Use these links to rapidly review the document
TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on May 21, 2018

Registration No. 333-222475


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 1
to

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Altice USA, Inc.
(Exact name of registrant as specified in its Charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  4841
(Primary Standard Industrial
Classification Code Number)
  38-3980194
(I.R.S. Employer
Identification No.)

1 Court Square West
Long Island City, NY 11101
(516) 803-2300

(Address, including zip code, and telephone number, including area code, of registrant's principal executive office)



David Connolly
Executive Vice President, General Counsel and Secretary
1 Court Square West
Long Island City, NY 11101
(516) 803-2300
(Name, address, including zip code, and telephone number, including area code, of agent for service)



With a copy to:
Richard B. Alsop
Scott Petepiece
Daniel Litowitz
Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022
(212) 848-4000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

         If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.     o

         If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

         If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

         If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (check one)

Large accelerated filer  o   Accelerated filer  o   Non-accelerated filer  ý
(Do not check if a
smaller reporting company)
  Smaller reporting company  o

Emerging growth company  o

         If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.     o

          The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

   


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. The securities described herein may not be distributed until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion,
Preliminary Prospectus dated May 21, 2018

PROSPECTUS

              Shares

Altice USA, Inc.

LOGO

Class A Common Stock

Class B Common Stock



           This prospectus is being furnished to shareholders of record, as of                                    , 2018, of Altice N.V., a public limited liability company (" Naamloze vennootschap ") incorporated in the Netherlands, in connection with the planned pro rata distribution (the "Distribution") by Altice N.V. to its shareholders of 495,366,932 shares consisting of a combination of Class B common stock, par value $0.01 per share (the "Class B common stock"), of Altice USA, Inc. ("Altice USA" or the "Company") and Class A common stock, par value $0.01 per share (the "Class A common stock" and, together with the Class B common stock, the "Altice USA common stock"). As of May 21, 2018, Altice N.V. indirectly owned 490,085,674 shares of Class B common stock and 51,456,042 shares of Class A common stock representing 73.5% of the total outstanding capital stock and 98.4% of the total voting power of the outstanding capital stock of Altice USA. The Distribution will not increase the number of outstanding shares of Altice USA.

           Each Altice N.V. common share outstanding as of                        CET on                                    , 2018, the record date for the Distribution (the "Record Date"), will entitle the holder thereof to receive shares of Class A common stock and/or Class B common stock as described below. Delivery of the shares in the Distribution will be made in book-entry form.

           The Distribution will be structured as a distribution in kind to holders of Altice N.V.'s common shares A and common shares B. The number of shares of Altice USA common stock to be distributed to each Altice N.V. shareholder as of the Record Date will be based on such shareholder's ownership of Altice N.V. common shares. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution. The number of shares of Class B common stock distributed will be subject to a cap of 247.7 million shares, representing 50% of the total shares of Altice USA common stock being distributed and approximately one-third of the total issued share capital of Altice USA (the "Class B Cap"). If the Class B Cap is exceeded, the shares of Class B common stock delivered to Altice N.V. shareholders of record who elect to receive them will be subject to proration, and such shareholders will receive shares of Class A common stock in lieu of the portion of shares of Class B common stock that is cut back.

           If an Altice N.V. shareholder of record does not make an election by                        CET on                                    , 2018 (the "Election Deadline"), such shareholder will receive only shares of Class A common stock in the Distribution (the "Default Election"). Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution.

           Altice N.V. is ultimately controlled by Patrick Drahi through Next Alt S.à r.l. ("Next Alt"). As of May 22, 2018, Next Alt held          % of the outstanding share capital and voting rights of Altice N.V., representing          % of the economic rights and          % of the voting power in general meetings. As of May 21, 2018, Altice N.V. (through CVC 3 B.V. ("CVC 3"), its direct wholly owned subsidiary), Neptune Holding US LP ("Holding LP"), a Delaware limited partnership controlled by CVC 3, Uppernext S.C.S.p. ("Uppernext"), an entity controlled by Mr. Drahi, and A4 S.A., an entity controlled by the family of Mr. Drahi, on a combined basis, owned 74.5% of our issued and outstanding shares of common stock, which represents 98.5% of the voting power of our outstanding capital stock.

           Mr. Drahi has informed us that Next Alt will elect to receive 100% of the shares of Altice USA to which it is entitled in the Distribution in the form of Class B common stock and will be subject to proration, in the same manner as other Altice N.V. shareholders, in the event the Class B Cap is exceeded. In connection with the Distribution, Next Alt will enter into voting agreements (the "Concert Group voting agreements") with certain current and former officers and directors of Altice N.V., Altice USA and other Altice Group companies (such officers and directors, collectively, the "Concert Group") with respect to all shares of Altice USA common stock they own (including any shares of Altice USA common stock that such members receive in the Distribution). In addition, the Concert Group members who are Altice USA directors or officers have informed us that they intend to elect to receive 100% of the shares of Altice USA to which such members are entitled in the Distribution in the form of Class B common stock. It is also expected that the other members of the Concert Group intend to elect to receive 100% of the shares of Altice USA to which such members are entitled in the Distribution in the form of Class B common stock. As a result of Next Alt's and the Concert Group's intended election, the Concert Group voting agreements and the Holding LP voting agreement (as defined herein), Mr. Drahi (through entities controlled directly or indirectly by him or his family (including Next Alt, Uppernext and A4 S.A.)) will control Altice USA immediately after giving effect to the Distribution regardless of the elections made by the other Altice N.V. shareholders. See "Certain Relationships and Related-Party Transactions—Right of First Refusal and Concert Group Voting Agreements."

           Fractional shares of Altice USA common stock will not be distributed in the Distribution. Fractional shares of Class A common stock and Class B common stock (after conversion into shares of Class A common stock) will be aggregated into whole shares of Class A common stock, which will be sold in the open market at prevailing market prices. The aggregate cash proceeds from such sales, net of any brokerage fees and other costs, will be distributed pro rata to holders who would have otherwise been entitled to receive a fractional share in the Distribution.

           The Distribution will be effective as of                        CET, on                                    , 2018 (the "Distribution Date").

           Altice N.V. shareholders will not be required to pay any consideration for the Altice USA common stock they receive in the Distribution, and they will not be required to surrender or exchange their common shares of Altice N.V. in connection with the Distribution. Prior to the Election Deadline and subject to the Class B Cap, Altice N.V. shareholders will, however, have the right to elect the percentage of shares of Class A common stock and shares of Class B common stock they wish to receive in the Distribution.

           Our shares of Class A common stock are listed on the New York Stock Exchange (the "NYSE") under the symbol "ATUS." Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange.

            In reviewing this prospectus, you should carefully consider the matters described in the "Risk Factors" section beginning on page 21 of this prospectus.

           Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.



   

The date of this prospectus is                            , 2018.


Table of Contents


TABLE OF CONTENTS

 
  Page  

TRADEMARKS, SERVICE MARKS AND TRADE NAMES

    ii  

MARKET AND INDUSTRY DATA

    ii  

INDUSTRY TERMS

    iii  

QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION

    1  

SUMMARY

    8  

SUMMARY OF THE DISTRIBUTION

    10  

SUMMARY HISTORICAL FINANCIAL DATA

    16  

RISK FACTORS

    21  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    52  

THE DISTRIBUTION

    54  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

    61  

USE OF PROCEEDS

    68  

MARKET PRICE OF CLASS A COMMON STOCK

    69  

DIVIDEND POLICY

    70  

CAPITALIZATION

    71  

SELECTED HISTORICAL FINANCIAL DATA

    72  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    76  

BUSINESS

    144  

REGULATION

    159  

MANAGEMENT

    167  

EXECUTIVE COMPENSATION

    174  

PRINCIPAL STOCKHOLDERS

    190  

THE MASTER SEPARATION AGREEMENT

    193  

ANCILLARY AGREEMENTS

    196  

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

    199  

DESCRIPTION OF CAPITAL STOCK

    204  

DESCRIPTION OF CERTAIN INDEBTEDNESS

    214  

SHARES ELIGIBLE FOR FUTURE SALE

    229  

LEGAL MATTERS

    231  

EXPERTS

    231  

WHERE YOU CAN FIND MORE INFORMATION

    232  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

    F-1  



        This prospectus is being furnished solely to provide information to Altice N.V. shareholders as of the Record Date who will receive shares of Altice USA common stock in the Distribution. It is not and is not to be construed as an inducement or encouragement to buy or sell any securities of Altice N.V. or Altice USA. This prospectus describes Altice USA's business, its relationship with Altice N.V. and how the Distribution affects Altice USA and its shareholders, and provides other information to assist you in evaluating the benefits and risks of holding or disposing of the Altice USA common stock that you will receive in the Distribution.

        The information contained in this prospectus is accurate only as of its date. Our business, financial condition, operating results and prospects may have changed since that date. Certain numerical figures included in this prospectus have been subject to rounding adjustments. Accordingly, such numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

i


Table of Contents


TRADEMARKS, SERVICE MARKS AND TRADE NAMES

        We own or have rights to use the trademarks, service marks and trade names that we and Altice N.V. use in connection with our businesses, such as Altice, Suddenlink, Optimum, Lightpath, Altice Media Solutions, Altice Labs, Altice Technical Services, News 12 Networks, News 12 Varsity and Audience Partners. Each trademark, service mark and trade name of any other company appearing in this prospectus is, to our knowledge, owned by such other company. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are listed without the ® and ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of any applicable licensors to these trademarks, service marks and trade names.


MARKET AND INDUSTRY DATA

        Market and industry data and forecasts used in this prospectus have been obtained from independent industry sources. Some market data and statistical information contained in this prospectus are also based on management's estimates and calculations, which are derived from our review and interpretation of the independent sources, our internal market and brand research, our knowledge of the industry and public filings. Although we believe these sources to be reliable, we have not independently verified the data obtained from these sources and we cannot assure you of the accuracy or completeness of the data. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements contained in this prospectus.

ii


Table of Contents


INDUSTRY TERMS

        The following is a glossary of certain industry terms used throughout this prospectus:

ARPU   Average monthly revenue per residential customer.
Churn   Customer attrition rate.
CLEC   Competitive Local Exchange Carrier.
DBS   Direct Broadcast Satellite.
DOCSIS   Data Over Cable Service Interface Specification.
DSL   Digital subscriber line.
DVR   Digital video recorder.
FTTH   Fiber-to-the-home.
FTTT   Fiber-to-the-tower.
Gbps   Gigabits per second.
HD   High-definition.
HFC   Hybrid fiber-coaxial.
Homes Passed   Represents the estimated number of single residence homes, apartments and condominium units passed by the cable distribution network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our cable distribution network.
ILEC   Incumbent Local Exchange Carrier.
Mbps   Megabits per second.
MDU   Multiple dwelling unit.
MVPD   Multichannel video programming distributor.
OTT   Over-the-top; video programming and other content transmitted over the Internet.
SIP   Session Initiated Protocol.
SMATV   Satellite Master Antenna Television.
SMB   Small and medium-sized business.
VOD   Video-on-demand.
VoIP   Voice over Internet Protocol.

iii


Table of Contents



QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION

         The following questions and answers briefly address some commonly asked questions about the Distribution. They may not include all the information that is important to you. We encourage you to read carefully this entire prospectus and the other documents referred to herein. We have included references in certain parts of this section to a more detailed discussion of each topic presented in this section.

Why Is Altice N.V. Distributing Its Shares in Altice USA?

        Altice N.V. believes the proposed separation of Altice N.V. and Altice USA (the "Separation") through the Distribution will unlock more of the value of Altice USA and allow Altice N.V. management to effect a turnaround of its French business more expeditiously. In addition, the Distribution and resulting separation of Altice N.V. and Altice USA are expected to help Altice N.V. and Altice USA focus on their core businesses. Altice N.V. believes the Distribution will enhance management accountability, transparency and focus for both Altice USA's business and Altice N.V.'s remaining businesses. Altice N.V. also believes the Distribution will better enable investors to invest specifically in the geographic regions in which they are interested and allow for better geographic alignment between investors and securities analysts and the companies.

Is Altice N.V. Shareholder Approval Needed in Connection with the Distribution?

        Yes, under Altice N.V.'s articles of association, Altice N.V. is required to submit the distribution in kind that results in the Distribution to a shareholder vote at an Annual General Meeting ("AGM"). At the AGM, the Altice N.V. shareholders will be asked to approve (i) the distribution in kind and (ii) the board resolution approving the change in identity and character of the business of Altice N.V resulting from the Distribution.

What Is Being Distributed in the Distribution?

        495,366,932 shares in aggregate of our Class A common stock and Class B common stock will be distributed in the Distribution. The shares of Altice USA common stock to be distributed by Altice N.V. in connection with the Distribution will constitute approximately 67.2% of the issued and outstanding shares of Altice USA common stock immediately after the Distribution. The Distribution will not increase the number of outstanding shares of Altice USA.

        The Distribution will be structured as a distribution in kind to holders of Altice N.V.'s common shares A and common shares B. The number of shares of Altice USA common stock to be distributed to each Altice N.V. shareholder as of the Record Date will be based on such shareholder's ownership of Altice N.V. common shares. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution. The number of shares of Class B common stock distributed will be subject to the Class B Cap. If the Class B Cap is exceeded, the shares of Class B common stock delivered to Altice N.V. shareholders of record who elect to receive them will be subject to proration, and such shareholders will receive shares of Class A common stock in lieu of the portion of shares of Class B common stock that is cut back.

        If an Altice N.V. shareholder of record does not make an election by the Election Deadline, such shareholder will receive the Default Election. Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution.

        As of May 21, 2018, Altice N.V. (through CVC 3) owned 5,281,258 shares of Class A common stock and 490,085,674 shares of Class B common stock. CVC 3 is also the sole member of Neptune Holding US GP LLC, which is the sole general partner of Holding LP. In connection with the

1


Table of Contents

Distribution, shares of Altice USA common stock will be distributed by CVC 3 to Altice N.V. by means of a distribution from the share premium reserve in combination with a decrease of issued share capital of CVC 3 by way of cancelling shares. Subsequently Altice N.V. will transfer the Altice USA common stock to its shareholders. In addition, as of May 21, 2018, Altice N.V. indirectly through Holding LP owned 46,174,784 shares of Class A common stock (of which          % is attributable to Neptune Management LP in connection with the Carry Unit Plan (as defined herein) and          % is attributable to Altice N.V. (through CVC 3)).

        Prior to the Separation, CVC 3 will transfer its control of the general partner of Holding LP to us. CVC 3 will maintain substantially the same rights as a limited partner in Holding LP after the Separation as it had prior to the Separation. In addition, we and Next Alt intend to enter into an agreement (the "Holding LP voting agreement") pursuant to which Next Alt will be granted a proxy to vote the shares of Altice USA common stock held by Holding LP. See "Ancillary Agreements—Voting Agreement relating to Holding LP" for more information.

