frequently if circumstances warrant and such lives are revised to the extent necessary due to changing facts and circumstances. Any changes in estimated useful lives are reflected prospectively.
Property, plant and equipment (including equipment under capital leases) consist of the following assets, which are depreciated or amortized on a straight-line basis over the estimated useful lives shown below:
|
|
December 31, |
|
Estimated |
|
Customer equipment |
|
$ |
1,952,336 |
|
3 to 5 years |
Headends and related equipment |
|
|
2,388,289 |
|
4 to 25 years |
Infrastructure |
|
|
5,639,226 |
|
3 to 25 years |
Equipment and software |
|
|
1,577,616 |
|
3 to 10 years |
Construction in progress (including materials and supplies) |
|
|
87,412 |
|
|
Furniture and fixtures |
|
|
96,561 |
|
5 to 12 years |
Transportation equipment |
|
|
210,013 |
|
5 to 18 years |
Buildings and building improvements |
|
|
322,267 |
|
10 to 40 years |
Leasehold improvements |
|
|
354,136 |
|
Term of lease |
Land |
|
|
14,507 |
|
|
|
|
|
|
|
|
|
|
|
12,642,363 |
|
|
Less accumulated depreciation and amortization |
|
|
(9,625,348 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,017,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the period January 1, 2016 through June 20, 2016 and the years ended December 31, 2015 and 2014, the Company capitalized certain costs aggregating $58,409, $144,349, and $153,675 respectively, related to the acquisition and development of internal use software, which are included in the table above.
Depreciation expense on property, plant and equipment (including capital leases) for the period January 1, 2016 through June 20, 2016 and the years ended December 31, 2015 and 2014 amounted to $404,234, $857,440 and $852,451, respectively, (including impairment charges of $425 in 2014).
At December 31, 2015, the gross amount of equipment and related accumulated amortization recorded under capital leases was as follows:
|
|
December 31, |
|
|
Equipment |
|
$ |
90,099 |
|
Less accumulated amortization |
|
|
(28,119 |
) |
|
|
|
|
|
|
|
$ |
61,980 |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING LEASES
The Company leases certain office, production, and transmission facilities under terms of leases expiring at various dates through 2035. The leases generally provide for escalating rentals over the term of the lease plus certain real estate taxes and other costs or credits. Costs associated with such operating leases are recognized on a straight-line basis over the initial lease term. The difference between rent expense and rent paid is recorded as deferred rent. In addition, the Company rents space on utility poles for its operations. The Company's pole rental agreements are for varying terms, and management anticipates renewals as they expire. Rent expense, including pole rentals, for the year ended December 31, 2016 amounted to $65,881.
The minimum future annual payments for all operating leases (with initial or remaining terms in excess of one year) during the next five years and thereafter, including pole rentals from January 1, 2017 through December 31, 2021, at rates now in force are as follows:
2017 |
|
$ |
76,513 |
|
2018 |
|
|
70,242 |
|
2019 |
|
|
61,986 |
|
2020 |
|
|
56,953 |
|
2021 |
|
|
53,658 |
|
Thereafter |
|
|
142,655 |
|
OPERATING LEASES
The Company leases certain office, production, and transmission facilities under terms of leases expiring at various dates through 2035. The leases generally provide for escalating rentals over the term of the lease plus certain real estate taxes and other costs or credits. Costs associated with such operating leases are recognized on a straight-line basis over the initial lease term. The difference between rent expense and rent paid is recorded as deferred rent. In addition, the Company rents space on utility poles for its operations. The Company's pole rental agreements are for varying terms, and management anticipates renewals as they expire. Rent expense, including pole rentals, for the period January 1, 2016 through June 20, 2016 and the years ended December 31, 2015 and 2014 amounted to $41,573, $82,704 and $77,769, respectively.
The minimum future annual payments for all operating leases (with initial or remaining terms in excess of one year) during the next five years and thereafter, including pole rentals from January 1, 2017 through December 31, 2021, are as follows:
2017 |
|
$ |
57,853 |
|
2018 |
|
|
52,206 |
|
2019 |
|
|
44,908 |
|
2020 |
|
|
41,221 |
|
2021 |
|
|
38,697 |
|
Thereafter |
|
|
141,063 |
|
|
Amortizable Intangible Assets | |||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Estimated Useful Lives | ||||||||||
Customer relationships | $ | 5,970,884 | (1,207,217 | ) | $ | 4,763,667 | 8 to 18 years | ||||||
Trade names (a) | 1,067,083 | (432,402 | ) | 634,681 | 2 to 4 years | ||||||||
Other amortizable intangibles | 37,052 | (8,805 | ) | 28,247 | 1 to 15 years | ||||||||
$ | 7,075,019 | $ | (1,648,424 | ) | $ | 5,426,595 |
(a) | On May 23, 2017, Altice N.V. announced the adoption of a global brand which will replace the Company's brands in the future, reducing the remaining useful lives of these trade name intangibles. The Company has estimated the remaining useful lives to be 3 years from the date of the adoption, which reflects one year as an in-use asset and two years as a defensive asset. Amortization expense is calculated on an accelerated basis based on the Company's estimate of the intangible asset during the in-use period. The remaining estimated value of the defensive asset once it is no longer in use will be amortized over the defensive period. Estimated amortization expense related to the Optimum and Lightpath trade names are approximately $545,805 for 2017 (of which $334,312 has been expensed through September 30, 2017), $355,006 for 2018, $46,627 for 2019 and $18,140 through May 2020. |
Cablevision | Cequel | Total | |||||||||
Cable television franchises | $ | 8,113,575 | $ | 4,906,506 | $ | 13,020,081 | |||||
Goodwill | 5,839,757 | 2,153,742 | 7,993,499 | ||||||||
Total | $ | 13,953,332 | $ | 7,060,248 | $ | 21,013,580 |
Gross goodwill as of January 1, 2017 | $ | 7,992,700 | |
Goodwill recorded in connection with acquisition in first quarter 2017 (Cablevision Segment) | 20,687 | ||
Adjustments to purchase accounting relating to Cablevision Acquisition | 3,213 | ||
Transfer of Cablevision goodwill related to Altice Technical Services US Corp. (See Note 14 for further details) | (23,101 | ) | |
Net goodwill as of September 30, 2017 | $ | 7,993,499 |
INTANGIBLE ASSETS
The following table summarizes information relating to the Company's acquired intangible assets as of December 31, 2016:
|
|
Amortizable Intangible Assets |
|||||||||
|
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
|
Estimated Useful |
|||
Customer relationships |
|
$ |
5,925,884 |
|
$ |
(580,276 |
) |
$ |
5,345,608 |
|
8 to 18 years |
Trade names |
|
|
1,066,783 |
|
|
(83,397 |
) |
|
983,386 |
|
2 to 12 years |
Other amortizable intangibles |
|
|
26,743 |
|
|
(3,093 |
) |
|
23,650 |
|
1 to 15 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,019,410 |
|
$ |
(666,766 |
) |
$ |
6,352,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the year ended December 31, 2016 aggregated $653,410.
The following table sets forth the estimated amortization expense on intangible assets for the periods presented:
Estimated amortization expense |
||||
Year Ending December 31, 2017 |
|
$ |
928,597 |
|
Year Ending December 31, 2018 |
|
|
834,312 |
|
Year Ending December 31, 2019 |
|
|
758,189 |
|
Year Ending December 31, 2020 |
|
|
681,610 |
|
Year Ending December 31, 2021 |
|
|
604,456 |
|
The following table summarizes information relating to the Company's acquired indefinite-lived intangible assets as of December 31, 2016:
|
|
Optimum |
|
Suddenlink |
|
Total |
|
|||
Cable television franchises |
|
$ |
8,113,575 |
|
$ |
4,906,506 |
|
$ |
13,020,081 |
|
Goodwill |
|
|
5,838,959 |
|
|
2,153,741 |
|
|
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,952,534 |
|
$ |
7,060,247 |
|
$ |
21,012,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying amount of goodwill is presented below:
Gross goodwill as of January 1, 2016 |
|
$ |
2,040,402 |
|
Goodwill recorded in connection with Cablevision Acquisition |
|
|
5,838,959 |
|
Adjustments to purchase accounting relating to Cequel Acquisition |
|
|
113,339 |
|
|
|
|
|
|
Net goodwill as of December 31, 2016 |
|
$ |
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLE ASSETS
The following table summarizes information relating to the Company's acquired intangible assets:
|
|
December 31, 2015 |
|||||||||
|
|
Gross |
|
Accumulated |
|
Net |
|
Estimated |
|||
Customer relationships |
|
$ |
39,414 |
|
$ |
(27,778 |
) |
$ |
11,636 |
|
10 to 18 years |
Trade names |
|
|
— |
|
|
— |
|
|
— |
|
|
Other amortizable intangibles |
|
|
57,847 |
|
|
(32,532 |
) |
|
25,315 |
|
3 to 28 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
97,261 |
|
$ |
(60,310 |
) |
$ |
36,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the period January 1, 2016 through June 20, 2016 and the years ended December 31, 2015 and 2014 amounted to $10,316, $7,812 and $8,220, respectively, excluding impairment charges of $5,831 in 2014.
The following table summarizes information relating to the Company's acquired indefinite-lived intangible assets:
|
|
December 31, |
|
|
Cable television franchises |
|
$ |
731,848 |
|
Trademarks and other assets |
|
|
7,250 |
|
Goodwill |
|
|
262,345 |
|
|
|
|
|
|
Total |
|
$ |
1,001,443 |
|
|
|
|
|
|
|
|
|
|
|
The carrying amount of goodwill is presented below:
Gross goodwill as of December 31, 2015 (Predecessor) |
|
$ |
596,403 |
|
Accumulated impairment losses |
|
|
(334,058 |
) |
|
|
|
|
|
Net goodwill as of June 20, 2016 |
|
$ |
262,345 |
|
|
|
|
|
|
|
|
|
|
|
Impairment Charges
Goodwill and indefinite-lived intangible assets are tested annually for impairment or earlier upon the occurrence of certain events or substantive changes in circumstances.
The Company's impairment analysis as of December 31, 2014 resulted in pre-tax impairment charges of $200, related to the excess of the carrying value over the estimated fair value of the Newsday trademarks. Additionally, in 2014, the Company recorded impairment charges of $5,631, relating to the excess of the carrying value over the estimated fair values of Newsday's amortizing subscriber relationships and advertiser relationships, respectively. The decrease in fair values, which were determined based on discounted cash flows, resulted primarily from the decline in projected cash flows related to these assets. These pre-tax impairment charges are included in depreciation and amortization (including impairments).
No goodwill impairments were recorded for the period January 1, 2016 through June 20, 2016 and for the years ended December 31, 2015 and 2014, respectively.
|
• | in respect of the CVC Term Loans, (i) with respect to any alternate base rate loan, 1.25% per annum and (ii) with respect to any eurodollar loan, 2.25% per annum, and |
• | in respect of the CVC Revolving Credit Facility loans (i) with respect to any alternate base rate loan, 2.25% per annum and (ii) with respect to any eurodollar loan, 3.25% per annum. |
• | in respect of the Cequel Term Loans, (i) with respect to any alternate base rate loan, 1.25% per annum and (ii) with respect to any eurodollar loan, 2.25% per annum, and |
• | in respect of Cequel Revolving Credit Facility loans (i) with respect to any alternate base rate loan, 2.25% per annum and (ii) with respect to any eurodollar loan, 3.25% per annum. |
Carrying Amount (a) | |||||||||||||||
Maturity Date | Interest Rate | Principal | September 30, 2017 | December 31, 2016 | |||||||||||
CSC Holdings Restricted Group: | |||||||||||||||
Revolving Credit Facility (b) | $20,000 on October 9, 2020, remaining balance on November 30, 2021 | 4.49% | $ | 1,175,000 | $ | 1,149,024 | $ | 145,013 | |||||||
Term Loan Facility | July 17, 2025 | 3.48% | 2,992,500 | 2,974,768 | 2,486,874 | ||||||||||
Cequel: | |||||||||||||||
Revolving Credit Facility (c) | November 30, 2021 | — | — | — | — | ||||||||||
Term Loan Facility | July 28, 2025 | 3.49% | 1,261,838 | 1,253,110 | 812,903 | ||||||||||
$ | 5,429,338 | 5,376,902 | 3,444,790 | ||||||||||||
Less: Current portion | 92,650 | 33,150 | |||||||||||||
Long-term debt | $ | 5,284,252 | $ | 3,411,640 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | At September 30, 2017, $123,473 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $1,001,527 of the facility was undrawn and available, subject to covenant limitations. |
(c) | At September 30, 2017, $16,575 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $333,425 of the facility was undrawn and available, subject to covenant limitations. |
Interest Rate | Principal Amount | Carrying Amount (a) | ||||||||||||||||
Issuer | Date Issued | Maturity Date | September 30, 2017 | December 31, 2016 | ||||||||||||||
CSC Holdings (b)(f) | February 6, 1998 | February 15, 2018 | 7.875 | % | $ | 300,000 | $ | 303,531 | $ | 310,334 | ||||||||
CSC Holdings (b)(f) | July 21, 1998 | July 15, 2018 | 7.625 | % | 500,000 | 511,312 | 521,654 | |||||||||||
CSC Holdings (c)(f) | February 12, 2009 | February 15, 2019 | 8.625 | % | 526,000 | 544,422 | 553,804 | |||||||||||
CSC Holdings (c)(f) | November 15, 2011 | November 15, 2021 | 6.750 | % | 1,000,000 | 957,954 | 951,702 | |||||||||||
CSC Holdings (c)(f) | May 23, 2014 | June 1, 2024 | 5.250 | % | 750,000 | 657,903 | 650,193 | |||||||||||
CSC Holdings (e) | October 9, 2015 | January 15, 2023 | 10.125 | % | 1,800,000 | 1,777,085 | 1,774,750 | |||||||||||
CSC Holdings (e)(l) | October 9, 2015 | October 15, 2025 | 10.875 | % | 1,684,221 | 1,660,583 | 1,970,379 | |||||||||||
CSC Holdings (e) | October 9, 2015 | October 15, 2025 | 6.625 | % | 1,000,000 | 986,394 | 985,469 | |||||||||||
CSC Holdings (g) | September 23, 2016 | April 15, 2027 | 5.500 | % | 1,310,000 | 1,304,353 | 1,304,025 | |||||||||||
Cablevision (k) | September 23, 2009 | September 15, 2017 | 8.625 | % | — | — | 926,045 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2018 | 7.750 | % | 750,000 | 757,515 | 767,545 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2020 | 8.000 | % | 500,000 | 491,224 | 488,992 | |||||||||||
Cablevision (c)(f) | September 27, 2012 | September 15, 2022 | 5.875 | % | 649,024 | 568,796 | 559,500 | |||||||||||
Cequel and Cequel Capital Senior Notes (d)(m) | Oct. 25, 2012 Dec. 28, 2012 | September 15, 2020 | 6.375 | % | 1,050,000 | 1,025,616 | 1,457,439 | |||||||||||
Cequel and Cequel Capital Senior Notes (d) | May 16, 2013 Sept. 9, 2014 | December 15, 2021 | 5.125 | % | 1,250,000 | 1,132,926 | 1,115,767 | |||||||||||
Altice US Finance I Corporation Senior Secured Notes (h) | June 12, 2015 | July 15, 2023 | 5.375 | % | 1,100,000 | 1,081,815 | 1,079,869 | |||||||||||
Cequel and Cequel Capital Senior Secured Notes (i) | June 12, 2015 | July 15, 2025 | 7.750 | % | 620,000 | 604,001 | 602,925 | |||||||||||
Altice US Finance I Corporation Senior Notes (j) | April 26, 2016 | May 15, 2026 | 5.500 | % | 1,500,000 | 1,487,745 | 1,486,933 | |||||||||||
$ | 16,289,245 | 15,853,175 | 17,507,325 | |||||||||||||||
Less: Current portion | 1,572,358 | 926,045 | ||||||||||||||||
Long-term debt | $ | 14,280,817 | $ | 16,581,280 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | The debentures are not redeemable by CSC Holdings prior to maturity. |
(c) | Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
(d) | The Company may redeem some or more of all the notes at the redemption price set forth in the relevant indenture, plus accrued and unpaid interest. |
(e) | The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a “make whole” premium specified in the relevant indenture plus accrued and unpaid interest. |
(f) | The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
(g) | The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
(h) | Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
(i) | Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
(j) | Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
(k) | In April 2017, the Company redeemed $500,000 of the senior notes from proceeds from the CVC Term Loan facility. In September 2017, these senior notes matured and the Company repaid the remaining principal balance of $400,000. |
(l) | In July 2017, the Company used approximately $350,120 of the proceeds from the IPO to fund the redemption of $315,779 principal amount of CSC Holdings senior notes due October 2025 and the related call premium of approximately $34,341which was recorded as a loss on extinguishment of debt. The Company also recorded a write-off of deferred financings costs in connection with this redemption aggregating $4,516. |
(m) | In April 2017, the Company redeemed $450,000 of the senior notes from proceeds from the Cequel Term Loan facility. |
Years Ending December 31, | Cablevision | Cequel | Total | ||||||||
2017 | $ | 29,925 | $ | 5,256 | $ | 35,181 | |||||
2018 | 1,598,699 | 14,421 | 1,613,120 | ||||||||
2019 | 561,995 | 12,713 | 574,708 | ||||||||
2020 | 530,007 | 1,062,723 | 1,592,730 | ||||||||
2021 | 3,664,638 | 1,263,578 | 4,928,216 | ||||||||
Thereafter | 10,058,245 | 4,428,075 | 14,486,320 |
DEBT
CSC Holdings Credit Facilities
In connection with the Cablevision Acquisition, in October 2015, Neptune Finco Corp. ("Finco"), a wholly-owned subsidiary of the Company formed to complete the financing described herein and the merger with CSC Holdings, borrowed an aggregate principal amount of $3,800,000 under a term loan facility (the "Term Credit Facility") and entered into revolving loan commitments in an aggregate principal amount of $2,000,000 (the "Revolving Credit Facility" and, together with the Term Credit Facility, the "Credit Facilities"). The Term Credit Facility was to mature on October 9, 2022 and the Revolving Credit Facility was to mature on October 9, 2020 (see discussion below regarding the extension amendments). In addition, on June 21, 2016 and July 21, 2016, the Company entered into incremental loan assumption agreements whereby the Revolving Credit Facility was increased by $70,000 and $35,000, respectively, to $2,105,000.
Finco also issued $1,800,000 aggregate principal amount of 10.125% senior notes due 2023 (the "2023 Notes"), $2,000,000 aggregate principal amount of 10.875% senior notes due 2025 (the "2025 Notes"), and $1,000,000 aggregate principal amount of 6.625% senior guaranteed notes due 2025 (the "2025 Guaranteed Notes") (collectively the "Cablevision Acquisition Notes").
On June 21, 2016, immediately following the Cablevision Acquisition, Finco merged with and into CSC Holdings, with CSC Holdings surviving the merger (the "CSC Holdings Merger"), and the Cablevision Acquisition Notes and the Credit Facilities became obligations of CSC Holdings. The 2025 Guaranteed Notes are guaranteed on a senior basis by each restricted subsidiary of CSC Holdings (other than CSC TKR, LLC and its subsidiaries, which own and operate the New Jersey cable television systems, Cablevision Lightpath, Inc. and any subsidiaries of CSC Holdings that are "Excluded Subsidiaries" under the indenture governing the 2025 Guaranteed Notes) (such subsidiaries, the "Initial Guarantors") and the obligations under the Credit Facilities are (i) guaranteed on a senior basis by each Initial Guarantor and (ii) secured on a first priority basis by capital stock held by CSC Holdings and the guarantors in certain subsidiaries of CSC Holdings, subject to certain exclusions and limitations.
Altice USA used the proceeds from the Term Credit Facility and the Cablevision Acquisition Notes, together with an equity contribution from Altice N.V. and its Co-Investors and existing cash at Cablevision, to (a) finance the Cablevision Acquisition, (b) refinance the credit agreement, dated as of April 17, 2013 (the "Previous Credit Facility"), among CSC Holdings, certain subsidiaries of CSC Holdings and the lenders party thereto ($2,030,699 outstanding at the date of the Cablevision Acquisition), (c) repay the senior secured credit agreement, dated as of October 12, 2012, among Newsday LLC, CSC Holdings, and the lenders party thereto (the "Previous Newsday Credit Facility") of $480,000, and (d) pay related fees and expenses.
The Credit Facilities permit CSC Holdings to request revolving loans, swing line loans or letters of credit from the revolving lenders, swingline lenders or issuing banks, as applicable, thereunder, from time to time prior to October 9, 2020, unless the commitments under the Revolving Credit Facility have been previously terminated.
There is also a commitment fee of 0.375% on undrawn amounts under the revolving credit facility.
On September 9, 2016, CSC Holdings entered into an amendment (the "Extension Amendment") to the Credit Facilities and the incremental loan assumption agreements dated June 21, 2016 and July 21, 2016 between CSC Holdings and certain lenders party thereto (the "Extending Lenders") pursuant to which each Extending Lender agreed to extend the maturity of its Term Credit Facility under the Credit Facilities to October 11, 2024 and to certain other amendments to the Credit Facilities. In October 2016, CSC Holdings used the net proceeds from the sale of $1,310,000 aggregate principal amount of 5.5% senior guaranteed notes due 2027 (the "2027 Guaranteed Notes") (after the deduction of fees and expenses) to prepay outstanding loans under the CSC Holdings Term Credit Facility that were not extended pursuant to the Extension Amendment. The total aggregate principal amount of the Term Credit Facility, after giving effect to the use of proceeds of the 2027 Guaranteed Notes, is $2,500,000 (the "Extended Term Loan"). The Extended Term Loan was effective on October 11, 2016. In connection with the prepayment of the Term Credit Facility, the Company wrote-off the deferred financing costs and the unamortized discount related to the existing term loan aggregating $102,894. Additionally, the Company recorded deferred financing costs and an original issue discount of $7,249 and $6,250, respectively, which are both being amortized to interest expense over the term of the Extended Term Loan.
On December 9, 2016, the Credit Facilities were amended to increase the availability under the Revolving Credit Facility from $2,105,000 to $2,300,000 and extend the maturity on $2,280,000 of this facility to November 30, 2021. The remaining $20,000 will mature on October 9, 2020.
The Credit Facilities require CSC Holdings to prepay outstanding term loans, subject to certain exceptions and deductions, with (i) 100% of the net cash proceeds of certain asset sales, subject to reinvestment rights and certain other exceptions, and (ii) commencing with the first full fiscal year after the consummation of the Cablevision Acquisition, a ratable share (based on the outstanding principal amount of the Extended Term Loan divided by the sum of the outstanding principal amount of all pari passu indebtedness and the Extended Term Loan) of 50% of the annual excess cash flow of CSC Holdings and its restricted subsidiaries, which will be reduced to 0% if the Consolidated Net Senior Secured Leverage Ratio of CSC Holdings is less than or equal to 4.5 to 1.
Under the Term Credit Facility, CSC Holdings was required to make and made scheduled quarterly payment of $9,500 beginning with the fiscal quarter ending September 30, 2016. Under the Extended Term Loan, CSC Holdings is required to make scheduled quarterly payments equal to 0.25% of the principal amount of the Extended Term Loan, with the remaining balance scheduled to be paid on October 11, 2024, beginning with the fiscal quarter ending March 31, 2017.
The CSC Holdings Credit Facilities include negative covenants that are substantially similar to the negative covenants contained in the indentures under which the Cablevision Acquisition Notes were issued (see discussion below). The Credit Facilities include one financial maintenance covenant (solely for the benefit of the Revolving Credit Facility), consisting of a maximum Consolidated Net Senior Secured Leverage Ratio of 5.0 to 1, which will be tested on the last day of any fiscal quarter but only if on such day there are outstanding borrowings under the CSC Holdings Revolving Credit Facility (including swingline loans but excluding any cash collateralized letters of credit and undrawn letters of credit not to exceed $15,000). The CSC Holdings Credit Facilities contain customary representations, warranties and affirmative covenants. In addition, the CSC Holdings Credit Facilities contains restrictive covenants that limit, among other things, the ability of CSC Holdings and its subsidiaries to incur indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments or loans, engage in transactions with affiliates, pay dividends, and make acquisitions and dispose of assets. If an event of default occurs, the obligations under the CSC Holdings Credit Facilities may be accelerated.
CSC Holdings was in compliance with all of its financial covenants under the CSC Holdings Credit Facilities as of December 31, 2016.
Cequel Credit Facilities
In connection with the Cequel Acquisition, lenders holding (a) $290,000 of loans and commitments under the revolving credit facility under the old credit facility and (b) approximately $815,400 of loans under the term loan facility under the old credit facility consented to roll over, on a cashless basis, such lenders' loans and commitments under the old credit facility into loans and commitments of the same amount under a new credit facility (the "Cequel Credit Facility") made available to a subsidiary of Cequel effective upon the consummation of the Cequel Acquisition (the 'Cequel Credit Agreement"). Upon the closing of the Cequel Acquisition, the $290,000 of loans and commitments under the revolving credit facility under the old credit facility that lenders elected to rollover into the Cequel Credit Facility, plus $60,000 of new revolving commitments from other lenders, formed a new $350,000 revolving credit facility under the Cequel Credit Facility, and all remaining commitments under the then existing $500,000 revolving credit facility under the old credit facility were terminated.
The interest rate on the term loans outstanding under the Cequel Credit Facility equal the prime rate plus 2.25% or the LIBO rate plus 3.25%, with a LIBO rate floor of 1.00%, while the interest rate on the revolver loans equal the prime rate plus 2.25% or the LIBO rate plus 3.25%. The term loan facility requires quarterly repayments in annual amounts equal to 1.00% of the original principal amount, which commenced on March 31, 2016, with the remainder due at maturity. There is a commitment fee of 0.5% on undrawn amounts under the revolving credit facility.
The debt under the Cequel Credit Agreement is secured by a first priority security interest in the capital stock of Suddenlink, an indirect wholly-owned subsidiary of Cequel and substantially all of the present and future assets of Suddenlink and its restricted subsidiaries, and is guaranteed by the Cequel Communications Holdings II, LLC, an indirect wholly-owned subsidiary of Cequel (the "Parent Guarantor") as well as all of Suddenlink's existing and future direct and indirect subsidiaries, subject to certain exceptions set forth in the Cequel Credit Agreement.
The Cequel Credit Agreement contains customary representations, warranties and affirmative covenants. In addition, the Cequel Credit Agreement contains restrictive covenants that limit, among other things, the ability of Suddenlink and its subsidiaries to incur indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments or loans, engage in transactions with affiliates, pay dividends, and make acquisitions and dispose of assets. The Cequel Credit Agreement also contains a maximum senior secured leverage maintenance covenant of 5.0 times EBITDA as defined in the Cequel Credit Agreement. Additionally, the Cequel Credit Agreement contains customary events of default, including failure to make payments, breaches of covenants and representations, cross defaults to other indebtedness, unpaid judgments, changes of control and bankruptcy events. The lenders' commitments to fund amounts under the revolving credit facility are subject to certain customary conditions.
Amendments to Cequel Credit Agreement
On October 25, 2016, an indirect wholly-owned subsidiary of Cequel entered into the First Amendment to the Cequel Credit Agreement, amending the credit agreement dated June 12, 2015, between the Company and certain lenders party thereto pursuant to which the applicable margin for the term loans outstanding under the Cequel Credit Facility was lowered by 25 basis points, the LIBO rate floor for the term loans outstanding under the Cequel Credit Facility was lowered by 25 basis points to 0.75% and the maturity date for the term loans outstanding under the Cequel Credit Facility was extended to January 15, 2025. The proceeds of $815,000 from the new term loan were used to repay the amount outstanding under the existing term loan of $809,327 and related fees and expenses. In connection with the extinguishment of the existing term loan, the Company recorded a loss on extinguishment of debt of $4,807, representing primarily the write-off of deferred financing costs related to the term loan. In connection with the First Amendment to the Cequel Credit Agreement, the Company recorded deferred financing costs of $2,092, which are being amortized to interest expense over the term of the loan.
On December 9, 2016, the Company entered into the Second Amendment to the Cequel Credit Agreement which extended the maturity on the revolver to November 30, 2021.
As of December 31, 2016, Cequel was in compliance with all of its financial covenants under the Cequel Credit Agreement.
The following table provides details of the Company's outstanding credit facility debt (net of unamortized financing costs and unamortized discounts):
|
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying Value(a) |
|
|||
CSC Holdings Restricted Group: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(b) |
|
November 30, 2021 |
|
|
4.07 |
% |
$ |
175,256 |
|
$ |
145,013 |
|
Term Credit Facility(c) |
|
October 11, 2024 |
|
|
3.88 |
% |
|
2,500,000 |
|
|
2,486,874 |
|
Cequel: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(d) |
|
November 30, 2021 |
|
|
— |
|
|
— |
|
|
— |
|
Term Credit Facility |
|
January 15, 2025 |
|
|
3.88 |
% |
|
815,000 |
|
|
812,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,490,256 |
|
|
3,444,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
33,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
$ |
3,411,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The unamortized discounts and deferred financing costs amounted to $45,466 at December 31, 2016. |
|
(b) |
Includes $100,256 of credit facility debt incurred to finance the Cablevision Acquisition. See discussion above regarding the amendment to the revolving credit facility entered into December 2016. |
|
(c) |
Represents $3,800,000 principal amount of debt incurred to finance the Cablevision Acquisition, net of principal repayments made. See discussion above regarding the Extension Amendment entered into September 2016. |
|
(d) |
At December 31, 2016, $17,031 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $332,969 of the facility was undrawn and available, subject to covenant limitations. |
During the twelve months ending December 31, 2017, the Company is required to make principal payments aggregating $25,000 under the CSC Holdings Term Credit Facility and $8,150 under the Cequel Term Credit Facility.
Senior Guaranteed Notes and Senior Notes and Debentures
The following table summarizes the Company's senior guaranteed notes, senior secured notes and senior notes and debentures as of December 31, 2016:
Issuer |
|
Date Issued |
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying |
|
|||
CSC Holdings(b)(e) |
|
February 6, 1998 |
|
February 15, 2018 |
|
|
7.875 |
% |
$ |
300,000 |
|
$ |
310,334 |
|
CSC Holdings(b)(e) |
|
July 21, 1998 |
|
July 15, 2018 |
|
|
7.625 |
% |
|
500,000 |
|
|
521,654 |
|
CSC Holdings(c)(e) |
|
February 12, 2009 |
|
February 15, 2019 |
|
|
8.625 |
% |
|
526,000 |
|
|
553,804 |
|
CSC Holdings(c)(e) |
|
November 15, 2011 |
|
November 15, 2021 |
|
|
6.750 |
% |
|
1,000,000 |
|
|
951,702 |
|
CSC Holdings(c)(e) |
|
May 23, 2014 |
|
June 1, 2024 |
|
|
5.250 |
% |
|
750,000 |
|
|
650,193 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
January 15, 2023 |
|
|
10.125 |
% |
|
1,800,000 |
|
|
1,774,750 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
10.875 |
% |
|
2,000,000 |
|
|
1,970,379 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
6.625 |
% |
|
1,000,000 |
|
|
985,469 |
|
CSC Holdings(f) |
|
September 23, 2016 |
|
April 15, 2027 |
|
|
5.500 |
% |
|
1,310,000 |
|
|
1,304,025 |
|
Cablevision(c)(e) |
|
September 23, 2009 |
|
September 15, 2017 |
|
|
8.625 |
% |
|
900,000 |
|
|
926,045 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2018 |
|
|
7.750 |
% |
|
750,000 |
|
|
767,545 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2020 |
|
|
8.000 |
% |
|
500,000 |
|
|
488,992 |
|
Cablevision(c)(e) |
|
September 27, 2012 |
|
September 15, 2022 |
|
|
5.875 |
% |
|
649,024 |
|
|
559,500 |
|
Cequel Communications Holdings I LLC and Cequel |
|
October 25, 2012 |
|
September 15, 2020 |
|
|
6.375 |
% |
|
1,500,000 |
|
|
1,457,439 |
|
Cequel Communications Holdings I LLC and Cequel |
|
May 16, 2013 |
|
December 15, 2021 |
|
|
5.125 |
% |
|
1,250,000 |
|
|
1,115,767 |
|
Altice US Finance I Corporation(g) |
|
June 12, 2015 |
|
July 15, 2023 |
|
|
5.375 |
% |
|
1,100,000 |
|
|
1,079,869 |
|
Cequel Communications Holdings I LLC and Cequel Capital Corporation(h) |
|
June 12, 2015 |
|
July 15, 2025 |
|
|
7.750 |
% |
|
620,000 |
|
|
602,925 |
|
Altice US Finance I Corporation(i) |
|
April 26, 2016 |
|
May 15, 2026 |
|
|
5.500 |
% |
|
1,500,000 |
|
|
1,486,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,955,024 |
|
|
17,507,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
|
|
926,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
$ |
16,581,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The carrying amount of the notes is net of the unamortized deferred financing costs and/or discounts/premiums of $447,699. |
|
(b) |
The debentures are not redeemable by CSC Holdings prior to maturity. |
|
(c) |
Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
|
(d) |
The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a "make whole" premium specified in the relevant indenture plus accrued and unpaid interest. |
|
(e) |
The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
|
(f) |
The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
|
(g) |
Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
|
(h) |
Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
|
(i) |
Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
The indentures under which the senior notes and debentures were issued contain various covenants, which are generally less restrictive than those contained in the Credit Agreement. The Company was in compliance with all of its financial covenants under these indentures as of December 31, 2016.