        Altice N.V. is ultimately controlled by Mr. Drahi through Next Alt. As of May 22, 2018, Next Alt held          % of the outstanding share capital and voting rights of Altice N.V., representing          % of the economic rights and          % of the voting power in general meetings. Mr. Drahi has informed us that Next Alt will elect to receive 100% of the shares of Altice USA to which it is entitled in the Distribution in the form of Class B common stock and will be subject to proration, in the same manner as other Altice N.V. shareholders, in the event the Class B Cap is exceeded. In addition, the Concert Group members who are Altice USA directors or officers have informed us that they intend to elect to receive 100% of the shares of Altice USA to which such members are entitled in the Distribution in the form of Class B common stock. It is also expected that the other members of the Concert Group intend to elect to receive 100% of the shares of Altice USA to which such members are entitled in the Distribution in the form of Class B common stock. As a result of Next Alt's and the Concert Group's intended election, the Concert Group voting agreements and the Holding LP voting agreement, Mr. Drahi (through entities controlled directly or indirectly by him or his family (including Next Alt, Uppernext and A4 S.A.)) will control Altice USA immediately after giving effect to the Distribution regardless of the elections made by the other Altice N.V. shareholders. For more information regarding the Concert Group voting agreements, see "Certain Relationships and Related-Party Transactions—Right of First Refusal and Concert Group Voting Agreements."

        Fractional shares of Altice USA common stock will not be distributed in the Distribution. Fractional shares of Class A common stock and Class B common stock (after conversion into shares of Class A common stock) will be aggregated into whole shares of Class A common stock, which will be sold in the open market at prevailing market prices. The aggregate cash proceeds from such sales, net of any brokerage fees and other costs, will be distributed pro rata to holders who would have otherwise been entitled to receive a fractional share in the Distribution.

When Is the Distribution Expected to be Completed?

        The Distribution is expected to be completed by the end of the second quarter of 2018.

What Will Altice N.V. Shareholders Receive in the Distribution?

        Each Altice N.V. shareholder, irrespective of whether such Altice N.V. shareholder holds Altice N.V. common shares A or common shares B, will be entitled to receive 0.4163 shares of Altice USA common stock for each whole Altice N.V. share held on the Record Date. As described above, the number of shares of Class A common stock and Class B common stock to be received by a shareholder will depend on the mix elected by such shareholder and any proration as a result of the Class B Cap.

2


Table of Contents

Who Is Entitled to Receive Shares of Altice USA Common Stock in the Distribution?

        Each Altice N.V. common share outstanding as of the Record Date will entitle the holder thereof to receive shares of Class A common stock and/or Class B common stock as described above.

What Do Altice N.V. Shareholders Need to do to Receive Shares of Altice USA Common Stock?

        Holders of Altice N.V. common shares on the Record Date are not required to pay any cash or deliver any other consideration or give up any Altice N.V. common shares to receive the shares of Altice USA common stock in the Distribution. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution until the Election Deadline, subject to the Class B Cap. Altice N.V. shareholders who hold their shares through a broker-dealer or financial institution will need to instruct such broker-dealer or financial institution to effect the election in accordance with its policies. Delivery of the shares in the Distribution will be made in book-entry form.

        If an Altice N.V. shareholder of record does not make an election by the Election Deadline, such shareholder will receive the Default Election. Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution.

        Holders of Altice N.V. common shares who sell those shares prior to the Record Date, so that they are not the record holder of such shares on the Record Date, will also be selling the right to receive the shares of Altice USA common stock that would have been distributed to them in the Distribution with respect to the Altice N.V. common shares they sell. Holders of Altice N.V. common shares on the Record Date will be entitled to receive the shares of Altice USA common stock that are distributable in respect of those shares even if such holders sell those Altice N.V. common shares prior to the Distribution Date.

Is the Distribution Subject to Any Conditions?

        The implementation of the Distribution is subject to the following conditions precedent being satisfied or waived.

    Approval of Altice N.V. shareholders at the AGM of (i) the distribution in kind and (ii) the board resolution approving the change in identity and character of the business of Altice N.V. resulting from the Distribution;

    The receipt of approvals from, or notices to, certain federal and state authorities in the United States, including the Federal Communications Commission and the Department of Justice;

    This Registration Statement being declared effective by the U.S. Securities and Exchange Commission (the "Commission");

    The prospectus prepared by Altice USA in connection with the Distribution for the purposes of Article 3 of Directive 2003/71/EC of the European Parliament and the Council being approved by the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten) ;

    The entry into a master separation agreement (the "Master Separation Agreement"), the entry into a stockholders' agreement among Altice USA, Next Alt and certain other parties (the "post-Distribution stockholders' agreement") and the entry into, amendments to or termination of various arrangements between Altice N.V. and Altice USA, such as a license to use the Altice brand and the management agreement pursuant to which we pay a quarterly management fee to Altice N.V.;

3


Table of Contents

    (i) Altice USA's third amended and restated certificate of incorporation having been approved and adopted by the affirmative vote of the holders of a majority of the aggregate voting power of all outstanding shares of capital stock of Altice USA, (ii) Altice USA having mailed or caused to be mailed to its stockholders an Information Statement on Schedule 14C with respect to such approval and adoption and the 20-day waiting period under Regulation 14C under the Exchange Act shall have elapsed, and (iii) Altice USA having filed or caused to be filed with the Secretary of State of the State of Delaware the third amended and restated certificate of incorporation following the completion of the 20-day waiting period under Regulation 14C under the Exchange Act;

    The absence of any law or any governmental order issued by a governmental authority of competent jurisdiction being in effect that enjoins or makes illegal the Separation; and

    The declaration and payment of a one-time $1.5 billion dividend to Altice USA stockholders as of a record date prior to the Distribution (the "Pre-Distribution Dividend").

        As of the date of this prospectus, all of the foregoing conditions have been satisfied except: (i) the entry into the post-Distribution stockholders' agreement and the entry into, amendments to or termination of various arrangements between Altice N.V. and Altice USA, (ii) the filing of the third amended and restated certificate of incorporation with the Secretary of State of the State of Delaware following the completion of the 20-day waiting period under Regulation 14C under the Exchange Act, (iii) the absence of any law or governmental order issued by a governmental authority of competent jurisdiction being in effect that enjoins or makes the Separation illegal, and (iv) the payment of the Pre-Distribution Dividend. Holders of Altice N.V. shares that are entitled to receive shares of Altice USA common stock in the Distribution are not entitled to receive any portion of the Pre-Distribution Dividend.

        Altice N.V. shall, in its sole and absolute discretion, determine the Record Date, the Distribution Date and all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition and notwithstanding anything to the contrary set forth in this prospectus, Altice N.V. may at any time and from time to time until the Distribution decide to abandon or modify the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution or modifying or changing the terms of the Distribution if, at any time, the Altice N.V. board of directors determines, in its sole and absolute discretion, that the Distribution is not in the best interests of Altice N.V. or its shareholders or is otherwise not advisable. Entering into, terminating or modifying any agreements between Altice N.V. and Altice USA require prior approval of our Audit Committee pursuant to our Related-Party Transaction Approval Policy. See "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions."

What Will Govern Altice N.V. Shareholders' Rights as Altice USA Stockholders?

        Prior to the Distribution, CVC 3 B.V., a direct subsidiary of Altice N.V. and controlling stockholder of Altice USA, will approve and adopt Altice USA's third amended and restated certificate of incorporation and our Board of Directors ("Board") will approve and adopt Altice USA's second amended and restated bylaws. In this prospectus, we treat our third amended and restated certificate of incorporation and second amended and restated bylaws as being in effect on the date of this prospectus. The rights of Altice USA stockholders are governed by Delaware law, as well as Altice USA's third amended and restated certificate of incorporation and second amended and restated bylaws. A description of these rights is included in this prospectus under the heading "Description of Capital Stock."

4


Table of Contents

How Many Classes of Common Stock Does Altice USA Have Outstanding and How Do They Differ from One Another?

        As of the date of this prospectus, Altice USA has 246,982,292 shares of Class A common stock and 490,086,674 shares of Class B common stock issued and outstanding. As of the date hereof, Altice USA has not issued any shares of its Class C common stock or its preferred stock.

        Holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to twenty-five votes per share, in each case, on any matter submitted to a vote of Altice USA stockholders. Except as set forth in Altice USA's third amended and restated certificate of incorporation or as required by Delaware law, holders of shares of Class A common stock and Class B common stock will vote together as a single class on all matters (including the election of directors) submitted to a vote of Altice USA stockholders.

        Except as set forth in Altice USA's third amended and restated certificate of incorporation or as required by Delaware law, all shares of Class A common stock and Class B common stock have the same rights and privileges and rank equally, share ratably and are identical in all respects for all matters.

        Each share of Class B common stock is convertible at any time upon written notice to Altice USA at the option of the holder into one share of Class A common stock pursuant to Altice USA's third amended and restated certificate of incorporation. For additional information about converting shares of Class B common stock into shares of Class A common stock, see "Description of Capital Stock—Class A Common Stock, Class B Common Stock and Class C Common Stock—Conversion and Transfers."

        Altice USA's third amended and restated certificate of incorporation does not provide for the automatic conversion of shares of Class B common stock upon transfer under any circumstances. As a result, the holders of Class B common stock will be free to transfer them without converting them into shares of Class A common stock. Any shares of Class B common stock that are converted into Class A common stock may not be reissued. The disparate voting rights of the shares of Class B common stock will not change upon transfer unless first converted into shares of Class A common stock.

        Our shares of Class A common stock are listed on the NYSE under the symbol "ATUS." Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange.

        For additional information about the Class A common stock and Class B common stock, please refer to the "Description of Capital Stock" included elsewhere in this prospectus.

What If Altice N.V. Shareholders Want to Convert or Sell Shares of Our Class B Common Stock Received in the Distribution?

        Our shares of Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and accordingly a trading market for our Class B common stock may not develop or be limited. Our Class B common stock is freely transferable (except for shares received by individuals who are our affiliates) and is convertible at any time upon written notice to Altice USA, without cost to the holder, into our Class A common stock on a share-for-share basis. Altice USA's third amended and restated certificate of incorporation provides that Altice USA will, no later than ten (10) calendar days after receipt by Altice USA of written notice from a holder of our Class B common stock, issue and take action to deliver a certificate or certificates representing the number of shares of our Class A common stock to which a converting holder is entitled (if such shares are certificated) or, if such shares are uncertificated, register such shares in book-entry form. The date of conversion will be the date of such issuance, in the case of certificated shares, or registration, in the case of uncertificated

5


Table of Contents

shares. Altice USA's third amended and restated certificate of incorporation further provides that Altice USA will not be liable for any losses incurred by any person resulting from any delay in effecting any such conversion.

        Shares of our Class B common stock that have been converted into our Class A common stock may not be converted back into shares of our Class B common stock. Individuals who may be considered our affiliates after the Distribution include individuals who control, are controlled by or are under common control with us, as those terms generally are interpreted for federal securities law purposes. These individuals may include some or all of our directors and executive officers. Individuals who are our affiliates will be permitted to sell their shares of Altice USA common stock only pursuant to an effective registration statement under the Securities Act, or an exemption from the registration requirements of the Securities Act, such as those afforded by Rule 144 thereunder.

Do Altice N.V. Shareholders Have to Convert Shares of Class B Common Stock Before Selling Them?

        No. Altice N.V. shareholders will be able to sell their shares of our Class B common stock without restriction, except for shares received by individuals who are our affiliates. Because our Class B common stock is unlisted, however, there may be a limited market for shares of our Class B common stock.

Are There Risks Associated with the Distribution and Our Business After the Distribution?

        Yes. You should carefully review the risks described in this prospectus under the heading "Risk Factors" beginning on page 21.

Who Can Altice N.V. Shareholders Contact with Questions About the Distribution?

        Altice N.V. shareholders should contact the following with questions about the Distribution:

        Head of Investor Relations, Nick Brown: +41 79 720 1503 / nick.brown@altice.net

Is Altice USA Common Stock Listed on a Stock Exchange?

        Our shares of Class A common stock are listed on the New York Stock Exchange under the symbol "ATUS." Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange.

What are the U.S. federal income tax consequences of the Distribution to Altice N.V. shareholders?

        For U.S. federal income tax purposes, a U.S. Holder (as defined below) of Altice N.V. shares will be treated as receiving a distribution on its Altice N.V. shares in an amount equal to the fair market value of the Altice U.S. shares received by such U.S. Holder and any cash received in lieu of fractional shares. As a result, the Distribution will be taxable as a foreign-source dividend to such U.S. Holder to the extent of the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder. Non-corporate U.S. Holders may benefit from the preferential long-term capital gains rate with respect to such dividend assuming they meet certain requirements. To the extent the fair market value of the Altice U.S. shares distributed to a U.S. Holder of Altice N.V. shares pursuant to the Distribution exceeds the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder, such excess will be treated as a non-taxable return of capital to the extent of the U.S. Holder's basis in the Altice N.V. shares, and as a capital gain thereafter.

        The Non-U.S. Holders of Altice N.V. shares will not be subject to U.S. federal income tax on the Distribution (unless the Distribution is effectively connected with the Non-U.S. Holder's conduct of a

6


Table of Contents

U.S. trade or business, and if an applicable income tax treaty requires, is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder in the United States).

        For further information concerning the U.S. federal income tax consequences of the Distribution, see "Material U.S. Federal Income Tax Consequences" beginning on page 61.

How Will Altice N.V. Shareholders Determine the Tax Basis They Will Have in the Shares of the Altice USA Common Stock Received in the Distribution?

        For U.S. federal income tax purposes, the shareholders of Altice N.V. will have a tax basis in each share of Altice USA Class A common stock and Class B common stock received in the Distribution equal to the fair market value of the share at the time of the Distribution.

7


Table of Contents



SUMMARY

         This summary of certain information contained in this prospectus may not include all the information that is important to you. To understand fully and for a more complete description of the terms and conditions of the Distribution, you should read this prospectus in its entirety and the documents referred to herein. See "Where You Can Find More Information."

         Unless the context indicates otherwise, "Altice USA," "we," "us," "our" and the "Company" refer to Altice USA, Inc. and its consolidated subsidiaries, "Altice N.V." refers to our parent company, Altice N.V., prior to the Distribution and "Altice Group" refers to Altice N.V. and its consolidated subsidiaries. See "Industry Terms" for a glossary of certain abbreviations and terms used throughout this prospectus.

Information About Altice USA

        Altice USA is one of the largest broadband communications and video services providers in the United States. We deliver broadband, pay television, telephony services, proprietary content and advertising services to approximately 4.9 million residential and business customers. Our footprint extends across 21 states through a fiber-rich broadband network with more than 8.6 million homes passed as of March 31, 2018.