CSC Holdings 5.5% Senior Guaranteed Notes due 2027
In September 2016, CSC Holdings issued $1,310,000 aggregate principal amount of 5.50% senior guaranteed notes due April 15, 2027. The 2027 Guaranteed Notes are senior unsecured obligations and rank pari passu in right of payment with all of the existing and future senior indebtedness, including the existing senior notes and the Credit Facilities and rank senior in right of payment to all of existing and future subordinated indebtedness.
As discussed above, in October 2016, CSC Holdings used the proceeds from the issuance of the 2027 Guaranteed Notes (after the deduction of fees and expenses) to prepay the outstanding loans under the Term Credit Facility that were not extended pursuant to the Extension Amendment. In connection with the issuance of the 2027 Guaranteed Notes, the Company incurred deferred financing costs of approximately $5,575, which are being amortized to interest expense over the term of the 2027 Guaranteed Notes.
Cablevision Acquisition Notes
The $1,000,000 principal amount of the 2025 Guaranteed Notes bear interest at a rate of 6.625% per annum and were issued at a price of 100.00%. Interest on the 2025 Guaranteed Notes is payable semi-annually on January 15 and July 15, commencing on July 15, 2016. These 2025 Guaranteed Notes are guaranteed on a senior basis by the Initial Guarantors.
The $1,800,000 principal amount of the 2023 Notes and $2,000,000 principal amount of the 2025 Notes, bear interest at a rate of 10.125% and 10.875%, respectively, per annum and were issued at prices of 100.00%. Interest on the 2023 Notes and 2025 Notes is payable semi-annually on January 15 and July 15, which began on July 15, 2016.
Deferred financing costs of approximately $76,579 incurred in connection with the issuance of the Cablevision Acquisition Notes are being amortized to interest expense over the term of the Cablevision Acquisition Notes.
The indentures under which the Cablevision and CSC Holdings Senior Guaranteed Notes and Senior Notes and Debentures were issued contain certain covenants and agreements with respect to investment grade debt securities, including limitations on the ability of CSC Holdings and its restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) make investments or other restricted payments, (iii) create liens, (iv) sell assets and subsidiary stock, (v) pay dividends or make other distributions or repurchase or redeem our capital stock or subordinated debt, (vi) engage in certain transactions with affiliates, (vii) enter into agreements that restrict the payment of dividends by subsidiaries or the repayment of intercompany loans and advances, and (viii) engage in mergers or consolidations, in each case subject to certain exceptions. The indentures also contain certain customary events of default. If an event of default occurs, the obligations under the Cablevision Acquisition Notes may be accelerated. As of December 31, 2016, Cablevision was in compliance with all of its financial covenants under the indentures under which the senior notes and debentures and guaranteed notes were issued.
Cequel Senior Secured Notes
On June 12, 2015, Altice US Finance I Corporation, an indirect subsidiary of Altice N.V., issued $1,100,000 principal amount of senior secured notes (the "2023 Senior Secured Notes"), the proceeds from which were placed in escrow to finance a portion of the purchase price for the Cequel Acquisition. The 2023 Senior Secured Notes bear interest at a rate of 5.375% per annum and were issued at a price of 100.00%. Interest on the 2023 Senior Secured Notes is payable semi-annually on January 15 and July 15 of each year. Following the consummation of the Cequel Acquisition and related transactions the equity interests in Altice US Finance I Corporation were contributed through one or more intermediary steps to Suddenlink, and the Senior Secured Notes were guaranteed by Cequel Communications Holdings II LLC, Suddenlink and certain of the subsidiaries of Suddenlink and are secured by certain assets of Cequel Communications Holdings II LLC, Suddenlink and its subsidiaries.
On April 26, 2016, Altice US Finance I Corporation issued $1,500,000 aggregate principal amount of senior secured notes (the "2026 Senior Secured Notes"). The proceeds from the sale were used to repay the $1,477,200 remaining balance under the Old Credit Facility and to pay related fees and expenses (see discussion above). The 2026 Senior Secured Notes mature on May 15, 2026 and bear interest at a rate of 5.50% annually. Interest on the 2026 Senior Secured Notes is payable semi-annually on May 15 and November 15 of each year, commencing on November 15, 2016. Deferred financing costs recorded in connection with the issuance of these notes amounted to $13,773 and are being amortized over the term of the notes.
Cequel Senior Notes
On June 12, 2015, Altice US Finance II Corporation, an indirect subsidiary of Altice N.V., issued $300,000 principal amount of the 2025 Senior Notes, the proceeds from which were placed in escrow, to finance a portion of the purchase price for the Cequel Acquisition. The 2025 Senior Notes were issued by the 2025 Senior Notes Issuer, an indirect subsidiary of Altice N.V., bear interest at a rate of 7.75% per annum and were issued at a price of 100.00%. Interest on the 2025 Senior Notes is payable semi-annually on January 15 and July 15 of each year. Following the consummation of the Cequel Acquisition and related transactions, the 2025 Senior Notes Issuer merged into Cequel, the 2025 Senior Notes became the obligations of Cequel and Cequel Capital Corporation became the co-issuer of the 2025 Senior Notes.
On June 12, 2015, Altice US Finance S.A., an indirect subsidiary of Altice N.V. issued $320,000 principal amount of the 7.75% Senior Notes due 2025 (the "Holdco Notes"), the proceeds from which were placed in escrow, to finance a portion of the purchase price for the Cequel Acquisition. The Holdco Notes bear interest at a rate of 7.75% per annum and were issued at a price of 98.275%. Interest on the Holdco Notes is payable semi-annually on January 15 and July 15 of each year. The Holdco Notes were automatically exchanged into an equal aggregate principal amount of 2025 Senior Notes at Cequel during the second quarter of 2016. The exchange resulted in a decrease to member's equity of approximately $315,352.
The Issuers have no ability to service interest or principal on the Notes, other than through any dividends or distributions received from Suddenlink. Suddenlink is restricted in certain circumstances, from paying dividends or distributions to the Issuers by the terms of the New Credit Agreement. However, the Cequel Credit Agreement permits Suddenlink to make dividends and distributions subject to satisfaction of certain conditions, including pro forma compliance with a maximum senior secured leverage ratio, and that no event of default has occurred and is continuing, or would be caused by the making of such dividends or other distributions, and based on, among other things, availability under a restricted payment basket. The 2020 Notes, the 2021 Notes and the 2025 Senior Notes are unsecured and are not guaranteed by any subsidiaries of the Original Issuers, including Suddenlink.
The Cequel Indentures contain certain covenants, agreements and events of default which are customary with respect to non-investment grade debt securities, including limitations on the Company's ability to incur additional indebtedness, pay dividends on or make other distributions or repurchase the Company's capital stock, make certain investments, enter into certain types of transactions with affiliates, create liens and sell certain assets or merge with or into other companies.
Notes Payable to Affiliates and Related Parties
On June 21, 2016, in connection with the Cablevision Acquisition, the Company issued notes payable to affiliates aggregating $1,750,000, of which $875,000 bear interest at 10.75% and are due on December 20, 2023 and $875,000 bear interest at 11% and are due on December 20, 2024. The Company may redeem all or, part of the notes at a redemption price equal to 100% of the principal amount thereof plus the applicable premium, as defined in the notes agreement, and accrued and unpaid interest. For the year ended December 31, 2016, the Company recognized interest expense of $102,557 related to these notes payable. As of December 31, 2016, the accrued interest related to these notes of $102,557 is reflected in accrued interest in the Company's balance sheet.
Summary of Debt Maturities
Total amounts payable by the Company under its various debt obligations outstanding as of December 31, 2016, including notes payable, collateralized indebtedness (see Note 10), and capital leases, during the next five years and thereafter, are as follows:
Years Ending December 31, |
|
Cablevision |
|
Cequel |
|
Altice USA |
|
Total |
|
||||
2017 |
|
$ |
1,719,180 |
|
$ |
9,113 |
|
$ |
— |
|
$ |
1,728,293 |
|
2018 |
|
|
2,103,441 |
|
|
8,652 |
|
|
— |
|
|
2,112,093 |
|
2019 |
|
|
557,348 |
|
|
8,330 |
|
|
— |
|
|
565,678 |
|
2020 |
|
|
526,340 |
|
|
1,508,213 |
|
|
— |
|
|
2,034,553 |
|
2021 |
|
|
1,200,256 |
|
|
1,258,223 |
|
|
— |
|
|
2,458,479 |
|
Thereafter |
|
|
9,884,024 |
|
|
3,995,280 |
|
|
1,750,000 |
|
|
15,629,304 |
|
DEBT
Restricted Group Credit Facility
Prior to the Merger, CSC Holdings and certain of its subsidiaries (the "Restricted Subsidiaries") had a credit agreement (the "Previous Credit Facility") that provided for (1) a revolving credit facility of $1,500,000, (2) a Term A facility of $958,510, and (3) a Term B facility of $1,200,000.
Loans under the Previous Credit Facility bore interest as follows:
|
|
|
|
• |
Revolving credit loans and Term A loans, either (i) the Eurodollar rate (as defined) plus a spread ranging from 1.50% to 2.25% based on the cash flow ratio (as defined), or (ii) the base rate (as defined) plus a spread ranging from 0.50% to 1.25% based on the cash flow ratio; |
|
• |
Term B loans, either (i) the Eurodollar rate plus a spread of 2.50% or (ii) the base rate plus a spread of 1.50%. |
There was a commitment fee of 0.30% on undrawn amounts under the revolving credit facility in connection with the Previous Credit Facility.
Repayment of Restricted Group Credit Facility Debt
In May 2014, CSC Holdings used the net proceeds from the issuance of the 2024 Notes (discussed below), as well as cash on hand, to make a $750,000 repayment on its outstanding Term B loan facility. In September 2014, CSC Holdings made a repayment of $200,000 on its outstanding Term B loan facility with cash on hand. In connection with these repayments, the Company recognized a loss on extinguishment of debt of approximately $4,054 and wrote-off unamortized deferred financing costs related to this loan facility of approximately $5,564 for the year ended December 31, 2014.
In April 2015, CSC Holdings made a repayment of $200,000 on its outstanding Term B loan facility with cash on hand. In connection with the repayment, the Company recognized a loss on extinguishment of debt of $731 and wrote-off unamortized deferred financing costs related to this loan facility of $1,004 for the year ended December 31, 2015.
On June 21, 2016, in connection with the Merger, the Previous Credit Facility was repaid.
Newsday LLC Credit Facility
Newsday LLC ("Newsday") had a senior secured credit agreement (the "Newsday Credit Agreement"), which consisted of a $480,000 floating rate term loan. Interest under the Newsday Credit Agreement was calculated, at the election of Newsday, at either the Eurodollar rate or the base rate, plus 3.50% or 2.50%, respectively, as specified in the Newsday Credit Agreement. Borrowings under the Newsday Credit Agreement were guaranteed by CSC Holdings on a senior unsecured basis and certain of its subsidiaries that own interests in Newsday on a senior secured basis. The Newsday Credit Agreement was secured by a lien on the assets of Newsday and Cablevision senior notes with an aggregate principal amount of $611,455 owned by Newsday Holdings.
On June 21, 2016, in connection with the Merger, Newsday LLC repaid its outstanding indebtedness under the Newsday Credit Agreement.
The following table provides details of the Company's outstanding credit facility debt (net of unamortized financing costs and unamortized discounts):
|
|
Maturity Date |
|
Interest |
|
Principal |
|
December 31, |
|
||||
Restricted Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Term A loan facility(b) |
|
|
April 17, 2018 |
|
|
2.17 |
% |
$ |
886,621 |
|
|
885,105 |
|
Term B loan facility(b) |
|
|
April 17, 2020 |
|
|
2.92 |
% |
|
1,159,031 |
|
|
1,150,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Group Credit Facilities debt |
|
|
|
|
|
|
|
|
|
|
$ |
2,035,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The unamortized discounts and deferred financing costs amounted to $11,200 at December 31, 2015, |
|
(b) |
In connection with the Merger, the Company repaid the then outstanding Term A and Term B loan facilities (see discussion above). |
Senior Notes and Debentures
The following table summarizes the Company's senior notes and debentures as of December 31, 2015:
Issuer |
|
Date Issued |
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying |
|
|||
CSC Holdings(a) |
|
February 6, 1998 |
|
February 15, 2018 |
|
|
7.875 |
% |
$ |
300,000 |
|
$ |
299,091 |
|
CSC Holdings(a) |
|
July 21, 1998 |
|
July 15, 2018 |
|
|
7.625 |
% |
|
500,000 |
|
|
498,942 |
|
CSC Holdings(b) |
|
February 12, 2009 |
|
February 15, 2019 |
|
|
8.625 |
% |
|
526,000 |
|
|
511,079 |
|
CSC Holdings(b) |
|
November 15, 2011 |
|
November 15, 2021 |
|
|
6.750 |
% |
|
1,000,000 |
|
|
985,640 |
|
CSC Holdings(b) |
|
May 23, 2014 |
|
June 1, 2024 |
|
|
5.250 |
% |
|
750,000 |
|
|
737,500 |
|
Cablevision(b) |
|
September 23, 2009 |
|
September 15, 2017 |
|
|
8.625 |
% |
|
900,000 |
|
|
891,238 |
|
Cablevision(b) |
|
April 15, 2010 |
|
April 15, 2018 |
|
|
7.750 |
% |
|
750,000 |
|
|
744,402 |
|
Cablevision(b) |
|
April 15, 2010 |
|
April 15, 2020 |
|
|
8.000 |
% |
|
500,000 |
|
|
494,410 |
|
Cablevision(b) |
|
September 27, 2012 |
|
September 15, 2022 |
|
|
5.875 |
% |
|
649,024 |
|
|
638,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
$ |
5,801,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The debentures are not redeemable by the Company prior to maturity. |
|
(b) |
The Company may redeem some or all of the notes at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
|
(c) |
The carrying amount of the notes is net of the unamortized deferred financing costs and/or discounts/premiums. |
The table above excludes (i) the principal amount of Cablevision 7.75% senior notes due 2018 of $345,238 and the principal amount of Cablevision 8.00% senior notes due 2020 of $266,217 held by Newsday at December 31, 2015 which are eliminated in the consolidated balance sheets of Cablevision.
Issuance of Debt Securities
In May 2014, CSC Holdings issued $750,000 aggregate principal amount of 5.25% senior notes due June 1, 2024 (the "2024 Notes"). The 2024 Notes are senior unsecured obligations and rank equally in right of payment with all of CSC Holdings' other existing and future unsecured and unsubordinated indebtedness. CSC Holdings used the net proceeds from the issuance of the 2024 Notes, as well as cash on hand, to make a $750,000 repayment on its outstanding Term B loan facility. In connection with the issuance of the 2024 Notes, the Company incurred deferred financing costs of approximately $14,273.
The indentures under which the Senior Notes and Debentures were issued contain certain covenants and agreements, including limitations on the ability of CSC Holdings and its restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) make investments or other restricted payments, (iii) create liens, (iv) sell assets and subsidiary stock, (v) pay dividends or make other distributions or repurchase or redeem our capital stock or subordinated debt, (vi) engage in certain transactions with affiliates, (vii) enter into agreements that restrict the payment of dividends by subsidiaries or the repayment of intercompany loans and advances, and (viii) engage in mergers or consolidations, in each case subject to certain exceptions. The indentures also contain certain customary events of default.
Repurchases of Cablevision Senior Notes
In January 2014, Cablevision repurchased with cash on hand $27,831 aggregate principal amount of its then outstanding 5.875% senior notes due September 15, 2022 (the "2022 Notes"). In October 2014, Cablevision repurchased with cash on hand an additional $9,200 aggregate principal amount of the 2022 Notes. In connection with these repurchases, Cablevision recorded a gain from the extinguishment of debt of $934, net of fees, and a write-off of approximately $1,436 of unamortized deferred financing costs associated with these notes.
Debt Transaction Subsequent to Merger
In connection with the Merger, in October 2015, Finco borrowed an aggregate principal amount of $3,800,000 under the Term Credit Facility and entered into revolving loan commitments in an aggregate principal amount of $2,000,000. The Term Credit Facility was to mature on October 9, 2022 and the Revolving Credit Facility was to mature on October 9, 2020 (see discussion below regarding the extension amendments). In addition, on June 21, 2016 and July 21, 2016, the Company entered into incremental loan assumption agreements whereby the Revolving Credit Facility was increased by $70,000 and $35,000, respectively, to $2,105,000.
Finco also issued $1,800,000 aggregate principal amount of the 2023 Notes, $2,000,000 aggregate principal amount of the 2025 Notes, and $1,000,000 aggregate principal amount of the 2025 Guaranteed Notes.
On June 21, 2016, immediately following the Merger, Finco merged with and into CSC Holdings, with CSC Holdings surviving the merger (the "CSC Holdings Merger"), and the Merger Notes and the Credit Facilities became obligations of CSC Holdings. The 2025 Guaranteed Notes are guaranteed on a senior basis by each restricted subsidiary of CSC Holdings (other than CSC TKR, LLC and its subsidiaries, which own and operate the New Jersey cable television systems, Cablevision Lightpath, Inc. and any subsidiaries of CSC Holdings that are "Excluded Subsidiaries" under the indenture governing the 2025 Guaranteed Notes) (such subsidiaries, the "Initial Guarantors") and the obligations under the Credit Facilities are (i) guaranteed on a senior basis by each Initial Guarantor and (ii) secured on a first priority basis by capital stock held by CSC Holdings and the guarantors in certain subsidiaries of CSC Holdings, subject to certain exclusions and limitations.
Altice used the proceeds from the Term Credit Facility and the Merger Notes, together with an equity contribution from Altice and its Co-Investors and existing cash at Cablevision, to (a) finance the Merger, (b) refinance the credit agreement, dated as of April 17, 2013 (the "Previous Credit Facility"), among CSC Holdings, certain subsidiaries of CSC Holdings and the lenders party thereto ($2,030,699 outstanding at Merger Date), (c) repay the senior secured credit agreement, dated as of October 12, 2012, among Newsday LLC, CSC Holdings, and the lenders party thereto (the "Previous Newsday Credit Facility") of $480,000 at Merger Debt, and (d) pay related fees and expenses.
The Credit Facilities permit CSC Holdings to request revolving loans, swing line loans or letters of credit from the revolving lenders, swingline lenders or issuing banks, as applicable, thereunder, from time to time prior to October 9, 2020, unless the commitments under the Revolving Credit Facility have been previously terminated.
Loans comprising each Eurodollar Borrowing or ABR Borrowing, as applicable, bear interest at a rate per annum equal to the Adjusted LIBO Rate or the Alternate Base Rate, as applicable, plus the Applicable Margin, where the Applicable Margin means: in respect of revolving credit loans with respect to any Eurodollar Loan, 3.25% per annum and (ii) with respect to any ABR Loan, 2.25% per annum.
On September 9, 2016, CSC Holdings entered into an amendment (the "Extension Amendment") to the Credit Facilities and the incremental loan assumption agreements dated June 21, 2016 and July 21, 2016 between CSC Holdings and certain lenders party thereto (the "Extending Lenders") pursuant to which each Extending Lender agreed to extend the maturity of its Term Credit Facility under the Credit Facilities to October 11, 2024 and to certain other amendments to the Credit Facilities. In October 2016, CSC Holdings used the net proceeds from the sale of $1,310,000 aggregate principal amount of 5.5% senior guaranteed notes due 2027 (the "2027 Guaranteed Notes") (after the deduction of fees and expenses) to prepay outstanding loans under the Term Credit Facility that were not extended pursuant to the Extension Amendment. The total aggregate principal amount of the Term Credit Facility, after giving effect to the use of proceeds of the 2027 Guaranteed Notes, is $2,500,000 (the "Extended Term Loan"). The Extended Term Loan was effective on October 11, 2016. In connection with the prepayment of the Term Credit Facility, the Company wrote-off the deferred financing costs and the unamortized discount related to the existing term loan aggregating $102,894. Additionally, the Company recorded deferred financing costs and an original issue discount of $7,249 and $6,250, respectively, which are both being amortized to interest expense over the term of the Extended Term Loan.
On December 9, 2016, the Credit Facilities were amended to increase the availability under the Revolving Credit Facility from $2,105,000 to $2,300,000 and extend the maturity on $2,280,000 of this facility to November 30, 2021. The remaining $20,000 will mature on October 9, 2020. The Credit Facilities require CSC Holdings to prepay outstanding term loans, subject to certain exceptions and deductions, with (i) 100% of the net cash proceeds of certain asset sales, subject to reinvestment rights and certain other exceptions, and (ii) commencing with the first full fiscal year after the consummation of the Merger, a ratable share (based on the outstanding principal amount of the Extended Term Loan divided by the sum of the outstanding principal amount of all pari passu indebtedness and the Extended Term Loan) of 50% of the annual excess cash flow of CSC Holdings and its restricted subsidiaries, which will be reduced to 0% if the Consolidated Net Senior Secured Leverage Ratio of CSC Holdings is less than or equal to 4.5 to 1.
Under the Term Credit Facility, CSC Holdings was required to make and made scheduled quarterly payment of $9,500 beginning with the fiscal quarter ending September 30, 2016. Under the Extended Term Loan, CSC Holdings is required to make scheduled quarterly payments equal to 0.25% of the principal amount of the Extended Term Loan, with the remaining balance scheduled to be paid on October 11, 2024, beginning with the fiscal quarter ending March 31, 2017.
Interest will be calculated under the Extended Term Loan subject to a "floor" applicable to the Adjusted LIBO Rate of 0.75% per annum, and the Applicable Margin is (1) with respect to any ABR Loan, 2.00% per annum and (2) with respect to any Eurodollar Loan, 3.00% per annum. If the Adjusted LIBO Rate for the Extended Term Loan is less than 0.75% for any given period, the interest rate is fixed at 3.75% per annum.
The Credit Facilities include negative covenants that are substantially similar to the negative covenants contained in the indentures under which the Merger Notes were issued (see discussion below). The Credit Facilities include one financial maintenance covenant (solely for the benefit of the Revolving Credit Facility), consisting of a maximum Consolidated Net Senior Secured Leverage Ratio of 5.0 to 1, which will be tested on the last day of any fiscal quarter but only if on such day there are outstanding borrowings under the Revolving Credit Facility (including swingline loans but excluding any cash collateralized letters of credit and undrawn letters of credit not to exceed $15,000). The Credit Facilities also contain 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 obligations under the Credit Facilities may be accelerated.
Total amounts payable by the Company under its various debt obligations outstanding, including the debt transaction subsequent to the merger discussed above and including notes payable, collateralized indebtedness, and capital leases, during the periods shown below, are as follows:
Years Ending December 31, |
|
|
|
|
2017 |
|
$ |
1,719,180 |
|
2018 |
|
|
2,103,441 |
|
2019 |
|
|
557,348 |
|
2020 |
|
|
526,340 |
|
2021 |
|
|
1,200,256 |
|
Thereafter |
|
|
9,884,024 |
|
|
Asset Derivatives | Liability Derivatives | |||||||||||||||||
Derivatives Not Designated as Hedging Instruments | Balance Sheet Location | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | |||||||||||||
Prepaid forward contracts | Derivative contracts, current | $ | 54,578 | $ | 352 | $ | (54,578 | ) | $ | (13,158 | ) | |||||||
Prepaid forward contracts | Derivative contracts, long-term | — | 10,604 | (52,488 | ) | — | ||||||||||||
Put/Call options | Liabilities under derivative contracts, current | — | — | (48,326 | ) | — | ||||||||||||
Interest rate swap contracts | Liabilities under derivative contracts, long-term | — | — | (69,271 | ) | (78,823 | ) | |||||||||||
$ | 54,578 | $ | 10,956 | $ | (224,663 | ) | $ | (91,981 | ) |
Number of shares (a) | 21,477,618 | ||
Collateralized indebtedness settled | $ | (617,151 | ) |
Derivatives contracts settled | (37,838 | ) | |
(654,989 | ) | ||
Proceeds from new monetization contracts | 662,724 | ||
Net cash proceeds | $ | 7,735 |
(a) | Share amounts are adjusted for the 2 for 1 stock split in February 2017. |
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 statement 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 December 31, 2016, 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 and it diversifies its equity derivative contracts among various counterparties to mitigate exposure to any single financial institution. All of the counterparties to such transactions carry investment grade credit ratings as of December 31, 2016.
Interest Rate Swap Contracts
In June 2016, the Company entered into two new fixed to floating interest rate swap contracts. One fixed to floating interest rate swap is converting $750,000 from a fixed rate of 1.6655% to six-month LIBO rate and a second tranche of $750,000 from a fixed rate of 1.68% to six-month LIBO rate. The objective of these swaps is to cover the exposure of the 2026 Senior Secured Notes to changes in the market interest rate. These swap contracts were not designated as hedges for accounting purposes. Accordingly, the changes in the fair value of these interest rate swap contracts are recorded through the statement of operations.
The Company does not hold or issue 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:
|
|
|
|
Asset |
|
Liability |
|
||
Derivatives Not Designated as Hedging Instruments |
|
Balance Sheet Location |
|
Fair Value at |
|
Fair Value at |
|
||
Prepaid forward contracts |
|
Derivative contracts, current |
|
$ |
352 |
|
$ |
13,158 |
|
Prepaid forward contracts |
|
Derivative contracts, long-term |
|
|
10,604 |
|
|
— |
|
Interest rate swap contracts |
|
Liabilities under derivative contracts, long-term |
|
|
— |
|
|
78,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,956 |
|
$ |
91,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized and realized losses related to Company's equity derivative contracts related to the Comcast common stock for the year ended December 31, 2016 of $53,696, are reflected in loss on equity derivative contracts, net in the Company's consolidated statement of operations.
For the year ended December 31, 2016, the Company recorded a gain on investments of $141,538, representing the net increase in the fair values of all investment securities pledged as collateral.
For the year ended December 31, 2016, the Company recorded a net loss on interest rate swap contracts of $72,961.
Settlements of Collateralized Indebtedness
The following table summarizes the settlement of the Company's collateralized indebtedness relating to Comcast shares that were settled by delivering cash equal to the collateralized loan value, net of the value of the related equity derivative contracts.
Number of shares(a) |
|
|
5,337,750 |
|
|
|
|
|
|
|
|
|
|
|
Collateralized indebtedness settled |
|
$ |
(143,102 |
) |
Derivative contracts settled |
|
|
— |
|
|
|
|
|
|
|
|
|
(143,102 |
) |
Proceeds from new monetization contracts |
|
|
179,388 |
|
|
|
|
|
|
Net cash receipt |
|
$ |
36,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Share amounts were adjusted for the 2 for 1 stock split in February 2017. |
The cash was obtained from the proceeds of new monetization contracts covering an equivalent number of Comcast shares. The terms of the new contracts allow the Company to retain upside participation in Comcast shares up to each respective contract's upside appreciation limit with downside exposure limited to the respective hedge price.
In January 2017, the Company settled collateralized indebtedness relating to 5,337,750 Comcast shares (adjusted for the 2 for 1 stock split in February 2017) by delivering cash equal to the collateralized loan value obtained from the proceeds of a new monetization contract covering an equivalent number of Comcast shares. Accordingly, the consolidated balance sheet of the Company as of December 31, 2016 reflect the reclassification of $184,286 of investment securities pledged as collateral from a current asset to a long-term asset and $150,036 of collateralized indebtedness from a current liability to a long-term liability.
DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS
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.
The Company monitors the financial institutions that are counterparties to its equity derivative contracts and it diversifies its equity derivative contracts among various counterparties to mitigate exposure to any single financial institution.
The following represents the location of the assets and liabilities associated with the Company's derivative instruments within the consolidated balance sheets:
|
|
|
|
Asset |
|
Liability |
|
||
Derivatives Not Designated |
|
Balance Sheet Location |
|
Fair Value at |
|
||||
Prepaid forward contracts |
|
Current derivative contracts |
|
$ |
10,333 |
|
$ |
2,706 |
|
Prepaid forward contracts |
|
Long-term derivative contracts |
|
|
72,075 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
82,408 |
|
$ |
2,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized and realized gains (losses) related to Company's equity derivative contracts related to the Comcast common stock for the period January 1, 2016 through June 20, 2016 and the years ended December 31, 2015 and 2014 of $(36,283), $104,927, and $(45,055), respectively, are reflected in gain (loss) on equity derivative contracts, net in the Company's consolidated statements of operations.
For the period January 1, 2016 through June 20, 2016 and the years ended December 31, 2015 and 2014, the Company recorded a gain (loss) on investments of $129,510, $(33,935) and $129,832, respectively, representing the net increase (decrease) in the fair values of all investment securities pledged as collateral.