        We acquired Cequel Corporation ("Suddenlink" or "Cequel") on December 21, 2015 and Cablevision Systems Corporation ("Optimum" or "Cablevision") on June 21, 2016. These acquisitions are referred to throughout this prospectus as the "Suddenlink Acquisition" or the "Cequel Acquisition" and the "Optimum Acquisition" or the "Cablevision Acquisition," respectively, and collectively as the "Acquisitions." We are a holding company that does not conduct any business operations of our own. We serve our customers through two business segments: Optimum, which operates in the New York metropolitan area, and Suddenlink, which principally operates in markets in the south-central United States. We have made significant progress in integrating the operations of Optimum and Suddenlink and are realizing the operational and commercial benefits of common ownership and one management team.

        We are currently majority-owned and controlled by Altice N.V. As of May 21, 2018, Mr. Drahi (through entities controlled directly or indirectly by Mr. Drahi or his family (including Next Alt, Uppernext and A4 S.A.)) owned, on a combined basis, 74.5% of our issued and outstanding shares of common stock, which represents 98.5% of the voting power of our outstanding capital stock.

Information About Altice N.V.

        Altice Group is a multinational cable, fiber, mobile, telecommunications, content, media and advertising company operating in Western Europe (comprising France and Portugal), the U.S., Israel, the Dominican Republic and the French Overseas Territories.

        The parent company of the Altice Group is Altice N.V., which succeeded Altice S.A. pursuant to a cross-border merger completed on August 9, 2015. Altice N.V. is a public company with limited liability ( naamloze vennootschap ) incorporated under the laws of the Netherlands. Altice N.V. is ultimately controlled by Mr. Drahi through Next Alt. As of May 22, 2018, Next Alt held          % of the share capital and voting rights of Altice N.V., representing          % of the economic rights and          % of the voting power in general meetings. Altice N.V.'s common shares A and common shares B are listed on Euronext Amsterdam.

        Altice Group has expanded internationally through a number of acquisitions of telecommunications businesses, including: SFR and PT Portugal in Western Europe; HOT in Israel; Altice Hispaniola and Tricom in the Dominican Republic; Cequel Corporation, which, through its subsidiary Cequel Communications, LLC, operates the 'Suddenlink' brand in the U.S., and Cablevision Systems Corporation in the U.S.

8


Table of Contents

Risk Factors

        There are a number of risks you should carefully consider regarding the Distribution, our business and Altice USA common stock. These risks are discussed more fully under "Risk Factors" beginning on page 21 of this prospectus.

Company Information

        We were incorporated in Delaware on September 14, 2015. Our principal executive office is located at 1 Court Square West, Long Island City, NY 11101. Our telephone number at that address is (516) 803-2300. Our website address is www.alticeusa.com. Information on our and our subsidiaries' websites or Twitter feeds, the Altice N.V. website or Twitter feed, or any Altice N.V. filing, is deemed not to be a part of this prospectus and inclusions of websites and Twitter feeds are inactive textual references only.

9


Table of Contents



SUMMARY OF THE DISTRIBUTION

Distributing Company

  Altice N.V., a public limited liability company (" Naamloze vennootschap ") incorporated in the Netherlands.

Distributed Company

 

Altice USA, Inc., a Delaware corporation.

Distributed Securities

 

495,366,932 shares in aggregate of the Class A common stock and Class B common stock.

Share Capital

 

Altice USA has two classes of outstanding common stock: Class A common stock and Class B common stock. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to twenty-five votes and is convertible at any time into one share of Class A common stock. We also have authorized 4,000,000,000 shares of Class C common stock, par value $0.01 (the "Class C common stock"), which if issued will be non-voting. In addition, our third amended and restated certificate of incorporation authorizes shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by our Board.

Record Date

 

The Record Date is            CET, on                        , 2018.

Distribution Date

 

The Distribution Date is            CET, on                        , 2018.

Election Deadline

 

The Election Deadline is            CET, on                        , 2018.

Distribution Election

 

The Distribution will be structured as a distribution in kind to holders of Altice N.V.'s common shares A and common shares B. The number of shares of Altice USA common stock to be distributed to each Altice N.V. shareholder as of the Record Date will be based on such shareholder's ownership of Altice N.V. common shares. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution. The number of shares of Class B common stock distributed will be subject to the Class B Cap. If the Class B Cap is exceeded, the shares of Class B common stock delivered to Altice N.V. shareholders of record who elect to receive them will be subject to proration, and such shareholders will receive shares of Class A common stock in lieu of the portion of shares of Class B common stock that is cut back.

 

If an Altice N.V. shareholder of record does not make an election by the Election Deadline, such shareholder will receive the Default Election. Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution.

10


Table of Contents

 

Altice N.V. is ultimately controlled by Mr. Drahi through Next Alt. As of May 22, 2018, Next Alt held          % of the outstanding share capital and voting rights of Altice N.V., representing          % of the economic rights and          % of the voting power in general meetings.

 

Mr. Drahi has informed us that Next Alt will elect to receive 100% of the shares of Altice USA to which it is entitled in the Distribution in the form of Class B common stock and will be subject to proration, in the same manner as other Altice N.V. shareholders, in the event the Class B Cap is exceeded. In addition, the Concert Group members who are Altice USA directors or officers have informed us that they intend to elect to receive 100% of the shares of Altice USA to which such members are entitled in the Distribution in the form of Class B common stock. It is also expected that the other members of the Concert Group intend to elect to receive 100% of the shares of Altice USA to which such members are entitled in the Distribution in the form of Class B common stock. As a result of Next Alt's and the Concert Group's intended election, the Concert Group voting agreements and the Holding LP voting agreement, Mr. Drahi (through entities controlled directly or indirectly by him or his family (including Next Alt, Uppernext and A4 S.A.)) will control Altice USA immediately after giving effect to the Distribution regardless of the elections made by the other Altice N.V. shareholders. For more information regarding the Concert Group voting agreements, see "Certain Relationships and Related-Party Transactions—Right of First Refusal and Concert Group Voting Agreements."

Distribution Ratio

 

Each Altice N.V. shareholder, irrespective of whether such Altice N.V. shareholder holds Altice N.V. common shares A or common shares B, will be entitled to receive 0.4163 shares of Altice USA common stock for each whole Altice N.V. share held on the Record Date. As described above, the number of shares of Class A common stock and Class B common stock to be received by a shareholder will depend on the mix elected by such shareholder and any proration as a result of the Class B Cap.

Fractional Shares

 

Fractional shares of Altice USA common stock will not be distributed in the Distribution. Fractional shares of Class A common stock and Class B common stock (after conversion into shares of Class A common stock) will be aggregated into whole shares of Class A common stock, which will be sold in the open market at prevailing market prices. The aggregate cash proceeds from such sales, net of any brokerage fees and other costs, will be distributed pro rata to holders who would have otherwise been entitled to receive a fractional share in the Distribution.

11


Table of Contents

Conditions to the Distribution

 

The implementation of the Distribution is subject to the following conditions precedent being satisfied or waived.

 

Approval of Altice N.V. shareholders at the AGM of (i) the distribution in kind and (ii) the board resolution approving the change in identity and character of the business of Altice N.V. resulting from the Distribution;

 

The receipt of approvals from, or notices to, certain federal and state authorities in the United States, including the Federal Communications Commission and the Department of Justice;

 

This Registration Statement being declared effective by the Commission;

 

The prospectus prepared by Altice USA in connection with the Distribution for the purposes of Article 3 of Directive 2003/71/EC of the European Parliament and the Council being approved by the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten) ;

 

The entry into the Master Separation Agreement, the entry into the post-Distribution stockholders' agreement and the entry into, amendments to or termination of various arrangements between Altice N.V. and Altice USA, such as a license to use the Altice brand and the management agreement pursuant to which we pay a quarterly management fee to Altice N.V.;

 

(i) Altice USA's third amended and restated certificate of incorporation having been approved and adopted by the affirmative vote of the holders of a majority of the aggregate voting power of all outstanding shares of capital stock of Altice USA, (ii) Altice USA having mailed or caused to be mailed to its stockholders an Information Statement on Schedule 14C with respect to such approval and adoption and the 20-day waiting period under Regulation 14C under the Exchange Act shall have elapsed, and (iii) Altice USA having filed or caused to be filed with the Secretary of State of the State of Delaware the third amended and restated certificate of incorporation following the completion of the 20-day waiting period under Regulation 14C under the Exchange Act;

 

The absence of any law or any governmental order issued by a governmental authority of competent jurisdiction being in effect that enjoins or makes illegal the Separation; and

 

The declaration and payment of the Pre-Distribution Dividend.

12


Table of Contents

 

As of the date of this prospectus, all of the foregoing conditions have been satisfied except: (i) the entry into the post-Distribution stockholders' agreement and the entry into, amendments to or termination of various arrangements between Altice N.V. and Altice USA, (ii) the filing of the third amended and restated certificate of incorporation with the Secretary of State of the State of Delaware following the completion of the 20-day waiting period under Regulation 14C under the Exchange Act, (iii) the absence of any law or governmental order issued by a governmental authority of competent jurisdiction being in effect that enjoins or makes the Separation illegal, and (iv) the payment of the Pre-Distribution Dividend. Holders of Altice N.V. shares that are entitled to receive shares of Altice USA common stock in the Distribution are not entitled to receive any portion of the Pre-Distribution Dividend.

 

Altice N.V. shall, in its sole and absolute discretion, determine the Record Date, the Distribution Date and all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition and notwithstanding anything to the contrary set forth in this prospectus, Altice N.V. may at any time and from time to time until the Distribution decide to abandon or modify the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution or modifying or changing the terms of the Distribution if, at any time, the Altice N.V. board of directors determines, in its sole and absolute discretion, that the Distribution is not in the best interests of Altice N.V. or its shareholders or is otherwise not advisable. Entering into, terminating or modifying any agreements between Altice N.V. and Altice USA require prior approval of our Audit Committee pursuant to our Related-Party Transaction Approval Policy. See "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions."

Trading Market and Symbol

 

Our Class A common stock is listed on the NYSE under the symbol "ATUS." Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange.

13


Table of Contents

Tax Consequences to Altice N.V. Shareholders

 

For U.S. federal income tax purposes, a U.S. Holder of Altice N.V. shares will be treated as receiving a distribution on its Altice N.V. shares in an amount equal to the fair market value of the Altice U.S. shares received by such U.S. Holder. As a result, the Distribution will be taxable as a foreign-source dividend to such U.S. Holder to the extent of the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder. Non-corporate U.S. Holders may benefit from the preferential long-term capital gains rate with respect to such dividend assuming they meet certain requirements. To the extent the fair market value of the Altice U.S. shares distributed to a U.S. Holder of Altice N.V. shares pursuant to the Distribution exceeds the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder, such excess will be treated as a non-taxable return of capital to the extent of the U.S. Holder's basis in the Altice N.V. shares, and as a capital gain thereafter. The Non-U.S. Holders of Altice N.V. shares will not be subject to U.S. federal income tax on the Distribution (unless the Distribution is effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or business, and if an applicable income tax treaty requires, is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder in the United States). The U.S. Holders and Non-U.S. Holders of Altice N.V. may also be subject to taxes on the Distribution in other jurisdictions.

Relationship with Altice N.V. after the Distribution

 

In connection with the Distribution, on May 18, 2018, we entered into the Master Separation Agreement, and we will enter into certain agreements regarding, among other things, the license of the Altice brand and amendments to certain commercial agreements between the Company, on the one hand, and Altice N.V. and its affiliates, on the other hand. Entering into, terminating or modifying any agreements between Altice N.V. and Altice USA require prior approval of our Audit Committee pursuant to our Related-Party Transaction Approval Policy. As of the date of this prospectus, the Master Separation Agreement and each of the agreements or transactions described in "Ancillary Agreements" (other than the trademark license agreement) have been approved by our Audit Committee pursuant to the Company's Related-Party Transaction Approval Policy. See "The Master Separation Agreement," "Ancillary Agreements" and "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions."

14


Table of Contents

Dividend Policy

 

As a condition to the Distribution, pursuant to authority delegated by our Board, our Audit Committee declared a one-time $1.5 billion dividend to Altice USA stockholders as of a record date of May 22, 2018 payable two business days prior to the Distribution, provided that the Master Separation Agreement has not been terminated on or prior to the payment date. Holders of Altice N.V. shares that are entitled to receive shares of Altice USA common stock in the Distribution are not entitled to receive any portion of the Pre-Distribution Dividend. Other than this dividend, we currently intend to retain any future earnings to fund the operation, development and expansion of our business and do not intend to pay any dividends on our Class A or Class B common stock. Any future determination relating to our dividend policy will be made in the sole and absolute discretion of our Board and will depend upon then existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors that our Board may deem relevant. See "Dividend Policy" and "Description of Certain Indebtedness."

 

Although we do not currently intend to pay dividends other than as described above, our Board has authorized a share repurchase program of up to $2 billion for a three-year period following the Distribution with respect to our Class A common stock as a means to return capital to our stockholders, among other reasons.

Transfer Agents, Registrars and Conversion Agent

 

The transfer agent and registrar for our Class A common stock and Class B common stock is American Stock Transfer & Trust Company, LLC ("AST"). The conversion agent with respect to any conversions of Class B common stock to Class A common Stock is also AST. The transfer agent and registrar for Altice N.V.'s common shares A and common shares B is ING Bank N.V.

Risk Factors

 

Our business faces both general and specific risks and uncertainties. Our business also faces risks relating to the Distribution. Accordingly, you should read carefully the information set forth under "Risk Factors" beginning on page 21 of this prospectus.

15


Table of Contents



SUMMARY HISTORICAL FINANCIAL DATA

        The summary consolidated historical balance sheet and operating data of Altice USA for the years ended December 31, 2017 and 2016 presented below have been derived from the audited consolidated financial statements of Altice USA included elsewhere herein. The summary consolidated historical balance sheet and operating data of Altice USA as of and for the three months ended March 31, 2018 and 2017 presented below have been derived from the unaudited condensed consolidated financial statements of Altice USA included elsewhere herein. The historical operating data of Altice USA for the year ended December 31, 2016 include the operating results of Cequel for the year ended December 31, 2016 and the operating results of Cablevision for the period from the date of acquisition, June 21, 2016, through December 31, 2016.

        The summary consolidated historical balance sheet and operating data of Altice USA for the three months ended March 31, 2018 presented below reflects the adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers ("ASC 606") and ASU No. 2017-07 Compensation-Retirement Benefits (Topic 715) ("ASU 2017-07"). It also gives effect to the acquisition of Altice Technical Services US Corp. ("ATS") as the Company became the owner of 100% of the equity interests in ATS in March 2018. ATS was previously owned by Altice N.V. and a member of ATS's management through a holding company. As the acquisition is a combination of businesses under common control, the Company combined the results of operations and related assets and liabilities of ATS for all periods since its commencement of operations in April 2017.

        The summary consolidated historical balance sheet and operating data of Altice USA as of and for the three months ended March 31, 2017 and as of and for the years ended December 31, 2017 and 2016 presented below have been amended to retrospectively apply the adoption of ASC 606 and ASU No. 2017-07. The balance sheet data of Altice USA as of December 31, 2017 also gives effect to the ATS acquisition.

        The summary historical results presented below are not necessarily indicative of the results to be expected for any future period. This information should be read in conjunction with the audited

16


Table of Contents

consolidated financial statements of Altice USA and Management's Discussion and Analysis of Financial Condition and Results of Operations of Altice USA included elsewhere herein.

 
  Altice USA  
 
  Three months
March 31,
  Year ended
December 31,
 
 
  2018   2017   2017   2016  
 
  (Unaudited)
  (dollars in thousands)
 

Revenue:

                         

Residential:

                         

Pay TV

  $ 1,033,708   $ 1,083,878   $ 4,274,122   $ 2,788,873  

Broadband

    701,621     625,918     2,608,595     1,651,574  

Telephony

    166,038     180,961     700,765     465,771  

Business services and wholesale

    333,090     319,420     1,298,213     819,541  

Advertising

    87,582     83,361     391,866     252,049  

Other(a)

    7,675     8,721     33,389     39,404  

Total revenue

    2,329,714     2,302,259     9,306,950     6,017,212  

Operating expenses:

                         

Programming and other direct costs

    787,361     758,352     3,035,655     1,911,230  

Other operating expenses

    583,023     608,144     2,347,315     1,702,472  

Restructuring and other expense

    3,587     76,929     152,401     240,395  

Depreciation and amortization          

    642,705     608,724     2,930,571     1,700,306  

Operating income

    313,038     250,110     841,008     462,809  

Other non-operating expenses, net

    (502,690 )   (372,206 )   (2,208,596 )   (1,553,954 )

Loss before income taxes

    (189,652 )   (122,096 )   (1,367,588 )   (1,091,145 )

Income tax benefit

    60,703     45,908     2,862,352     259,666  

Net income (loss)

    (128,949 )   (76,188 )   1,494,764     (831,479 )

Net income attributable to noncontrolling interests

    (2 )   (237 )   (1,587 )   (551 )

Net income (loss) attributable to Altice USA stockholders

  $ (128,951 ) $ (76,425 ) $ 1,493,177   $ (832,030 )

Adjusted EBITDA(b)

  $ 980,953   $ 943,611   $ 3,981,410   $ 2,417,878  

Adjusted EBITDA margin

    42.1 %   40.9 %   42.8 %   40.2 %

Capital Expenditures

  $ 257,615   $ 257,427   $ 951,349   $ 625,541  

Capital expenditures as a percentage of revenue

    11.1 %   11.2 %   10.2 %   10.4 %

Adjusted EBITDA less capital expenditures

  $ 723,338   $ 686,184   $ 3,030,061   $ 1,792,337  

Adjusted EBITDA less capital expenditures as a percentage of revenue

    31.0 %   29.8 %   32.6 %   29.8 %

(a)
Other revenue for the year ended December 31, 2016 includes revenue recognized by Newsday Media Group ("Newsday") for the period from June 21, 2016 (the "Cablevision Acquisition Date"), through July 7, 2016, the date the Company sold a 75% interest in Newsday and ceased consolidating its operating results.

(b)
We define Adjusted EBITDA, which is a non-GAAP financial measure, as net income (loss) excluding income taxes, income (loss) from discontinued operations, other non-operating income or expenses, loss on extinguishment of debt and write-off of deferred financing costs, loss on interest rate swap contracts, gain (loss) on equity derivative contracts, gain (loss) on investments,

17


Table of Contents

    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. We believe Adjusted EBITDA is an appropriate measure for evaluating the operating performance of the Company. Adjusted EBITDA and similar measures with similar titles are common performance measures used by investors, analysts and peers to compare performance in our industry. Internally, we use revenue and Adjusted EBITDA measures as important indicators of our business performance, and evaluate management's effectiveness with specific reference to these indicators. We believe Adjusted EBITDA provides management and investors a useful measure for period-to-period comparisons of our core business and operating results by excluding items that are not comparable across reporting periods or that do not otherwise relate to the Company's ongoing operating results. Adjusted EBITDA should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), and other measures of performance presented in accordance with U.S. generally accepted accounting principles ("GAAP"). Since Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies.

    We also use Adjusted EBITDA less Capital Expenditures as an indicator of the Company's financial performance. We believe this measure is one of several benchmarks used by investors, analysts and peers for comparison of performance in the Company's industry, although it may not be directly comparable to similar measures reported by other companies.

        The following is a reconciliation of net income (loss) to Adjusted EBITDA:

 
  Altice USA   Altice USA  
 
  Three months ended
March 31,
  Year ended
December 31,
 
 
  2018   2017   2017   2016  
 
  (Unaudited)
  (dollars in thousands)
 

Net income (loss)

  $ (128,949 ) $ (76,188 ) $ 1,494,764   $ (831,479 )

Income tax benefit

    (60,703 )   (45,908 )   (2,862,352 )   (259,666 )

Other expense (income)(a)

    11,658     2,100     13,651     (1,186 )

Loss on extinguishment of debt and write-off of deferred financing costs

    4,705         600,240     127,649  

Loss (gain) on interest rate swap contracts

    31,922     (2,342 )   (5,482 )   72,961  

Loss (gain) on equity derivative contracts, net(b)

    (168,352 )   71,044     236,330     53,696  

Loss (gain) on investments and sale of affiliate interests, net

    248,602     (131,658 )   (237,354 )   (141,896 )

Interest expense, net

    374,155     433,062     1,601,211     1,442,730  

Depreciation and amortization

    642,705     608,724     2,930,571     1,700,306  

Restructuring and other expenses

    3,587     76,929     152,401     240,395  

Share-based compensation

    21,623     7,848     57,430     14,368  

Adjusted EBITDA

  $ 980,953   $ 943,611   $ 3,981,410   $ 2,417,878  

(a)
Includes primarily dividends received on Comcast common stock owned by the Company.

18


Table of Contents

(b)
Consists of unrealized and realized losses (gains) due to the change in fair value of derivative contracts.
 
  Altice USA  
Balance Sheet Data:
  As of
Mar. 31,
2018
  As of
Dec. 31,
2017
  As of
Dec. 31,
2016
 
 
  (Unaudited)
  (dollars in thousands)
 

Cash and cash equivalents

    1,427,651   $ 329,848   $ 486,792  

Total assets

    35,279,409     34,812,082     36,498,578  

Total debt

    22,973,894     21,941,311     24,030,065  

Net debt excluding collateralized indebtedness and notes payable to affiliates and related parties(1)

    20,194,972     20,261,989     20,507,204  

(1)
Amounts presented are net of cash and cash equivalents.

Customer Metrics

        The following table sets forth certain customer metrics by segment (unaudited):

 
  As March 31, 2018   As of December 31, 2017   As of December 31, 2016  
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total   Cablevision   Cequel   Total  
 
  (in thousands, except per customer amounts)
 

Homes passed(a)

    5,174     3,468     8,642     5,164     3,457     8,621     5,116     3,407     8,524  

Total customer relationships(b)(c)

    3,151     1,765     4,917     3,156     1,750     4,906     3,141     1,751     4,892  

Residential

    2,888     1,655     4,543     2,893     1,642     4,535     2,879     1,649     4,528  

SMB

    263     110     373     263     109     371     262     102     364  

Residential customers:

                                                       

Pay TV

    2,340     1,035     3,375     2,363     1,042     3,406     2,428     1,107     3,535  

Broadband

    2,673     1,399     4,073     2,670     1,376     4,046     2,619     1,344     3,963  

Telephony

    1,954     596     2,550     1,965     592     2,557     1,962     597     2,559  

Residential triple product customer penetration(d):

    63.8 %   25.7 %   49.9 %   64.2 %   25.7 %   50.2 %   64.8 %   25.5 %   50.5 %

Penetration of homes passed(e):

    60.9 %   50.9 %   56.9 %   61.1 %   50.6 %   56.9 %   61.4 %   51.4 %   57.4 %

ARPU(f)

  $ 154.48   $ 113.58   $ 139.63   $ 155.39   $ 112.21   $ 139.75   $ 154.49   $ 109.30   $ 138.07  

(a)
Represents the estimated number of single residence homes, apartments and condominium units passed by the cable distribution network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our cable distribution network. For Cequel, broadband services were not available to approximately 100 homes passed and telephony services were not available to approximately 500 homes passed.

(b)
Represents number of households/businesses that receive at least one of the Company's services.

(c)
Customers represent each customer account (set up and segregated by customer name and address), weighted equally and counted as one customer, regardless of size, revenue generated, or number of boxes, units, or outlets. In calculating the number of customers, we count all customers other than inactive/disconnected customers. Free accounts are included in the customer counts along with all active accounts, but they are limited to a prescribed group. Most of these accounts are also not entirely free, as they typically generate revenue through pay-per-view or other pay services and certain equipment fees. Free status is not granted to regular customers as a promotion. In counting bulk residential customers, such as an apartment building, we count each subscribing family unit within the building as one customer, but do not count the master account for the entire building as a customer. We count a bulk commercial customer, such as a hotel, as one customer, and do not count individual room units at that hotel.

19


Table of Contents

(d)
Represents the number of customers that subscribe to three of our services divided by total residential customer relationships.

(e)
Represents the number of total customer relationships divided by homes passed.

(f)
Calculated by dividing the average monthly revenue for the respective quarter (fourth quarter for annual periods) presented derived from the sale of broadband, pay television and telephony services to residential customers for the respective quarter by the average number of total residential customers for the same period.

20


Table of Contents


RISK FACTORS

         You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including the financial statements and the related notes included elsewhere in this prospectus and the information set forth under the caption "Cautionary Statement Regarding Forward-Looking Statements." We describe below what we believe are currently the material risks and uncertainties we face, but they are not the only risks and uncertainties we face. Some of the risks relate to our business, others to the Distribution. Some risks relate principally to the securities markets and ownership of our Class A common stock and Class B common stock. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occur, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In that event, the market price of our Class A common stock or Class B common stock could decline.

Risk Factors Relating to the Distribution

The Distribution will result in a taxable dividend to the U.S. Holders of Altice N.V. shares and may result in a taxable dividend to Non-U.S. Holders of Altice N.V. shares.

        The Distribution will be subject to U.S. federal income tax as a foreign-source dividend to the U.S. Holders of Altice N.V. shares to the extent of the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by the respective U.S. Holder. Non-corporate U.S. Holders may benefit from the preferential long-term capital gains rate with respect to such dividend assuming they meet certain requirements. To the extent the fair market value of the Altice U.S. shares distributed to a U.S. Holder of Altice N.V. shares pursuant to the Distribution and any cash received in lieu of fractional shares exceed the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder, such excess will be treated as a non-taxable return of capital to the extent of the U.S. Holder's basis in the Altice N.V. shares, and as a capital gain thereafter. The Non-U.S. Holders of Altice N.V. shares will not be subject to U.S. federal income tax on the Distribution (unless the Distribution is effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or business, and if an applicable income tax treaty requires, is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder in the United States). The U.S. Holders and Non-U.S. Holders of Altice N.V. may also be subject to taxes on the Distribution in other jurisdictions.

The terms of our arrangements with the Altice Group, or that we obtained because we were part of the Altice Group, may be more favorable than what we will be able to obtain from an unaffiliated third party or following the Distribution when we are no longer a subsidiary of Altice N.V. We may be unable to replace the services, products and technology the Altice Group provides us in a timely manner or on comparable terms.

        Prior to the Distribution, our business has been operated as part of the Altice Group. As part of the Altice Group, we entered into a variety of transactions and agreements with our affiliates, including:

21


Table of Contents

        We negotiated these arrangements with the Altice Group in the context of a parent-subsidiary relationship. Although the Altice Group is contractually obligated to provide us with services, products and technology during the term of the relevant agreements, there can be no assurance that we will be able to replace these services, products or technology in a timely manner or on comparable terms. They also contain terms and provisions that may be more favorable than terms and provisions we might have obtained in arm's-length negotiations with unaffiliated third parties. When Altice Group ceases to provide services and products pursuant to those arrangements, our costs of procuring those services from third parties may increase. In addition, we may have received more favorable pricing or other terms from third party vendors because we were part of the Altice Group. After the Distribution, when we are no longer a subsidiary of Altice N.V., we may not be able to obtain equally favorable terms.

Our inter-company agreements are being negotiated while we are a subsidiary of Altice N.V.

        In connection with the Distribution, on May 18, 2018, we entered into the Master Separation Agreement, and we will enter into certain agreements regarding, among other things, the license of the Altice brand, and amendments to certain commercial agreements between the Company, on the one hand, and Altice N.V. and its affiliates, on the other hand. See "The Master Separation Agreement" and "Ancillary Agreements". The terms of these inter-company agreements are being established while we are a subsidiary of Altice N.V. and, therefore, may not be the result of arms'-length negotiations. We believe that the terms of these inter-company agreements are commercially reasonable and fair to all parties under the circumstances; however, conflicts could arise in the interpretation or any extension or renegotiation of the foregoing agreements after the Distribution. These inter-company arrangements are subject to compliance with the Altice USA Related-Party Transaction Approval Policy, which requires Audit Committee approval of certain agreements with Altice N.V. As of the date of this prospectus, the Master Separation Agreement and each of the agreements or transactions described in "Ancillary Agreements" (other than the trademark license agreement) have been approved by our Audit Committee pursuant to the Company's Related-Party Transaction Approval Policy. See "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions."

We may not realize the potential benefits from the Distribution in the near term or at all.

        We believe that, as an independent company, we will be able to, among other things, better focus our financial and operational resources on our specific business, implement and maintain a capital structure designed to meet our specific needs, design and implement corporate strategies and policies that are exclusively targeted to our business and more effectively respond to industry dynamics, and decouple our business from Altice N.V. as it focuses resources on addressing issues within other Altice Group businesses. However, by separating from Altice N.V., we may have less leverage with suppliers and we may experience other adverse events. In addition, we may be unable to achieve some or all of the benefits that we expect to achieve as an independent company in the time we expect, if at all. The completion of the Distribution will also require significant amounts of our management's time and effort, which may divert management's attention from operating and growing our business.

Altice N.V.'s board of directors may abandon the Distribution at any time.

        No assurance can be given that the Distribution will occur, or if it occurs that it will occur on the terms described in this prospectus. In addition to the conditions to the Distribution described herein (certain of which may be waived by the Altice N.V. board of directors in its sole discretion), the Altice N.V. board of directors may abandon the Distribution at any time prior to the Distribution Date for any reason or for no reason. If any condition to the Distribution is waived or if any material amendments or modifications are made to the terms of the Distribution, we intend to promptly issue a

22


Table of Contents

press release and file an amendment to this Registration Statement or file a Current Report on Form 8-K informing the market of the substance of such waiver, amendment or modification.

The combined market values of Altice N.V. common shares and Altice USA common stock that Altice N.V. shareholders will hold after the Distribution may be less than the market value of Altice N.V. common shares prior to the Distribution.