Settlements of Collateralized Indebtedness
The following table summarizes the settlement of the Company's collateralized indebtedness relating to Comcast shares that were settled by delivering cash equal to the collateralized loan value, net of the value of the related equity derivative contracts.
|
|
January 1 to |
|
Year Ended |
|
||
Number of shares(a) |
|
|
10,802,118 |
|
|
26,815,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized indebtedness settled |
|
$ |
(273,519 |
) |
$ |
(569,562 |
) |
Derivative contracts settled |
|
|
(8,075 |
) |
|
(69,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
(281,594 |
) |
|
(639,237 |
) |
Proceeds from new monetization contracts |
|
|
337,149 |
|
|
774,703 |
|
|
|
|
|
|
|
|
|
Net cash receipt |
|
$ |
55,555 |
|
$ |
135,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Share amounts adjusted for the 2 for 1 stock split in February 2017. |
The cash was obtained from the proceeds of new monetization contracts covering an equivalent number of Comcast shares. The terms of the new contracts allow the Company to retain upside participation in Comcast shares up to each respective contract's upside appreciation limit with downside exposure limited to the respective hedge price.
|
• | 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. |
Fair Value Hierarchy | September 30, 2017 | December 31, 2016 | |||||||
Assets: | |||||||||
Money market funds (of which $14,700 is classified as restricted cash as of December 31, 2016) | Level I | $ | 65,801 | $ | 100,139 | ||||
Investment securities pledged as collateral | Level I | 1,652,917 | 1,483,030 | ||||||
Prepaid forward contracts | Level II | 54,578 | 10,956 | ||||||
Liabilities: | |||||||||
Prepaid forward contracts | Level II | 107,066 | 13,158 | ||||||
Put/Call Options | Level II | 48,326 | — | ||||||
Interest rate swap contracts | Level II | 69,271 | 78,823 | ||||||
Contingent consideration related to 2017 acquisition | Level III | 30,000 | — |
September 30, 2017 | December 31, 2016 | ||||||||||||||||
Fair Value Hierarchy | Carrying Amount (a) | Estimated Fair Value | Carrying Amount (a) | Estimated Fair Value | |||||||||||||
Altice USA debt instruments: | |||||||||||||||||
Notes payable to affiliates and related parties | Level II | $ | — | $ | — | $ | 1,750,000 | $ | 1,837,876 | ||||||||
CSC Holdings debt instruments: | |||||||||||||||||
Credit facility debt | Level II | 4,123,792 | 4,167,500 | 2,631,887 | 2,675,256 | ||||||||||||
Collateralized indebtedness | Level II | 1,314,788 | 1,286,557 | 1,286,069 | 1,280,048 | ||||||||||||
Senior guaranteed notes | Level II | 2,290,748 | 2,460,675 | 2,289,494 | 2,416,375 | ||||||||||||
Senior notes and debentures | Level II | 6,412,789 | 7,421,261 | 6,732,816 | 7,731,150 | ||||||||||||
Notes payable | Level II | 76,442 | 72,802 | 13,726 | 13,260 | ||||||||||||
Cablevision senior notes: | Level II | 1,817,536 | 1,998,340 | 2,742,082 | 2,920,056 | ||||||||||||
Cequel debt instruments: | |||||||||||||||||
Cequel credit facility | Level II | 1,253,110 | 1,261,838 | 812,903 | 815,000 | ||||||||||||
Senior secured notes | Level II | 2,569,559 | 2,745,750 | 2,566,802 | 2,689,750 | ||||||||||||
Senior notes | Level II | 2,762,543 | 3,036,850 | 3,176,131 | 3,517,275 | ||||||||||||
Notes payable | Level II | 3,083 | 3,083 | — | — | ||||||||||||
$ | 22,624,390 | $ | 24,454,656 | $ | 24,001,910 | $ | 25,896,046 |
(a) | Amounts are net of unamortized deferred financing costs and discounts. |
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:
|
|
At December 31, 2016 (Successor) |
|
||||||||||
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
100,139 |
|
$ |
— |
|
$ |
— |
|
$ |
100,139 |
|
Investment securities pledged as collateral |
|
|
1,483,030 |
|
|
— |
|
|
— |
|
|
1,483,030 |
|
Prepaid forward contracts |
|
|
— |
|
|
10,956 |
|
|
— |
|
|
10,956 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid forward contracts |
|
|
— |
|
|
13,158 |
|
|
— |
|
|
13,158 |
|
Interest rate swap contracts |
|
|
|
|
|
78,823 |
|
|
|
|
|
78,823 |
|
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 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.
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 Secured Notes, Senior Guaranteed Notes, Notes Payable to Affiliates and Related Parties, 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:
|
|
|
|
December 31, 2016 |
|
||||
|
|
Fair Value |
|
Carrying |
|
Estimated |
|
||
Altice USA debt instruments: |
|
|
|
|
|
|
|
|
|
Notes payable to affiliates and related parties |
|
Level II |
|
$ |
1,750,000 |
|
$ |
1,837,876 |
|
CSC Holdings debt instruments: |
|
|
|
|
|
|
|
|
|
Credit facility debt |
|
Level II |
|
|
2,631,887 |
|
|
2,675,256 |
|
Collateralized indebtedness(b) |
|
Level II |
|
|
1,286,069 |
|
|
1,280,048 |
|
Senior guaranteed notes |
|
Level II |
|
|
2,289,494 |
|
|
2,416,375 |
|
Senior notes and debentures(c) |
|
Level II |
|
|
6,732,816 |
|
|
7,731,150 |
|
Notes payable |
|
Level II |
|
|
13,726 |
|
|
13,260 |
|
Cablevision senior notes(d) |
|
Level II |
|
|
2,742,082 |
|
|
2,920,056 |
|
Cequel debt instruments: |
|
|
|
|
|
|
|
|
|
Cequel credit facility |
|
Level II |
|
|
812,903 |
|
|
815,000 |
|
Senior Secured Notes |
|
Level II |
|
|
1,079,869 |
|
|
1,152,250 |
|
Senior Notes |
|
Level II |
|
|
4,663,064 |
|
|
5,054,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,001,910 |
|
$ |
25,896,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Amounts are net of unamortized deferred financing costs and discounts. |
|
(b) |
The total carrying value of the collateralized debt was reduced by $9,142 to reflect its fair value on the Cablevision Acquisition Date. |
|
(c) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $39,713 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
|
(d) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $13,075 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
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.
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:
|
|
At December 31, 2015 |
|
||||||||||
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
922,765 |
|
$ |
— |
|
$ |
— |
|
$ |
922,765 |
|
Investment securities |
|
|
130 |
|
|
— |
|
|
— |
|
|
130 |
|
Investment securities pledged as collateral |
|
|
1,211,982 |
|
|
— |
|
|
— |
|
|
1,211,982 |
|
Prepaid forward contracts |
|
|
— |
|
|
82,408 |
|
|
— |
|
|
82,408 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid forward contracts |
|
|
— |
|
|
2,706 |
|
|
— |
|
|
2,706 |
|
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 prepaid forward contracts reflected as derivative contracts and liabilities under derivative contracts on the Company's 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.
In addition, see Note 9 for a discussion of impairment charges related to nonfinancial assets not measured at fair value on a recurring basis.
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:
|
|
|
|
December 31, 2015 |
|
||||
|
|
Fair Value |
|
Carrying |
|
Estimated |
|
||
Debt instruments: |
|
|
|
|
|
|
|
|
|
Credit facility debt |
|
Level II |
|
$ |
2,514,454 |
|
$ |
2,525,654 |
|
Collateralized indebtedness |
|
Level II |
|
|
1,191,324 |
|
|
1,176,396 |
|
Senior notes and debentures |
|
Level II |
|
|
5,801,011 |
|
|
5,756,608 |
|
Notes payable |
|
Level II |
|
|
14,544 |
|
|
14,483 |
|
|
|
|
|
|
|
|
|
|
|
Total debt instruments |
|
|
|
$ |
9,521,333 |
|
$ |
9,473,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value estimates related to the Company's debt instruments and senior notes receivable 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.
|
INCOME TAXES
The Company files a federal consolidated and certain state combined income tax returns with its 80% or more owned subsidiaries. In connection with the contribution of common stock of Cequel to the Company, Cequel joined the Company's federal consolidated group. Cablevision joined the Company's federal consolidated group on the Cablevision Acquisition Date.
Income tax benefit attributable to the Company's continuing operations for the year ended December 31, 2016 consist of the following components:
Current expense (benefit): |
|
|
|
|
Federal |
|
$ |
(981 |
) |
State |
|
|
5,310 |
|
|
|
|
|
|
|
|
|
4,329 |
|
|
|
|
|
|
Deferred benefit: |
|
|
|
|
Federal |
|
|
(223,159 |
) |
State |
|
|
(40,830 |
) |
|
|
|
|
|
|
|
|
(263,989 |
) |
|
|
|
|
|
Tax benefit relating to uncertain tax positions |
|
|
(6 |
) |
|
|
|
|
|
Income tax benefit |
|
$ |
(259,666 |
) |
|
|
|
|
|
|
|
|
|
|
The income tax benefit attributable to the Company's continuing operations differs from the amount derived by applying the statutory federal rate to pretax income principally due to the effect of the following items:
|
|
December 31, |
|
|
Federal tax benefit at statutory rate |
|
$ |
(381,901 |
) |
State income taxes, net of federal impact |
|
|
(39,336 |
) |
Changes in the valuation allowance |
|
|
297 |
|
Changes in the state rates used to measure deferred taxes, net of federal impact |
|
|
153,239 |
|
Tax benefit relating to uncertain tax positions |
|
|
(120 |
) |
Non-deductible share-based compensation related to the carried unit plan |
|
|
5,029 |
|
Non-deductible Cablevision Acquisition transaction costs |
|
|
4,457 |
|
Other non-deductible expenses |
|
|
1,551 |
|
Research credit |
|
|
(400 |
) |
Other, net |
|
|
(2,482 |
) |
|
|
|
|
|
Income tax benefit |
|
$ |
(259,666 |
) |
|
|
|
|
|
|
|
|
|
|
As described in Note 1, in June, 2016, (i) Cequel was contributed to Altice USA and (ii) Altice USA completed the Cablevision Acquisition. Accordingly, in the second quarter of 2016, Cequel and Cablevision joined the federal consolidated and certain state combined income tax returns of Altice USA. As a result, the applicate tax rate used to measure deferred tax assets and liabilities of Cequel increased, resulting in a non-cash deferred income tax charge of $153,660.
In the fourth quarter of 2016, ASU 2015-17 was adopted with prospective application. Accordingly, all deferred tax assets and liabilities are presented as noncurrent in the consolidated balance sheet as of December 31, 2016.
The tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance at December 31, 2016 are as follows.
|
|
December 31, |
|
|
NOLs and tax credit carry forwards |
|
$ |
971,728 |
|
Compensation and benefit plans |
|
|
93,939 |
|
Partnership investments |
|
|
113,473 |
|
Restructuring liability |
|
|
37,393 |
|
Other liabilities |
|
|
45,561 |
|
Liabilities under derivative contracts |
|
|
31,529 |
|
Interest deferred for tax purposes |
|
|
39,633 |
|
Other |
|
|
6,615 |
|
|
|
|
|
|
Deferred tax asset |
|
|
1,339,871 |
|
Valuation allowance |
|
|
(3,125 |
) |
|
|
|
|
|
Net deferred tax asset, noncurrent |
|
|
1,336,746 |
|
|
|
|
|
|
Fixed assets and intangibles |
|
|
(9,065,635 |
) |
Investments |
|
|
(187,795 |
) |
Prepaid expenses |
|
|
(10,172 |
) |
Fair value adjustment- debt and deferred finance costs |
|
|
(30,535 |
) |
Other |
|
|
(9,424 |
) |
|
|
|
|
|
Deferred tax liability, noncurrent |
|
|
(9,303,561 |
) |
|
|
|
|
|
Total net deferred tax liability |
|
$ |
(7,966,815 |
) |
|
|
|
|
|
|
|
|
|
|
The Cablevision Acquisition resulted in an ownership change under Internal Revenue Code ("IRC") Section 382 and certain state taxing authorities whereby Cablevision's federal net operating losses ("NOLs") immediately prior to the Cablevision Acquisition of $877,975 will be subject to certain limitations. The Cequel Acquisition resulted in a third ownership change with regard to Cequel NOLs. Utilization of Cequel NOLs of $1,709,263 are limited under IRC Section 382. The utilization of the NOLs will be determined based on the ordering rules required by the applicable taxing jurisdiction. Since the limitation amounts accumulate for future use to the extent they are not utilized in any given year, the Company believes its loss carryforwards should become fully available to offset future taxable income.
At December 31, 2016, the Company had consolidated federal NOLs of $3,078,119 expiring on various dates from 2019 through 2036. The Company has recorded a deferred tax asset related to $2,302,619 of such NOLs. A deferred tax asset has not been recorded for the remaining NOL of $775,500 as this portion relates to 'windfall' deductions on share-based awards that have not yet been realized. In connection with the adoption of ASU 2016-09 in the first quarter of 2017, the deferred tax asset for such windfall deductions will be recorded to accumulated deficit in the amount of approximately $309,000.
As of December 31, 2016, the Company has $43,215 of federal alternative minimum tax credit carry forwards which do not expire and $18,672 of research credits, expiring in varying amounts from 2023 through 2036.
Deferred tax assets have resulted primarily from the Company's future deductible temporary differences and NOLs. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. In evaluating the need for a valuation allowance, management takes into account various factors, including the expected level of future taxable income, available tax planning strategies and reversals of existing taxable temporary differences. If such estimates and related assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company's consolidated statements of income. Management evaluates the realizability of the deferred tax assets and the need for additional valuation allowances quarterly. Pursuant to the Cablevision Acquisition and Cequel Acquisition, deferred tax liabilities resulting from the book fair value adjustment increased significantly and future taxable income that will result from the reversal of existing taxable temporary differences for which deferred tax liabilities are recognized is sufficient to conclude it is more likely than not that the Company will realize all of its gross deferred tax assets, except those deferred tax assets against which a valuation allowance has been recorded which relate to certain state NOLs.
In the normal course of business, the Company engages in transactions in which the income tax consequences may be uncertain. The Company's income tax returns are filed based on interpretation of tax laws and regulations. Such income tax returns are subject to examination by taxing authorities. For financial statement purposes, the Company only recognizes tax positions that it believes are more likely than not of being sustained. There is considerable judgment involved in determining whether positions taken or expected to be taken on the tax return are more likely than not of being sustained.
A reconciliation of the beginning and ending amount of unrecognized tax benefits associated with uncertain tax positions, excluding associated deferred tax benefits and accrued interest, is as follows:
Balance at January 1, 2016 |
|
$ |
— |
|
Increase to tax position in connection with the Cablevision Acquisition |
|
|
4,031 |
|
Decreases related to prior year tax positions |
|
|
(6 |
) |
|
|
|
|
|
Balance at December 31, 2016 |
|
$ |
4,025 |
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016, if all uncertain tax positions were sustained at the amounts reported or expected to be reported in the Company's tax returns, the elimination of the Company's unrecognized tax benefits, net of the deferred tax impact, would decrease income tax expense by $5,185.
In the second quarter of 2016, the Company changed its accounting policy on a prospective basis to present interest expense relating to uncertain tax positions as additional interest expense. In the period ended December 31, 2016, $309 of interest expense relating to uncertain tax position was recorded to interest expense.
The most significant jurisdictions in which the Company is required to file income tax returns include the states of New York, New Jersey and Connecticut and the City of New York, Texas and West Virginia. The State of New York is presently auditing income tax returns for years 2009 through 2011.
Management does not believe that the resolution of the ongoing income tax examination described above will have a material adverse impact on the financial position of the Company. Changes in the liabilities for uncertain tax positions will be recognized in the interim period in which the positions are effectively settled or there is a change in factual circumstances.
INCOME TAXES
Income tax expense attributable to the Company's continuing operations consists of the following components:
|
|
January 1 to |
|
Year Ended |
|
Year Ended |
|
|||
Current expense: |
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
6,473 |
|
$ |
4,844 |
|
$ |
6,122 |
|
State |
|
|
1,917 |
|
|
15,869 |
|
|
2,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,390 |
|
|
20,713 |
|
|
8,910 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred (benefit) expense: |
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
93,253 |
|
|
97,927 |
|
|
135,873 |
|
State |
|
|
22,897 |
|
|
35,469 |
|
|
23,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,150 |
|
|
133,396 |
|
|
159,779 |
|
|
|
|
|
|
|
|
|
|
|
|
Tax (benefit) expense relating to uncertain tax positions |
|
|
308 |
|
|
763 |
|
|
(52,921 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
$ |
124,848 |
|
$ |
154,872 |
|
$ |
115,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit attributable to discontinued operations for the year ended December 31, 2015 of $8,731 is comprised of current and deferred income tax benefit of $111 and $8,620, respectively. Income tax expense attributable to discontinued operations for the year ended December 31, 2014 of $2,206 is comprised of current and deferred income tax expense of $108 and $2,098, respectively.
The income tax (benefit) expense attributable to the Company's continuing operations differs from the amount derived by applying the statutory federal rate to pretax income principally due to the effect of the following items:
|
|
January 1 to |
|
Year Ended |
|
Year Ended |
|
|||
Federal tax expense at statutory rate |
|
$ |
100,926 |
|
$ |
119,931 |
|
$ |
148,803 |
|
State income taxes, net of federal impact |
|
|
14,825 |
|
|
18,874 |
|
|
19,059 |
|
Changes in the valuation allowance |
|
|
86 |
|
|
(902 |
) |
|
(344 |
) |
Changes in the state rates used to measure deferred taxes, net of federal impact |
|
|
— |
|
|
(1,006 |
) |
|
(322 |
) |
Tax expense (benefit) relating to uncertain tax positions |
|
|
178 |
|
|
574 |
|
|
(52,914 |
) |
New York tax reform |
|
|
— |
|
|
16,334 |
|
|
(2,050 |
) |
Non-deductible officers' compensation |
|
|
462 |
|
|
846 |
|
|
1,532 |
|
Non-deductible merger transaction costs |
|
|
9,392 |
|
|
— |
|
|
— |
|
Other non-deductible expenses |
|
|
1,337 |
|
|
3,099 |
|
|
3,697 |
|
Research credit |
|
|
(850 |
) |
|
(2,630 |
) |
|
(2,634 |
) |
Adjustment to prior year tax expense |
|
|
— |
|
|
(515 |
) |
|
(192 |
) |
Other, net |
|
|
(1,508 |
) |
|
267 |
|
|
1,133 |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
$ |
124,848 |
|
$ |
154,872 |
|
$ |
115,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance at December 31, 2015 are as follows.
Deferred Tax Asset (Liability) |
|
|
|
|
Current |
|
|
|
|
NOLs and tax credit carry forwards |
|
$ |
76,007 |
|
Compensation and benefit plans |
|
|
80,831 |
|
Allowance for doubtful accounts |
|
|
2,196 |
|
Merger transaction costs |
|
|
7,332 |
|
Inventory |
|
|
7,135 |
|
Other |
|
|
26,216 |
|
|
|
|
|
|
Deferred tax asset |
|
|
199,717 |
|
Valuation allowance |
|
|
(2,098 |
) |
|
|
|
|
|
Net deferred tax asset, current |
|
|
197,619 |
|
|
|
|
|
|
Investments |
|
|
(163,396 |
) |
Prepaid expenses |
|
|
(19,627 |
) |
|
|
|
|
|
Deferred tax liability, current |
|
|
(183,023 |
) |
|
|
|
|
|
Net deferred tax asset, current |
|
$ |
14,596 |
|
|
|
|
|
|
Noncurrent |
|
|
|
|
NOLs and tax credit carry forwards |
|
$ |
36,866 |
|
Compensation and benefit plans |
|
|
97,005 |
|
Partnership investments |
|
|
123,529 |
|
Investments |
|
|
9,798 |
|
Other |
|
|
9,201 |
|
|
|
|
|
|
Deferred tax asset |
|
|
276,399 |
|
Valuation allowance |
|
|
(2,816 |
) |
|
|
|
|
|
Net deferred tax asset, noncurrent |
|
|
273,583 |
|
|
|
|
|
|
Fixed assets and intangibles |
|
|
(978,418 |
) |
|
|
|
|
|
Deferred tax liability, noncurrent |
|
|
(978,418 |
) |
|
|
|
|
|
Net deferred tax liability, noncurrent |
|
|
(704,835 |
) |
|
|
|
|
|
Total net deferred tax liability |
|
$ |
(690,239 |
) |
|
|
|
|
|
|
|
|
|
|
The Company used the 'with-and-without' approach to determine the recognition and measurement of excess tax benefits. Cash flows resulting from excess tax benefits were classified as cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for options exercised and restricted shares issued in excess of the deferred tax asset attributable to share-based compensation expense for such awards. The Company realized excess tax benefit of $82, $5,694 and $336 for the period January 1, 2016 through June 20, 2016, and for the years ended December 31, 2015 and 2014, respectively, resulting in an increase to paid-in-capital.
Deferred tax assets have resulted primarily from the Company's future deductible temporary differences and NOLs. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company's ability to realize its deferred tax assets depends upon the generation of sufficient future taxable income and tax planning strategies to allow for the utilization of its NOLs and deductible temporary differences. If such estimates and related assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company's consolidated statements of income. Management evaluates the realizability of the deferred tax assets and the need for additional valuation allowances quarterly. At this time, based on current facts and circumstances, management believes that it is more likely than not that the Company will realize benefit for its gross deferred tax assets, except those deferred tax assets against which a valuation allowance has been recorded which relate to certain state NOLs.
In the normal course of business, the Company engages in transactions in which the income tax consequences may be uncertain. The Company's income tax returns are filed based on interpretation of tax laws and regulations. Such income tax returns are subject to examination by taxing authorities. For financial statement purposes, the Company only recognizes tax positions that it believes are more likely than not of being sustained. There is considerable judgment involved in determining whether positions taken or expected to be taken on the tax return are more likely than not of being sustained.
A reconciliation of the beginning and ending amount of unrecognized tax benefits associated with uncertain tax positions, excluding associated deferred tax benefits and accrued interest, is as follows:
Balance at December 31, 2014 |
|
$ |
4,011 |
|
Increases related to prior year tax positions |
|
|
316 |
|
Increases related to prior year tax positions |
|
|
(88 |
) |
Increases related to current year tax positions |
|
|
3 |
|
Settlements paid in cash |
|
|
(220 |
) |
|
|
|
|
|
Balance at December 31, 2015 |
|
|
4,022 |
|
Increases related to prior year tax positions |
|
|
3 |
|
Increases related to current year tax positions |
|
|
6 |
|
|
|
|
|
|
Balance at June 20, 2016 |
|
$ |
4,031 |
|
|
|
|
|
|
|
|
|
|
|
In the second quarter of 2016, the Company changed its accounting policy on a prospective basis to present interest expense relating to uncertain tax positions as additional interest expense. During the period ended June 20, 2016 and December 31, 2015, interest expense of $209 and $314 was included in income tax expense, respectively.
The most significant jurisdictions in which the Company is required to file income tax returns include the states of New York, New Jersey and Connecticut and the City of New York. The State of New York is presently auditing income tax returns for years 2009 through 2011.
Management does not believe that the resolution of the ongoing income tax examination described above will have a material adverse impact on the financial position of the Company. Changes in the liabilities for uncertain tax positions will be recognized in the interim period in which the positions are effectively settled or there is a change in factual circumstances.
|
BENEFIT PLANS
Qualified and Non-qualified Defined Benefit Plans
Retirement Plans (collectively, the "Defined Benefit Plans")
The Company sponsors a non-contributory qualified defined benefit cash balance retirement plan (the "Pension Plan") for the benefit of non-union employees of Cablevision, as well as certain employees covered by a collective bargaining agreement in Brooklyn.
The Company maintains an unfunded non-contributory non-qualified defined benefit excess cash balance plan ("Excess Cash Balance Plan") covering certain current and former employees of Cablevision who participate in the Pension Plan, as well as an additional unfunded non-contributory, non-qualified defined benefit plan ("CSC Supplemental Benefit Plan") for the benefit of certain former officers and employees of Cablevision which provided that, upon retiring on or after normal retirement age, a participant receives a benefit equal to a specified percentage of the participant's average compensation, as defined. All participants were 100% vested in the CSC Supplemental Benefit Plan. The benefits related to the CSC Supplemental Plan were paid to participants in January 2017 and the plan was terminated.
Cablevision's Pension Plan and the Excess Cash Balance Plan are frozen and no employee of Cablevision who was not already a participant could participate in the plans and no further annual Pay Credits (a certain percentage of employees' eligible pay) are made. Existing account balances under the plans continue to be credited with monthly interest in accordance with the terms of the plans.
Plan Results for Defined Benefit Plans
Summarized below is the funded status and the amounts recorded on the Company's consolidated balance sheets for all of the Company's Defined Benefit Plans at December 31, 2016:
Change in projected benefit obligation: |
|
|
|
|
Projected benefit obligation at beginning of year |
|
$ |
403,963 |
|
Service cost |
|
|
— |
|
Interest cost |
|
|
14,077 |
|
Actuarial gain |
|
|
(11,429 |
) |
Curtailments |
|
|
3,968 |
|
Benefits paid |
|
|
(28,062 |
) |
|
|
|
|
|
Projected benefit obligation at end of year |
|
|
382,517 |
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
Fair value of plan assets at beginning of year |
|
|
297,846 |
|
Actual return on plan assets, net |
|
|
5,829 |
|
Employer contributions |
|
|
8,505 |
|
Benefits paid |
|
|
(28,062 |
) |
|
|
|
|
|
Fair value of plan assets at end of year |
|
|
284,118 |
|
|
|
|
|
|
Unfunded status at end of year |
|
$ |
(98,399 |
) |
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation for the Company's Defined Benefit Plans aggregated $382,517 at December 31, 2016.
The Company's net funded status relating to its Defined Benefit Plans at December 31, 2016, is as follows:
Defined Benefit Plans |
|
$ |
(98,399 |
) |
Less: Current portion related to nonqualified plans |
|
|
14,293 |
|
|
|
|
|
|
Long-term defined benefit plan obligations |
|
$ |
(84,106 |
) |
|
|
|
|
|
|
|
|
|
|
Components of the net periodic benefit cost, recorded in other operating expenses, for the Defined Benefit Plans for the year ended December 31, 2016, is as follows:
Service cost |
|
$ |
— |
|
Interest cost |
|
|
6,946 |
|
Expected return on plan assets, net |
|
|
(4,022 |
) |
Curtailment loss |
|
|
231 |
|
Settlement income (reclassified from accumulated other comprehensive loss)(a) |
|
|
(154 |
) |
|
|
|
|
|
Net periodic benefit cost |
|
$ |
3,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
As a result of benefit payments to terminated or retired individuals exceeding the service and interest costs for the Pension Plan and the Excess Cash Balance Pension Plan during the period June 21, 2016 through December 31, 2016, the Company recognized a non-cash settlement loss that represented the acceleration of the recognition of a portion of the previously unrecognized actuarial losses recorded in accumulated other comprehensive loss on the Company's consolidated balance sheet relating to these plans. |
Plan Assumptions for Defined Benefit Plans
Weighted-average assumptions used to determine net periodic cost (made at the beginning of the year) and benefit obligations (made at the end of the year) for the Defined Benefit Plans are as follows:
|
|
Net Periodic |
|
Benefit Obligations |
|
||
|
|
June 21, 2016 to |
|
December 31, 2016 |
|
||
Discount rate(a) |
|
|
3.53 |
% |
|
3.81 |
% |
Rate of increase in future compensation levels |
|
|
— |
% |
|
— |
% |
Expected rate of return on plan assets (Pension Plan only) |
|
|
3.97 |
% |
|
N/A |
|
|
|
|
(a) |
The discount rate of 3.53% for the period June 21, 2016 through December 31, 2016, represents the average of the quarterly discount rates used to remeasure the Company's projected benefit obligation and net periodic benefit cost in connection with the recognition of settlement losses discussed above. |
The discount rate used by the Company in calculating the net periodic benefit cost for the Cash Balance Plan and the Excess Cash Balance Plan was determined based on the expected future benefit payments for the plans and from the Towers Watson U.S. Rate Link: 40-90 Discount Rate Model. The model was developed by examining the yields on selected highly rated corporate bonds.
The Company's expected long-term return on Pension Plan assets is based on a periodic review and modeling of the plan's asset allocation structure over a long-term horizon. Expectations of returns and risk for each asset class are the most important of the assumptions used in the review and modeling and are based on comprehensive reviews of historical data, forward looking economic outlook, and economic/financial market theory. The expected long-term rate of return was chosen as a best estimate and was determined by (a) historical real returns, net of inflation, for the asset classes covered by the investment policy, and (b) projections of inflation over the long-term period during which benefits are payable to plan participants.
Pension Plan Assets and Investment Policy
The weighted average asset allocations of the Pension Plan at December 31, 2016 is as follows:
|
|
Plan Assets |
|
|
Asset Class: |
|
|
|
|
Mutual funds |
|
|
43 |
% |
Fixed income securities |
|
|
55 |
|
Cash equivalents and other |
|
|
2 |
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
The Pension Plan's investment objectives reflect an overall low risk tolerance to stock market volatility. This strategy allows for the Pension Plan to invest in portfolios that would obtain a rate of return throughout economic cycles, commensurate with the investment risk and cash flow needs of the Pension Plan. The investments held in the Pension Plan are readily marketable and can be sold to fund benefit payment obligations of the plan as they become payable.
Investment allocation decisions are formally made by the Company's Benefit Committee, which takes into account investment advice provided by its external investment consultant. The investment consultant takes into account expected long-term risk, return, correlation, and other prudent investment assumptions when recommending asset classes and investment managers to the Company's Investment and Benefit Committee. The major categories of the Pension Plan assets are cash equivalents and bonds which are marked-to-market on a daily basis. Due to the Pension Plan's significant holdings in long-term government and non-government fixed income securities, the Pension Plan's assets are subjected to interest rate risk; specifically, a rising interest rate environment. Consequently, an increase in interest rates may cause a decrease to the overall liability of the Pension Plan thus creating a hedge against rising interest rates. In addition, a portion of the Pension Plan's bond portfolio is invested in foreign debt securities where there could be foreign currency risks associated with them, as well as in non-government securities which are subject to credit risk of the bond issuer defaulting on interest and/or principal payments.
Investments at Estimated Fair Value
The fair values of the assets of the Pension Plan at December 31, 2016 by asset class are as follows:
Asset Class |
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Mutual funds |
|
$ |
121,356 |
|
$ |
— |
|
$ |
— |
|
$ |
121,356 |
|
Fixed income securities held in a portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign issued corporate debt |
|
|
— |
|
|
13,583 |
|
|
— |
|
|
13,583 |
|
U.S. corporate debt |
|
|
— |
|
|
48,046 |
|
|
— |
|
|
48,046 |
|
Government debt |
|
|
— |
|
|
4,810 |
|
|
— |
|
|
4,810 |
|
U.S. Treasury securities |
|
|
— |
|
|
77,285 |
|
|
— |
|
|
77,285 |
|
Asset-backed securities |
|
|
— |
|
|
14,065 |
|
|
— |
|
|
14,065 |
|
Other |
|
|
— |
|
|
247 |
|
|
— |
|
|
247 |
|
Cash equivalents(a) |
|
|
2,593 |
|
|
3,089 |
|
|
— |
|
|
5,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(b) |
|
$ |
123,949 |
|
$ |
161,125 |
|
$ |
— |
|
$ |
285,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
A significant portion represents an investment in a short-term investment fund that invests primarily in securities of high quality and low risk. |
|
(b) |
Excludes cash and net payables relating to the purchase of securities that were not settled as of December 31, 2016. |
The fair values of mutual funds and cash equivalents were derived from quoted market prices that the Pension Plan administrator has the ability to access.
The fair values of corporate and government debt, treasury securities and asset-back securities were derived from bids received from a vendor or broker not available in an active market that the Pension Plan administrator has the ability to access.
Benefit Payments and Contributions for Defined Benefit Plans
The following benefit payments are expected to be paid:
2017 |
|
$ |
45,899 |
|
2018 |
|
|
28,812 |
|
2019 |
|
|
27,565 |
|
2020 |
|
|
28,399 |
|
2021 |
|
|
25,692 |
|
2022 - 2026 |
|
|
120,664 |
|
The Company currently expects to contribute approximately $12,700 to the Pension Plan in 2017.
Defined Contribution Plans
The Company maintains the Cablevision 401(k) Savings Plan, a contributory qualified defined contribution plan for the benefit of non-union employees of Cablevision. Participants can contribute a percentage of eligible annual compensation and the Company will make a matching cash contribution or discretionary contribution, as defined in the plan. In addition, the Company maintains an unfunded non-qualified excess savings plan for which the Company provides a matching contribution similar to the Cablevision 401(k) Savings Plan. Applicable employees of the Company are eligible for an enhanced employer matching contribution, as well as a year-end employer discretionary contribution to the Cablevision 401(k) Savings Plan and the Cablevision Excess Savings Plan.