        After the Distribution, holders of Altice N.V. common shares prior to the Distribution will own a combination of Altice N.V. common shares and Altice USA common stock. Any number of matters, including the risks described in this prospectus, may adversely impact the value of Altice N.V. common shares and Altice USA common stock after the Distribution. Some of these matters may not have been identified by Altice N.V. prior to the consummation of the Distribution and, in any event, may not be within Altice N.V.'s or our control. In the event of any adverse circumstances, facts, changes or effects, the combined market values of Altice N.V. common shares and Altice USA common stock held by Altice N.V. shareholders after the Distribution may be less than the market value of Altice N.V. common shares before the Distribution.

Following the Distribution, certain of our overlapping directors and officers will have relationships with Altice N.V., Next Alt and A4 S.A., which may result in the diversion of corporate opportunities and other conflicts with respect to our business and executives.

        Following the Distribution, four of our directors, including Mr. Drahi, who is expected to join our Board as Chairman upon the completion of the Distribution, will be employed by or affiliated with Next Alt, Altice N.V. or A4 S.A., an entity controlled by the family of Mr. Drahi. These directors have fiduciary duties to us and, in addition, they have duties to Next Alt, Altice N.V. or A4 S.A. As a result, these directors and officers may face real or apparent conflicts of interest with respect to matters affecting both us and Altice N.V., Next Alt or A4 S.A., whose interests may be adverse to ours in some circumstances.

        Our third amended and restated certificate of incorporation will recognize that Mr. Drahi and certain directors, principals, officers, employees and/or other representatives of Next Alt, Altice N.V. and A4 S.A. and their affiliates (each such director, principal, officer, employee and/or other representative, an "Next Alt Group Representative" and collectively, the "Next Alt Group Representatives") may serve as our directors, officers or agents and that Mr. Drahi, Next Alt, Altice N.V., A4 S.A., the Next Alt Group Representatives and their respective affiliates, and members of our Board to be designated by Next Alt and A4 S.A. pursuant to the post-Distribution stockholders' agreement (the "Designated Directors"), may now engage, may continue to engage and may in the future engage in the same or similar activities or related lines of business as those in which we, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which we, directly or indirectly, may engage. In the third amended and restated certificate of incorporation we will renounce our rights to certain business opportunities and provide that none of Mr. Drahi, Next Alt, Altice N.V., A4 S.A., any Next Alt Group Representative, any Designated Director, or their respective affiliates, have any duty to refrain from, directly or indirectly, engaging in the same or similar business activities or lines of businesses in which we or any of our affiliates engage or are reasonably likely to engage, or otherwise competing with us or any of our affiliates, or have any duty to communicate such opportunities to us, unless such opportunities arise in or are predominantly related to North America. The third amended and restated certificate of incorporation will further provide that, to the fullest extent permitted by law, none of Mr. Drahi, Next Alt, Altice N.V., A4 S.A., any Next Alt Group Representative, any Designated Director (including any Designated Director who serves as one of our officers) or any of the foregoing persons' affiliates shall be liable to us or our stockholders for breach of any fiduciary duty solely because they engage in such activities.

23


Table of Contents

In connection with the Distribution, Altice USA will agree to indemnify Altice N.V. for certain liabilities and Altice N.V. will agree to indemnify Altice USA for certain liabilities, and such indemnities may not be adequate.

        Pursuant to the Master Separation Agreement and other agreements with Altice N.V., including the Indemnification Agreement, Altice N.V. will agree to indemnify Altice USA for certain liabilities and Altice USA will agree to indemnify Altice N.V. for certain liabilities, in each case, for uncapped amounts. See "The Master Separation Agreement" and "Ancillary Agreements." Indemnity payments that Altice USA may be required to pay to Altice N.V. may be significant and could negatively impact our business. There can be no assurance that the indemnity from Altice N.V. will be sufficient to protect Altice USA against the full amount of such liabilities or that Altice N.V. will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from Altice N.V. any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves.

Risk Factors Relating to Our Business

We operate in a highly competitive business environment which could materially adversely affect our business, financial condition, results of operations and liquidity.

        We operate in a highly competitive, consumer-driven industry and we compete against a variety of broadband, pay television and telephony providers and delivery systems, including broadband communications companies, wireless data and telephony providers, satellite-delivered video signals, Internet-delivered video content and broadcast television signals available to residential and business customers in our service areas. Some of our competitors include AT&T and its DirecTV subsidiary, CenturyLink, DISH Network, Frontier and Verizon. In addition, our pay television services compete with all other sources of leisure, news, information and entertainment, including movies, sporting or other live events, radio broadcasts, home-video services, console games, print media and the Internet.

        In some instances, our competitors have fewer regulatory burdens, easier access to financing, greater resources, greater operating capabilities and efficiencies of scale, stronger brand-name recognition, longstanding relationships with regulatory authorities and customers, more customers, more flexibility to offer promotional packages at prices lower than ours and greater access to programming or other services. This competition creates pressure on our pricing and has adversely affected, and may continue to affect, our ability to add and retain customers, which in turn adversely affects our business, financial condition and results of operations. The effects of competition may also adversely affect our liquidity and ability to service our debt. For example, we face intense competition from Verizon, which has constructed FTTH network infrastructure that passes a significant number of households in our New York metropolitan service area. We estimate that Verizon is currently able to sell a fiber-based triple play, including broadband, pay television and telephony services, to at least half of the households in our New York metropolitan service area and may expand these and other service offerings to more customers in the future. Any estimate of Verizon's build-out and sales activity in our New York metropolitan service area is difficult to assess because it is based on visual inspections and other limited estimating techniques and therefore serves only as an approximation.

        Our competitive risks are heightened by the rapid technological change inherent in our business, evolving consumer preferences and the need to acquire, develop and adopt new technology to differentiate our products and services from those of our competitors, and to meet consumer demand. We may need to anticipate far in advance which technology we should use for the development of new products and services or the enhancement of existing products and services. The failure to accurately anticipate such changes may adversely affect our ability to attract and retain customers, which in turn could adversely affect our business, financial condition and results of operations. Consolidation and cooperation in our industry may allow our competitors to acquire service capabilities or offer products

24


Table of Contents

that are not available to us or offer similar products and services at prices lower than ours. For example, Comcast and Charter Communications have agreed to jointly explore operational efficiencies to speed their respective entries into the wireless market, including in the areas of creating common operating platforms and emerging wireless technology platforms. In addition, changes in the regulatory and legislative environments may result in changes to the competitive landscape.

        In addition, certain of our competitors own directly or are affiliated with companies that own programming content or have exclusive arrangements with content providers that may enable them to obtain lower programming costs or offer exclusive programming that may be attractive to prospective customers. For example, DirecTV has exclusive arrangements with the National Football League that give it access to programming we cannot offer. AT&T also has an agreement to acquire Time Warner, which owns a number of cable networks, including TBS, CNN and HBO, as well as Warner Bros. Entertainment, which produces television, film and home-video content. AT&T's and DirecTV's potential access to Time Warner programming could allow AT&T and DirecTV to offer competitive and promotional packages that could negatively affect our ability to maintain or increase our existing customers and revenues. DBS operators such as DISH Network and DirecTV also have marketing arrangements with certain phone companies in which the DBS provider's pay television services are sold together with the phone company's broadband and mobile and traditional phone services.

        Another source of competition for our pay television services is the delivery of video content over the Internet directly to customers, some of which is offered without charging a fee for access to the content. This competition comes from a number of different sources, including companies that deliver movies, television shows and other video programming over broadband Internet connections, such as Netflix, Hulu, iTunes, YouTube, Amazon Prime, Sling TV, Playstation Vue, DirecTV Now and Go90. It is possible that additional competitors will enter the market and begin providing video content over the Internet directly to customers. Increasingly, content owners, such as HBO and CBS, are selling their programming directly to consumers over the Internet without requiring a pay-television subscription. The availability of these services has and will continue to adversely affect customer demand for our pay television services, including premium and on-demand services. Further, due to consumer electronics innovations, consumers are able to watch such Internet-delivered content on television sets and mobile devices, such as smartphones and tablets. Internet access services are also offered by providers of wireless services, including traditional cellular phone carriers and others focused solely on wireless data services. All wireless carriers have started to offer unlimited data plans, which could, in some cases, become a substitute for the fixed broadband services we provide. The Federal Communications Commission ("FCC") is likely to continue to make additional radio spectrum available for these wireless Internet access services.

        Our pay television services also face competition from broadcast television stations, entities that make digital video recorded movies and programs available for home rental or sale, SMATV systems, which generally serve large MDUs under an agreement with the landlord and service providers and open video system operators. Private cable systems can offer improved reception of local television stations and many of the same satellite-delivered program services that are offered by cable systems. SMATV systems currently benefit from operating advantages not available to franchised cable systems, including fewer regulatory burdens. Cable television has also long competed with broadcast television, which consists of television signals that the viewer is able to receive without charge using an "off-air" antenna. The extent of such competition is dependent upon the quality and quantity of broadcast signals available through "off-air" reception, compared to the services provided by the local cable system. The use of radio spectrum now provides traditional broadcasters with the ability to deliver HD television pictures and multiple digital-quality program streams. There can be no assurance that existing, proposed or as yet undeveloped technologies will not become dominant in the future and render our video service offering less profitable or even obsolete.

25


Table of Contents

        Most broadband communications companies, which already have wired networks, an existing customer base and other operational functions in place (such as billing and service personnel), offer DSL services. We believe DSL service competes with our broadband service and is often offered at prices lower than our Internet services. However, DSL is often offered at speeds lower than the speeds we offer. In addition, DSL providers may currently be in a better position to offer Internet services to businesses since their networks tend to be more complete in commercial areas. They may also increasingly have the ability to combine video services with telephone and Internet services offered to their customers, particularly as broadband communications companies enter into co-marketing agreements with other service providers. In addition, current and future fixed and wireless Internet services, such as 3G, 4G and 5G fixed and wireless broadband services and Wi-Fi networks, and devices such as wireless data cards, tablets and smartphones, and mobile wireless routers that connect to such devices, may compete with our broadband services.

        Our telephony services compete directly with established broadband communications companies and other carriers, including wireless providers, as increasing numbers of homes are replacing their traditional telephone service with wireless telephone service. We also compete against VoIP providers like Vonage, Skype, GoogleTalk, Facetime, WhatsApp and magicJack that do not own networks but can provide service to any person with a broadband connection, in some cases free of charge. In addition, we compete against ILECs, other CLECs and long-distance voice-service companies for large commercial and enterprise customers. While we compete with the ILECs, we also enter into interconnection agreements with ILECs so that our customers can make and receive calls to and from customers served by the ILECs and other telecommunications providers. Federal and state law and regulations require ILECs to enter into such agreements and provide facilities and services necessary for connection, at prices subject to regulation. The specific price, terms and conditions of each agreement, however, depend on the outcome of negotiations between us and each ILEC. Interconnection agreements are also subject to approval by the state regulatory commissions, which may arbitrate negotiation impasses. We have entered into interconnection agreements with Verizon for New York, New Jersey and portions of Connecticut, and with Frontier for portions of Connecticut, which have been approved by the respective state commissions. We have also entered into interconnection agreements with other ILECs in New York and New Jersey. These agreements, like all interconnection agreements, are for limited terms and upon expiration are subject to renegotiation, potential arbitration and approval under the laws in effect at that time.

        We also face competition for our advertising sales from traditional and non-traditional media outlets, including television and radio stations, traditional print media and the Internet.

We face significant risks as a result of rapid changes in technology, consumer expectations and behavior.

        The broadband communications industry has undergone significant technological development over time and these changes continue to affect our business, financial condition and results of operations. Such changes have had, and will continue to have, a profound impact on consumer expectations and behavior. Our video business faces technological change risks as a result of the continuing development of new and changing methods for delivery of programming content such as Internet-based delivery of movies, shows and other content which can be viewed on televisions, wireless devices and other developing mobile devices. Consumers' video consumption patterns are also evolving, for example, with more content being downloaded for time-shifted consumption. A proliferation of delivery systems for video content can adversely affect our ability to attract and retain customers and the demand for our services and it can also decrease advertising demand on our delivery systems. Our broadband business faces technological challenges from rapidly evolving wireless Internet solutions. Our telephony service offerings face technological developments in the proliferation of telephony delivery systems including those based on Internet and wireless delivery. If we do not develop or acquire and successfully implement new technologies, we will limit our ability to compete effectively for customers, content and

26


Table of Contents

advertising. We cannot provide any assurance that we will realize, in full or in part, the anticipated benefits we expect from the introduction of our home communications hub, Altice One, or that it will be rolled out across our footprint in the timeframe we anticipate. In addition, we may be required to make material capital and other investments to anticipate and to keep up with technological change. These challenges could adversely affect our business, financial condition and results of operations.

        In the fourth quarter of 2017, we entered into a multi-year strategic agreement with Sprint pursuant to which we will utilize Sprint's network to provide mobile voice and data services to our customers throughout the nation, and our broadband network will be utilized to accelerate the densification of Sprint's network. We believe this additional product offering will enable us to deliver greater value and more benefits to our customers, including by offering "quad play" offerings that bundle broadband, pay television, telephony and mobile voice and data services to our customers. Some of our competitors already offer, or have announced plans to offer, their own "quad-play" offerings that bundle broadband, pay television, telephony and mobile voice and data services. If our customers do not view our quad play offers as competitive with those offered by our competitors, we could experience increased customer churn. We cannot provide any assurance that we will realize, in full or in part, the anticipated benefits we expect from the introduction of our mobile voice and data services, or that they will be rolled out in the timeframe we anticipate. In addition, we may be required to make material capital and other investments to anticipate and to keep up with technological change. These challenges could adversely affect our business, financial condition and results of operations.

Programming and retransmission costs are increasing and we may not have the ability to pass these increases on to our customers. Disputes with programmers and the inability to retain or obtain popular programming can adversely affect our relationship with customers and lead to customer losses.

        Programming costs are one of our largest categories of expenses. In recent years, the cost of programming in the cable and satellite video industries has increased significantly and is expected to continue to increase, particularly with respect to costs for sports programming and broadcast networks. We may not be able to pass programming cost increases on to our customers due to the increasingly competitive environment. If we are unable to pass these increased programming costs on to our customers, our results of operations would be adversely affected. Moreover, programming costs are related directly to the number of customers to whom the programming is provided. Our smaller customer base relative to our competitors may limit our ability to negotiate lower per-customer programming costs, which could result in reduced operating margins relative to our competitors with a larger customer base.

        The expiration dates of our various programming contracts are staggered, which results in the expiration of a portion of our programming contracts throughout each year. We attempt to control our programming costs and, therefore, the cost of our video services to our customers, by negotiating favorable terms for the renewal of our affiliation agreements with programmers. On certain occasions in the past, such negotiations have led to disputes with programmers that have resulted in temporary periods during which we did not carry or decided to stop carrying a particular broadcast network or programming service or services. For example, in 2017, we were unable to reach agreement with Starz on acceptable economic terms, and effective January 1, 2018, all Starz services were removed from our lineups in our Optimum and Suddenlink segments, and we launched alternative networks offered by other programmers under new long-term contracts. On February 13, 2018, we and Starz reached a new carriage agreement and we started restoring the Starz services previously offered by Optimum and Suddenlink. Also, in our Suddenlink segment, we were unable to reach agreement with Viacom on acceptable economic terms for a long-term contract renewal and, effective October 1, 2014, all Viacom networks were removed from our channel lineups in our Suddenlink footprint. We and Viacom did not reach a new agreement to include certain Viacom networks in the Suddenlink channel lineup until May 2017. To the extent we are unable to reach agreement with certain programmers on terms we believe

27


Table of Contents

are reasonable, we may be forced to, or determine for strategic or business reasons to, remove certain programming channels from our line-up and may decide to replace such programming channels with other programming channels, which may not be available on acceptable terms or be as attractive to customers. Such disputes, or the removal or replacement of programming, may inconvenience some of our customers and can lead to customer dissatisfaction and, in certain cases, the loss of customers, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. There can be no assurance that our existing programming contracts will be renewed on favorable or comparable terms, or at all, or that the rights we negotiate will be adequate for us to execute our business strategy.

        We may also be subject to increasing financial and other demands by broadcast stations. Federal law allows commercial television broadcast stations to make an election between "must-carry" rights and an alternative "retransmission consent" regime. Local stations that elect "must-carry" are entitled to mandatory carriage on our systems, but at no fee. When a station opts for retransmission consent, cable operators negotiate for the right to carry the station's signal, which typically requires payment of a per-customer fee. Our retransmission agreements with stations expire from time to time. Upon expiration of these agreements, we may carry some stations under short-term arrangements while we attempt to negotiate new long-term retransmission agreements. In connection with any negotiation of new retransmission agreements, we may become subject to increased or additional costs, which we may not be able to pass on to our customers. To the extent that we cannot pass on such increased or additional costs to customers or offset such increased or additional costs through the sale of additional services, our business, financial condition, results of operations and liquidity could be materially adversely affected. In addition, in the event contract negotiations with stations are unsuccessful, we could be required, or determine for strategic or business reasons, to cease carrying such stations' signals, possibly for an indefinite period. Any loss of stations could make our video service less attractive to our customers, which could result in a loss of customers, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. There can be no assurance that any expiring retransmission agreements will be renewed on favorable or comparable terms, or at all.

We may not be able to successfully implement our growth strategy.

        Our future growth, profitability and results of operations depend upon our ability to successfully implement our business strategy, which, in turn, is dependent upon a number of factors, including our ability to continue to:

        There can be no assurance that we can successfully achieve any or all of the above initiatives in the manner or time period that we expect. Furthermore, achieving these objectives will require investments which may result in short-term costs without generating any current revenues and therefore may be dilutive to our earnings. We cannot provide any assurance that we will realize, in full or in part, the anticipated benefits we expect our strategy will achieve. The failure to realize those benefits could have a material adverse effect on our business, financial condition and results of operations. In addition, if we are unable to continue improving our operational performance and customer experience

28


Table of Contents

we may face a decrease in new customers and an increase in customer churn, which could have a material adverse effect on our business, financial condition and results of operations. In particular, there can be no assurance that we will be able to successfully implement our plan to build a FTTH network within the anticipated timeline or at all or within the cost parameters we currently expect. Similarly, we may not be successful in deploying Altice One or the mobile voice and data services we intend to offer under our agreement with Sprint on our current timeline or realize, in full or in part, the anticipated benefits we expect from the introduction thereof, and we may face technological or other challenges in pursuing these or other initiatives.

The financial markets are subject to volatility and disruptions, which have in the past, and may in the future, adversely affect our business, including by affecting the cost of new capital and our ability to fund acquisitions or other strategic transactions.

        The capital markets experience volatility and disruption. At times, the markets have exerted extreme downward pressure on stock prices and upward pressure on the cost of new debt, which has severely restricted credit availability for many companies.

        Historical market disruptions have typically been accompanied by a broader economic downturn, which has historically led to lower demand for our products, such as video services, as well as lower levels of television advertising, and increased incidence of customers' inability to pay for the services we provide. A recurrence of these conditions may further adversely impact our business, financial condition and results of operations.

        We rely on the capital markets, particularly for offerings of debt securities and borrowings under syndicated facilities, to meet our financial commitments and liquidity needs if we are unable to generate sufficient cash from operations to fund such anticipated commitments and needs and to fund acquisitions or other strategic transactions. Disruptions or volatility in the capital markets could also adversely affect our ability to refinance on satisfactory terms, or at all, our scheduled debt maturities and could adversely affect our ability to draw on our revolving credit facilities.

        Disruptions in the capital markets as well as the broader global financial market can also result in higher interest rates on publicly issued debt securities and increased costs under credit facilities. Such disruptions could increase our interest expense, adversely affecting our business, financial position and results of operations.

        Our access to funds under our revolving credit facilities is dependent on the ability of the financial institutions that are parties to those facilities to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our revolving credit facilities are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others.

        Longer term, volatility and disruptions in the capital markets and the broader global financial market as a result of uncertainty, changing or increased regulation of financial institutions, reduced alternatives or failures of significant financial institutions could adversely affect our access to the liquidity needed for our businesses. Such disruptions could require us to take measures to conserve cash or impede or delay potential acquisitions, strategic transactions and refinancing transactions until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged.

29


Table of Contents

We are highly leveraged and have substantial indebtedness, which reduces our capability to withstand adverse developments or business conditions.

        Our subsidiaries have incurred substantial amounts of indebtedness to finance the Acquisitions, our operations, upgrades to our cable plant and acquisitions of other cable systems, sources of programming and other businesses. We have also incurred substantial indebtedness in order to offer new or upgraded services to our current and potential customers. At March 31, 2018, the carrying value of our total aggregate indebtedness, including collateralized indebtedness, was approximately $23.0 billion ($16.4 billion at our Cablevision segment and $6.6 billion at our Cequel segment). Because we are highly leveraged, our payments on our indebtedness are significant in relation to our revenues and cash flow, which exposes us to significant risk in the event of downturns in our businesses (whether through competitive pressures or otherwise), our industry or the economy generally, since our cash flows would decrease, but our required payments under our indebtedness would not.

        Economic downturns may impact our ability to comply with the covenants and restrictions in our indentures, credit facilities and agreements governing our other indebtedness and may impact our ability to pay or refinance our indebtedness as it comes due. If we do not repay or refinance our debt obligations when they become due and do not otherwise comply with the covenants and restrictions in our indentures, credit facilities and agreements governing our other indebtedness, we would be in default under those agreements and the underlying debt could be declared immediately due and payable. In addition, any default under any of our indentures, credit facilities or agreements governing our other indebtedness could lead to an acceleration of debt under any other debt instruments or agreements that contain cross-acceleration or cross-default provisions. If the indebtedness incurred under our indentures, credit facilities and agreements governing our other indebtedness were accelerated, we would not have sufficient cash to repay amounts due thereunder. To avoid a default, we could be required to defer capital expenditures, sell assets, seek strategic investments from third parties or otherwise reduce or eliminate discretionary uses of cash. However, if such measures were to become necessary, there can be no assurance that we would be able to sell sufficient assets or raise strategic investment capital sufficient to meet our scheduled debt maturities as they come due. In addition, any significant reduction in necessary capital expenditures could adversely affect our ability to retain our existing customer base and obtain new customers, which would adversely affect our business, financial position and results of operations.

        Our overall leverage and the terms of our financing arrangements could also:

30


Table of Contents

        In addition, a substantial portion of our indebtedness bears interest at variable rates. If market interest rates increase, our variable-rate debt will have higher debt service requirements, which could adversely affect our cash flows and financial condition. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk." We have historically entered into, and may in the future enter into, hedging arrangements to limit our exposure to an increase in interest rates. Additionally, we have entered into two fixed to floating interest rate swap agreements. If there is an increase in interest rates, our obligations under these swap agreements may increase. Although we have entered, and may in the future continue to enter, into hedging arrangements, no amount of hedging activity can fully insulate us from the risks associated with changes in interest rates.

If we incur additional indebtedness, such indebtedness could further exacerbate the risks associated with our substantial indebtedness.

        If we incur additional indebtedness, such indebtedness will be added to our current debt levels and the related risks we currently face could be magnified. Any decrease in our revenues or an increase in operating costs (and corresponding reduction in our cash flows) would also adversely affect our ability to pay our indebtedness as it comes due.

We have in past periods incurred substantial losses from continuing operations, and we may do so in the future, which may reduce our ability to raise needed capital.

        We have in the past incurred substantial losses from continuing operations and we may do so in the future. Significant losses from continuing operations could limit our ability to raise any needed financing, or to do so on favorable terms, as such losses could be taken into account by potential investors, lenders and the organizations that issue investment ratings on our indebtedness.

A lowering or withdrawal of the ratings assigned to our subsidiaries' debt securities and credit facilities by ratings agencies may further increase our future borrowing costs and reduce our access to capital.

        Credit rating agencies continually revise their ratings for companies they follow. The condition of the financial and credit markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future. In addition, developments in our business and operations or the amount of indebtedness could lead to a ratings downgrade on our or our subsidiaries' indebtedness. The debt ratings for our subsidiaries' debt securities and credit facilities are currently below the "investment grade" category, which results in higher borrowing costs as well as a reduced pool of potential investors of that debt as some investors will not purchase debt securities or become lenders under credit facilities that are not rated in an investment grade rating category. In addition, there can be no assurance that any rating assigned will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency, if in that rating agency's judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Any such fluctuation in the rating of us or our subsidiaries may impact our ability to access debt markets in the future or increase our cost of future debt which could have a material adverse effect on our business, financial condition and results of operations, which in return may adversely affect the market price of shares of our Class A common stock or Class B common stock.

31


Table of Contents

Our subsidiaries' ability to meet obligations under their indebtedness may be restricted by limitations on our other subsidiaries' ability to send funds.

        Our subsidiaries that have incurred indebtedness under indentures and credit facilities are primarily holding companies whose ability to pay interest and principal on such indebtedness is wholly or partially dependent upon the operations of their respective subsidiaries and the distributions or other payments of cash, in the form of distributions, loans or advances, those other subsidiaries deliver to our indebted subsidiaries. Our subsidiaries are separate and distinct legal entities and, unless any such subsidiaries has guaranteed the underlying indebtedness, have no obligation, contingent or otherwise, to pay any amounts due on our indebted subsidiaries' indebtedness or to make any funds available to our indebted subsidiaries to do so. These subsidiaries may not generate enough cash to make such funds available to our indebted subsidiaries and in certain circumstances legal and contractual restrictions may also limit their ability to do so. Also, our subsidiaries' creditors, including trade creditors, in the event of a liquidation or reorganization of any subsidiary, would be entitled to a claim on the assets of such subsidiaries, including any assets transferred to those subsidiaries, prior to any of our claims as a stockholder and those creditors are likely to be paid in full before any distribution is made to us. To the extent that we are a creditor of a subsidiary, our claims could be subordinated to any security interest in the assets of that subsidiary and/or any indebtedness of that subsidiary senior to that held by us.

        In addition, our Optimum and Suddenlink businesses are each currently financed on a standalone basis and constitute separate financing groups, which are subject to covenants that restrict the use of their respective cash flows outside their respective restricted groups. Consequently, cash flows from operations of Optimum and its subsidiaries may not be able to be applied to meet the obligations or other expenses of Suddenlink and its subsidiaries and cash flows from operations of Suddenlink may not be able to be applied to meet the obligations or other expenses of Optimum and its subsidiaries, except to the extent that the relevant restricted group is able to pay a dividend under the agreements governing their respective indebtedness.

Our ability to incur additional indebtedness and use our funds is limited by significant restrictive covenants in financing agreements.

        The indentures, credit facilities and agreements governing the indebtedness of our subsidiaries contain various negative covenants that restrict our subsidiaries' (and their respective subsidiaries') ability to, among other things:

32


Table of Contents

        We are also subject to certain affirmative covenants under our subsidiaries' revolving credit facilities, which, among other things, require the relevant Cablevision and Cequel subsidiaries to each maintain a specified financial ratio if there are any outstanding utilizations. Our ability to meet these financial ratios may be affected by events beyond our control and, as a result, there can be no assurance that we will be able to meet these ratios.

        Violation of these covenants could result in a default that would permit the relevant creditors to require the immediate repayment of the borrowings thereunder, which could result in a default under other debt instruments and agreements that contain cross-default provisions and, in the case of revolving credit facilities, permit the relevant lenders to restrict the relevant borrower's ability to borrow undrawn funds under such revolving credit facilities. A default under any of the agreements governing our indebtedness could materially adversely affect our growth, financial condition and results of operations.

        As a result, we may be:

        These restrictions could have a material adverse effect on our ability to grow in accordance with our strategy and on the value of our debt and equity securities. In addition, our financial results, substantial indebtedness and credit ratings could materially adversely affect the availability and terms of our financing.

We will need to raise significant amounts of funding over the next several years to fund capital expenditures, repay existing obligations and meet other obligations and the failure to do so successfully could adversely affect our business. We may also engage in extraordinary transactions that involve the incurrence of large amounts of indebtedness.

        Our business is capital intensive. Operating and maintaining our cable systems requires significant amounts of cash payments to third parties. Capital expenditures were $257.6 million and $257.4 for the three months ended March 31, 2018 and 2017 and $951.3 million and $625.5 million for the years ended 2017 and 2016 and primarily included payments for customer premise equipment, network infrastructure, support and other costs. Capital expenditures were $166,801 and $184,399 for the three months ended March 31, 2018 and 2017 and $711.4 million and $298.4 million in 2017 and for the period from the date of the Cablevision Acquisition through December 31, 2016, respectively, for our Cablevision segment and $90,814 and $73,028 for the three months ended March 31, 2018 and 2017 and $279.9 million and $327.2 million in 2017 and 2016, respectively, for our Cequel segment.

        We have commenced a plan to build a FTTH network, which will enable us to deliver more than 10 Gbps broadband speeds across our entire Optimum footprint and part of our Suddenlink footprint. We also introduced Altice One during the fourth quarter of 2017, which is our most advanced home communications hub, and have begun rolling it out across our Optimum footprint. Also in the fourth quarter of 2017, we entered into a multi-year strategic agreement pursuant to which we will utilize Sprint's network to provide mobile voice and data services to our customers throughout the nation, and our broadband network will be utilized to accelerate the densification of Sprint's network. We may not be able to execute these initiatives within the anticipated timelines and we may incur greater than anticipated costs and capital expenditures, fail to realize anticipated benefits, experience business disruptions or encounter other challenges to executing either as planned. The failure to realize the anticipated benefits of these initiatives could have a material adverse effect on our business, financial condition and results of operations.