The Company also maintains a 401(k) plan for employees of Cequel. Cequel employees that qualify for participation can contribute a percentage of eligible annual compensation and the Company will make a matching cash contribution, as defined in the plan.
The cost associated with these plans (including the enhanced employer matching and discretionary contributions) was $28,501 for the year ended December 31, 2016.
BENEFIT PLANS
Qualified and Non-qualified Defined Benefit Plans
Cablevision Retirement Plans (collectively, the "Defined Benefit Plans")
The Company sponsors a non-contributory qualified defined benefit cash balance retirement plan (the "Pension Plan") for the benefit of non-union employees other than those of Newsday, as well as certain employees covered by a collective bargaining agreement in Brooklyn.
The Company maintains an unfunded non-contributory non-qualified defined benefit excess cash balance plan ("Excess Cash Balance Plan") covering certain current and former employees of the Company who participate in the Pension Plan, as well as an additional unfunded non-contributory, non-qualified defined benefit plan ("CSC Supplemental Benefit Plan") for the benefit of certain former officers and employees of the Company which provided that, upon retiring on or after normal retirement age, a participant receives a benefit equal to a specified percentage of the participant's average compensation, as defined. All participants were 100% vested in the CSC Supplemental Benefit Plan. The benefits related to the CSC Supplemental Plan were paid to participants in January 2017 and the plan was terminated.
The Company amended the Pension Plan and the Excess Cash Balance Plan to freeze participation and future benefit accruals effective December 31, 2013 for all Company employees except those covered by a collective bargaining agreement in Brooklyn. Effective April 1, 2015, participation was frozen and future benefit accruals ceased for employees covered by a collective bargaining agreement in Brooklyn. Therefore, after April 1, 2015, no employee of the Company who was not already a participant could participate in the plans and no further annual Pay Credits (a certain percentage of employees' eligible pay) were made. Existing account balances under the plans continue to be credited with monthly interest in accordance with the terms of the plans.
Plan Results for Defined Benefit Plans
Summarized below is the funded status and the amounts recorded on the Company's consolidated balance sheets for all of the Company's Defined Benefit Plans at December 31, 2015:
Change in projected benefit obligation: |
|
|
|
|
Projected benefit obligation at beginning of year |
|
$ |
430,846 |
|
Service cost |
|
|
344 |
|
Interest cost |
|
|
15,523 |
|
Actuarial (gain) loss |
|
|
(14,912 |
) |
Curtailments |
|
|
— |
|
Benefits paid |
|
|
(27,838 |
) |
|
|
|
|
|
Projected benefit obligation at end of year |
|
|
403,963 |
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
Fair value of plan assets at beginning of year |
|
|
303,676 |
|
Actual return (loss) on plan assets, net |
|
|
(3,921 |
) |
Employer contributions |
|
|
25,929 |
|
Benefits paid |
|
|
(27,838 |
) |
|
|
|
|
|
Fair value of plan assets at end of year |
|
|
297,846 |
|
|
|
|
|
|
Unfunded status at end of year |
|
$ |
(106,117 |
) |
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation for the Company's Defined Benefit Plans aggregated $403,963 at December 31, 2015.
The Company's net funded status relating to its Defined Benefit Plans at December 31, 2015 are as follows:
Defined Benefit Plans |
|
$ |
(106,117 |
) |
Less: Current portion related to nonqualified plans |
|
|
6,889 |
|
|
|
|
|
|
Long-term defined benefit plan obligations |
|
$ |
(99,228 |
) |
|
|
|
|
|
|
|
|
|
|
Components of the net periodic benefit cost, recorded in other operating expenses, for the Defined Benefit Plans for the period January 1, 2016 to June 20, 2016 and for the years ended December 31, 2015 and 2014, are as follows:
|
|
January 1, |
|
Year ended |
|
Year ended |
|
|||
Service cost |
|
$ |
— |
|
$ |
344 |
|
$ |
774 |
|
Interest cost |
|
|
7,130 |
|
|
15,523 |
|
|
18,040 |
|
Expected return on plan assets, net |
|
|
(3,565 |
) |
|
(8,297 |
) |
|
(9,548 |
) |
Recognized actuarial loss (reclassified from accumulated other comprehensive loss) |
|
|
(1,446 |
) |
|
1,294 |
|
|
2,364 |
|
Settlement (income) loss (reclassified from accumulated other comprehensive loss)(a) |
|
|
1,655 |
|
|
3,822 |
|
|
5,348 |
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
3,774 |
|
$ |
12,686 |
|
$ |
16,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
As a result of benefit payments to terminated or retired individuals exceeding the service and interest costs for the Pension Plan and the Excess Cash Balance Pension Plan during the period January 1, 2016 through June 20, 2016, and years ended December 31, 2015 and 2014, the Company recognized a non-cash settlement loss that represented the acceleration of the recognition of a portion of the previously unrecognized actuarial losses recorded in accumulated other comprehensive loss on the Company's consolidated balance sheets relating to these plans. |
Plan Assumptions for Defined Benefit Plans
Weighted-average assumptions used to determine net periodic cost (made at the beginning of the year) and benefit obligations (made at the end of the year) for the Defined Benefit Plans are as follows:
|
|
Weighted-Average Assumptions |
|
||||||||||
|
|
Net Periodic Benefit Cost |
|
|
|
||||||||
|
|
Benefit |
|
||||||||||
|
|
January 1, |
|
Year ended |
|
Year ended |
|
||||||
Discount rate(a) |
|
|
3.76 |
% |
|
3.83 |
% |
|
4.24 |
% |
|
3.94 |
% |
Rate of increase in future compensation levels |
|
|
— |
% |
|
— |
% |
|
3.50 |
% |
|
— |
% |
Expected rate of return on plan assets (Pension Plan only) |
|
|
3.97 |
% |
|
4.03 |
% |
|
4.53 |
% |
|
N/A |
|
|
|
|
(a) |
The discount rates of 3.76%, 3.83%, and 4.24% for the period January 1, 2016 through June 20, 2016 , and years ended December 31, 2015 and 2014, respectively, represent the average of the quarterly discount rates used to remeasure the Company's projected benefit obligation and net periodic benefit cost in connection with the recognition of settlement losses discussed above. |
The discount rate used by the Company in calculating the net periodic benefit cost for the Cash Balance Plan and the Excess Cash Balance Plan was determined based on the expected future benefit payments for the plans and from the Towers Watson U.S. Rate Link: 40-90 Discount Rate Model. The model was developed by examining the yields on selected highly rated corporate bonds.
The Company's expected long-term return on Pension Plan assets is based on a periodic review and modeling of the plan's asset allocation structure over a long-term horizon. Expectations of returns and risk for each asset class are the most important of the assumptions used in the review and modeling and are based on comprehensive reviews of historical data, forward looking economic outlook, and economic/financial market theory. The expected long-term rate of return was chosen as a best estimate and was determined by (a) historical real returns, net of inflation, for the asset classes covered by the investment policy, and (b) projections of inflation over the long-term period during which benefits are payable to plan participants.
Pension Plan Assets and Investment Policy
The weighted average asset allocations of the Pension Plan at December 31, 2015 are as follows:
|
|
Plan Assets at |
|
|
Asset Class: |
|
|
|
|
Mutual funds |
|
|
39 |
% |
Fixed income securities |
|
|
61 |
|
Cash equivalents and other |
|
|
— |
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
The Pension Plan's investment objectives reflect an overall low risk tolerance to stock market volatility. This strategy allows for the Pension Plan to invest in portfolios that would obtain a rate of return throughout economic cycles, commensurate with the investment risk and cash flow needs of the Pension Plan. The investments held in the Pension Plan are readily marketable and can be sold to fund benefit payment obligations of the plan as they become payable.
Investment allocation decisions are formally made by the Altice USA Benefits Committee, which takes into account investment advice provided by its external investment consultant. The investment consultant takes into account expected long-term risk, return, correlation, and other prudent investment assumptions when recommending asset classes and investment managers to the Company's Investment and Benefit Committee. The major categories of the Pension Plan assets are cash equivalents and bonds which are marked-to-market on a daily basis. Due to the Pension Plan's significant holdings in long-term government and non-government fixed income securities, the Pension Plan's assets are subjected to interest rate risk; specifically, a rising interest rate environment. Consequently, an increase in interest rates may cause a decrease to the overall liability of the Pension Plan thus creating a hedge against rising interest rates. In addition, a portion of the Pension Plan's bond portfolio is invested in foreign debt securities where there could be foreign currency risks associated with them, as well as in non-government securities which are subject to credit risk of the bond issuer defaulting on interest and/or principal payments.
Investments at Estimated Fair Value
The fair values of the assets of the Pension Plan at December 31, 2015 by asset class are as follows:
Asset Class |
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Mutual funds |
|
$ |
117,174 |
|
$ |
— |
|
$ |
— |
|
$ |
117,174 |
|
Fixed income securities held in a portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign issued corporate debt |
|
|
— |
|
|
12,825 |
|
|
— |
|
|
12,825 |
|
U.S. corporate debt |
|
|
— |
|
|
54,005 |
|
|
— |
|
|
54,005 |
|
Government debt |
|
|
— |
|
|
8,273 |
|
|
— |
|
|
8,273 |
|
U.S. Treasury securities |
|
|
— |
|
|
90,414 |
|
|
— |
|
|
90,414 |
|
Asset-backed securities |
|
|
— |
|
|
18,563 |
|
|
— |
|
|
18,563 |
|
Cash equivalents(a) |
|
|
893 |
|
|
— |
|
|
— |
|
|
893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(b) |
|
$ |
118,067 |
|
$ |
184,080 |
|
$ |
— |
|
$ |
302,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Represents an investment in a money market fund. |
|
(b) |
Excludes cash and net payables relating to the sale of securities that were not settled as of December 31, 2015. |
The fair values of mutual funds and cash equivalents were derived from quoted market prices that the Pension Plan administrator has the ability to access.
The fair values of corporate and government debt, treasury securities and asset-back securities were derived from bids received from a vendor or broker not available in an active market that the Pension Plan administrator has the ability to access.
Defined Contribution Plans
The Company also maintains the Cablevision 401(k) Savings Plan, a contributory qualified defined contribution plan for the benefit of non-union employees of the Company. Employees can contribute a percentage of eligible annual compensation and the Company will make a matching cash contribution or discretionary contribution, as defined in the plan. In addition, the Company maintains an unfunded non-qualified excess savings plan for which the Company provides a matching contribution similar to the Cablevision 401(k) Savings Plan.
Applicable employees of the Company are eligible for an enhanced employer matching contribution, as well as a year-end employer discretionary contribution to the Cablevision 401(k) Savings Plan and the Cablevision Excess Savings Plan.
The cost associated with these plans (including the enhanced employer matching and discretionary contributions) was $26,964, $61,343 and $65,725 for the period January 1, 2016 through June 20, 2016, and years ended December 31, 2015 and 2014, respectively.
|
Number of Time Vesting Awards | Number of Performance Based Vesting Awards | Weighted Average Grant Date Fair Value | |||||||
Balance, December 31, 2016 | 192,800,000 | 10,000,000 | $ | 0.37 | |||||
Granted | 28,025,000 | — | 3.14 | ||||||
Forfeited | (4,229,166 | ) | — | 0.37 | |||||
Balance, September 30, 2017 | 216,595,834 | 10,000,000 | 0.71 | ||||||
Awards vested at September 30, 2017 | — | — |
EQUITY AND LONG-TERM INCENTIVE PLANS
Equity Plans
In July 2016, 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 awards generally will vest as follows: 50% on the second anniversary of June 21, 2016 for Cablevision employees or December 21, 2015 for Cequel employees ("Base Date"), 25% on the third anniversary of the Base Date, and 25% on the fourth anniversary of the Base Date. Neptune Holding US GP LLC, the general partner of Neptune Management LP, has the right to repurchase (or to assign to an affiliate, including the Company, the right to repurchase) vested awards held by employees for sixty days following their termination. For the performance-based awards, vesting occurs upon achievement or satisfaction of a specified performance condition. The Company considered the probability of achieving the established performance targets in determining the equity-based compensation with respect to these awards at the end of each reporting period. The carried unit plan has 259,442,785 units authorized for issuance, of which 147,700,000 have been issued to employees of the Company and 55,100,000 have been issued to employees of Altice N.V. and affiliated companies.
The Company measures the cost of employee services received in exchange for carry units based on the fair value of the award at grant date. An option pricing model was used which requires subjective assumptions for which changes in these assumptions could materially affect the fair value of the carry units outstanding. The time to liquidity event assumption was based on management's judgment. The equity volatility assumption of 60% was estimated using the historical weekly volatility of publicly traded comparable companies. The risk-free rate of 0.74% assumed in valuing the units was based on the U.S. Constant Maturity Treasury Rates for a period matching the expected time to liquidity event. The discount for lack of marketability of 20% was based on Finnerty's (2012) average-strike put option model. The weighted average grant date fair value of the outstanding units is $0.37 per unit and the fair value was $1.76 per unit as of December 31, 2016. For the year ended December 31, 2016, the Company recognized an expense of $14,368 related to the push down of share-based compensation related to the carry unit plan of which approximately $9,849 related to units granted to employees of the Company and $4,519 related to employees of Altice N.V. and affiliated companies allocated to the Company.
Beginning on the fourth anniversary of the Base Date, the holders of carry units have an annual opportunity (a sixty day period determined by the administrator of the plan) to sell their units back to Neptune Holding US GP LLC (or affiliate, including the Company, designated by Neptune Holding US GP). Accordingly, the carried units are presented as temporary equity on the consolidated balance sheet at fair value. Adjustments to fair value at each reporting period are recorded in paid in capital.
The right of Neptune Holding US GP LLC to assign to an affiliate, including the Company, the right to repurchase an employee's vested units during the sixty-day period following termination, or to satisfy its obligation to repurchase an employee's vested units during annual sixty-day periods following the fourth anniversary of the Base Date, may be exercised by Neptune Holding US GP LLC in its discretion at the time a repurchase right or obligation arises. The carry unit plan requires the purchase price payable to the employee or former employee, as the case may be, to be paid in cash, a promissory note (with a term of not more than 3 years and bearing interest at the long-term applicable federal rate under Section 1274(d) of the Internal Revenue Code) or combination thereof, in each case as determined by Neptune Holding US GP LLC in its discretion at the time of the repurchase. Neptune Holding US GP LLC expects that vested units will be redeemed for shares of Class A common stock upon vesting.
EQUITY AND LONG-TERM INCENTIVE PLANS
Equity Plans
In connection with the Merger, outstanding equity-based awards granted under the Company's equity plans were cancelled and converted into a right to receive cash based upon the $34.90 per Share merger price in accordance with the original terms of the awards. On the Merger Date, the Company had 11,880,700 stock options, 3,769,485 restricted shares, 1,724,940 restricted stock units issued to employees and 466,283 restricted stock units issued to non-employee directors outstanding. The aggregate payment was $439,167 and represents a portion of the merger consideration. Approximately $63,484 of compensation costs related to the acceleration of the vesting of these awards in connection with the Merger and the related employer payroll taxes of $7,929 were recorded on the black line and therefore are not reflected in either the Predecessor or Successor periods.
In March 2015, the Company's Board of Directors approved the Cablevision Systems Corporation 2015 Employee Stock Plan ("2015 Plan"), which was approved by Cablevision's stockholders at its annual stockholders meeting on May 21, 2015. Under the 2015 Plan, the Company was authorized to grant stock options, restricted shares, restricted stock units, stock appreciation rights, and other equity-based awards. As of December 31, 2015, 79,780 equity based awards had been granted under the 2015 Plan.
The Company also had an employee stock plan ("2006 Plan") under which it was authorized to grant incentive stock options, nonqualified stock options, restricted shares, restricted stock units, stock appreciation rights and other equity-based awards and a 2006 Stock Plan for Non-Employee Directors, whereby the Company was authorized to grant nonqualified stock options, restricted stock units and other equity-based awards. In 2015 and 2014, the Company granted its non-employee directors an aggregate of 73,056 and 66,421 restricted stock units, respectively. Total non-employee director restricted stock units outstanding as of December 31, 2015 were 466,283.
Since share-based compensation expense is based on awards that are ultimately expected to vest, such compensation expense was reduced for estimated forfeitures. Forfeitures were estimated based primarily on historical experience.
The following table presents the share-based compensation expense recognized by the Company as other operating expenses:
|
|
January 1, |
|
Year ended |
|
Year ended |
|
|||
Stock options |
|
$ |
3,848 |
|
$ |
9,159 |
|
$ |
7,573 |
|
Restricted shares and restricted stock units |
|
|
20,930 |
|
|
51,162 |
|
|
36,411 |
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation related to equity classified awards |
|
|
24,778 |
|
|
60,321 |
|
|
43,984 |
|
|
|
|
|
|
|
|
|
|
|
|
Other share-based compensation |
|
|
453 |
|
|
4,965 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation |
|
$ |
25,231 |
|
$ |
65,286 |
|
$ |
43,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
An income tax benefit of $10,357, $26,718 and $17,801 was recognized in continuing operations resulting from share-based compensation expense for the period from January 1, 2016 through June 20, 2016 and years ended December 31, 2015 and 2014, respectively.
Cash received from stock option exercises for the period January 1, 2016 through June 20, 2016, and years ended December 31, 2015 and 2014, respectively was $14,411, $18,727 and $55,355, respectively.
Valuation Assumptions—Stock Options
The Company calculated the fair value of each option award on the date of grant. The Company's computation of expected life was determined based on historical experience of similar awards, giving consideration to the contractual terms of the share-based awards and vesting schedules, or by using the simplified method (the average of the vesting period and option term), if applicable. The interest rate for periods within the contractual life of the stock option was based on interest yields for U.S. Treasury instruments in effect at the time of grant. The Company's computation of expected volatility was based on historical volatility of its common stock.
The following assumptions were used to calculate the fair values of stock option awards granted in the first quarter of 2015 and 2014:
|
|
2015 |
|
2014 |
|
||
Risk-free interest rate |
|
|
1.82 |
% |
|
2.12 |
% |
Expected life (in years) |
|
|
8 |
|
|
6.5 |
|
Dividend yield |
|
|
3.63 |
% |
|
3.79 |
% |
Volatility |
|
|
39.98 |
% |
|
42.80 |
% |
Grant date fair value |
|
$ |
5.45 |
|
$ |
5.27 |
|
Share-Based Payment Award Activity
The following table summarizes activity relating to Company employees who held Cablevision stock options for the period January 1, 2016 to June 20, 2016 and for the year ended December 31, 2015:
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|||||
|
|
Shares Under Option |
|
|
|
|
|
|||||||||
|
|
Weighted |
|
|
|
|||||||||||
|
|
Time |
|
Performance |
|
Aggregate |
|
|||||||||
Balance, December 31, 2014 |
|
|
5,097,666 |
|
|
7,633,500 |
|
$ |
14.41 |
|
|
7.17 |
|
$ |
79,347 |
|
Granted |
|
|
2,000,000 |
|
|
— |
|
|
19.17 |
|
|
|
|
|
|
|
Exercised |
|
|
(353,666 |
) |
|
(1,024,283 |
) |
|
12.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015 |
|
|
6,744,000 |
|
|
6,609,217 |
|
|
15.28 |
|
|
6.80 |
|
|
221,900 |
|
Exercised |
|
|
(744,000 |
) |
|
(728,517 |
) |
|
13.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 20, 2016 |
|
|
6,000,000 |
|
|
5,880,700 |
|
$ |
15.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The aggregate intrinsic value is calculated as the difference between (i) the exercise price of the underlying award and (ii) the quoted price of CNYG Class A common stock on December 31, 2015, as indicated. |
Restricted Stock Award Activity
The following table summarizes activity relating to Company employees who held Cablevision restricted shares and restricted stock units for the period January 1, 2016 to June 20, 2016 and for the year ended December 31, 2015:
|
|
Number of |
|
Number of |
|
Number of |
|
Weighted |
|
||||
Unvested award balance, December 31, 2014 |
|
|
5,314,870 |
|
|
2,035,300 |
|
|
— |
|
$ |
15.46 |
|
Granted |
|
|
1,747,870 |
|
|
584,400 |
|
|
1,851,700 |
|
|
19.43 |
|
Vested |
|
|
(1,598,363 |
) |
|
(739,600 |
) |
|
— |
|
|
14.48 |
|
Awards forfeited |
|
|
(496,629 |
) |
|
— |
|
|
(79,270 |
) |
|
17.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested award balance, December 31, 2015 |
|
|
4,967,748 |
|
|
1,880,100 |
|
|
1,772,430 |
|
|
17.53 |
|
Vested |
|
|
(2,239,167 |
) |
|
(753,296 |
) |
|
— |
|
|
15.35 |
|
Awards forfeited |
|
|
(85,900 |
) |
|
— |
|
|
(47,490 |
) |
|
18.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested award balance, June 20, 2016 |
|
|
2,642,681 |
|
|
1,126,804 |
|
|
1,724,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The PSUs entitled the employee to shares of CNYG common stock up to 150% of the number of PSUs granted depending on the level of achievement of the specified performance criteria. If the minimum performance threshold was not met, no shares were issued. Accrued dividends were paid to the extent that a PSU vested and the related stock was issued. |
During the first quarter of 2016, 2,992,463 Cablevision restricted shares issued to employees of the Company vested. To fulfill the employees' statutory minimum tax withholding obligations for the applicable income and other employment taxes, 1,248,875 of these shares, with an aggregate value of $41,469, were surrendered to the Company. During the year ended December 31, 2015, 2,337,963 Cablevision restricted shares issued to employees of the Company vested. To fulfill the employees' statutory minimum tax withholding obligations for the applicable income and other employment taxes, 1,004,950 of these shares, with an aggregate value of $19,141 were surrendered to the Company. These acquired shares had been classified as treasury stock.
Long-Term Incentive Plan Awards
In March 2011, the Company's Board of Directors approved the Cablevision Systems Corporation 2011 Cash Incentive Plan, which was approved by the Company's stockholders at its annual stockholders meeting in May 2011. The Company recorded expenses of $9,169, $27,170 and $43,892 for the period January 1, 2016 through June 20, 2016, and years ended December 31, 2015 and 2014, respectively, related to this plan.
Carried Unit Plan
Subsequent to the merger, in July 2016, certain employees of the Company and its affiliates received awards of units in a Carry Unit Plan of an entity which has an ownership interest in the Company's parent, Neptune Holding. The awards generally will vest as follows: 50% on the second anniversary of June 21, 2016 ("Base Date"), 25% on the third anniversary of the Base Date, and 25% on the fourth anniversary of the Base Date. Prior to the fourth anniversary, the Company has the right to repurchase vested awards held by employees upon their termination. The Carry Unit Plan has 259,442,785 units authorized for issuance, of which 102,500,000 have been issued to employees of the Company and 100,300,000 have been issued to employees of Altice and affiliated companies.
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | $ | 986 | $ | 720 | $ | 1,380 | $ | 720 | |||||||
Operating expenses: | |||||||||||||||
Programming and other direct costs | $ | (1,196 | ) | $ | (642 | ) | $ | (3,026 | ) | $ | (642 | ) | |||
Other operating expenses, net | (28,332 | ) | (8,056 | ) | (73,263 | ) | (13,056 | ) | |||||||
Operating expenses, net | (29,528 | ) | (8,698 | ) | (76,289 | ) | (13,698 | ) | |||||||
Interest expense (a) | — | (48,617 | ) | (90,405 | ) | (53,922 | ) | ||||||||
Loss on extinguishment of debt and write-off of deferred financing costs | — | — | (513,723 | ) | — | ||||||||||
Net charges | $ | (28,542 | ) | $ | (56,595 | ) | $ | (679,037 | ) | $ | (66,900 | ) | |||
Capital Expenditures | $ | 72,185 | $ | — | $ | 98,234 | $ | — |
(a) | See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $90,405 for the nine months ended September 30, 2017. |
September 30, 2017 | December 31, 2016 | ||||||
Due from: | |||||||
Altice US Finance S.A. (a) | $ | 12,951 | $ | 12,951 | |||
Newsday (b) | 4,177 | 6,114 | |||||
Altice Management Americas (b) | 615 | 3,117 | |||||
i24NEWS (b) | 3,373 | — | |||||
Other Altice N.V. subsidiaries (b) | 37 | — | |||||
$ | 21,153 | $ | 22,182 | ||||
Due to: | |||||||
CVC 3BV (c) | — | 71,655 | |||||
Neptune Holdings US LP (c) | — | 7,962 | |||||
Altice Management International (d) | — | 44,121 | |||||
ATS (b)(e) | 22,541 | — | |||||
Newsday (b) | 103 | 275 | |||||
Other Altice N.V. subsidiaries (f) | 6,358 | 3,350 | |||||
$ | 29,002 | $ | 127,363 |
(a) | Represents interest on senior notes paid by the Company on behalf of the affiliate. |
(b) | Represents amounts paid by the Company on behalf of the respective related party and for Newsday and ATS, the net amounts due from the related party also include charges for certain transition services provided. |
(c) | Represents distributions payable to stockholders. |
(d) | Amounts payable as of December 31, 2016 primarily represent amounts due for equipment purchases and software development services discussed above. |
(e) | Represents amounts due to ATS for construction, maintenance, and installation services, net of charges to ATS pursuant to the TSA. See discussion above. |
(f) | Represents amounts due to affiliates for services provided to the Company. |
AFFILIATE AND RELATED PARTY TRANSACTIONS
Equity Method Investments
In July 2016, the Company completed the sale of a 75% interest in Newsday LLC to an employee of the Company. The Company retained the remaining 25% ownership interest. Effective July 7, 2016, the operating results of Newsday are no longer consolidated with those of the Company and the Company's 25% interest in the operating results of Newsday is recorded on the equity basis.
At December 31, 2016, the Company's investment in Newsday was $3,640 and is included in investments in affiliates on our consolidated balance sheet. For the period July 8, 2016 to December 31, 2016, the Company recorded equity in net loss of Newsday of $1,132.
In December 2016, the Company made an investment of $1,966 in I24NEWS, Altice N.V.'s 24/7 international news and current affairs channel, representing a 25% ownership interest, which is included in investments in affiliates on our consolidated balance sheet at December 31, 2016. The 75% interest is owned by a subsidiary of Altice N.V. The operating results of I24NEWS will be recorded on an equity basis upon commencement of operations in 2017.
Affiliate and Related Party Transactions
As the transactions discussed below were conducted between subsidiaries under common control, amounts charged for certain services may not have represented amounts that might have been received or incurred if the transactions were based upon arm's length negotiations.
The following table summarizes the revenue and charges related to services provided to or received from subsidiaries of Altice N.V. and Newsday for the year ended December 31, 2016:
Revenue |
|
$ |
1,086 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Programming and other direct costs |
|
$ |
(1,947 |
) |
Other operating expenses |
|
|
(18,854 |
) |
|
|
|
|
|
Operating expenses, net |
|
|
(20,801 |
) |
|
|
|
|
|
Interest expense(a) |
|
|
(112,712 |
) |
|
|
|
|
|
Net charges |
|
$ |
(132,427 |
) |
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
45,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $102,557, as well as for interest expense of $10,155 related to the Holdco Notes prior to the exchange. |
Revenue
The Company recognized revenue in connection with sale of advertising to Newsday.
Programming and other direct costs
Programming and other direct costs includes costs incurred by the Company for the transport and termination of voice and data services provided by a subsidiary of Altice N.V.
Other operating expenses
A subsidiary of Altice N.V. provides certain executive services, including CEO, CFO and COO services, to the Company. Compensation under the terms of the agreement is an annual fee of $30,000 to be paid by the Company. Fees associated with this agreement recorded by the Company amounted to approximately $20,556 for the year ended December 31, 2016.
Other operating expenses includes advertising purchased from Newsday of $705 and IT consulting services of $182 provided by an Altice N.V. subsidiary, partially offset by a credit of $2,589 for transition services provided to Newsday.
Capital expenditures
The Company purchased equipment of $44,121 from Altice Management International and $1,025 from another Altice N.V. subsidiary. In addition, the Company acquired certain software development services that were capitalized from Altice Labs S.A. aggregating $740.
Aggregate amounts that were due from and due to related parties at December 31, 2016 is summarized below:
Due from: |
|
|
|
|
Altice US Finance S.A.(a) |
|
$ |
12,951 |
|
Newsday(b) |
|
|
6,114 |
|
Altice Management Americas(b) |
|
|
3,117 |
|
|
|
|
|
|
|
|
$ |
22,182 |
|
|
|
|
|
|
|
|
|
|
|
Due to: |
|
|
|
|
CVC 3BV(c) |
|
|
71,655 |
|
Neptune Holdings US LP(c) |
|
|
7,962 |
|
Altice Management International(d) |
|
|
44,121 |
|
Newsday(b) |
|
|
275 |
|
Other Altice subsidiaries(b) |
|
|
3,350 |
|
|
|
|
|
|
|
|
$ |
127,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Represents interest on senior notes paid by the Company on behalf of the affiliate. |
|
(b) |
Represents amounts paid by the Company on behalf of the respective related party and/or the net amounts due from the related party for services provided. |
|
(c) |
Represents distributions payable to shareholders. |
|
(d) |
Represents amounts due for equipment purchases and software development services discussed above. |
The table above does not include notes payable to affiliates and related parties of $1,750,000 and the related accrued interest of $102,557 as December 31, 2016 which is reflected in accrued interest in the Company's balance sheet. See discussion in Note 9.
AFFILIATE AND RELATED PARTY TRANSACTIONS
Equity Method Investments
In September 2015, the Company purchased the minority interest in Newsday Holdings LLC ("Newsday Holdings") held by Tribune Media Company ("Tribune") for approximately $8,300. As a result of this transaction, Newsday Holdings became a wholly-owned subsidiary of the Company. In addition, the indemnity provided by the Company to Tribune for certain taxes incurred by Tribune if Newsday Holdings or its subsidiary sold or otherwise disposed of Newsday assets in a taxable transaction or failed to maintain specified minimum outstanding indebtedness, was amended so that the restriction period lapsed on September 2, 2015.
Subsequent to the Merger, in July 2016, the Company completed the sale of a 75% interest in Newsday LLC. The Company retained the remaining 25% ownership interest.
In December 2016, the Company made an investment of $1,966 in I24NEWS, Altice's 24/7 international news and current affairs channel, representing a 25% ownership interest and the 75% interest is owned by a subsidiary of Altice.
Related Party Transactions
As the transactions discussed below were conducted between subsidiaries under common control, amounts charged for certain services may not have represented amounts that might have been received or incurred if the transactions were based upon arm's length negotiations.
Cablevision is controlled by Charles F. Dolan, certain members of his immediate family and certain family related entities (collectively the "Dolan Family"). Members of the Dolan Family are also the controlling stockholders of AMC Networks, The Madison Square Garden Company and MSG Networks Inc. ("MSG Networks").
The following table summarizes the revenue and charges (credits) related to services provided to or received from AMC Networks, Madison Square Garden Company and MSG Networks for the Predecessor periods:
|
|
|
|
Years Ended |
|
|||||
|
|
January 1, |
|
|||||||
|
|
2015 |
|
2014 |
|
|||||
Revenue |
|
$ |
2,088 |
|
$ |
5,343 |
|
$ |
5,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
Programming and other direct costs, net of credits |
|
$ |
84,636 |
|
$ |
176,909 |
|
$ |
179,144 |
|
Other operating expenses, net of credits |
|
|
2,182 |
|
|
5,372 |
|
|
3,878 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses, net |
|
|
86,818 |
|
|
182,281 |
|
|
183,022 |
|
|
|
|
|
|
|
|
|
|
|
|
Net charges |
|
$ |
84,730 |
|
$ |
176,938 |
|
$ |
177,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
The Company recognized revenue in connection with television advertisements and print advertising, as well as certain telecommunication services charged by its subsidiaries to AMC Networks, Madison Square Garden and MSG Networks. The Company and its subsidiaries, together with AMC Networks, Madison Square Garden and MSG Networks may have entered into agreements with third parties in which the amounts paid/received by AMC Networks, Madison Square Garden and MSG Networks, their subsidiaries, or the Company may have differed from the amounts that would have been paid/received if such arrangements were negotiated separately. Where subsidiaries of the Company have incurred a cost incremental to fair value and AMC Networks, Madison Square Garden and MSG Networks have received a benefit incremental to fair value from these negotiations, the Company and its subsidiaries charged AMC Networks, Madison Square Garden and MSG Networks for the incremental amount.