33


Table of Contents

        We expect these capital expenditures to continue to be significant as we further enhance our service offerings. We may have substantial future capital commitments in the form of long-term contracts that require substantial payments over a period of time. In the longer term, our ability to fund our operations, make planned capital expenditures, make scheduled payments on our indebtedness and repay our indebtedness depends on our future operating performance and cash flows and our ability to access the capital markets, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control. Competition, market disruptions or deterioration in economic conditions could lead to lower demand for our products, as well as lower levels of advertising, and increased incidence of customers' inability to pay for the services we provide. These events would adversely impact our results of operations, cash flows and financial position. As such, we may not be able to generate sufficient cash from our operations to fund anticipated capital expenditures, meet all existing future contractual payment obligations and repay our indebtedness at maturity.

        As a result, we could be dependent upon our continued access to the capital and credit markets to issue additional debt or equity or refinance existing debt obligations. We intend to raise significant amounts of funding over the next several years to fund capital expenditures, repay existing obligations and meet other obligations. If we are unable to do so, we will need to take other actions including:

        However, we may not be able to refinance existing obligations or raise any required additional capital or to do so on favorable terms. Borrowing costs related to future capital raising activities may be significantly higher than our current borrowing costs and we may not be able to raise additional capital on favorable terms, or at all, if financial markets experience volatility. If we are unable to pursue our spending programs, we may be forced to cancel or scale back those programs. Our choice of which spending programs to cancel or reduce may be limited. Failure to successfully pursue our capital expenditure and other spending plans could materially and adversely affect our ability to compete effectively. It is possible that in the future we may also engage in extraordinary transactions and such transactions could result in the incurrence of substantial additional indebtedness.

We rely on network and information systems for our operations and a disruption or failure of, or defects in, those systems may disrupt our operations, damage our reputation with customers and adversely affect our results of operations.

        Network and information systems are essential to our ability to deliver our services to our customers. While we have in place multiple security systems designed to protect against intentional or unintentional disruption, failure, misappropriation or corruption of our network and information systems, there can be no assurance that our efforts to protect our network and information systems will prevent any of the problems identified above. A problem of this type might be caused by events such as computer hacking, computer viruses, worms and other destructive or disruptive software, "cyber-attacks" and other malicious activity, defects in the hardware and software comprising our network and information systems, as well as natural disasters, power outages, terrorist attacks and similar events. Such events could have an adverse impact on us and our customers, including degradation of service, service disruption, excessive call volume to call centers and damage to our plant, equipment and data. Operational or business delays may result from the disruption of network or information systems and

34


Table of Contents

the subsequent remediation activities. Moreover, these events may create negative publicity resulting in reputation or brand damage with customers and our results of operations could suffer.

        We also use certain vendors to supply some of the hardware, software and support of our network, some of which have been customized or altered to fit our business needs. Certain of these vendors and suppliers may have leverage over us considering that there are limited suppliers of certain products and services, or that there is a long lead time and/or significant expense required to transition to another provider. In addition, some of these vendors and suppliers do not have a long operating history or may not be able to continue to supply the equipment and services we desire. Some of our hardware, software and operational support vendors and some of our service providers represent our sole source of supply or have, either through contract or as a result of intellectual property rights, a position of some exclusivity. In addition, because of the pace at which technological innovations occur in our industry, we may not be able to obtain access to the latest technology on reasonable terms. Any delays or the termination or disruption in these relationships as a result of contractual disagreements, operational or financial failures on the part of our vendors and suppliers, or other adverse events that prevent such vendors and suppliers from providing the equipment or services we need, with the level of quality we require, in a timely manner and at reasonable prices, could result in significant costs to us and have a negative effect on our ability to provide services and rollout advanced services. Our ability to replace such vendors and suppliers may be limited and, as a result, our business, financial condition, results of operations and liquidity could be materially adversely affected.

If we experience a significant data security breach or fail to detect and appropriately respond to a significant data security breach, our results of operations and reputation could suffer.

        The nature of our business involves the receipt and storage of information about our customers and employees. We have procedures in place to detect and respond to data security incidents. However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures. In addition, hardware, software or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. Unauthorized parties may also attempt to gain access to our systems or facilities and to our proprietary business information. If our efforts to protect the security of information about our customers and employees are unsuccessful, a significant data security breach may result in costly government enforcement actions, private litigation and negative publicity resulting in reputation or brand damage with customers, and our financial condition and results of operations could suffer.

A portion of our workforce is represented by labor unions. Collective bargaining agreements can increase our expenses. Labor disruptions could adversely affect our business, financial condition and results of operations.

        As of December 31, 2017, 208 Cablevision full-time employees were covered by collective bargaining agreements (primarily technicians in Brooklyn, New York) with the Communication Workers of America ("CWA"). Cablevision and the CWA entered into a collective bargaining agreement in 2015. This agreement was renewed in June 2016 for an additional three-year term. On March 10, 2017, the International Brotherhood of Electrical Workers ("IBEW") was certified to represent 100 employees in Oakland, New Jersey. We are currently negotiating a collective bargaining agreement with the IBEW relating to these employees and there can be no assurance that we will be able to reach an agreement on terms acceptable to us. The collective bargaining agreements with the CWA and IBEW covering these groups of employees or any other agreements with other unions may increase our expenses. In addition, any disruptions to our operations due to labor related problems could have an adverse effect on our business, financial condition and results of operations.

35


Table of Contents

A significant amount of our book value consists of intangible assets that may not generate cash in the event of a voluntary or involuntary sale.

        At March 31, 2018, we reported approximately $35.3 billion of consolidated total assets, of which approximately $25.9 billion were intangible ($18.3 billion at our Cablevision segment and $7.6 billion at our Cequel segment). Intangible assets primarily included franchises from city and county governments to operate cable systems, goodwill, customer relationships and trade names. While we believe the carrying values of our intangible assets are recoverable, we may not receive any cash in the event of a voluntary or involuntary sale of these intangible assets, particularly if we were not continuing as an operating business. We urge our stockholders to read carefully our consolidated financial statements contained herein, which provide more detailed information about these intangible assets.

We may engage in acquisitions and other strategic transactions and the integration of such acquisitions and other strategic transactions could materially adversely affect our business, financial condition and results of operations.

        Our business has grown significantly as a result of acquisitions, including the Acquisitions, which entail numerous risks including:

        We also participate in competitive bidding processes, some of which may involve significant cable systems. If we are the winning bidder in any such process involving significant cable systems or we otherwise engage in acquisitions or other strategic transactions in the future, we may incur additional debt, contingent liabilities and amortization expenses, which could materially adversely affect our business, financial condition and results of operations. We could also issue substantial additional equity which could dilute existing stockholders.

        If our acquisitions, including the Acquisitions and the integration of the Optimum and Suddenlink businesses, do not result in the anticipated operating efficiencies, are not effectively integrated, or result in costs which exceed our expectations, our business, financial condition and results of operations could be materially adversely affected.

36


Table of Contents

Significant unanticipated increases in the use of bandwidth-intensive Internet-based services could increase our costs.

        The rising popularity of bandwidth-intensive Internet-based services poses risks for our broadband services. Examples of such services include peer-to-peer file sharing services, gaming services and the delivery of video via streaming technology and by download. If heavy usage of bandwidth-intensive broadband services grows beyond our current expectations, we may need to incur more expenses than currently anticipated to expand the bandwidth capacity of our systems or our customers could have a suboptimal experience when using our broadband service. In order to continue to provide quality service at attractive prices, we need the continued flexibility to develop and refine business models that respond to changing consumer uses and demands and to manage bandwidth usage efficiently. Our ability to undertake such actions could be restricted by regulatory and legislative efforts to impose so-called "net neutrality" requirements on broadband communication providers like us that provide broadband services. For more information, see "Regulation—Broadband."

Our business depends on intellectual property rights and on not infringing on the intellectual property rights of others.

        We rely on our patents, copyrights, trademarks and trade secrets, as well as licenses and other agreements with our vendors and other parties, to use our technologies, conduct our operations and sell our products and services. Our intellectual property rights may be challenged and invalidated by third parties and may not be strong enough to provide meaningful commercial competitive advantage. Third parties have in the past, and may in the future, assert claims or initiate litigation related to exclusive patent, copyright, trademark and other intellectual property rights to technologies and related standards that are relevant to us. These assertions have increased over time as a result of our growth and the general increase in the pace of patent claims assertions, particularly in the United States. Because of the existence of a large number of patents in the networking field, the secrecy of some pending patents and the rapid rate of issuance of new patents, we believe it is not possible to determine in advance whether a product or any of its components infringes or will infringe on the patent rights of others. Asserted claims and/or initiated litigation can include claims against us or our manufacturers, suppliers or customers, alleging infringement of their proprietary rights with respect to our existing or future products and/or services or components of those products and/or services.

        Regardless of the merit of these claims, they can be time-consuming, result in costly litigation and diversion of technical and management personnel, or require us to modify our business, develop a non-infringing technology, be enjoined from use of certain intellectual property, use alternate technology or enter into license agreements. There can be no assurance that licenses will be available on acceptable terms and conditions, if at all, or that our indemnification by our suppliers will be adequate to cover our costs if a claim were brought directly against us or our customers. Furthermore, because of the potential for high court awards that are not necessarily predictable, it is not unusual to find even arguably unmeritorious claims settled for significant amounts. If any infringement or other intellectual property claim made against us by any third party is successful, if we are required to indemnify a customer with respect to a claim against the customer, or if we fail to modify our business, develop non-infringing technology, use alternate technology or license the proprietary rights on commercially reasonable terms and conditions, our business, financial condition and results of operations could be materially adversely affected.

We may be liable for the material that content providers distribute over our networks.

        The law relating to the liability of private network operators for information carried on, stored or disseminated through their networks is still unsettled. As such, we could be exposed to legal claims relating to content disseminated on our networks. Claims could challenge the accuracy of materials on our network or could involve matters such as defamation, invasion of privacy or copyright infringement.

37


Table of Contents

If we need to take costly measures to reduce our exposure to these risks or are required to defend ourselves against such claims, our business, reputation, financial condition and results of operations could be materially adversely affected.

If we are unable to retain key employees, our ability to manage our business could be adversely affected.

        Our operational results have depended, and our future results will depend, upon the retention and continued performance of our management team. The competitive environment for management talent in the broadband communications industry could adversely impact our ability to retain and hire new key employees for management positions. The loss of the services of key members of management and the inability or delay in hiring new key employees could adversely affect our ability to manage our business and our future operational and financial results.

Impairment of Altice Group's or Mr. Drahi's reputation could adversely affect current and future customers' perception of Altice USA.

        Our ability to attract and retain customers depends, in part, upon the external perceptions of Altice Group's and Mr. Drahi's reputation and the quality of Altice Group's products and its corporate and management integrity. The broadband communications and video services industry is by its nature more prone to reputational risks than other industries. This has been compounded in recent years by the free flow of unverified information on the Internet and, in particular, on social media. Impairment, including any loss of goodwill or reputational advantages, of Altice Group's or Mr. Drahi's reputation in markets in which we do not operate could adversely affect current and future customers' perception of Altice USA. The consummation of the Distribution may not lessen these risks.

Macroeconomic developments may adversely affect our business.

        Our performance is subject to global economic conditions and the related impact on consumer spending levels. Continued uncertainty about global economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit, unemployment, negative financial news, and/or declines in income or asset values, which could have a material negative effect on demand for our products and services. As our business depends on consumer discretionary spending, our results of operations are sensitive to changes in macroeconomic conditions. Our customers may have less money for discretionary purchases as a result of job losses, foreclosures, bankruptcies, increased fuel and energy costs, higher interest rates, higher taxes, reduced access to credit, and lower home values. These and other economic factors could adversely affect demand for our products, which in turn could adversely affect our financial condition and results of operations.

Online piracy of entertainment and media content could result in reduced revenues and increased expenditures which could materially harm our business, financial condition and results of operations.

        Online entertainment and media content piracy is extensive in many parts of the world and is made easier by technological advances. This trend facilitates the creation, transmission and sharing of high quality unauthorized copies of entertainment and media content. The proliferation of unauthorized copies of this content will likely continue, and if it does, could have an adverse effect on our business, financial condition and results of operations because these products could reduce the revenue we receive for our products. Additionally, in order to contain this problem, we may have to implement elaborate and costly security and antipiracy measures, which could result in significant expenses and losses of revenue. There can be no assurance that even the highest levels of security and anti-piracy measures will prevent piracy.

38


Table of Contents

The AMC Networks Distribution could result in significant tax liability.

        We have received private letter rulings from the Internal Revenue Service (the "IRS") to the effect that, among other things, the AMC Networks Distribution (whereby Cablevision distributed to its stockholders all of the outstanding common stock of AMC Networks, a company which consisted principally of national programming networks, including AMC, WE tv, IFC and Sundance Channel, previously owned and operated by Cablevision) and certain related transactions, will qualify for tax-free treatment under the Internal Revenue Code of 1986, as amended (the "Code").

        Although a private letter ruling from the IRS generally is binding on the IRS, if the factual representations or assumptions made in the letter ruling request are untrue or incomplete in any material respect, we will not be able to rely on the ruling. Furthermore, the IRS will not rule on whether a distribution satisfies certain requirements necessary to obtain tax-free treatment under the Code. Rather, the ruling is based upon our representations that these conditions have been satisfied, and any inaccuracy in such representations could invalidate the ruling.

        If the AMC Networks Distribution does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, we would be subject to tax as if we had sold the AMC Networks common stock, as the case may be, in a taxable sale for its fair value. Cablevision stockholders at the time of the distribution would be subject to tax as if they had received a distribution equal to the fair value of AMC Networks common stock that was distributed to them, which generally would be treated as a taxable dividend. It is expected that the amount of any such taxes to Cablevision's stockholders and us would be substantial.

Risk Factors Relating to Regulatory and Legislative Matters

Our business is subject to extensive governmental legislation and regulation, which could adversely affect our business, increase our operational and administrative expenses and limit our revenues.

        Regulation of the cable, telephone, and broadband industries imposes operational and administrative expenses and limits their revenues. The Company operates in all of these industries and is therefore subject to, among other things:

39


Table of Contents

        Many aspects of these regulations are currently the subject of judicial proceedings and administrative or legislative proposals. There are also efforts to amend or expand the federal, state and local regulation of some of our cable systems, which may compound the regulatory risks we already face, and proposals that might make it easier for our employees to unionize. The Permanent Internet Tax Freedom Act prohibits many taxes on Internet access service, but certain states and localities are considering new taxes and fees on our provision of cable, broadband, and telecommunications taxes that could increase operating expenses. Certain states are also considering adopting energy efficiency regulations governing the operation of equipment that we use, which could constrain innovation. Congress periodically considers whether to rewrite the entire Communications Act of 1934, as amended (the "Communications Act") to account for changes in the communications marketplace or to adopt more focused changes. In response to recent data breaches and increasing concerns regarding the protection of consumers' personal information, Congress, states, and regulatory agencies are considering the adoption of new privacy and data security laws and regulations that could result in additional privacy, as well as network and information security, requirements for our business. These new laws, as well as existing legal and regulatory obligations, could require significant expenditures.