Programming and other direct costs
Programming and other direct costs included costs incurred by the Company for the carriage of the MSG Networks and Fuse program services (2014 period only), as well as for AMC, WE tv, IFC, Sundance Channel and BBC America (2015 period only) on the Company's cable systems. The Company also purchased certain programming signal transmission and production services from AMC Networks.
Other operating expenses (credits)
The Company, AMC Networks, Madison Square Garden and MSG Networks routinely entered into transactions with each other in the ordinary course of business. Such transactions included, but were not limited to, sponsorship agreements and cross-promotion arrangements. Additionally, amounts reflected in the tables were net of allocations to AMC Networks, Madison Square Garden and MSG Networks for services performed by the Company on their behalf. Amounts also included charges to the Company for services performed or paid by the affiliate on the Company's behalf.
Subsequent to the Merger, the Company continues to receive or provide services to these entities, but these entities are no longer related parties.
Transactions with Other Affiliates
During the period ended January 1, 2016 to June 20, 2016 and the years ended December 31, 2015 and 2014, the Company provided services to or incurred costs on behalf of certain related parties, including from time to time, the Dolan Family. All costs incurred on behalf of these related parties were reimbursed to the Company. Aggregate amounts that were due from and due to AMC Networks, Madison Square Garden and MSG Networks and other affiliates at December 31, 2015 (Predecessor) is summarized below:
|
|
December 31, |
|
|
Amounts due from affiliates |
|
$ |
767 |
|
Amounts due to affiliates |
|
|
29,729 |
|
|
COMMITMENTS AND CONTINGENCIES
Commitments
Future cash payments and commitments required under arrangements pursuant to contracts entered into by the Company in the normal course of business as of December 31, 2016 are as follows:
|
|
Payments Due by Period |
|
|||||||||||||
|
|
Total |
|
Year 1 |
|
Years 2 - 3 |
|
Years 4 - 5 |
|
More than |
|
|||||
Off balance sheet arrangements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase obligations(a) |
|
$ |
7,136,605 |
|
$ |
2,396,634 |
|
$ |
3,307,915 |
|
$ |
1,394,318 |
|
$ |
37,738 |
|
Guarantees(b) |
|
|
19,793 |
|
|
3,909 |
|
|
15,884 |
|
|
— |
|
|
— |
|
Letters of credit(c) |
|
|
114,251 |
|
|
220 |
|
|
14,297 |
|
|
99,734 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
7,270,649 |
|
$ |
2,400,763 |
|
$ |
3,338,096 |
|
$ |
1,494,052 |
|
$ |
37,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Purchase obligations primarily include contractual commitments with various programming vendors to provide video services to customers and minimum purchase obligations to purchase goods or services. Future fees payable under contracts with programming vendors are based on numerous factors, including the number of subscribers receiving the programming. Amounts reflected above related to programming agreements are based on the number of subscribers receiving the programming as of December 2016 multiplied by the per subscriber rates or the stated annual fee, as applicable, contained in the executed agreements in effect as of December 31, 2016. |
|
(b) |
Includes franchise and performance surety bonds primarily for the Company's cable television systems. |
|
(c) |
Represent letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Payments due by period for these arrangements represent the year in which the commitment expires although payments under these arrangements are required only in the event of nonperformance. |
The table above does not include obligations for payments required to be made under multi-year franchise agreements based on a percentage of revenues generated from video service per year.
Many of the Company's franchise agreements and utility pole leases require the Company to remove its cable wires and other equipment upon termination of the respective agreements. The Company has concluded that the fair value of these asset retirement obligations cannot be reasonably estimated since the range of potential settlement dates is not determinable.
Legal Matters
Cable Operations Litigation
Marchese, et al. v. Cablevision Systems Corporation and CSC Holdings, LLC:
The Company is a defendant in a lawsuit filed in the U.S. District Court for the District of New Jersey by several present and former Cablevision subscribers, purportedly on behalf of a class of iO video subscribers in New Jersey, Connecticut and New York. After three versions of the complaint were dismissed without prejudice by the District Court, plaintiffs filed their third amended complaint on August 22, 2011, alleging that the Company violated Section 1 of the Sherman Antitrust Act by allegedly tying the sale of interactive services offered as part of iO television packages to the rental and use of set-top boxes distributed by Cablevision, and violated Section 2 of the Sherman Antitrust Act by allegedly seeking to monopolize the distribution of Cablevision compatible set-top boxes. Plaintiffs seek unspecified treble monetary damages, attorney's fees, as well as injunctive and declaratory relief. On September 23, 2011, the Company filed a motion to dismiss the third amended complaint. On January 10, 2012, the District Court issued a decision dismissing with prejudice the Section 2 monopolization claim, but allowing the Section 1 tying claim and related state common law claims to proceed. Cablevision's answer to the third amended complaint was filed on February 13, 2012. On December 7, 2015, the parties entered into a settlement agreement, which is subject to approval by the Court. On December 11, 2015, plaintiffs filed a motion for preliminary approval of the settlement, conditional certification of the settlement class, and approval of a class notice distribution plan. On March 10, 2016 the Court granted preliminary approval of the settlement and approved the class notice distribution plan. Class notice distribution and the claims submission process have now concluded. The Court granted final approval of the settlement on September 12, 2016, and the effective date of the settlement was October 24, 2016. The Company recorded an expense of $15,600 in connection with settlement. As of December 31, 2016, the Company has an estimated liability associated with the settlement of $6,100 representing the cost of benefits to class members that are reasonably expected to be provided and has paid out $9,500 in attorneys' fees.
In re Cablevision Consumer Litigation:
Following expiration of the affiliation agreements for carriage of certain Fox broadcast stations and cable networks on October 16, 2010, News Corporation terminated delivery of the programming feeds to the Company, and as a result, those stations and networks were unavailable on the Company's cable television systems. On October 30, 2010, the Company and Fox reached an agreement on new affiliation agreements for these stations and networks, and carriage was restored. Several purported class action lawsuits were subsequently filed on behalf of the Company's customers seeking recovery for the lack of Fox programming. Those lawsuits were consolidated in an action before the U. S. District Court for the Eastern District of New York, and a consolidated complaint was filed in that court on February 22, 2011. Plaintiffs asserted claims for breach of contract, unjust enrichment, and consumer fraud, seeking unspecified compensatory damages, punitive damages and attorneys' fees. On March 28, 2012, the Court ruled on the Company's motion to dismiss, denying the motion with regard to plaintiffs' breach of contract claim, but granting it with regard to the remaining claims, which were dismissed. On April 16, 2012, plaintiffs filed a second consolidated amended complaint, which asserts a claim only for breach of contract. The Company's answer was filed on May 2, 2012. On October 10, 2012, plaintiffs filed a motion for class certification and on December 13, 2012, a motion for partial summary judgment. On March 31, 2014, the Court granted plaintiffs' motion for class certification, and denied without prejudice plaintiffs' motion for summary judgment. On May 30, 2014, the Court approved the form of class notice, and on October 7, 2014, approved the class notice distribution plan. The class notice distribution has been completed, and the opt-out period expired on February 27, 2015. Expert discovery commenced on May 5, 2014, and concluded on December 8 and 28, 2015, when the Court ruled on the pending expert discovery motions. On January 26, 2016, the Court approved a schedule for filing of summary judgment motions. Plaintiffs filed a motion for summary judgment on March 31, 2016. The Company filed its own summary judgment motion on June 13, 2016. The parties are actively engaged in settlement discussions although financial terms have not yet been finalized. The motions for summary judgment have been denied with leave to re-file in the event the discussions between the parties are not successful. In the period ended June 21, 2016 to December 31, 2016, the Company recorded an estimated liability associated with a potential settlement totaling $5,200. The amount ultimately paid in connection with a possible settlement could exceed the amount recorded.
Patent Litigation
Cablevision is named as a defendant in certain lawsuits claiming infringement of various patents relating to various aspects of the Company's businesses. In certain of these cases other industry participants are also defendants. In certain of these cases the Company expects that any potential liability would be the responsibility of the Company's equipment vendors pursuant to applicable contractual indemnification provisions. The Company believes that the claims are without merit and intends to defend the actions vigorously, but is unable to predict the outcome of these lawsuits or reasonably estimate a range of possible loss.
In addition to the matters discussed above, the Company is party to various lawsuits, some involving claims for substantial damages. Although the outcome of these other matters cannot be predicted and the impact of the final resolution of these other matters on the Company's results of operations in a particular subsequent reporting period is not known, management does not believe that the resolution of these other lawsuits will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due.
COMMITMENTS AND CONTINGENCIES
Legal Matters
Cable Operations Litigation
Marchese, et al. v. Cablevision Systems Corporation and CSC Holdings, LLC:
The Company is a defendant in a lawsuit filed in the U.S. District Court for the District of New Jersey by several present and former Cablevision subscribers, purportedly on behalf of a class of iO video subscribers in New Jersey, Connecticut and New York. After three versions of the complaint were dismissed without prejudice by the District Court, plaintiffs filed their third amended complaint on August 22, 2011, alleging that the Company violated Section 1 of the Sherman Antitrust Act by allegedly tying the sale of interactive services offered as part of iO television packages to the rental and use of set-top boxes distributed by Cablevision, and violated Section 2 of the Sherman Antitrust Act by allegedly seeking to monopolize the distribution of Cablevision compatible set-top boxes. Plaintiffs seek unspecified treble monetary damages, attorney's fees, as well as injunctive and declaratory relief. On September 23, 2011, the Company filed a motion to dismiss the third amended complaint. On January 10, 2012, the District Court issued a decision dismissing with prejudice the Section 2 monopolization claim, but allowing the Section 1 tying claim and related state common law claims to proceed. Cablevision's answer to the third amended complaint was filed on February 13, 2012. On December 7, 2015, the parties entered into a settlement agreement, which is subject to approval by the Court. On December 11, 2015, plaintiffs filed a motion for preliminary approval of the settlement, conditional certification of the settlement class, and approval of a class notice distribution plan. On March 10, 2016 the Court granted preliminary approval of the settlement and approved the class notice distribution plan.
Subsequent to the Merger, the class notice distribution and the claims submission process have now concluded. The Court granted final approval of the settlement on September 12, 2016 in the amount of $15,600, and the effective date of the settlement was October 24, 2016.
In re Cablevision Consumer Litigation:
Following expiration of the affiliation agreements for carriage of certain Fox broadcast stations and cable networks on October 16, 2010, News Corporation terminated delivery of the programming feeds to the Company, and as a result, those stations and networks were unavailable on the Company's cable television systems. On October 30, 2010, the Company and Fox reached an agreement on new affiliation agreements for these stations and networks, and carriage was restored. Several purported class action lawsuits were subsequently filed on behalf of the Company's customers seeking recovery for the lack of Fox programming. Those lawsuits were consolidated in an action before the U. S. District Court for the Eastern District of New York, and a consolidated complaint was filed in that court on February 22, 2011. Plaintiffs asserted claims for breach of contract, unjust enrichment, and consumer fraud, seeking unspecified compensatory damages, punitive damages and attorneys' fees. On March 28, 2012, the Court ruled on the Company's motion to dismiss, denying the motion with regard to plaintiffs' breach of contract claim, but granting it with regard to the remaining claims, which were dismissed. On April 16, 2012, plaintiffs filed a second consolidated amended complaint, which asserts a claim only for breach of contract. The Company's answer was filed on May 2, 2012. On October 10, 2012, plaintiffs filed a motion for class certification and on December 13, 2012, a motion for partial summary judgment. On March 31, 2014, the Court granted plaintiffs' motion for class certification, and denied without prejudice plaintiffs' motion for summary judgment. On May 30, 2014, the Court approved the form of class notice, and on October 7, 2014, approved the class notice distribution plan. The class notice distribution has been completed, and the opt-out period expired on February 27, 2015. Expert discovery commenced on May 5, 2014, and concluded on December 8 and 28, 2015, when the Court ruled on the pending expert discovery motions. On January 26, 2016, the Court approved a schedule for filing of summary judgment motions. Plaintiffs filed a motion for summary judgment on March 31, 2016. The Company filed its own summary judgment motion on June 13, 2016. The parties are actively engaged in settlement discussions although financial terms have not yet been finalized.
Patent Litigation
Cablevision is named as a defendant in certain lawsuits claiming infringement of various patents relating to various aspects of the Company's businesses. In certain of these cases other industry participants are also defendants. In certain of these cases the Company expects that any potential liability would be the responsibility of the Company's equipment vendors pursuant to applicable contractual indemnification provisions. The Company believes that the claims are without merit and intends to defend the actions vigorously, but is unable to predict the outcome of these lawsuits or reasonably estimate a range of possible loss.
In addition to the matters discussed above, the Company is party to various lawsuits, some involving claims for substantial damages. Although the outcome of these other matters cannot be predicted and the impact of the final resolution of these other matters on the Company's results of operations in a particular subsequent reporting period is not known, management does not believe that the resolution of these other lawsuits will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due.
Other Litigation
In April 2011, Thomas C. Dolan, a director and Executive Vice President, Strategy and Development, in the Office of the Chairman at Cablevision, filed a lawsuit against Cablevision and Rainbow Media Holdings LLC (which was subsequently dismissed as a party) in New York State Supreme Court. The lawsuit raised compensation-related claims related to events largely from 2005 to 2008. The matter was handled under the direction of an independent committee of the Board of Directors of Cablevision. In April 2015, the Court granted summary judgment in favor of the plaintiff on liability, with damages to be determined. On June 18, 2015, the Company filed a notice of appeal. On February 8, 2016, Cablevision and Thomas C. Dolan entered into a settlement pursuant to which the Company agreed to pay plaintiff $21,000 and plaintiff released all claims. A stipulation of dismissal with prejudice was approved and entered by the Court on February 8, 2016, and payment was made the same day. The appeal has also been withdrawn. The Company recorded an expense of $21,000 which is reflected in discontinued operations in the accompanying consolidated statements of operations for the year ended December 31, 2015 (see Note 6).
|
INTERIM FINANCIAL INFORMATION (Unaudited)
The following is a summary of the Company's selected quarterly financial data for the years ended December 31, 2016 and 2015:
2016: |
|
March 31, |
|
April 1 to |
|
||
Revenue |
|
$ |
1,645,890 |
|
$ |
1,491,714 |
|
Operating expenses |
|
|
(1,394,635 |
) |
|
(1,267,663 |
) |
|
|
|
|
|
|
|
|
Operating income |
|
$ |
251,255 |
|
$ |
224,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
94,311 |
|
$ |
69,201 |
|
Net loss attributable to noncontrolling interests |
|
|
66 |
|
|
170 |
|
|
|
|
|
|
|
|
|
Net income attributable to Cablevision Systems Corporation stockholders |
|
$ |
94,377 |
|
$ |
69,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
0.35 |
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.35 |
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
0.34 |
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.34 |
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
94,377 |
|
$ |
69,371 |
|
Loss from discontinued operations, net of income taxes |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
94,377 |
|
$ |
69,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor |
|
|||||||||||||
2015: |
|
March 31, |
|
June 30, |
|
September 30, |
|
December 31, |
|
Total |
|
|||||
Revenue |
|
$ |
1,622,352 |
|
$ |
1,661,940 |
|
$ |
1,624,828 |
|
$ |
1,636,425 |
|
$ |
6,545,545 |
|
Operating expenses |
|
|
(1,398,601 |
) |
|
(1,417,476 |
) |
|
(1,441,712 |
) |
|
(1,439,285 |
) |
|
(5,697,074 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
223,751 |
|
$ |
244,464 |
|
$ |
183,116 |
|
$ |
197,140 |
|
$ |
848,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
54,901 |
|
$ |
75,676 |
|
$ |
23,431 |
|
$ |
33,781 |
|
$ |
187,789 |
|
Income (loss) from discontinued operations, net of income taxes |
|
|
(10,502 |
) |
|
— |
|
|
(406 |
) |
|
(1,633 |
) |
|
(12,541 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
44,399 |
|
|
75,676 |
|
|
23,025 |
|
|
32,148 |
|
|
175,248 |
|
Net loss (income) attributable to noncontrolling interests |
|
|
234 |
|
|
(81 |
) |
|
78 |
|
|
(30 |
) |
|
201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Cablevision Systems Corporation stockholders |
|
$ |
44,633 |
|
$ |
75,595 |
|
$ |
23,103 |
|
$ |
32,118 |
|
$ |
175,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
0.21 |
|
$ |
0.28 |
|
$ |
0.09 |
|
$ |
0.12 |
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of income taxes |
|
$ |
(0.04 |
) |
$ |
— |
|
$ |
— |
|
$ |
(0.01 |
) |
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.17 |
|
$ |
0.28 |
|
$ |
0.09 |
|
$ |
0.12 |
|
$ |
0.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
0.20 |
|
$ |
0.27 |
|
$ |
0.08 |
|
$ |
0.12 |
|
$ |
0.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of income taxes |
|
$ |
(0.04 |
) |
$ |
— |
|
$ |
— |
|
$ |
(0.01 |
) |
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.16 |
|
$ |
0.27 |
|
$ |
0.08 |
|
$ |
0.12 |
|
$ |
0.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
55,135 |
|
$ |
75,595 |
|
$ |
23,509 |
|
$ |
33,751 |
|
$ |
187,990 |
|
Income (loss) from discontinued operations, net of income taxes |
|
|
(10,502 |
) |
|
— |
|
|
(406 |
) |
|
(1,633 |
) |
|
(12,541 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
44,633 |
|
$ |
75,595 |
|
$ |
23,103 |
|
$ |
32,118 |
|
$ |
175,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Values | Estimated Useful Lives | ||||
Current assets | $ | 1,923,071 | |||
Accounts receivable | 271,305 | ||||
Property, plant and equipment | 4,864,621 | 2-18 years | |||
Goodwill | 5,842,172 | ||||
Indefinite-lived cable television franchises | 8,113,575 | Indefinite-lived | |||
Customer relationships | 4,850,000 | 8 to 18 years | |||
Trade names (a) | 1,010,000 | 12 years | |||
Amortizable intangible assets | 23,296 | 1-15 years | |||
Other non-current assets | 748,998 | ||||
Current liabilities | (2,311,201 | ) | |||
Long-term debt | (8,355,386 | ) | |||
Deferred income taxes. | (6,832,773 | ) | |||
Other non-current liabilities | (189,355 | ) | |||
Total | $ | 9,958,323 |
(a) | See Note 8 for additional information regarding a change in the remaining estimated useful lives of the Company's trade names. |
Nine Months Ended September 30, 2016 | |||
Revenue | $ | 6,848,916 | |
Net loss | $ | (527,851 | ) |
BUSINESS COMBINATION
As discussed in Note 1, the Company completed the Cablevision Acquisition on June 21, 2016 and the Cequel Acquisition on December 21, 2015. The acquisitions were accounted for as a business combinations in accordance with ASC Topic 805. Accordingly, the Company recorded the fair value of the assets and liabilities assumed at the date of the acquisitions.
The following table provides the preliminary allocation of the total purchase price of $9,958,323 to the identifiable tangible and intangible assets and liabilities of Cablevision based on preliminary fair value information currently available, which is subject to change within the measurement period (up to one year from the acquisition date). The table also summarizes the allocation of the total purchase price of $3,973,528 to the identifiable tangible and intangible assets and liabilities based on fair value information in connection with the Cequel Acquisition. The remaining useful lives represent the period over which acquired tangible and intangible assets with a finite life are being depreciated or amortized.
|
|
Cablevision |
|
Cequel |
||||||
|
|
Preliminary |
|
Estimated |
|
Fair Values |
|
Estimated |
||
Current assets |
|
$ |
1,923,071 |
|
|
|
$ |
161,874 |
|
|
Accounts receivable |
|
|
271,305 |
|
|
|
|
180,422 |
|
|
Property, plant and equipment |
|
|
4,864,621 |
|
2 - 18 years |
|
|
2,107,220 |
|
3 - 13 years |
Goodwill |
|
|
5,838,959 |
|
|
|
|
2,153,741 |
|
|
Cable television franchise rights |
|
|
8,113,575 |
|
Indefinite-lived |
|
|
4,906,506 |
|
Indefinite-lived |
Customer relationships |
|
|
4,850,000 |
|
8 to 18 years |
|
|
1,075,884 |
|
8 years |
Trade names |
|
|
1,010,000 |
|
12 years |
|
|
56,782 |
|
2 years |
Amortizable intangible assets |
|
|
23,296 |
|
1 - 15 years |
|
|
3,356 |
|
11 years |
Other non-current assets |
|
|
748,998 |
|
|
|
|
73,811 |
|
|
Current liabilities |
|
|
(2,305,954 |
) |
|
|
|
(534,662 |
) |
|
Long-term debt |
|
|
(8,355,386 |
) |
|
|
|
(4,717,305 |
) |
|
Deferred income taxes |
|
|
(6,834,807 |
) |
|
|
|
(1,492,017 |
) |
|
Other non-current liabilities |
|
|
(189,355 |
) |
|
|
|
(2,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
9,958,323 |
|
|
|
$ |
3,973,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of customer relationships and cable television franchises were valued using derivations of the "income" approach. The future expected earnings from these assets were discounted to their present value equivalent.
Trade names were valued using the relief from royalty method, which is based on the present value of the royalty payments avoided as a result of the company owning the intangible asset.
The basis for the valuation methods was the Company's projections. These projections were based on management's assumptions including among others, penetration rates for video, high speed data, and voice; revenue growth rates; operating margins; and capital expenditures. The assumptions are derived based on the Company's and its peers' historical operating performance adjusted for current and expected competitive and economic factors surrounding the cable industry. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows generated by the respective intangible asset. The value is highly dependent on the achievement of the future financial results contemplated in the projections. The estimates and assumptions made in the valuation are inherently subject to significant uncertainties, many of which are beyond the Company's control, and there is no assurance that these results can be achieved. The primary assumptions for which there is a reasonable possibility of the occurrence of a variation that would have significantly affected the value include the assumptions regarding revenue growth, programming expense growth rates, the amount and timing of capital expenditures and the discount rate utilized.
In establishing fair value for the vast majority of the acquired property, plant and equipment, the cost approach was utilized. The cost approach considers the amount required to replace an asset by constructing or purchasing a new asset with similar utility, then adjusts the value in consideration of physical depreciation, and functional and economic obsolescence as of the appraisal date. The cost approach relies on management's assumptions regarding current material and labor costs required to rebuild and repurchase significant components of our property, plant and equipment along with assumptions regarding the age and estimated useful lives of our property, plant and equipment.
The estimates of expected useful lives take into consideration the effects of contractual relationships, customer attrition, eventual development of new technologies and market competition.
Long-term debt assumed was valued using quoted market prices (Level 2). The carrying value of most other assets and liabilities approximated fair value as of the acquisition dates.
As a result of applying business combination accounting, the Company recorded goodwill, which represented the excess of organization value over amounts assigned to the other identifiable tangible and intangible assets arising from expectations of future operational performance and cash generation.
The following table presents the unaudited pro forma revenue, loss from continuing operations and net loss for the year ended December 31, 2016 as if the Cablevision Acquisition had occurred on January 1, 2016:
Revenue |
|
$ |
9,154,816 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(721,257 |
) |
|
|
|
|
|
|
|
|
|
|
The pro forma results presented above include the impact of additional amortization expense related to the identifiable intangible assets recorded in connection with the Cablevision Acquisition, additional depreciation expense related to the fair value adjustment to property, plant and equipment and the incremental interest resulting from the issuance of debt to fund the acquisitions, net of the reversal of interest and amortization of deferred financing costs related to credit facilities that were repaid on the date of the Cablevision Acquisition, the accretion/ amortization of fair value adjustments associated with the long-term debt acquired and the remeasurement of deferred taxes associated with the acquisition of Cablevision.
BUSINESS COMBINATION
As discussed in Note 1, Cablevision completed the Merger on June 21, 2016. The Merger was accounted for as a business combination in accordance with ASC Topic 805. The following table provides the preliminary allocation of the total purchase price of $9,958,323 to the identifiable tangible and intangible assets and liabilities of Cablevision based on preliminary fair value information currently available, which is subject to change within the measurement period (up to one year from the acquisition date).
|
|
Estimates of Fair |
|
Estimated Useful |
|
Current assets |
|
$ |
1,923,071 |
|
|
Accounts receivable |
|
|
271,305 |
|
|
Property, plant and equipment |
|
|
4,864,621 |
|
2 - 18 years |
Goodwill |
|
|
5,838,959 |
|
|
Indefinite-lived cable television franchises |
|
|
8,113,575 |
|
Indefinite-lived |
Customer relationships |
|
|
4,850,000 |
|
8 to 18 years |
Trade names |
|
|
1,010,000 |
|
12 years |
Amortizable intangible assets |
|
|
23,296 |
|
1 - 15 years |
Other non-current assets |
|
|
748,998 |
|
|
Current liabilities |
|
|
(2,305,954 |
) |
|
Long-term debt |
|
|
(8,355,386 |
) |
|
Deferred income taxes. |
|
|
(6,834,807 |
) |
|
Other non-current liabilities |
|
|
(189,355 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
9,958,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of identified intangible assets was estimated using derivations of the "income" approach. Customer relationships and cable television franchises were valued using the multiple period excess earnings method ("MPEEM") approach. The MPEEM approach quantifies the expected earnings of an asset by isolating earnings attributable to the asset from the overall business enterprise earnings and then removing a charge for those assets that contribute to the generation of the isolated earnings. The future expected earnings are discounted to their present value equivalent.
Trade names were valued using the relief from royalty method, which is based on the present value of the royalty payments avoided as a result of the company owning the intangible asset.
The basis for the valuation methods was the Company's projections. These projections were based on management's assumptions including among others, penetration rates for video, high speed data, and voice; revenue growth rates; operating margins; and capital expenditures. The assumptions are derived based on the Company's and its peers' historical operating performance adjusted for current and expected competitive and economic factors surrounding the cable industry. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows generated by the respective intangible asset. The value is highly dependent on the achievement of the future financial results contemplated in the projections. The estimates and assumptions made in the valuation are inherently subject to significant uncertainties, many of which are beyond the Company's control, and there is no assurance that these results can be achieved. The primary assumptions for which there is a reasonable possibility of the occurrence of a variation that would have significantly affected the value include the assumptions regarding revenue growth, programming expense growth rates, the amount and timing of capital expenditures and the discount rate utilized.
In establishing fair value for the vast majority of the Company's property, plant and equipment, the cost approach was utilized. The cost approach considers the amount required to replace an asset by constructing or purchasing a new asset with similar utility, then adjusts the value in consideration of physical depreciation, and functional and economic obsolescence as of the appraisal date. The cost approach relies on management's assumptions regarding current material and labor costs required to rebuild and repurchase significant components of our property, plant and equipment along with assumptions regarding the age and estimated useful lives of our property, plant and equipment.
The estimates of expected useful lives take into consideration the effects of contractual relationships, customer attrition, eventual development of new technologies and market competition.
As a result of applying business combination accounting, the Company recorded goodwill, which represented the excess of organization value over amounts assigned to the other identifiable tangible and intangible assets arising from expectations of future operational performance and cash generation.
The following table sets forth the estimated amortization expense on the intangible assets recorded in the connection with the Merger for the years ending December 31:
Estimated amortization expense |
|
|
|
|
Year Ending December 31, 2017 |
|
$ |
701,908 |
|
Year Ending December 31, 2018 |
|
|
655,409 |
|
Year Ending December 31, 2019 |
|
|
609,245 |
|
Year Ending December 31, 2020 |
|
|
562,613 |
|
Year Ending December 31, 2021 |
|
|
515,430 |
|
The unaudited pro forma revenue, loss from continuing operations and net loss for the years ended December 31, 2015, as if the Merger had occurred on January 1, 2015, are as follows:
Revenue |
|
$ |
6,545,545 |
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(740,115 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(752,656 |
) |
|
|
|
|
|
|
|
|
|
|
The pro forma results presented above include the impact of additional interest expense related to the debt issued to finance the Merger. The pro forma results also reflect additional amortization expense related to the identifiable intangible assets recorded in connection with the Merger and additional depreciation expense related to the fair value adjustment to property, plant and equipment.
|
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Principles of Consolidation
The accompanying consolidated financial statements of Cablevision include the accounts of Cablevision and its majority-owned subsidiaries. Cablevision has no business operations independent of CSC Holdings, whose operating results and financial position are consolidated into Cablevision. All significant intercompany transactions and balances between Cablevision and CSC Holdings and their respective consolidated subsidiaries are eliminated in consolidation.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("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 revenues and expenses during the reporting period. Actual results could differ from those estimates. See Note 11 for a discussion of fair value estimates.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("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 revenues and expenses during the reporting period. Actual results could differ from those estimates. See Note 12 for a discussion of fair value estimates.
Reclassifications
Certain reclassifications have been made in the consolidated financial statements in the 2014 and 2015 financial statements to conform to the 2016 presentation.
Revenue Recognition
The Company recognizes video, high-speed data, and voice services revenues as the services are provided to customers. Revenue received from customers who purchase bundled services at a discounted rate is allocated to each product in a pro-rata manner based on the individual product's selling price (generally, the price at which the product is regularly sold on a standalone basis). Installation revenue for the Company's video, consumer high-speed data and VoIP services is recognized as installations are completed, as direct selling costs have exceeded this revenue in all periods reported. Advertising revenues are recognized when commercials are aired.
Revenues derived from other sources are recognized when services are provided or events occur.
Revenue Recognition
The Company recognizes video, high-speed data, and voice services revenues as the services are provided to customers. Revenue received from customers who purchase bundled services at a discounted rate is allocated to each product in a pro-rata manner based on the individual product's selling price (generally, the price at which the product is regularly sold on a standalone basis). Installation revenue for the Company's video, consumer high-speed data and VoIP services is recognized as installations are completed, as direct selling costs have exceeded this revenue in all periods reported. Advertising revenues are recognized when commercials are aired.
Revenues derived from other sources are recognized when services are provided or events occur.
Multiple-Element Transactions
In the normal course of business, the Company may enter into multiple-element transactions where it is simultaneously both a customer and a vendor with the same counterparty or in which it purchases multiple products and/or services, or settles outstanding items contemporaneous with the purchase of a product or service from a single counterparty. The Company's policy for accounting for each transaction negotiated contemporaneously is to record each deliverable of the transaction based on its best estimate of selling price in a manner consistent with that used to determine the price to sell each deliverable on a standalone basis. In determining the fair value of the respective deliverable, the Company will utilize quoted market prices (as available), historical transactions or comparable transactions.
Multiple-Element Transactions
In the normal course of business, the Company may enter into multiple-element transactions where it is simultaneously both a customer and a vendor with the same counterparty or in which it purchases multiple products and/or services, or settles outstanding items contemporaneous with the purchase of a product or service from a single counterparty. The Company's policy for accounting for each transaction negotiated contemporaneously is to record each deliverable of the transaction based on its best estimate of selling price in a manner consistent with that used to determine the price to sell each deliverable on a standalone basis. In determining the fair value of the respective deliverable, the Company will utilize quoted market prices (as available), historical transactions or comparable transactions.
Gross Versus Net Revenue Recognition
In the normal course of business, 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. The Company's policy is that, in instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities and amounts received from the customers are recorded on a gross basis. That is, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customer are recorded as revenue. For the year ended December 31, 2016, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $154,732.
Gross Versus Net Revenue Recognition
In the normal course of business, 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. The Company's policy is that, in instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities and amounts received from the customers are recorded on a gross basis. That is, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customer are recorded as revenue. For the period January 1, 2016 through June 20, 2016 and for the years ended December 31, 2015 and 2014, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $95,432, $199,701 and $178,630, respectively.
Technical and Operating Expenses
Costs of revenue related to sales of services are classified as "programming and other direct costs" in the accompanying consolidated statement of operations.
Technical and Operating Expenses
Costs of revenue related to sales of services are classified as "programming and other direct costs" in the accompanying consolidated statements of operations.
Programming Costs
Programming expenses related to the Company's video service represent fees paid to programming distributors to license the programming distributed to subscribers. This programming is acquired generally under multi-year distribution agreements, with rates usually based on the number of subscribers that receive the programming. If there are periods when an existing distribution agreement has expired and the parties have not finalized negotiations of either a renewal of that agreement or a new agreement for certain periods of time, the Company continues to carry and pay for these services until execution of definitive replacement agreements or renewals. The amount of programming expense recorded during the interim period is based on the Company's estimates of the ultimate contractual agreement expected to be reached, which is based on several factors, including previous contractual rates, customary rate increases and the current status of negotiations. Such estimates are adjusted as negotiations progress until new programming terms are finalized.
In addition, the Company has received, or may receive, incentives from programming distributors for carriage of the distributors' programming. The Company generally recognizes these incentives as a reduction of programming costs in "programming and other direct costs", generally over the term of the distribution agreement.
Programming Costs
Programming expenses related to the Company's video service represent fees paid to programming distributors to license the programming distributed to subscribers. This programming is acquired generally under multi-year distribution agreements, with rates usually based on the number of subscribers that receive the programming. There have been periods when an existing distribution agreement has expired and the parties have not finalized negotiations of either a renewal of that agreement or a new agreement for certain periods of time. In substantially all these instances, the Company continues to carry and pay for these services until execution of definitive replacement agreements or renewals. The amount of programming expense recorded during the interim period is based on the Company's estimates of the ultimate contractual agreement expected to be reached, which is based on several factors, including previous contractual rates, customary rate increases and the current status of negotiations. Such estimates are adjusted as negotiations progress until new programming terms are finalized.
In addition, the Company has received, or may receive, incentives from programming distributors for carriage of the distributors' programming. The Company generally recognizes these incentives as a reduction of programming costs in "programming and other direct costs", generally over the term of the distribution agreement.
Advertising Expenses
Advertising costs are charged to expense when incurred and are reflected in "other operating expenses" in the accompanying consolidated statement of operations. Advertising costs amounted to $135,513 for the year ended December 31, 2016.
Advertising Expenses
Advertising costs are charged to expense when incurred and are reflected in "other operating expenses" in the accompanying consolidated statements of operations. Advertising costs amounted to $62,760, $160,671, and $156,228 for the period January 1, 2016 through June 20, 2016 and for the years ended December 31, 2015 and 2014, respectively.
Share-Based Compensation
Share-based compensation cost relates to awards of units in a carried unit plan. For carried interest units, the Company measures share-based compensation cost at the grant date fair value and recognizes the expense over the requisite service period or when it is probable any related performance condition will be met. For carried interest units with graded vesting requirement, compensation cost is recognized on an accelerated method under the graded vesting method over the requisite service period for the carried interest unit. Carried interest units that vest entirely at the end of the vesting requirement are expensed on a straight-line basis.
The Company estimates the fair value of carried interest units using an option pricing model. Key inputs that are used in applying the option pricing method are total equity value, equity volatility, risk free rate and time to liquidity event. The estimate of total equity value is determined using a combination of the income approach, which incorporates cash flow projections that are discounted at an appropriate rate, and the market approach, which involves applying a market multiple to the Company's projected operating results. The Company estimates volatility based on the historical equity volatility of comparable publicly-traded companies. Because there has been no public market for our equity prior to this offering, the estimates and assumptions the Company uses in the share-based compensation valuations are highly complex and subjective. Following the offering, such subjective valuations and estimates will no longer be necessary because we will rely on the market price of the Company's common stock to determine the fair value of share-based compensation awards. See Note 14 to the consolidated financial statements for additional information about our share-based compensation.
Share-Based Compensation
Share-based compensation expense is based on the fair value of the portion of share-based payment awards that are ultimately expected to vest. For share-based compensation awards that can be settled in cash, the Company recognizes compensation expense based on the estimated fair value of the award at each reporting period.
For options and performance based option awards, Cablevision recognized compensation expense based on the estimated grant date fair value using the Black-Scholes valuation model. For options not subject to performance based vesting conditions, Cablevision recognized the compensation expense using a straight-line amortization method. For options subject to performance based vesting conditions, Cablevision recognized compensation expense based on the probable outcome of the performance criteria over the requisite service period for each tranche of awards.
For restricted shares, Cablevision recognized compensation expense using a straight-line amortization method based on the grant date price of CNYG Class A common stock over the vesting period. For restricted stock units granted to non-employee director which vested 100% on the date of grant, compensation expense was recognized on the date of grant based on the grant date price of CNYG Class A common stock.
For performance based restricted stock units ("PSUs") which cliff vested in three years, Cablevision recognized compensation expense on a straight-line basis over the vesting period based on the estimated number of shares of CNYG Class A common stock expected to be issued.
Income Taxes
The Company's provision for income taxes is based on current period income, changes in deferred tax assets and liabilities and changes in estimates with regard to uncertain tax positions. Deferred tax assets are subject to an ongoing assessment of realizability. The Company provides deferred taxes for the outside basis difference of its investment in partnerships.
Income Taxes
The Company's provision for income taxes is based on current period income, changes in deferred tax assets and liabilities and changes in estimates with regard to uncertain tax positions. Deferred tax assets are subject to an ongoing assessment of realizability. The Company provides deferred taxes for the outside basis difference of its investment in partnerships. In the second quarter of 2016, the Company changed its accounting policy on a prospective basis to present interest expense relating to uncertain tax position as additional interest expense.
Cash and Cash Equivalents
The Company's cash investments are placed with money market funds and financial institutions that are investment grade as rated by Standard & Poor's and Moody's Investors Service. The Company selects money market funds that predominantly invest in marketable, direct obligations issued or guaranteed by the United States government or its agencies, commercial paper, fully collateralized repurchase agreements, certificates of deposit, and time deposits.
The Company considers the balance of its investment in funds that substantially hold securities that mature within three months or less from the date the fund purchases these securities to be cash equivalents. The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.
Cash and Cash Equivalents
The Company's cash investments are placed with money market funds and financial institutions that are investment grade as rated by Standard & Poor's and Moody's Investors Service. The Company selects money market funds that predominantly invest in marketable, direct obligations issued or guaranteed by the United States government or its agencies, commercial paper, fully collateralized repurchase agreements, certificates of deposit, and time deposits.
The Company considers the balance of its investment in funds that substantially hold securities that mature within three months or less from the date the fund purchases these securities to be cash equivalents. The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.
Accounts Receivable
Accounts receivable are recorded at net realizable value. The Company periodically assesses the adequacy of valuation allowances for uncollectible accounts receivable by evaluating the collectability of outstanding receivables and general factors such as historical collection experience, length of time individual receivables are past due, and the economic and competitive environment.
Accounts Receivable
Accounts receivable are recorded at net realizable value. The Company periodically assesses the adequacy of valuation allowances for uncollectible accounts receivable by evaluating the collectability of outstanding receivables and general factors such as historical collection experience, length of time individual receivables are past due, and the economic and competitive environment.
Investments
Investment securities and investment securities pledged as collateral are classified as trading securities and are stated at fair value with realized and unrealized holding gains and losses included in net income.
Investments
Investment securities and investment securities pledged as collateral are classified as trading securities and are stated at fair value with realized and unrealized holding gains and losses included in net income.
Long-Lived Assets and Amortizable Intangible Assets
Property, plant and equipment, including construction materials, are carried at cost, and include all direct costs and certain indirect costs associated with the construction of cable systems, and the costs of new equipment installations. Equipment under capital leases is recorded at the present value of the total minimum lease payments. Depreciation on equipment is calculated on the straight-line basis over the estimated useful lives of the assets or, with respect to equipment under capital leases and leasehold improvements, amortized over the shorter of the lease term or the assets' useful lives and reported in depreciation and amortization (including impairments) in the consolidated statements of operations.
The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized over the estimated useful life of the software and reported in depreciation and amortization (including impairments).
Long-Lived Assets and Amortizable Intangible Assets
Property, plant and equipment, including construction materials, are carried at cost, and include all direct costs and certain indirect costs associated with the construction of cable systems, and the costs of new equipment installations. Equipment under capital leases is recorded at the present value of the total minimum lease payments. Depreciation on equipment is calculated on the straight-line basis over the estimated useful lives of the assets or, with respect to equipment under capital leases and leasehold improvements, amortized over the shorter of the lease term or the assets' useful lives and reported in depreciation and amortization (including impairments) in the consolidated statements of operations.
The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized over the estimated useful life of the software and reported in depreciation and amortization (including impairments).
Customer relationships, trade names and other intangibles established in connection with acquisitions that are finite-lived are amortized in a manner that reflects the pattern in which the projected net cash inflows to the Company are expected to occur, such as the sum of the years' digits method, or when such pattern does not exist, using the straight-line basis over their respective estimated useful lives.
The Company reviews its long-lived assets (property, plant and equipment, and intangible assets subject to amortization that arose from acquisitions) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.
Customer relationships, trade names and other intangibles established in connection with acquisitions that are finite-lived are amortized in a manner that reflects the pattern in which the projected net cash inflows to the Company are expected to occur, such as the sum of the years' digits method, or when such pattern does not exist, using the straight-line basis over their respective estimated useful lives.
Long-Lived Assets and Amortizable Intangible Assets
Property, plant and equipment, including construction materials, are carried at cost, and include all direct costs and certain indirect costs associated with the construction of cable systems, and the costs of new equipment installations. Equipment under capital leases is recorded at the present value of the total minimum lease payments. Depreciation on equipment is calculated on the straight-line basis over the estimated useful lives of the assets or, with respect to equipment under capital leases and leasehold improvements, amortized over the shorter of the lease term or the assets' useful lives and reported in depreciation and amortization (including impairments) in the consolidated statements of operations.
The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized over the estimated useful life of the software and reported in depreciation and amortization (including impairments).
Customer relationships, trade names and other intangibles established in connection with acquisitions that are finite-lived are amortized in a manner that reflects the pattern in which the projected net cash inflows to the Company are expected to occur, such as the sum of the years' digits method, or when such pattern does not exist, using the straight-line basis over their respective estimated useful lives.
The Company reviews its long-lived assets (property, plant and equipment, and intangible assets subject to amortization that arose from acquisitions) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.
The Company reviews its long-lived assets (property, plant and equipment, and intangible assets subject to amortization that arose from acquisitions) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.
Long-Lived Assets and Amortizable Intangible Assets
Property, plant and equipment, including construction materials, are carried at cost, and include all direct costs and certain indirect costs associated with the construction of cable systems, and the costs of new equipment installations. Equipment under capital leases is recorded at the present value of the total minimum lease payments. Depreciation on equipment is calculated on the straight-line basis over the estimated useful lives of the assets or, with respect to equipment under capital leases and leasehold improvements, amortized over the shorter of the lease term or the assets' useful lives and reported in depreciation and amortization (including impairments) in the consolidated statements of operations.
The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized over the estimated useful life of the software and reported in depreciation and amortization (including impairments).
Customer relationships, trade names and other intangibles established in connection with acquisitions that are finite-lived are amortized in a manner that reflects the pattern in which the projected net cash inflows to the Company are expected to occur, such as the sum of the years' digits method, or when such pattern does not exist, using the straight-line basis over their respective estimated useful lives.
The Company reviews its long-lived assets (property, plant and equipment, and intangible assets subject to amortization that arose from acquisitions) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and the value of franchises, trademarks, and certain other intangibles acquired in purchase business combinations which have indefinite useful lives are not amortized. Rather, such assets are tested for impairment annually or upon the occurrence of a triggering event.
The Company assesses qualitative factors for its reporting units that carry goodwill. If the qualitative assessment results in a conclusion that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting unit.
When the qualitative assessment is not used, or if the qualitative assessment is not conclusive and it is necessary to calculate the fair value of a reporting unit, then the impairment analysis for goodwill is performed at the reporting unit level using a two-step approach. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill utilizing an enterprise-value based premise approach. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of goodwill impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill which would be recognized in a business combination.
The Company assesses qualitative factors to determine whether it is necessary to perform the one-step quantitative identifiable indefinite-lived intangible assets impairment test. This quantitative test is required only if the Company concludes that it is more likely than not that a unit of accounting's fair value is less than its carrying amount. When the qualitative assessment is not used, or if the qualitative assessment is not conclusive, the impairment test for other intangible assets not subject to amortization requires a comparison of the fair value of the intangible asset with its carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and the value of franchises, trademarks, and certain other intangibles acquired in purchase business combinations which have indefinite useful lives are not amortized. Rather, such assets are tested for impairment annually or upon the occurrence of a triggering event.
The Company assesses qualitative factors for its reporting units that carry goodwill. If the qualitative assessment results in a conclusion that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting unit.
When the qualitative assessment is not used, or if the qualitative assessment is not conclusive and it is necessary to calculate the fair value of a reporting unit, then the impairment analysis for goodwill is performed at the reporting unit level using a two-step approach. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill utilizing an enterprise-value based premise approach. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of goodwill impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill which would be recognized in a business combination.
The Company assesses qualitative factors to determine whether it is necessary to perform the one-step quantitative identifiable indefinite-lived intangible assets impairment test. This quantitative test is required only if the Company concludes that it is more likely than not that a unit of accounting's fair value is less than its carrying amount. When the qualitative assessment is not used, or if the qualitative assessment is not conclusive, the impairment test for other intangible assets not subject to amortization requires a comparison of the fair value of the intangible asset with its carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Deferred Financing Costs
Deferred financing costs are being amortized to interest expense using the effective interest method over the terms of the related debt.
Deferred Financing Costs
Deferred financing costs are being amortized to interest expense using the effective interest method over the terms of the related debt.
Derivative Financial Instruments
The Company accounts for derivative financial instruments as either assets or liabilities measured at fair value. The Company uses derivative instruments to manage its exposure to market risks from changes in certain equity prices and interest rates and does not hold or issue derivative instruments for speculative or trading purposes. These derivative instruments are not designated as hedges, and changes in the fair values of these derivatives are recognized in the statement of operations as gains (losses) on derivative contracts.
Derivative Financial Instruments
The Company accounts for derivative financial instruments as either assets or liabilities measured at fair value. The Company uses derivative instruments to manage its exposure to market risks from changes in certain equity prices and interest rates and does not hold or issue derivative instruments for speculative or trading purposes. These derivative instruments are not designated as hedges, and changes in the fair values of these derivatives are recognized in the statements of income as gains (losses) on derivative contracts.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when the Company believes it is probable that a liability has been incurred and the amount of the contingency can be reasonably estimated.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when the Company believes it is probable that a liability has been incurred and the amount of the contingency can be reasonably estimated.
Recently Adopted Accounting Pronouncements
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that the statement of cash flows disclose the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. ASU No. 2016-18 provides specific guidance on the presentation of restricted cash in the statement of cash flows. The new guidance was adopted as of December 31, 2016.
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17 (Topic 740), Balance Sheet Classification of Deferred Taxes. This ASU amends existing guidance to require the presentation of deferred tax liabilities and assets as noncurrent within a classified statement of financial position. ASU No. 2015-17 was adopted by the Company in the fourth quarter 2016 and was applied prospectively to all deferred tax liabilities and assets.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Prior to the issuance of the standard, entities were required to retrospectively apply adjustments made to provisional amounts recognized in a business combination. ASU No. 2015-16 was adopted by the Company on January 1, 2016.
In April 2015, the FASB issued ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. ASU No. 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU No. 2015-05 was adopted by the Company on January 1, 2016 and did not have a material impact on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs from line-of-credit arrangements after adoption of ASU No. 2015-03. ASU No. 2015-15 clarifies that the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU No. 2015-03 was adopted by the Company on January 1, 2016.
In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU No. 2014-15 was adopted by the Company for the annual period ended December 31, 2016.
In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period. ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. ASU No. 2014-12 was adopted by the Company on January 1, 2016 on a prospective basis and did not have any impact on the Company's consolidated financial statements.
Recently Issued But Not Yet Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and allows the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14 that approved deferring the effective date by one year so that ASU No. 2014-09 would become effective for the Company on January 1, 2018. The FASB also approved, in July 2015, permitting the early adoption of ASU No. 2014-09, but not before the original effective date for the Company of January 1, 2017.
In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in order to clarify the Codification and to correct any unintended application of the guidance. These items are not expected to have a significant effect on the current accounting standard. The amendments in this update affect the guidance in ASU No. 2014-09, which is not yet effective. ASU No. 2014-09 will be effective, reflecting the one-year deferral, for interim and annual periods beginning after December 15, 2017 (January 1, 2018 for the Company). Early adoption of the standard is permitted but not before the original effective date. Companies can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact that the adoption of ASU No. 2014-09 will have on its consolidated financial statements and selecting the method of transition to the new standard. We currently expect the adoption to impact the timing of the recognition of residential installation revenue and the recognition of commission expenses.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU No. 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The new guidance becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2016-15 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which provides simplification of income tax accounting for share-based payment awards. The new guidance becomes effective for the Company on January 1, 2017 with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value will be applied using the modified retrospective transition method. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term will be applied prospectively. The Company may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. In connection with the adoption on January 1, 2017, a deferred tax asset of approximately $309,000 for previously unrealized excess tax benefits will be recognized with the offset recorded to accumulated deficit.
In February 2016, the FASB issued ASU 2016-02, Leases, which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019 with early adoption permitted and will be applied using the modified retrospective method. The Company has not yet completed the evaluation of the effect that ASU No. 2016-02 will have on its consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07 Compensation—Retirement Benefits (Topic 715). ASU No. 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. It also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and what component of net benefit cost is eligible for capitalization. ASU No. 2017-07 becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2017-07 will have on its consolidated financial statements.
Recently Adopted Accounting Pronouncements
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17 (Topic 740), Balance Sheet Classification of Deferred Taxes. This ASU amends existing guidance to require the presentation of deferred tax liabilities and assets as noncurrent within a classified statement of financial position. ASU No. 2015-17 was adopted by the Company as of June 30, 2016 and was applied prospectively to all deferred tax liabilities and assets.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Prior to the issuance of the standard, entities were required to retrospectively apply adjustments made to provisional amounts recognized in a business combination. ASU No. 2015-16 was adopted by the Company on January 1, 2016.
In April 2015, the FASB issued ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. ASU No. 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU No. 2015-05 was adopted by the Company on January 1, 2016 and did not have a material impact on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs from line-of-credit arrangements after adoption of ASU No. 2015-03. ASU No. 2015-15 clarifies that the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU No. 2015-03 was adopted by the Company on January 1, 2016 representing a change in accounting principle and was applied retrospectively to all periods presented. Debt issuance costs, net for the Company of $67,119, as of December 31, 2015 were reclassified from deferred financing costs and presented as a reduction to debt in the consolidated balance sheets.
Debt issuance costs, net for the Company of $7,588 as of December 31, 2015 relating to its revolving credit facility were not impacted by the adoption of ASU No. 2015-03 and are reflected as long-term assets in the accompanying consolidated balance sheets.
In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU No. 2014-15 was adopted by the Company on January 1, 2016.
In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period. ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. ASU No. 2014-12 was adopted by the Company on January 1, 2016 on a prospective basis and did not have any impact on the Company's consolidated financial statements.
Recently Issued But Not Yet Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and allows the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14 that approved deferring the effective date by one year so that ASU No. 2014-09 would become effective for the Company on January 1, 2018. The FASB also approved, in July 2015, permitting the early adoption of ASU No. 2014-09, but not before the original effective date for the Company of January 1, 2017.
In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in order to clarify the Codification and to correct any unintended application of the guidance. These items are not expected to have a significant effect on the current accounting standard. The amendments in this update affect the guidance in ASU No. 2014-09, which is not yet effective. ASU No. 2014-09 will be effective, reflecting the one-year deferral, for interim and annual periods beginning after December 15, 2017 (January 1, 2018 for the Company). Early adoption of the standard is permitted but not before the original effective date. Companies can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact that the adoption of ASU No. 2014-09 will have on its consolidated financial statements and selecting the method of transition to the new standard. We currently expect the adoption to impact the timing of the recognition of residential installation revenue and the recognition of commission expenses.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that the statement of cash flows disclose the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. ASU No. 2016-18 provides specific guidance on the presentation of restricted cash in the statement of cash flows. The new guidance becomes effective for the Company on January 1, 2019 with early adoption permitted and will be applied retrospectively.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU No. 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The new guidance becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The Company has not yet completed the evaluation of the effect that ASU No. 2016-15 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which provides simplification of income tax accounting for share-based payment awards. The new guidance becomes effective for the Company on January 1, 2017 with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value will be applied using the modified retrospective transition method. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term will be applied prospectively. The Company may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. In connection with the adoption on January 1, 2017, a deferred tax asset of approximately $309,000 for previously unrealized excess tax benefits will be recognized with the offset recorded to accumulated deficit.
In February 2016, the FASB issued ASU 2016-02, Leases, which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019 with early adoption permitted and will be applied using the modified retrospective method. The Company has not yet completed the evaluation of the effect that ASU No. 2016-02 will have on its consolidated financial statements.
|
|
|
Shares of Common Stock |
|
||||
|
|
Class A |
|
Class B |
|
||
Balance at December 31, 2013 |
|
|
213,598,590 |
|
|
54,137,673 |
|
|
|
|
|
|
|
|
|
Employee and non-employee director stock transactions(a) |
|
|
6,621,345 |
|
|
— |
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014 |
|
|
220,219,935 |
|
|
54,137,673 |
|
|
|
|
|
|
|
|
|
Employee and non-employee director stock transactions(a) |
|
|
2,352,275 |
|
|
— |
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015 |
|
|
222,572,210 |
|
|
54,137,673 |
|
|
|
|
|
|
|
|
|
Employee and non-employee director stock transactions(a) |
|
|
(185,276 |
) |
|
— |
|
|
|
|
|
|
|
|
|
Balance at June 20, 2016 |
|
|
222,386,934 |
|
|
54,137,673 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Primarily included issuances of common stock in connection with employee and non-employee director exercises of stock options and restricted shares granted to employees, offset by shares acquired by the Company in connection with the fulfillment of employees' statutory tax withholding obligation for applicable income and other employment taxes and forfeited employee restricted shares. |
Declaration Date |
|
Dividend |
|
Record Date |
|
Payment Date |
|
August 6, 2015 |
|
$ |
0.15 |
|
August 21, 2015 |
|
September 10, 2015 |
May 1, 2015 |
|
$ |
0.15 |
|
May 22, 2015 |
|
June 12, 2015 |
February 24, 2015 |
|
$ |
0.15 |
|
March 16, 2015 |
|
April 3, 2015 |
November 5, 2014 |
|
$ |
0.15 |
|
November 21, 2014 |
|
December 12, 2014 |
July 29, 2014 |
|
$ |
0.15 |
|
August 15, 2014 |
|
September 5, 2014 |
May 6, 2014 |
|
$ |
0.15 |
|
May 23, 2014 |
|
June 13, 2014 |
February 25, 2014 |
|
$ |
0.15 |
|
March 14, 2014 |
|
April 3, 2014 |
|
|
|
|
Years Ended |
|
|||||
|
|
January 1, 2016 |
|
|||||||
|
|
2015 |
|
2014 |
|
|||||
Basic weighted average shares outstanding |
|
|
272,035 |
|
|
269,388 |
|
|
264,623 |
|
Effect of dilution: |
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
4,444 |
|
|
3,532 |
|
|
3,247 |
|
Restricted stock |
|
|
3,720 |
|
|
3,419 |
|
|
2,833 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding |
|
|
280,199 |
|
|
276,339 |
|
|
270,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity related to the allowance for doubtful accounts for the year ended December 31, 2016:
|
|
Balance at |
|
Provision for |
|
Deductions/ |
|
Balance |
|
||||
Allowance for doubtful accounts |
|
$ |
1,051 |
|
$ |
53,249 |
|
$ |
(42,623 |
) |
$ |
11,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
Provision for |
|
Deductions/ Write- |
|
Balance at End |
|
||||
Period from January 1, 2016 through June 20, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
6,039 |
|
$ |
13,240 |
|
$ |
(12,378 |
) |
$ |
6,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
12,112 |
|
$ |
35,802 |
|
$ |
(41,875 |
) |
$ |
6,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
14,614 |
|
$ |
47,611 |
|
$ |
(50,113 |
) |
$ |
12,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Non-Cash Investing and Financing Activities: | |||||||
Continuing Operations: | |||||||
Conversion of notes payable to affiliates and related parties of $1,750,000 (together with accrued and unpaid interest and applicable premium) to common stock (See Note 9) | $ | 2,264,252 | $ | — | |||
Property and equipment accrued but unpaid | 84,847 | 83,722 | |||||
Leasehold improvements paid by landlord | 3,998 | — | |||||
Notes payable to vendor | 25,879 | — | |||||
Supplemental Data: | |||||||
Cash interest paid | 1,481,363 | 931,345 | |||||
Income taxes paid, net | 26,396 | 5,342 |
During 2016, the Company's non-cash investing and financing activities and other supplemental data were as follows:
Non-Cash Investing and Financing Activities: |
|
|
|
|
Continuing Operations: |
|
|
|
|
Property and equipment accrued but unpaid |
|
$ |
155,653 |
|
Distributions declared but not paid |
|
|
79,617 |
|
Notes payable to vendor |
|
|
12,449 |
|
Deferred financing costs accrued but unpaid |
|
|
2,570 |
|
Supplemental Data: |
|
|
|
|
Cash interest paid |
|
|
1,092,114 |
|
Income taxes paid, net |
|
|
1,538 |
|
|
|
|
|
Years Ended |
|
|||||
|
|
January 1, 2016 |
|
|||||||
|
|
2015 |
|
2014 |
|
|||||
Non-Cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
|
|
Continuing Operations: |
|
|
|
|
|
|
|
|
|
|
Property and equipment accrued but unpaid |
|
$ |
68,356 |
|
$ |
63,843 |
|
$ |
48,824 |
|
Notes payable to vendor |
|
|
— |
|
|
8,318 |
|
|
34,522 |
|
Capital lease obligations |
|
|
— |
|
|
19,987 |
|
|
30,603 |
|
Intangible asset obligations |
|
|
290 |
|
|
1,121 |
|
|
525 |
|
Non-Cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
|
|
Dividends payable on unvested restricted share awards |
|
|
— |
|
|
3,517 |
|
|
3,809 |
|
Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
Continuing Operations: |
|
|
|
|
|
|
|
|
|
|
Cash interest paid |
|
|
258,940 |
|
|
560,361 |
|
|
550,241 |
|
Income taxes paid, net |
|
|
7,082 |
|
|
3,849 |
|
|
10,598 |
|
|
Property, plant and equipment (including equipment under capital leases) as of December 31, 2016 consist of the following assets, which are depreciated or amortized on a straight-line basis over their estimated useful lives.
|
|
|
|
Estimated |
|
Customer equipment |
|
$ |
871,049 |
|
3 to 5 years |
Headends and related equipment |
|
|
1,482,631 |
|
4 to 25 years |
Infrastructure |
|
|
3,740,494 |
|
3 to 25 years |
Equipment and software |
|
|
735,012 |
|
3 to 10 years |
Construction in progress (including materials and supplies) |
|
|
84,321 |
|
|
Furniture and fixtures |
|
|
45,576 |
|
5 to 12 years |
Transportation equipment |
|
|
135,488 |
|
5 to 10 years |
Buildings and building improvements |
|
|
390,337 |
|
10 to 40 years |
Leasehold improvements |
|
|
104,309 |
|
Term of lease |
Land |
|
|
47,715 |
|
|
|
|
|
|
|
|
|
|
|
7,636,932 |
|
|
Less accumulated depreciation and amortization |
|
|
(1,039,297 |
) |
|
|
|
|
|
|
|
|
|
$ |
6,597,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The estimated useful lives presented reflect the period of depreciation and amortization for the purchase of assets in new condition and do not reflect the remaining useful lives of the assets at December 31, 2016. |
|
|
December 31, |
|
Estimated |
|
Customer equipment |
|
$ |
1,952,336 |
|
3 to 5 years |
Headends and related equipment |
|
|
2,388,289 |
|
4 to 25 years |
Infrastructure |
|
|
5,639,226 |
|
3 to 25 years |
Equipment and software |
|
|
1,577,616 |
|
3 to 10 years |
Construction in progress (including materials and supplies) |
|
|
87,412 |
|
|
Furniture and fixtures |
|
|
96,561 |
|
5 to 12 years |
Transportation equipment |
|
|
210,013 |
|
5 to 18 years |
Buildings and building improvements |
|
|
322,267 |
|
10 to 40 years |
Leasehold improvements |
|
|
354,136 |
|
Term of lease |
Land |
|
|
14,507 |
|
|
|
|
|
|
|
|
|
|
|
12,642,363 |
|
|
Less accumulated depreciation and amortization |
|
|
(9,625,348 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,017,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016, the gross amount of buildings and equipment and related accumulated amortization recorded under capital leases were as follows:
Buildings and equipment |
|
$ |
53,833 |
|
Less accumulated amortization |
|
|
(6,306 |
) |
|
|
|
|
|
|
|
$ |
47,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
Equipment |
|
$ |
90,099 |
|
Less accumulated amortization |
|
|
(28,119 |
) |
|
|
|
|
|
|
|
$ |
61,980 |
|
|
|
|
|
|
|
|
|
|
|
|
The minimum future annual payments for all operating leases (with initial or remaining terms in excess of one year) during the next five years and thereafter, including pole rentals from January 1, 2017 through December 31, 2021, at rates now in force are as follows:
2017 |
|
$ |
76,513 |
|
2018 |
|
|
70,242 |
|
2019 |
|
|
61,986 |
|
2020 |
|
|
56,953 |
|
2021 |
|
|
53,658 |
|
Thereafter |
|
|
142,655 |
|
The minimum future annual payments for all operating leases (with initial or remaining terms in excess of one year) during the next five years and thereafter, including pole rentals from January 1, 2017 through December 31, 2021, are as follows:
2017 |
|
$ |
57,853 |
|
2018 |
|
|
52,206 |
|
2019 |
|
|
44,908 |
|
2020 |
|
|
41,221 |
|
2021 |
|
|
38,697 |
|
Thereafter |
|
|
141,063 |
|
|
Amortizable Intangible Assets | |||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Estimated Useful Lives | ||||||||||
Customer relationships | $ | 5,970,884 | (1,207,217 | ) | $ | 4,763,667 | 8 to 18 years | ||||||
Trade names (a) | 1,067,083 | (432,402 | ) | 634,681 | 2 to 4 years | ||||||||
Other amortizable intangibles | 37,052 | (8,805 | ) | 28,247 | 1 to 15 years | ||||||||
$ | 7,075,019 | $ | (1,648,424 | ) | $ | 5,426,595 |
(a) | On May 23, 2017, Altice N.V. announced the adoption of a global brand which will replace the Company's brands in the future, reducing the remaining useful lives of these trade name intangibles. The Company has estimated the remaining useful lives to be 3 years from the date of the adoption, which reflects one year as an in-use asset and two years as a defensive asset. Amortization expense is calculated on an accelerated basis based on the Company's estimate of the intangible asset during the in-use period. The remaining estimated value of the defensive asset once it is no longer in use will be amortized over the defensive period. Estimated amortization expense related to the Optimum and Lightpath trade names are approximately $545,805 for 2017 (of which $334,312 has been expensed through September 30, 2017), $355,006 for 2018, $46,627 for 2019 and $18,140 through May 2020. |
The following table summarizes information relating to the Company's acquired intangible assets as of December 31, 2016:
|
|
Amortizable Intangible Assets |
|||||||||
|
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
|
Estimated Useful |
|||
Customer relationships |
|
$ |
5,925,884 |
|
$ |
(580,276 |
) |
$ |
5,345,608 |
|
8 to 18 years |
Trade names |
|
|
1,066,783 |
|
|
(83,397 |
) |
|
983,386 |
|
2 to 12 years |
Other amortizable intangibles |
|
|
26,743 |
|
|
(3,093 |
) |
|
23,650 |
|
1 to 15 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,019,410 |
|
$ |
(666,766 |
) |
$ |
6,352,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|||||||||
|
|
Gross |
|
Accumulated |
|
Net |
|
Estimated |
|||
Customer relationships |
|
$ |
39,414 |
|
$ |
(27,778 |
) |
$ |
11,636 |
|
10 to 18 years |
Trade names |
|
|
— |
|
|
— |
|
|
— |
|
|
Other amortizable intangibles |
|
|
57,847 |
|
|
(32,532 |
) |
|
25,315 |
|
3 to 28 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
97,261 |
|
$ |
(60,310 |
) |
$ |
36,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cablevision | Cequel | Total | |||||||||
Cable television franchises | $ | 8,113,575 | $ | 4,906,506 | $ | 13,020,081 | |||||
Goodwill | 5,839,757 | 2,153,742 | 7,993,499 | ||||||||
Total | $ | 13,953,332 | $ | 7,060,248 | $ | 21,013,580 |
The following table summarizes information relating to the Company's acquired indefinite-lived intangible assets as of December 31, 2016:
|
|
Optimum |
|
Suddenlink |
|
Total |
|
|||
Cable television franchises |
|
$ |
8,113,575 |
|
$ |
4,906,506 |
|
$ |
13,020,081 |
|
Goodwill |
|
|
5,838,959 |
|
|
2,153,741 |
|
|
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,952,534 |
|
$ |
7,060,247 |
|
$ |
21,012,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
Cable television franchises |
|
$ |
731,848 |
|
Trademarks and other assets |
|
|
7,250 |
|
Goodwill |
|
|
262,345 |
|
|
|
|
|
|
Total |
|
$ |
1,001,443 |
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill as of January 1, 2017 | $ | 7,992,700 | |
Goodwill recorded in connection with acquisition in first quarter 2017 (Cablevision Segment) | 20,687 | ||
Adjustments to purchase accounting relating to Cablevision Acquisition | 3,213 | ||
Transfer of Cablevision goodwill related to Altice Technical Services US Corp. (See Note 14 for further details) | (23,101 | ) | |
Net goodwill as of September 30, 2017 | $ | 7,993,499 |
Gross goodwill as of January 1, 2016 |
|
$ |
2,040,402 |
|
Goodwill recorded in connection with Cablevision Acquisition |
|
|
5,838,959 |
|
Adjustments to purchase accounting relating to Cequel Acquisition |
|
|
113,339 |
|
|
|
|
|
|
Net goodwill as of December 31, 2016 |
|
$ |
7,992,700 |
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill as of December 31, 2015 (Predecessor) |
|
$ |
596,403 |
|
Accumulated impairment losses |
|
|
(334,058 |
) |
|
|
|
|
|
Net goodwill as of June 20, 2016 |
|
$ |
262,345 |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount (a) | |||||||||||||||
Maturity Date | Interest Rate | Principal | September 30, 2017 | December 31, 2016 | |||||||||||
CSC Holdings Restricted Group: | |||||||||||||||
Revolving Credit Facility (b) | $20,000 on October 9, 2020, remaining balance on November 30, 2021 | 4.49% | $ | 1,175,000 | $ | 1,149,024 | $ | 145,013 | |||||||
Term Loan Facility | July 17, 2025 | 3.48% | 2,992,500 | 2,974,768 | 2,486,874 | ||||||||||
Cequel: | |||||||||||||||
Revolving Credit Facility (c) | November 30, 2021 | — | — | — | — | ||||||||||
Term Loan Facility | July 28, 2025 | 3.49% | 1,261,838 | 1,253,110 | 812,903 | ||||||||||
$ | 5,429,338 | 5,376,902 | 3,444,790 | ||||||||||||
Less: Current portion | 92,650 | 33,150 | |||||||||||||
Long-term debt | $ | 5,284,252 | $ | 3,411,640 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | At September 30, 2017, $123,473 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $1,001,527 of the facility was undrawn and available, subject to covenant limitations. |
(c) | At September 30, 2017, $16,575 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $333,425 of the facility was undrawn and available, subject to covenant limitations. |
The following table provides details of the Company's outstanding credit facility debt (net of unamortized financing costs and unamortized discounts):
|
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying Value(a) |
|
|||
CSC Holdings Restricted Group: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(b) |
|
November 30, 2021 |
|
|
4.07 |
% |
$ |
175,256 |
|
$ |
145,013 |
|
Term Credit Facility(c) |
|
October 11, 2024 |
|
|
3.88 |
% |
|
2,500,000 |
|
|
2,486,874 |
|
Cequel: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility(d) |
|
November 30, 2021 |
|
|
— |
|
|
— |
|
|
— |
|
Term Credit Facility |
|
January 15, 2025 |
|
|
3.88 |
% |
|
815,000 |
|
|
812,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,490,256 |
|
|
3,444,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
33,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
$ |
3,411,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The unamortized discounts and deferred financing costs amounted to $45,466 at December 31, 2016. |
|
(b) |
Includes $100,256 of credit facility debt incurred to finance the Cablevision Acquisition. See discussion above regarding the amendment to the revolving credit facility entered into December 2016. |
|
(c) |
Represents $3,800,000 principal amount of debt incurred to finance the Cablevision Acquisition, net of principal repayments made. See discussion above regarding the Extension Amendment entered into September 2016. |
|
(d) |
At December 31, 2016, $17,031 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $332,969 of the facility was undrawn and available, subject to covenant limitations. |
|
|
Maturity Date |
|
Interest |
|
Principal |
|
December 31, |
|
||||
Restricted Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Term A loan facility(b) |
|
|
April 17, 2018 |
|
|
2.17 |
% |
$ |
886,621 |
|
|
885,105 |
|
Term B loan facility(b) |
|
|
April 17, 2020 |
|
|
2.92 |
% |
|
1,159,031 |
|
|
1,150,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Group Credit Facilities debt |
|
|
|
|
|
|
|
|
|
|
$ |
2,035,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The unamortized discounts and deferred financing costs amounted to $11,200 at December 31, 2015, |
|
(b) |
In connection with the Merger, the Company repaid the then outstanding Term A and Term B loan facilities (see discussion above). |
Interest Rate | Principal Amount | Carrying Amount (a) | ||||||||||||||||
Issuer | Date Issued | Maturity Date | September 30, 2017 | December 31, 2016 | ||||||||||||||
CSC Holdings (b)(f) | February 6, 1998 | February 15, 2018 | 7.875 | % | $ | 300,000 | $ | 303,531 | $ | 310,334 | ||||||||
CSC Holdings (b)(f) | July 21, 1998 | July 15, 2018 | 7.625 | % | 500,000 | 511,312 | 521,654 | |||||||||||
CSC Holdings (c)(f) | February 12, 2009 | February 15, 2019 | 8.625 | % | 526,000 | 544,422 | 553,804 | |||||||||||
CSC Holdings (c)(f) | November 15, 2011 | November 15, 2021 | 6.750 | % | 1,000,000 | 957,954 | 951,702 | |||||||||||
CSC Holdings (c)(f) | May 23, 2014 | June 1, 2024 | 5.250 | % | 750,000 | 657,903 | 650,193 | |||||||||||
CSC Holdings (e) | October 9, 2015 | January 15, 2023 | 10.125 | % | 1,800,000 | 1,777,085 | 1,774,750 | |||||||||||
CSC Holdings (e)(l) | October 9, 2015 | October 15, 2025 | 10.875 | % | 1,684,221 | 1,660,583 | 1,970,379 | |||||||||||
CSC Holdings (e) | October 9, 2015 | October 15, 2025 | 6.625 | % | 1,000,000 | 986,394 | 985,469 | |||||||||||
CSC Holdings (g) | September 23, 2016 | April 15, 2027 | 5.500 | % | 1,310,000 | 1,304,353 | 1,304,025 | |||||||||||
Cablevision (k) | September 23, 2009 | September 15, 2017 | 8.625 | % | — | — | 926,045 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2018 | 7.750 | % | 750,000 | 757,515 | 767,545 | |||||||||||
Cablevision (c)(f) | April 15, 2010 | April 15, 2020 | 8.000 | % | 500,000 | 491,224 | 488,992 | |||||||||||
Cablevision (c)(f) | September 27, 2012 | September 15, 2022 | 5.875 | % | 649,024 | 568,796 | 559,500 | |||||||||||
Cequel and Cequel Capital Senior Notes (d)(m) | Oct. 25, 2012 Dec. 28, 2012 | September 15, 2020 | 6.375 | % | 1,050,000 | 1,025,616 | 1,457,439 | |||||||||||
Cequel and Cequel Capital Senior Notes (d) | May 16, 2013 Sept. 9, 2014 | December 15, 2021 | 5.125 | % | 1,250,000 | 1,132,926 | 1,115,767 | |||||||||||
Altice US Finance I Corporation Senior Secured Notes (h) | June 12, 2015 | July 15, 2023 | 5.375 | % | 1,100,000 | 1,081,815 | 1,079,869 | |||||||||||
Cequel and Cequel Capital Senior Secured Notes (i) | June 12, 2015 | July 15, 2025 | 7.750 | % | 620,000 | 604,001 | 602,925 | |||||||||||
Altice US Finance I Corporation Senior Notes (j) | April 26, 2016 | May 15, 2026 | 5.500 | % | 1,500,000 | 1,487,745 | 1,486,933 | |||||||||||
$ | 16,289,245 | 15,853,175 | 17,507,325 | |||||||||||||||
Less: Current portion | 1,572,358 | 926,045 | ||||||||||||||||
Long-term debt | $ | 14,280,817 | $ | 16,581,280 |
(a) | The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums. |
(b) | The debentures are not redeemable by CSC Holdings prior to maturity. |
(c) | Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
(d) | The Company may redeem some or more of all the notes at the redemption price set forth in the relevant indenture, plus accrued and unpaid interest. |
(e) | The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a “make whole” premium specified in the relevant indenture plus accrued and unpaid interest. |
(f) | The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
(g) | The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
(h) | Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
(i) | Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
(j) | Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
(k) | In April 2017, the Company redeemed $500,000 of the senior notes from proceeds from the CVC Term Loan facility. In September 2017, these senior notes matured and the Company repaid the remaining principal balance of $400,000. |
(l) | In July 2017, the Company used approximately $350,120 of the proceeds from the IPO to fund the redemption of $315,779 principal amount of CSC Holdings senior notes due October 2025 and the related call premium of approximately $34,341which was recorded as a loss on extinguishment of debt. The Company also recorded a write-off of deferred financings costs in connection with this redemption aggregating $4,516. |
(m) | In April 2017, the Company redeemed $450,000 of the senior notes from proceeds from the Cequel Term Loan facility. |
The following table summarizes the Company's senior guaranteed notes, senior secured notes and senior notes and debentures as of December 31, 2016:
Issuer |
|
Date Issued |
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying |
|
|||
CSC Holdings(b)(e) |
|
February 6, 1998 |
|
February 15, 2018 |
|
|
7.875 |
% |
$ |
300,000 |
|
$ |
310,334 |
|
CSC Holdings(b)(e) |
|
July 21, 1998 |
|
July 15, 2018 |
|
|
7.625 |
% |
|
500,000 |
|
|
521,654 |
|
CSC Holdings(c)(e) |
|
February 12, 2009 |
|
February 15, 2019 |
|
|
8.625 |
% |
|
526,000 |
|
|
553,804 |
|
CSC Holdings(c)(e) |
|
November 15, 2011 |
|
November 15, 2021 |
|
|
6.750 |
% |
|
1,000,000 |
|
|
951,702 |
|
CSC Holdings(c)(e) |
|
May 23, 2014 |
|
June 1, 2024 |
|
|
5.250 |
% |
|
750,000 |
|
|
650,193 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
January 15, 2023 |
|
|
10.125 |
% |
|
1,800,000 |
|
|
1,774,750 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
10.875 |
% |
|
2,000,000 |
|
|
1,970,379 |
|
CSC Holdings(d) |
|
October 9, 2015 |
|
October 15, 2025 |
|
|
6.625 |
% |
|
1,000,000 |
|
|
985,469 |
|
CSC Holdings(f) |
|
September 23, 2016 |
|
April 15, 2027 |
|
|
5.500 |
% |
|
1,310,000 |
|
|
1,304,025 |
|
Cablevision(c)(e) |
|
September 23, 2009 |
|
September 15, 2017 |
|
|
8.625 |
% |
|
900,000 |
|
|
926,045 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2018 |
|
|
7.750 |
% |
|
750,000 |
|
|
767,545 |
|
Cablevision(c)(e) |
|
April 15, 2010 |
|
April 15, 2020 |
|
|
8.000 |
% |
|
500,000 |
|
|
488,992 |
|
Cablevision(c)(e) |
|
September 27, 2012 |
|
September 15, 2022 |
|
|
5.875 |
% |
|
649,024 |
|
|
559,500 |
|
Cequel Communications Holdings I LLC and Cequel |
|
October 25, 2012 |
|
September 15, 2020 |
|
|
6.375 |
% |
|
1,500,000 |
|
|
1,457,439 |
|
Cequel Communications Holdings I LLC and Cequel |
|
May 16, 2013 |
|
December 15, 2021 |
|
|
5.125 |
% |
|
1,250,000 |
|
|
1,115,767 |
|
Altice US Finance I Corporation(g) |
|
June 12, 2015 |
|
July 15, 2023 |
|
|
5.375 |
% |
|
1,100,000 |
|
|
1,079,869 |
|
Cequel Communications Holdings I LLC and Cequel Capital Corporation(h) |
|
June 12, 2015 |
|
July 15, 2025 |
|
|
7.750 |
% |
|
620,000 |
|
|
602,925 |
|
Altice US Finance I Corporation(i) |
|
April 26, 2016 |
|
May 15, 2026 |
|
|
5.500 |
% |
|
1,500,000 |
|
|
1,486,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,955,024 |
|
|
17,507,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
|
|
926,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
$ |
16,581,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The carrying amount of the notes is net of the unamortized deferred financing costs and/or discounts/premiums of $447,699. |
|
(b) |
The debentures are not redeemable by CSC Holdings prior to maturity. |
|
(c) |
Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
|
(d) |
The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a "make whole" premium specified in the relevant indenture plus accrued and unpaid interest. |
|
(e) |
The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788). |
|
(f) |
The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any. In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest. |
|
(g) |
Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%. |
|
(h) |
Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%. |
|
(i) |
Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%. |
The following table summarizes the Company's senior notes and debentures as of December 31, 2015:
Issuer |
|
Date Issued |
|
Maturity Date |
|
Interest |
|
Principal |
|
Carrying |
|
|||
CSC Holdings(a) |
|
February 6, 1998 |
|
February 15, 2018 |
|
|
7.875 |
% |
$ |
300,000 |
|
$ |
299,091 |
|
CSC Holdings(a) |
|
July 21, 1998 |
|
July 15, 2018 |
|
|
7.625 |
% |
|
500,000 |
|
|
498,942 |
|
CSC Holdings(b) |
|
February 12, 2009 |
|
February 15, 2019 |
|
|
8.625 |
% |
|
526,000 |
|
|
511,079 |
|
CSC Holdings(b) |
|
November 15, 2011 |
|
November 15, 2021 |
|
|
6.750 |
% |
|
1,000,000 |
|
|
985,640 |
|
CSC Holdings(b) |
|
May 23, 2014 |
|
June 1, 2024 |
|
|
5.250 |
% |
|
750,000 |
|
|
737,500 |
|
Cablevision(b) |
|
September 23, 2009 |
|
September 15, 2017 |
|
|
8.625 |
% |
|
900,000 |
|
|
891,238 |
|
Cablevision(b) |
|
April 15, 2010 |
|
April 15, 2018 |
|
|
7.750 |
% |
|
750,000 |
|
|
744,402 |
|
Cablevision(b) |
|
April 15, 2010 |
|
April 15, 2020 |
|
|
8.000 |
% |
|
500,000 |
|
|
494,410 |
|
Cablevision(b) |
|
September 27, 2012 |
|
September 15, 2022 |
|
|
5.875 |
% |
|
649,024 |
|
|
638,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
$ |
5,801,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The debentures are not redeemable by the Company prior to maturity. |
|
(b) |
The Company may redeem some or all of the notes at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date. |
|
(c) |
The carrying amount of the notes is net of the unamortized deferred financing costs and/or discounts/premiums. |
Years Ending December 31, | Cablevision | Cequel | Total | ||||||||
2017 | $ | 29,925 | $ | 5,256 | $ | 35,181 | |||||
2018 | 1,598,699 | 14,421 | 1,613,120 | ||||||||
2019 | 561,995 | 12,713 | 574,708 | ||||||||
2020 | 530,007 | 1,062,723 | 1,592,730 | ||||||||
2021 | 3,664,638 | 1,263,578 | 4,928,216 | ||||||||
Thereafter | 10,058,245 | 4,428,075 | 14,486,320 |
Total amounts payable by the Company under its various debt obligations outstanding as of December 31, 2016, including notes payable, collateralized indebtedness (see Note 10), and capital leases, during the next five years and thereafter, are as follows:
Years Ending December 31, |
|
Cablevision |
|
Cequel |
|
Altice USA |
|
Total |
|
||||
2017 |
|
$ |
1,719,180 |
|
$ |
9,113 |
|
$ |
— |
|
$ |
1,728,293 |
|
2018 |
|
|
2,103,441 |
|
|
8,652 |
|
|
— |
|
|
2,112,093 |
|
2019 |
|
|
557,348 |
|
|
8,330 |
|
|
— |
|
|
565,678 |
|
2020 |
|
|
526,340 |
|
|
1,508,213 |
|
|
— |
|
|
2,034,553 |
|
2021 |
|
|
1,200,256 |
|
|
1,258,223 |
|
|
— |
|
|
2,458,479 |
|
Thereafter |
|
|
9,884,024 |
|
|
3,995,280 |
|
|
1,750,000 |
|
|
15,629,304 |
|
Years Ending December 31, |
|
|
|
|
2017 |
|
$ |
1,719,180 |
|
2018 |
|
|
2,103,441 |
|
2019 |
|
|
557,348 |
|
2020 |
|
|
526,340 |
|
2021 |
|
|
1,200,256 |
|
Thereafter |
|
|
9,884,024 |
|
|
Asset Derivatives | Liability Derivatives | |||||||||||||||||
Derivatives Not Designated as Hedging Instruments | Balance Sheet Location | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | Fair Value at September 30, 2017 | Fair Value at December 31, 2016 | |||||||||||||
Prepaid forward contracts | Derivative contracts, current | $ | 54,578 | $ | 352 | $ | (54,578 | ) | $ | (13,158 | ) | |||||||
Prepaid forward contracts | Derivative contracts, long-term | — | 10,604 | (52,488 | ) | — | ||||||||||||
Put/Call options | Liabilities under derivative contracts, current | — | — | (48,326 | ) | — | ||||||||||||
Interest rate swap contracts | Liabilities under derivative contracts, long-term | — | — | (69,271 | ) | (78,823 | ) | |||||||||||
$ | 54,578 | $ | 10,956 | $ | (224,663 | ) | $ | (91,981 | ) |
|
|
|
|
Asset |
|
Liability |
|
||
Derivatives Not Designated as Hedging Instruments |
|
Balance Sheet Location |
|
Fair Value at |
|
Fair Value at |
|
||
Prepaid forward contracts |
|
Derivative contracts, current |
|
$ |
352 |
|
$ |
13,158 |
|
Prepaid forward contracts |
|
Derivative contracts, long-term |
|
|
10,604 |
|
|
— |
|
Interest rate swap contracts |
|
Liabilities under derivative contracts, long-term |
|
|
— |
|
|
78,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,956 |
|
$ |
91,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset |
|
Liability |
|
||
Derivatives Not Designated |
|
Balance Sheet Location |
|
Fair Value at |
|
||||
Prepaid forward contracts |
|
Current derivative contracts |
|
$ |
10,333 |
|
$ |
2,706 |
|
Prepaid forward contracts |
|
Long-term derivative contracts |
|
|
72,075 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
82,408 |
|
$ |
2,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares (a) | 21,477,618 | ||
Collateralized indebtedness settled | $ | (617,151 | ) |
Derivatives contracts settled | (37,838 | ) | |
(654,989 | ) | ||
Proceeds from new monetization contracts | 662,724 | ||
Net cash proceeds | $ | 7,735 |
(a) | Share amounts are adjusted for the 2 for 1 stock split in February 2017. |
Number of shares(a) |
|
|
5,337,750 |
|
|
|
|
|
|
|
|
|
|
|
Collateralized indebtedness settled |
|
$ |
(143,102 |
) |
Derivative contracts settled |
|
|
— |
|
|
|
|
|
|
|
|
|
(143,102 |
) |
Proceeds from new monetization contracts |
|
|
179,388 |
|
|
|
|
|
|
Net cash receipt |
|
$ |
36,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Share amounts were adjusted for the 2 for 1 stock split in February 2017. |
|
|
January 1 to |
|
Year Ended |
|
||
Number of shares(a) |
|
|
10,802,118 |
|
|
26,815,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized indebtedness settled |
|
$ |
(273,519 |
) |
$ |
(569,562 |
) |
Derivative contracts settled |
|
|
(8,075 |
) |
|
(69,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
(281,594 |
) |
|
(639,237 |
) |
Proceeds from new monetization contracts |
|
|
337,149 |
|
|
774,703 |
|
|
|
|
|
|
|
|
|
Net cash receipt |
|
$ |
55,555 |
|
$ |
135,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Share amounts adjusted for the 2 for 1 stock split in February 2017. |
|
Fair Value Hierarchy | September 30, 2017 | December 31, 2016 | |||||||
Assets: | |||||||||
Money market funds (of which $14,700 is classified as restricted cash as of December 31, 2016) | Level I | $ | 65,801 | $ | 100,139 | ||||
Investment securities pledged as collateral | Level I | 1,652,917 | 1,483,030 | ||||||
Prepaid forward contracts | Level II | 54,578 | 10,956 | ||||||
Liabilities: | |||||||||
Prepaid forward contracts | Level II | 107,066 | 13,158 | ||||||
Put/Call Options | Level II | 48,326 | — | ||||||
Interest rate swap contracts | Level II | 69,271 | 78,823 | ||||||
Contingent consideration related to 2017 acquisition | Level III | 30,000 | — |
|
|
At December 31, 2016 (Successor) |
|
||||||||||
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
100,139 |
|
$ |
— |
|
$ |
— |
|
$ |
100,139 |
|
Investment securities pledged as collateral |
|
|
1,483,030 |
|
|
— |
|
|
— |
|
|
1,483,030 |
|
Prepaid forward contracts |
|
|
— |
|
|
10,956 |
|
|
— |
|
|
10,956 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid forward contracts |
|
|
— |
|
|
13,158 |
|
|
— |
|
|
13,158 |
|
Interest rate swap contracts |
|
|
|
|
|
78,823 |
|
|
|
|
|
78,823 |
|
|
|
At December 31, 2015 |
|
||||||||||
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
922,765 |
|
$ |
— |
|
$ |
— |
|
$ |
922,765 |
|
Investment securities |
|
|
130 |
|
|
— |
|
|
— |
|
|
130 |
|
Investment securities pledged as collateral |
|
|
1,211,982 |
|
|
— |
|
|
— |
|
|
1,211,982 |
|
Prepaid forward contracts |
|
|
— |
|
|
82,408 |
|
|
— |
|
|
82,408 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid forward contracts |
|
|
— |
|
|
2,706 |
|
|
— |
|
|
2,706 |
|
September 30, 2017 | December 31, 2016 | ||||||||||||||||
Fair Value Hierarchy | Carrying Amount (a) | Estimated Fair Value | Carrying Amount (a) | Estimated Fair Value | |||||||||||||
Altice USA debt instruments: | |||||||||||||||||
Notes payable to affiliates and related parties | Level II | $ | — | $ | — | $ | 1,750,000 | $ | 1,837,876 | ||||||||
CSC Holdings debt instruments: | |||||||||||||||||
Credit facility debt | Level II | 4,123,792 | 4,167,500 | 2,631,887 | 2,675,256 | ||||||||||||
Collateralized indebtedness | Level II | 1,314,788 | 1,286,557 | 1,286,069 | 1,280,048 | ||||||||||||
Senior guaranteed notes | Level II | 2,290,748 | 2,460,675 | 2,289,494 | 2,416,375 | ||||||||||||
Senior notes and debentures | Level II | 6,412,789 | 7,421,261 | 6,732,816 | 7,731,150 | ||||||||||||
Notes payable | Level II | 76,442 | 72,802 | 13,726 | 13,260 | ||||||||||||
Cablevision senior notes: | Level II | 1,817,536 | 1,998,340 | 2,742,082 | 2,920,056 | ||||||||||||
Cequel debt instruments: | |||||||||||||||||
Cequel credit facility | Level II | 1,253,110 | 1,261,838 | 812,903 | 815,000 | ||||||||||||
Senior secured notes | Level II | 2,569,559 | 2,745,750 | 2,566,802 | 2,689,750 | ||||||||||||
Senior notes | Level II | 2,762,543 | 3,036,850 | 3,176,131 | 3,517,275 | ||||||||||||
Notes payable | Level II | 3,083 | 3,083 | — | — | ||||||||||||
$ | 22,624,390 | $ | 24,454,656 | $ | 24,001,910 | $ | 25,896,046 |
(a) | Amounts are net of unamortized deferred financing costs and discounts. |
|
|
|
|
December 31, 2016 |
|
||||
|
|
Fair Value |
|
Carrying |
|
Estimated |
|
||
Altice USA debt instruments: |
|
|
|
|
|
|
|
|
|
Notes payable to affiliates and related parties |
|
Level II |
|
$ |
1,750,000 |
|
$ |
1,837,876 |
|
CSC Holdings debt instruments: |
|
|
|
|
|
|
|
|
|
Credit facility debt |
|
Level II |
|
|
2,631,887 |
|
|
2,675,256 |
|
Collateralized indebtedness(b) |
|
Level II |
|
|
1,286,069 |
|
|
1,280,048 |
|
Senior guaranteed notes |
|
Level II |
|
|
2,289,494 |
|
|
2,416,375 |
|
Senior notes and debentures(c) |
|
Level II |
|
|
6,732,816 |
|
|
7,731,150 |
|
Notes payable |
|
Level II |
|
|
13,726 |
|
|
13,260 |
|
Cablevision senior notes(d) |
|
Level II |
|
|
2,742,082 |
|
|
2,920,056 |
|
Cequel debt instruments: |
|
|
|
|
|
|
|
|
|
Cequel credit facility |
|
Level II |
|
|
812,903 |
|
|
815,000 |
|
Senior Secured Notes |
|
Level II |
|
|
1,079,869 |
|
|
1,152,250 |
|
Senior Notes |
|
Level II |
|
|
4,663,064 |
|
|
5,054,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,001,910 |
|
$ |
25,896,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Amounts are net of unamortized deferred financing costs and discounts. |
|
(b) |
The total carrying value of the collateralized debt was reduced by $9,142 to reflect its fair value on the Cablevision Acquisition Date. |
|
(c) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $39,713 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
|
(d) |
The total carrying value of the senior notes and debentures assumed in connection with the Cablevision Acquisition was reduced by $13,075 to reflect the fair value of the notes on the Cablevision Acquisition Date. |
|
|
|
|
December 31, 2015 |
|
||||
|
|
Fair Value |
|
Carrying |
|
Estimated |
|
||
Debt instruments: |
|
|
|
|
|
|
|
|
|
Credit facility debt |
|
Level II |
|
$ |
2,514,454 |
|
$ |
2,525,654 |
|
Collateralized indebtedness |
|
Level II |
|
|
1,191,324 |
|
|
1,176,396 |
|
Senior notes and debentures |
|
Level II |
|
|
5,801,011 |
|
|
5,756,608 |
|
Notes payable |
|
Level II |
|
|
14,544 |
|
|
14,483 |
|
|
|
|
|
|
|
|
|
|
|
Total debt instruments |
|
|
|
$ |
9,521,333 |
|
$ |
9,473,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit attributable to the Company's continuing operations for the year ended December 31, 2016 consist of the following components:
Current expense (benefit): |
|
|
|
|
Federal |
|
$ |
(981 |
) |
State |
|
|
5,310 |
|
|
|
|
|
|
|
|
|
4,329 |
|
|
|
|
|
|
Deferred benefit: |
|
|
|
|
Federal |
|
|
(223,159 |
) |
State |
|
|
(40,830 |
) |
|
|
|
|
|
|
|
|
(263,989 |
) |
|
|
|
|
|
Tax benefit relating to uncertain tax positions |
|
|
(6 |
) |
|
|
|
|
|
Income tax benefit |
|
$ |
(259,666 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
January 1 to |
|
Year Ended |
|
Year Ended |
|
|||
Current expense: |
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
6,473 |
|
$ |
4,844 |
|
$ |
6,122 |
|
State |
|
|
1,917 |
|
|
15,869 |
|
|
2,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,390 |
|
|
20,713 |
|
|
8,910 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred (benefit) expense: |
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
93,253 |
|
|
97,927 |
|
|
135,873 |
|
State |
|
|
22,897 |
|
|
35,469 |
|
|
23,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,150 |
|
|
133,396 |
|
|
159,779 |
|
|
|
|
|
|
|
|
|
|
|
|
Tax (benefit) expense relating to uncertain tax positions |
|
|
308 |
|
|
763 |
|
|
(52,921 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
$ |
124,848 |
|
$ |
154,872 |
|
$ |
115,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
Federal tax benefit at statutory rate |
|
$ |
(381,901 |
) |
State income taxes, net of federal impact |
|
|
(39,336 |
) |
Changes in the valuation allowance |
|
|
297 |
|
Changes in the state rates used to measure deferred taxes, net of federal impact |
|
|
153,239 |
|
Tax benefit relating to uncertain tax positions |
|
|
(120 |
) |
Non-deductible share-based compensation related to the carried unit plan |
|
|
5,029 |
|
Non-deductible Cablevision Acquisition transaction costs |
|
|
4,457 |
|
Other non-deductible expenses |
|
|
1,551 |
|
Research credit |
|
|
(400 |
) |
Other, net |
|
|
(2,482 |
) |
|
|
|
|
|
Income tax benefit |
|
$ |
(259,666 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
January 1 to |
|
Year Ended |
|
Year Ended |
|
|||
Federal tax expense at statutory rate |
|
$ |
100,926 |
|
$ |
119,931 |
|
$ |
148,803 |
|
State income taxes, net of federal impact |
|
|
14,825 |
|
|
18,874 |
|
|
19,059 |
|
Changes in the valuation allowance |
|
|
86 |
|
|
(902 |
) |
|
(344 |
) |
Changes in the state rates used to measure deferred taxes, net of federal impact |
|
|
— |
|
|
(1,006 |
) |
|
(322 |
) |
Tax expense (benefit) relating to uncertain tax positions |
|
|
178 |
|
|
574 |
|
|
(52,914 |
) |
New York tax reform |
|
|
— |
|
|
16,334 |
|
|
(2,050 |
) |
Non-deductible officers' compensation |
|
|
462 |
|
|
846 |
|
|
1,532 |
|
Non-deductible merger transaction costs |
|
|
9,392 |
|
|
— |
|
|
— |
|
Other non-deductible expenses |
|
|
1,337 |
|
|
3,099 |
|
|
3,697 |
|
Research credit |
|
|
(850 |
) |
|
(2,630 |
) |
|
(2,634 |
) |
Adjustment to prior year tax expense |
|
|
— |
|
|
(515 |
) |
|
(192 |
) |
Other, net |
|
|
(1,508 |
) |
|
267 |
|
|
1,133 |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
$ |
124,848 |
|
$ |
154,872 |
|
$ |
115,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
NOLs and tax credit carry forwards |
|
$ |
971,728 |
|
Compensation and benefit plans |
|
|
93,939 |
|
Partnership investments |
|
|
113,473 |
|
Restructuring liability |
|
|
37,393 |
|
Other liabilities |
|
|
45,561 |
|
Liabilities under derivative contracts |
|
|
31,529 |
|
Interest deferred for tax purposes |
|
|
39,633 |
|
Other |
|
|
6,615 |
|
|
|
|
|
|
Deferred tax asset |
|
|
1,339,871 |
|
Valuation allowance |
|
|
(3,125 |
) |
|
|
|
|
|
Net deferred tax asset, noncurrent |
|
|
1,336,746 |
|
|
|
|
|
|
Fixed assets and intangibles |
|
|
(9,065,635 |
) |
Investments |
|
|
(187,795 |
) |
Prepaid expenses |
|
|
(10,172 |
) |
Fair value adjustment- debt and deferred finance costs |
|
|
(30,535 |
) |
Other |
|
|
(9,424 |
) |
|
|
|
|
|
Deferred tax liability, noncurrent |
|
|
(9,303,561 |
) |
|
|
|
|
|
Total net deferred tax liability |
|
$ |
(7,966,815 |
) |
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance at December 31, 2015 are as follows.
Deferred Tax Asset (Liability) |
|
|
|
|
Current |
|
|
|
|
NOLs and tax credit carry forwards |
|
$ |
76,007 |
|
Compensation and benefit plans |
|
|
80,831 |
|
Allowance for doubtful accounts |
|
|
2,196 |
|
Merger transaction costs |
|
|
7,332 |
|
Inventory |
|
|
7,135 |
|
Other |
|
|
26,216 |
|
|
|
|
|
|
Deferred tax asset |
|
|
199,717 |
|
Valuation allowance |
|
|
(2,098 |
) |
|
|
|
|
|
Net deferred tax asset, current |
|
|
197,619 |
|
|
|
|
|
|
Investments |
|
|
(163,396 |
) |
Prepaid expenses |
|
|
(19,627 |
) |
|
|
|
|
|
Deferred tax liability, current |
|
|
(183,023 |
) |
|
|
|
|
|
Net deferred tax asset, current |
|
$ |
14,596 |
|
|
|
|
|
|
Noncurrent |
|
|
|
|
NOLs and tax credit carry forwards |
|
$ |
36,866 |
|
Compensation and benefit plans |
|
|
97,005 |
|
Partnership investments |
|
|
123,529 |
|
Investments |
|
|
9,798 |
|
Other |
|
|
9,201 |
|
|
|
|
|
|
Deferred tax asset |
|
|
276,399 |
|
Valuation allowance |
|
|
(2,816 |
) |
|
|
|
|
|
Net deferred tax asset, noncurrent |
|
|
273,583 |
|
|
|
|
|
|
Fixed assets and intangibles |
|
|
(978,418 |
) |
|
|
|
|
|
Deferred tax liability, noncurrent |
|
|
(978,418 |
) |
|
|
|
|
|
Net deferred tax liability, noncurrent |
|
|
(704,835 |
) |
|
|
|
|
|
Total net deferred tax liability |
|
$ |
(690,239 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2016 |
|
$ |
— |
|
Increase to tax position in connection with the Cablevision Acquisition |
|
|
4,031 |
|
Decreases related to prior year tax positions |
|
|
(6 |
) |
|
|
|
|
|
Balance at December 31, 2016 |
|
$ |
4,025 |
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014 |
|
$ |
4,011 |
|
Increases related to prior year tax positions |
|
|
316 |
|
Increases related to prior year tax positions |
|
|
(88 |
) |
Increases related to current year tax positions |
|
|
3 |
|
Settlements paid in cash |
|
|
(220 |
) |
|
|
|
|
|
Balance at December 31, 2015 |
|
|
4,022 |
|
Increases related to prior year tax positions |
|
|
3 |
|
Increases related to current year tax positions |
|
|
6 |
|
|
|
|
|
|
Balance at June 20, 2016 |
|
$ |
4,031 |
|
|
|
|
|
|
|
|
|
|
|
|
Summarized below is the funded status and the amounts recorded on the Company's consolidated balance sheets for all of the Company's Defined Benefit Plans at December 31, 2016:
Change in projected benefit obligation: |
|
|
|
|
Projected benefit obligation at beginning of year |
|
$ |
403,963 |
|
Service cost |
|
|
— |
|
Interest cost |
|
|
14,077 |
|
Actuarial gain |
|
|
(11,429 |
) |
Curtailments |
|
|
3,968 |
|
Benefits paid |
|
|
(28,062 |
) |
|
|
|
|
|
Projected benefit obligation at end of year |
|
|
382,517 |
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
Fair value of plan assets at beginning of year |
|
|
297,846 |
|
Actual return on plan assets, net |
|
|
5,829 |
|
Employer contributions |
|
|
8,505 |
|
Benefits paid |
|
|
(28,062 |
) |
|
|
|
|
|
Fair value of plan assets at end of year |
|
|
284,118 |
|
|
|
|
|
|
Unfunded status at end of year |
|
$ |
(98,399 |
) |
|
|
|
|
|
|
|
|
|
|
Summarized below is the funded status and the amounts recorded on the Company's consolidated balance sheets for all of the Company's Defined Benefit Plans at December 31, 2015:
Change in projected benefit obligation: |
|
|
|
|
Projected benefit obligation at beginning of year |
|
$ |
430,846 |
|
Service cost |
|
|
344 |
|
Interest cost |
|
|
15,523 |
|
Actuarial (gain) loss |
|
|
(14,912 |
) |
Curtailments |
|
|
— |
|
Benefits paid |
|
|
(27,838 |
) |
|
|
|
|
|
Projected benefit obligation at end of year |
|
|
403,963 |
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
Fair value of plan assets at beginning of year |
|
|
303,676 |
|
Actual return (loss) on plan assets, net |
|
|
(3,921 |
) |
Employer contributions |
|
|
25,929 |
|
Benefits paid |
|
|
(27,838 |
) |
|
|
|
|
|
Fair value of plan assets at end of year |
|
|
297,846 |
|
|
|
|
|
|
Unfunded status at end of year |
|
$ |
(106,117 |
) |
|
|
|
|
|
|
|
|
|
|
The Company's net funded status relating to its Defined Benefit Plans at December 31, 2016, is as follows:
Defined Benefit Plans |
|
$ |
(98,399 |
) |
Less: Current portion related to nonqualified plans |
|
|
14,293 |
|
|
|
|
|
|
Long-term defined benefit plan obligations |
|
$ |
(84,106 |
) |
|
|
|
|
|
|
|
|
|
|
The Company's net funded status relating to its Defined Benefit Plans at December 31, 2015 are as follows:
Defined Benefit Plans |
|
$ |
(106,117 |
) |
Less: Current portion related to nonqualified plans |
|
|
6,889 |
|
|
|
|
|
|
Long-term defined benefit plan obligations |
|
$ |
(99,228 |
) |
|
|
|
|
|
|
|
|
|
|
Components of the net periodic benefit cost, recorded in other operating expenses, for the Defined Benefit Plans for the year ended December 31, 2016, is as follows:
Service cost |
|
$ |
— |
|
Interest cost |
|
|
6,946 |
|
Expected return on plan assets, net |
|
|
(4,022 |
) |
Curtailment loss |
|
|
231 |
|
Settlement income (reclassified from accumulated other comprehensive loss)(a) |
|
|
(154 |
) |
|
|
|
|
|
Net periodic benefit cost |
|
$ |
3,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
As a result of benefit payments to terminated or retired individuals exceeding the service and interest costs for the Pension Plan and the Excess Cash Balance Pension Plan during the period June 21, 2016 through December 31, 2016, the Company recognized a non-cash settlement loss that represented the acceleration of the recognition of a portion of the previously unrecognized actuarial losses recorded in accumulated other comprehensive loss on the Company's consolidated balance sheet relating to these plans. |
|
|
January 1, |
|
Year ended |
|
Year ended |
|
|||
Service cost |
|
$ |
— |
|
$ |
344 |
|
$ |
774 |
|
Interest cost |
|
|
7,130 |
|
|
15,523 |
|
|
18,040 |
|
Expected return on plan assets, net |
|
|
(3,565 |
) |
|
(8,297 |
) |
|
(9,548 |
) |
Recognized actuarial loss (reclassified from accumulated other comprehensive loss) |
|
|
(1,446 |
) |
|
1,294 |
|
|
2,364 |
|
Settlement (income) loss (reclassified from accumulated other comprehensive loss)(a) |
|
|
1,655 |
|
|
3,822 |
|
|
5,348 |
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
3,774 |
|
$ |
12,686 |
|
$ |
16,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
As a result of benefit payments to terminated or retired individuals exceeding the service and interest costs for the Pension Plan and the Excess Cash Balance Pension Plan during the period January 1, 2016 through June 20, 2016, and years ended December 31, 2015 and 2014, the Company recognized a non-cash settlement loss that represented the acceleration of the recognition of a portion of the previously unrecognized actuarial losses recorded in accumulated other comprehensive loss on the Company's consolidated balance sheets relating to these plans. |
|
|
Net Periodic |
|
Benefit Obligations |
|
||
|
|
June 21, 2016 to |
|
December 31, 2016 |
|
||
Discount rate(a) |
|
|
3.53 |
% |
|
3.81 |
% |
Rate of increase in future compensation levels |
|
|
— |
% |
|
— |
% |
Expected rate of return on plan assets (Pension Plan only) |
|
|
3.97 |
% |
|
N/A |
|
|
|
|
(a) |
The discount rate of 3.53% for the period June 21, 2016 through December 31, 2016, represents the average of the quarterly discount rates used to remeasure the Company's projected benefit obligation and net periodic benefit cost in connection with the recognition of settlement losses discussed above. |
|
|
Weighted-Average Assumptions |
|
||||||||||
|
|
Net Periodic Benefit Cost |
|
|
|
||||||||
|
|
Benefit |
|
||||||||||
|
|
January 1, |
|
Year ended |
|
Year ended |
|
||||||
Discount rate(a) |
|
|
3.76 |
% |
|
3.83 |
% |
|
4.24 |
% |
|
3.94 |
% |
Rate of increase in future compensation levels |
|
|
— |
% |
|
— |
% |
|
3.50 |
% |
|
— |
% |
Expected rate of return on plan assets (Pension Plan only) |
|
|
3.97 |
% |
|
4.03 |
% |
|
4.53 |
% |
|
N/A |
|
|
|
|
(a) |
The discount rates of 3.76%, 3.83%, and 4.24% for the period January 1, 2016 through June 20, 2016 , and years ended December 31, 2015 and 2014, respectively, represent the average of the quarterly discount rates used to remeasure the Company's projected benefit obligation and net periodic benefit cost in connection with the recognition of settlement losses discussed above. |
The weighted average asset allocations of the Pension Plan at December 31, 2016 is as follows:
|
|
Plan Assets |
|
|
Asset Class: |
|
|
|
|
Mutual funds |
|
|
43 |
% |
Fixed income securities |
|
|
55 |
|
Cash equivalents and other |
|
|
2 |
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Plan Assets at |
|
|
Asset Class: |
|
|
|
|
Mutual funds |
|
|
39 |
% |
Fixed income securities |
|
|
61 |
|
Cash equivalents and other |
|
|
— |
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
The fair values of the assets of the Pension Plan at December 31, 2016 by asset class are as follows:
Asset Class |
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Mutual funds |
|
$ |
121,356 |
|
$ |
— |
|
$ |
— |
|
$ |
121,356 |
|
Fixed income securities held in a portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign issued corporate debt |
|
|
— |
|
|
13,583 |
|
|
— |
|
|
13,583 |
|
U.S. corporate debt |
|
|
— |
|
|
48,046 |
|
|
— |
|
|
48,046 |
|
Government debt |
|
|
— |
|
|
4,810 |
|
|
— |
|
|
4,810 |
|
U.S. Treasury securities |
|
|
— |
|
|
77,285 |
|
|
— |
|
|
77,285 |
|
Asset-backed securities |
|
|
— |
|
|
14,065 |
|
|
— |
|
|
14,065 |
|
Other |
|
|
— |
|
|
247 |
|
|
— |
|
|
247 |
|
Cash equivalents(a) |
|
|
2,593 |
|
|
3,089 |
|
|
— |
|
|
5,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(b) |
|
$ |
123,949 |
|
$ |
161,125 |
|
$ |
— |
|
$ |
285,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
A significant portion represents an investment in a short-term investment fund that invests primarily in securities of high quality and low risk. |
|
(b) |
Excludes cash and net payables relating to the purchase of securities that were not settled as of December 31, 2016. |
The fair values of the assets of the Pension Plan at December 31, 2015 by asset class are as follows:
Asset Class |
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||
Mutual funds |
|
$ |
117,174 |
|
$ |
— |
|
$ |
— |
|
$ |
117,174 |
|
Fixed income securities held in a portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign issued corporate debt |
|
|
— |
|
|
12,825 |
|
|
— |
|
|
12,825 |
|
U.S. corporate debt |
|
|
— |
|
|
54,005 |
|
|
— |
|
|
54,005 |
|
Government debt |
|
|
— |
|
|
8,273 |
|
|
— |
|
|
8,273 |
|
U.S. Treasury securities |
|
|
— |
|
|
90,414 |
|
|
— |
|
|
90,414 |
|
Asset-backed securities |
|
|
— |
|
|
18,563 |
|
|
— |
|
|
18,563 |
|
Cash equivalents(a) |
|
|
893 |
|
|
— |
|
|
— |
|
|
893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(b) |
|
$ |
118,067 |
|
$ |
184,080 |
|
$ |
— |
|
$ |
302,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Represents an investment in a money market fund. |
|
(b) |
Excludes cash and net payables relating to the sale of securities that were not settled as of December 31, 2015. |
|
|
|
January 1, |
|
Year ended |
|
Year ended |
|
|||
Stock options |
|
$ |
3,848 |
|
$ |
9,159 |
|
$ |
7,573 |
|
Restricted shares and restricted stock units |
|
|
20,930 |
|
|
51,162 |
|
|
36,411 |
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation related to equity classified awards |
|
|
24,778 |
|
|
60,321 |
|
|
43,984 |
|
|
|
|
|
|
|
|
|
|
|
|
Other share-based compensation |
|
|
453 |
|
|
4,965 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation |
|
$ |
25,231 |
|
$ |
65,286 |
|
$ |
43,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
2014 |
|
||
Risk-free interest rate |
|
|
1.82 |
% |
|
2.12 |
% |
Expected life (in years) |
|
|
8 |
|
|
6.5 |
|
Dividend yield |
|
|
3.63 |
% |
|
3.79 |
% |
Volatility |
|
|
39.98 |
% |
|
42.80 |
% |
Grant date fair value |
|
$ |
5.45 |
|
$ |
5.27 |
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|||||
|
|
Shares Under Option |
|
|
|
|
|
|||||||||
|
|
Weighted |
|
|
|
|||||||||||
|
|
Time |
|
Performance |
|
Aggregate |
|
|||||||||
Balance, December 31, 2014 |
|
|
5,097,666 |
|
|
7,633,500 |
|
$ |
14.41 |
|
|
7.17 |
|
$ |
79,347 |
|
Granted |
|
|
2,000,000 |
|
|
— |
|
|
19.17 |
|
|
|
|
|
|
|
Exercised |
|
|
(353,666 |
) |
|
(1,024,283 |
) |
|
12.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015 |
|
|
6,744,000 |
|
|
6,609,217 |
|
|
15.28 |
|
|
6.80 |
|
|
221,900 |
|
Exercised |
|
|
(744,000 |
) |
|
(728,517 |
) |
|
13.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 20, 2016 |
|
|
6,000,000 |
|
|
5,880,700 |
|
$ |
15.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The aggregate intrinsic value is calculated as the difference between (i) the exercise price of the underlying award and (ii) the quoted price of CNYG Class A common stock on December 31, 2015, as indicated. |
|
|
Number of |
|
Number of |
|
Number of |
|
Weighted |
|
||||
Unvested award balance, December 31, 2014 |
|
|
5,314,870 |
|
|
2,035,300 |
|
|
— |
|
$ |
15.46 |
|
Granted |
|
|
1,747,870 |
|
|
584,400 |
|
|
1,851,700 |
|
|
19.43 |
|
Vested |
|
|
(1,598,363 |
) |
|
(739,600 |
) |
|
— |
|
|
14.48 |
|
Awards forfeited |
|
|
(496,629 |
) |
|
— |
|
|
(79,270 |
) |
|
17.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested award balance, December 31, 2015 |
|
|
4,967,748 |
|
|
1,880,100 |
|
|
1,772,430 |
|
|
17.53 |
|
Vested |
|
|
(2,239,167 |
) |
|
(753,296 |
) |
|
— |
|
|
15.35 |
|
Awards forfeited |
|
|
(85,900 |
) |
|
— |
|
|
(47,490 |
) |
|
18.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested award balance, June 20, 2016 |
|
|
2,642,681 |
|
|
1,126,804 |
|
|
1,724,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The PSUs entitled the employee to shares of CNYG common stock up to 150% of the number of PSUs granted depending on the level of achievement of the specified performance criteria. If the minimum performance threshold was not met, no shares were issued. Accrued dividends were paid to the extent that a PSU vested and the related stock was issued. |
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | $ | 986 | $ | 720 | $ | 1,380 | $ | 720 | |||||||
Operating expenses: | |||||||||||||||
Programming and other direct costs | $ | (1,196 | ) | $ | (642 | ) | $ | (3,026 | ) | $ | (642 | ) | |||
Other operating expenses, net | (28,332 | ) | (8,056 | ) | (73,263 | ) | (13,056 | ) | |||||||
Operating expenses, net | (29,528 | ) | (8,698 | ) | (76,289 | ) | (13,698 | ) | |||||||
Interest expense (a) | — | (48,617 | ) | (90,405 | ) | (53,922 | ) | ||||||||
Loss on extinguishment of debt and write-off of deferred financing costs | — | — | (513,723 | ) | — | ||||||||||
Net charges | $ | (28,542 | ) | $ | (56,595 | ) | $ | (679,037 | ) | $ | (66,900 | ) | |||
Capital Expenditures | $ | 72,185 | $ | — | $ | 98,234 | $ | — |
(a) | See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $90,405 for the nine months ended September 30, 2017. |
September 30, 2017 | December 31, 2016 | ||||||
Due from: | |||||||
Altice US Finance S.A. (a) | $ | 12,951 | $ | 12,951 | |||
Newsday (b) | 4,177 | 6,114 | |||||
Altice Management Americas (b) | 615 | 3,117 | |||||
i24NEWS (b) | 3,373 | — | |||||
Other Altice N.V. subsidiaries (b) | 37 | — | |||||
$ | 21,153 | $ | 22,182 | ||||
Due to: | |||||||
CVC 3BV (c) | — | 71,655 | |||||
Neptune Holdings US LP (c) | — | 7,962 | |||||
Altice Management International (d) | — | 44,121 | |||||
ATS (b)(e) | 22,541 | — | |||||
Newsday (b) | 103 | 275 | |||||
Other Altice N.V. subsidiaries (f) | 6,358 | 3,350 | |||||
$ | 29,002 | $ | 127,363 |
(a) | Represents interest on senior notes paid by the Company on behalf of the affiliate. |
(b) | Represents amounts paid by the Company on behalf of the respective related party and for Newsday and ATS, the net amounts due from the related party also include charges for certain transition services provided. |
(c) | Represents distributions payable to stockholders. |
(d) | Amounts payable as of December 31, 2016 primarily represent amounts due for equipment purchases and software development services discussed above. |
(e) | Represents amounts due to ATS for construction, maintenance, and installation services, net of charges to ATS pursuant to the TSA. See discussion above. |
(f) | Represents amounts due to affiliates for services provided to the Company. |
The following table summarizes the revenue and charges related to services provided to or received from subsidiaries of Altice N.V. and Newsday for the year ended December 31, 2016:
Revenue |
|
$ |
1,086 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Programming and other direct costs |
|
$ |
(1,947 |
) |
Other operating expenses |
|
|
(18,854 |
) |
|
|
|
|
|
Operating expenses, net |
|
|
(20,801 |
) |
|
|
|
|
|
Interest expense(a) |
|
|
(112,712 |
) |
|
|
|
|
|
Net charges |
|
$ |
(132,427 |
) |
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
45,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $102,557, as well as for interest expense of $10,155 related to the Holdco Notes prior to the exchange. |
Aggregate amounts that were due from and due to related parties at December 31, 2016 is summarized below:
Due from: |
|
|
|
|
Altice US Finance S.A.(a) |
|
$ |
12,951 |
|
Newsday(b) |
|
|
6,114 |
|
Altice Management Americas(b) |
|
|
3,117 |
|
|
|
|
|
|
|
|
$ |
22,182 |
|
|
|
|
|
|
|
|
|
|
|
Due to: |
|
|
|
|
CVC 3BV(c) |
|
|
71,655 |
|
Neptune Holdings US LP(c) |
|
|
7,962 |
|
Altice Management International(d) |
|
|
44,121 |
|
Newsday(b) |
|
|
275 |
|
Other Altice subsidiaries(b) |
|
|
3,350 |
|
|
|
|
|
|
|
|
$ |
127,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Represents interest on senior notes paid by the Company on behalf of the affiliate. |
|
(b) |
Represents amounts paid by the Company on behalf of the respective related party and/or the net amounts due from the related party for services provided. |
|
(c) |
Represents distributions payable to shareholders. |
|
(d) |
Represents amounts due for equipment purchases and software development services discussed above. |
|
|
|
|
Years Ended |
|
|||||
|
|
January 1, |
|
|||||||
|
|
2015 |
|
2014 |
|
|||||
Revenue |
|
$ |
2,088 |
|
$ |
5,343 |
|
$ |
5,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
Programming and other direct costs, net of credits |
|
$ |
84,636 |
|
$ |
176,909 |
|
$ |
179,144 |
|
Other operating expenses, net of credits |
|
|
2,182 |
|
|
5,372 |
|
|
3,878 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses, net |
|
|
86,818 |
|
|
182,281 |
|
|
183,022 |
|
|
|
|
|
|
|
|
|
|
|
|
Net charges |
|
$ |
84,730 |
|
$ |
176,938 |
|
$ |
177,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
Amounts due from affiliates |
|
$ |
767 |
|
Amounts due to affiliates |
|
|
29,729 |
|
|
2016: |
|
March 31, |
|
April 1 to |
|
||
Revenue |
|
$ |
1,645,890 |
|
$ |
1,491,714 |
|
Operating expenses |
|
|
(1,394,635 |
) |
|
(1,267,663 |
) |
|
|
|
|
|
|
|
|
Operating income |
|
$ |
251,255 |
|
$ |
224,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
94,311 |
|
$ |
69,201 |
|
Net loss attributable to noncontrolling interests |
|
|
66 |
|
|
170 |
|
|
|
|
|
|
|
|
|
Net income attributable to Cablevision Systems Corporation stockholders |
|
$ |
94,377 |
|
$ |
69,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
0.35 |
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.35 |
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
0.34 |
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.34 |
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
94,377 |
|
$ |
69,371 |
|
Loss from discontinued operations, net of income taxes |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
94,377 |
|
$ |
69,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor |
|
|||||||||||||
2015: |
|
March 31, |
|
June 30, |
|
September 30, |
|
December 31, |
|
Total |
|
|||||
Revenue |
|
$ |
1,622,352 |
|
$ |
1,661,940 |
|
$ |
1,624,828 |
|
$ |
1,636,425 |
|
$ |
6,545,545 |
|
Operating expenses |
|
|
(1,398,601 |
) |
|
(1,417,476 |
) |
|
(1,441,712 |
) |
|
(1,439,285 |
) |
|
(5,697,074 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
223,751 |
|
$ |
244,464 |
|
$ |
183,116 |
|
$ |
197,140 |
|
$ |
848,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
54,901 |
|
$ |
75,676 |
|
$ |
23,431 |
|
$ |
33,781 |
|
$ |
187,789 |
|
Income (loss) from discontinued operations, net of income taxes |
|
|
(10,502 |
) |
|
— |
|
|
(406 |
) |
|
(1,633 |
) |
|
(12,541 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
44,399 |
|
|
75,676 |
|
|
23,025 |
|
|
32,148 |
|
|
175,248 |
|
Net loss (income) attributable to noncontrolling interests |
|
|
234 |
|
|
(81 |
) |
|
78 |
|
|
(30 |
) |
|
201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Cablevision Systems Corporation stockholders |
|
$ |
44,633 |
|
$ |
75,595 |
|
$ |
23,103 |
|
$ |
32,118 |
|
$ |
175,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
0.21 |
|
$ |
0.28 |
|
$ |
0.09 |
|
$ |
0.12 |
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of income taxes |
|
$ |
(0.04 |
) |
$ |
— |
|
$ |
— |
|
$ |
(0.01 |
) |
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.17 |
|
$ |
0.28 |
|
$ |
0.09 |
|
$ |
0.12 |
|
$ |
0.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
0.20 |
|
$ |
0.27 |
|
$ |
0.08 |
|
$ |
0.12 |
|
$ |
0.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of income taxes |
|
$ |
(0.04 |
) |
$ |
— |
|
$ |
— |
|
$ |
(0.01 |
) |
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.16 |
|
$ |
0.27 |
|
$ |
0.08 |
|
$ |
0.12 |
|
$ |
0.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Cablevision Systems Corporation stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes |
|
$ |
55,135 |
|
$ |
75,595 |
|
$ |
23,509 |
|
$ |
33,751 |
|
$ |
187,990 |
|
Income (loss) from discontinued operations, net of income taxes |
|
|
(10,502 |
) |
|
— |
|
|
(406 |
) |
|
(1,633 |
) |
|
(12,541 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
44,633 |
|
$ |
75,595 |
|
$ |
23,103 |
|
$ |
32,118 |
|
$ |
175,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Values | Estimated Useful Lives | ||||
Current assets | $ | 1,923,071 | |||
Accounts receivable | 271,305 | ||||
Property, plant and equipment | 4,864,621 | 2-18 years | |||
Goodwill | 5,842,172 | ||||
Indefinite-lived cable television franchises | 8,113,575 | Indefinite-lived | |||
Customer relationships | 4,850,000 | 8 to 18 years | |||
Trade names (a) | 1,010,000 | 12 years | |||
Amortizable intangible assets | 23,296 | 1-15 years | |||
Other non-current assets | 748,998 | ||||
Current liabilities | (2,311,201 | ) | |||
Long-term debt | (8,355,386 | ) | |||
Deferred income taxes. | (6,832,773 | ) | |||
Other non-current liabilities | (189,355 | ) | |||
Total | $ | 9,958,323 |
(a) | See Note 8 for additional information regarding a change in the remaining estimated useful lives of the Company's trade names. |
|
|
Cablevision |
|
Cequel |
||||||
|
|
Preliminary |
|
Estimated |
|
Fair Values |
|
Estimated |
||
Current assets |
|
$ |
1,923,071 |
|
|
|
$ |
161,874 |
|
|
Accounts receivable |
|
|
271,305 |
|
|
|
|
180,422 |
|
|
Property, plant and equipment |
|
|
4,864,621 |
|
2 - 18 years |
|
|
2,107,220 |
|
3 - 13 years |
Goodwill |
|
|
5,838,959 |
|
|
|
|
2,153,741 |
|
|
Cable television franchise rights |
|
|
8,113,575 |
|
Indefinite-lived |
|
|
4,906,506 |
|
Indefinite-lived |
Customer relationships |
|
|
4,850,000 |
|
8 to 18 years |
|
|
1,075,884 |
|
8 years |
Trade names |
|
|
1,010,000 |
|
12 years |
|
|
56,782 |
|
2 years |
Amortizable intangible assets |
|
|
23,296 |
|
1 - 15 years |
|
|
3,356 |
|
11 years |
Other non-current assets |
|
|
748,998 |
|
|
|
|
73,811 |
|
|
Current liabilities |
|
|
(2,305,954 |
) |
|
|
|
(534,662 |
) |
|
Long-term debt |
|
|
(8,355,386 |
) |
|
|
|
(4,717,305 |
) |
|
Deferred income taxes |
|
|
(6,834,807 |
) |
|
|
|
(1,492,017 |
) |
|
Other non-current liabilities |
|
|
(189,355 |
) |
|
|
|
(2,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
9,958,323 |
|
|
|
$ |
3,973,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimates of Fair |
|
Estimated Useful |
|
Current assets |
|
$ |
1,923,071 |
|
|
Accounts receivable |
|
|
271,305 |
|
|
Property, plant and equipment |
|
|
4,864,621 |
|
2 - 18 years |
Goodwill |
|
|
5,838,959 |
|
|
Indefinite-lived cable television franchises |
|
|
8,113,575 |
|
Indefinite-lived |
Customer relationships |
|
|
4,850,000 |
|
8 to 18 years |
Trade names |
|
|
1,010,000 |
|
12 years |
Amortizable intangible assets |
|
|
23,296 |
|
1 - 15 years |
Other non-current assets |
|
|
748,998 |
|
|
Current liabilities |
|
|
(2,305,954 |
) |
|
Long-term debt |
|
|
(8,355,386 |
) |
|
Deferred income taxes. |
|
|
(6,834,807 |
) |
|
Other non-current liabilities |
|
|
(189,355 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
9,958,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated amortization expense |
|
|
|
|
Year Ending December 31, 2017 |
|
$ |
928,597 |
|
Year Ending December 31, 2018 |
|
|
834,312 |
|
Year Ending December 31, 2019 |
|
|
758,189 |
|
Year Ending December 31, 2020 |
|
|
681,610 |
|
Year Ending December 31, 2021 |
|
|
604,456 |
|
Estimated amortization expense |
|
|
|
|
Year Ending December 31, 2017 |
|
$ |
701,908 |
|
Year Ending December 31, 2018 |
|
|
655,409 |
|
Year Ending December 31, 2019 |
|
|
609,245 |
|
Year Ending December 31, 2020 |
|
|
562,613 |
|
Year Ending December 31, 2021 |
|
|
515,430 |
|
Nine Months Ended September 30, 2016 | |||
Revenue | $ | 6,848,916 | |
Net loss | $ | (527,851 | ) |
The following table presents the unaudited pro forma revenue, loss from continuing operations and net loss for the year ended December 31, 2016 as if the Cablevision Acquisition had occurred on January 1, 2016:
Revenue |
|
$ |
9,154,816 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(721,257 |
) |
|
|
|
|
|
|
|
|
|
|
The unaudited pro forma revenue, loss from continuing operations and net loss for the years ended December 31, 2015, as if the Merger had occurred on January 1, 2015, are as follows:
Revenue |
|
$ |
6,545,545 |
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(740,115 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(752,656 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|