        Additionally, there have been statements by federal government officials indicating that some laws and regulations applicable to our industry may be repealed or modified in a way that could be favorable to us and our competitors. There can be no assurance that any such repeal or modification will be beneficial to us or will not be more beneficial to our current and future competitors.

Our cable system franchises are subject to non-renewal or termination. The failure to renew a franchise in one or more key markets could adversely affect our business.

        Our cable systems generally operate pursuant to franchises, permits and similar authorizations issued by a state or local governmental authority controlling the public rights-of-way. Some franchises establish comprehensive facilities and service requirements, as well as specific customer service standards and monetary penalties for non-compliance. In many cases, franchises are terminable if the franchisee fails to comply with significant provisions set forth in the franchise agreement governing system operations. Franchises are generally granted for fixed terms and must be periodically renewed. Franchising authorities may resist granting a renewal if either past performance or the prospective operating proposal is considered inadequate. Franchise authorities often demand concessions or other commitments as a condition to renewal. In some instances, local franchises have not been renewed at expiration, and we have operated and are operating under either temporary operating agreements or without a franchise while negotiating renewal terms with the local franchising authorities.

        As of March 31, 2018, one of our largest franchises, the Town of Hempstead, New York, comprising an aggregate of approximately 85,000 pay television customers, was expired. We are currently lawfully operating in the Town of Hempstead, New York franchise area under temporary authority recognized by the State of New York. Lightpath holds a franchise from New York City that expired on December 20, 2008 and the renewal process is ongoing. We believe New York City is treating the expiration date of this franchise as extended until a formal determination on renewal is made, but there can be no assurance that we will be successful in renewing this franchise on anticipated terms or at all. We expect to renew or continue to operate under all or substantially all of our franchises.

        The traditional cable franchising regime is currently undergoing significant change as a result of various federal and state actions. Some state franchising laws do not allow incumbent operators like us

40


Table of Contents

to immediately opt into favorable statewide franchising as quickly as new entrants, and often require us to retain certain franchise obligations that are more burdensome than those applied to new entrants.

        There can be no assurance that we will be able to comply with all significant provisions of our franchise agreements and certain of our franchisors have from time to time alleged that we have not complied with these agreements. Additionally, although historically we have renewed our franchises without incurring significant costs, there can be no assurance that we will be able to renew, or to renew on terms as favorable, our franchises in the future. A termination of or a sustained failure to renew a franchise in one or more key markets could adversely affect our business in the affected geographic area.

Our cable system franchises are non-exclusive. Accordingly, local and state franchising authorities can grant additional franchises and create competition in market areas where none existed previously, resulting in overbuilds, which could adversely affect our results of operations.

        Cable systems are operated under non-exclusive franchises historically granted by local authorities. More than one cable system may legally be built in the same area, which is referred to as an overbuild. It is possible that a franchising authority might grant a second franchise to another cable operator and that such franchise might contain terms and conditions more favorable than those afforded to us. Although entry into the cable industry involves significant cost barriers and risks, well-financed businesses from outside the cable industry, such as online service providers, or public utilities that already possess fiber optic and other transmission lines in the areas they serve, may over time become competitors. In addition, there are a few cities that have constructed their own cable systems, in a manner similar to city-provided utility services, and private cable companies not affiliated with established local exchange carriers have also demonstrated an interest in constructing overbuilds. We believe that for any potential competitor to be successful, such competitor's overbuild would need to be able to serve the homes and businesses in the overbuilt area with equal or better service quality, on a more cost-effective basis than we can.

        In some cases, local government entities and municipal utilities may legally compete with us without securing a local franchise or on more favorable franchise terms. In recent years, federal legislative and regulatory proposals have sought to facilitate the ability of municipalities to construct and deploy broadband facilities that could compete with our cable systems. In addition, certain telephone companies have sought or are seeking authority to operate in communities without first obtaining a local franchise. As a result, competing operators may build systems in areas in which we hold franchises. The FCC has adopted rules that streamline entry for new competitors (including those affiliated with telephone companies) and reduce franchising burdens for these new entrants. The FCC subsequently extended more modest relief to incumbent cable operators like the Company, but a recent federal court decision curtailed a portion of this relief that relates to the cap on in-kind payments to franchising authorities. At the same time, a substantial number of states have adopted franchising laws designed to streamline entry for new competitors, and they often provide advantages for these new entrants that are not immediately available to existing operators.

        We believe the markets we serve are not significantly overbuilt. However, the FCC and some state regulatory commissions direct certain subsidies to entities deploying broadband to areas deemed to be "unserved" or "underserved." Many other organizations have applied for and received these funds, including broadband services competitors and new entrants into such services. We have generally opposed such subsidies when directed to areas that we serve and have deployed broadband capable networks. Despite those efforts, we could be placed at a competitive disadvantage if recipients use these funds to subsidize services that compete with our broadband services.

41


Table of Contents

Local franchising authorities have the ability to impose additional regulatory constraints on our business, which could reduce our revenues or increase our expenses.

        In addition to the franchise agreement, local franchising authorities in some jurisdictions have adopted cable regulatory ordinances that further regulate the operation of cable systems. This additional regulation increases the cost of operating our business. For example, some local franchising authorities impose minimum customer service standards on our operations. There are no assurances that the local franchising authorities will not impose new and more restrictive requirements.

Further regulation of the cable industry could restrict our marketing options or impair our ability to raise rates to cover our increasing costs.

        The cable industry has operated under a federal rate regulation regime for more than three decades. Currently, rate regulation by franchising authorities is strictly limited to the basic service tier and associated equipment and installation activities. A franchising authority that wishes to regulate basic cable service offered by a particular cable system must certify and demonstrate that the cable system is not subject to "effective competition" as defined by federal law. Our franchise authorities have not certified to exercise this limited rate regulation authority. If any of our local franchising authorities obtain certification to regulate rates, they would have the power to reduce rates and order refunds on the rates charged for basic service and equipment, which could reduce our revenues. The FCC and Congress also continue to be concerned that cable rate increases are exceeding inflation. It is possible that either the FCC or Congress will adopt more extensive rate regulation for our pay television services or regulate our other services, such as broadband and telephony services, which could impede our ability to raise rates, or require rate reductions. To the extent we are unable to raise our rates in response to increasing costs, or are required to reduce our rates, our business, financial condition, results of operations and liquidity will be materially adversely affected. There has been legislative and regulatory interest in requiring cable operators to offer historically bundled programming services on an à la carte basis. It is possible that new marketing restrictions could be adopted in the future. These restrictions could affect how we provide, and limit, customer equipment used in connection with our services and how we provide access to video programming beyond conventional cable delivery.

        There also continues to be interest at the FCC and in Congress in proposals that would allow customers to receive cable service without having to rent a set-top box from their cable operator. These proposals could, if adopted, adversely affect our relationship with our customers and programmers and our operations. It is also possible that regulations will be adopted affecting the negotiations between MVPDs (like us) and programmers. While these regulations might provide us with additional rights and protections in our programming negotiations, they might also limit our flexibility in ways that adversely affect our operations.

We may be materially adversely affected by regulatory changes related to pole attachment costs.

        Pole attachments are cable wires that are attached to utility poles. Cable system pole attachments to utility poles historically have been regulated at the federal or state level, generally resulting in favorable pole attachment rates for attachments used to provide cable service. Any changes in the current pole attachment approach could result in a substantial increase in our pole attachment costs.

42


Table of Contents

Changes in channel carriage regulations could impose significant additional costs on us.

        Cable operators also face significant regulation affecting the carriage of broadcast and other programming channels. We can be required to devote substantial capacity to the carriage of programming that we might not otherwise carry voluntarily, including certain local broadcast signals; local public, educational and governmental access programming; and unaffiliated, commercial leased access programming (channel capacity designated for use by programmers unaffiliated with the cable operator). Regulatory changes in this area could disrupt existing programming commitments, interfere with our preferred use of limited channel capacity and limit our ability to offer services that would maximize our revenue potential. It is possible that other legal restraints will be adopted limiting our discretion over programming decisions.

Increasing regulation of our Internet-based products and services could adversely affect our ability to provide new products and services.

        On February 26, 2015, the FCC adopted a new "net neutrality" or Open Internet order (the "2015 Order") that: (1) reclassified broadband Internet access service as a Title II common carrier service, (2) applied certain existing Title II provisions and associated regulations; (3) forbore from applying a range of other existing Title II provisions and associated regulations, but to varying degrees indicated that this forbearance may be only temporary and (4) issued new rules expanding disclosure requirements and prohibiting blocking, throttling, paid prioritization and unreasonable interference with the ability of end users and edge providers to reach each other. The 2015 Order also subjected broadband providers' Internet traffic exchange rates and practices to potential FCC oversight and created a mechanism for third parties to file complaints regarding these matters. The 2015 Order could limit our ability to efficiently manage our cable systems and respond to operational and competitive challenges. In December 2017, the FCC adopted an order (the "2017 Order") that in large part reverses the 2015 Order. The 2017 Order has not yet gone into effect, however, and the 2015 Order will remain binding until the 2017 Order takes effect. The 2017 Order is expected to be subject to legal challenge that may delay its effect or overturn it. Additionally, Congress and some states are considering legislation that may codify "net neutrality" rules.

Offering telephone services may subject us to additional regulatory burdens, causing us to incur additional costs.

        We offer telephone services over our broadband network and continue to develop and deploy interconnected VoIP services. The FCC has ruled that competitive telephone companies that support VoIP services, such as those that we offer to our customers, are entitled to interconnect with incumbent providers of traditional telecommunications services, which ensures that our VoIP services can operate in the market. However, the scope of these interconnection rights are being reviewed in a current FCC proceeding, which may affect our ability to compete in the provision of telephony services or result in additional costs. It remains unclear precisely to what extent federal and state regulators will subject VoIP services to traditional telephone service regulation. Expanding our offering of these services may require us to obtain certain authorizations, including federal and state licenses. We may not be able to obtain such authorizations in a timely manner, or conditions could be imposed upon such licenses or authorizations that may not be favorable to us. The FCC has already extended certain traditional telecommunications requirements, such as E911 capabilities, Universal Service Fund contribution, Communications Assistance for Law Enforcement Act ("CALEA"), measures to protect Customer Proprietary Network Information, customer privacy, disability access, number porting, battery back-up, network outage reporting, rural call completion reporting and other regulatory requirements to many VoIP providers such as us. If additional telecommunications regulations are applied to our VoIP service, it could cause us to incur additional costs and may otherwise materially adversely impact our operations. In 2011, the FCC released an order significantly changing the rules governing intercarrier

43


Table of Contents

compensation for the origination and termination of telephone traffic between interconnected carriers. These rules have resulted in a substantial decrease in interstate compensation payments over a multi-year period. The FCC is currently considering additional reforms that could further reduce interstate compensation payments. Further, although the FCC recently declined to impose additional regulatory burdens on certain point to point transport ("special access") services provided by cable companies, that FCC decision has been appealed by multiple parties. If those appeals are successfully, there could be additional regulatory burdens and additional costs placed on these services.

We may be materially adversely affected by regulatory, legal and economic changes relating to our physical plant.

        Our systems depend on physical facilities, including transmission equipment and miles of fiber and coaxial cable. Significant portions of those physical facilities occupy public rights-of-way and are subject to local ordinances and governmental regulations. Other portions occupy private property under express or implied easements, and many miles of the cable are attached to utility poles governed by pole attachment agreements. No assurances can be given that we will be able to maintain and use our facilities in their current locations and at their current costs. Changes in governmental regulations or changes in these relationships could have a material adverse effect on our business and our results of operations.

Certain aspects of the Tax Cuts and Jobs Act could have an adverse impact on us or our stockholders.

        On December 20, 2017, the U.S. Congress passed the Tax Cuts and Jobs Act (H.R. 1) and on December 22, 2017, the Tax Cuts and Jobs Act was signed into law. The Tax Cuts and Jobs Act makes significant changes to the U.S. federal income tax rules applicable to both individuals and entities, including corporations. The details of any forthcoming regulations or guidance in connection with the Tax Cuts and Jobs Act are uncertain and could have an adverse impact on our business and financial condition or on our stockholders. Our stockholders should consult with their tax advisors with respect to the potential effects of the Tax Cuts and Jobs Act on their investment in our common stock.

Risk Factors Relating to Ownership of Our Class A Common Stock and Class B Common Stock

Prior to the Distribution, no market exists for our Class B common stock and we cannot assure you that an active, liquid trading market will develop for our Class B common stock following the Distribution. Following the Distribution, holders of shares of our Class B common stock may need to convert them into shares of our Class A common stock to realize their full potential value, which over time could further concentrate voting power with remaining holders of our Class B common stock.

        Prior to the Distribution, our Class B common stock is held by Altice N.V. and is not listed on the NYSE or any other exchange. At the time of the Distribution, our Class B common stock will not be listed on the NYSE or any other stock exchange and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange. There is currently no trading market for the Class B common stock and we cannot assure you that an active trading market will develop or be sustained following the Distribution. If an active market is not developed or sustained, the market price and liquidity of the Class B common stock may be adversely affected. Because the Class B common stock is unlisted, holders of shares of Class B common stock may need to convert them into shares of our Class A common stock, which is listed on the NYSE, in order to realize their full potential value. Sellers of a significant amount of shares of Class B common stock may be more likely to convert them into shares of Class A common stock and sell them on the NYSE. This could over time reduce the number of shares of Class B common stock outstanding and potentially further concentrate voting power with remaining holders of Class B common stock.

44


Table of Contents

Our stockholders' percentage ownership in us may be diluted by future issuances of capital stock, which could reduce their influence over matters on which stockholders vote.

        Pursuant to our third amended and restated certificate of incorporation, our Board will have the authority, without action or vote of our stockholders, to issue all or any part of our authorized but unissued shares of Class A common stock, including shares issuable upon the exercise of options, Class B common stock, Class C common stock or shares of our authorized but unissued preferred stock. We may issue such capital stock to meet a number of our business needs, including funding any potential acquisitions or other strategic transactions. Future issuances of Class A common stock, Class B common stock or voting preferred stock could reduce our stockholders' influence over matters on which our stockholders vote and, in the case of issuances of preferred stock, would likely result in their interest in us being subject to the prior rights of holders of that preferred stock.

The market price of our Class A common stock or Class B common stock may be volatile after the Distribution.

        Securities markets often experience significant price and volume fluctuations. Even if an active trading market develops for our Class B common stock after the Distribution, the market price of our Class B common stock may be highly volatile and could be subject to wide fluctuations. The market price of our Class A common stock may also be highly volatile after the Distribution, and the market prices of our Class A common stock and Class B common stock will be influenced by many factors, some of which are beyond our control, including those described above in "—Risk Factors Relating to Our Business" and include, but are not limited to, the following:

45


Table of Contents

        Following the Distribution, the market price for shares of our Class A common stock may be affected by factors different from those affecting the market price for shares of our Class B common stock. As a result of the above and other factors, holders of our Class A common stock or Class B common stock may not be able to resell their shares at or above the value at the time of the Distribution or may not be able to resell them at all. These broad market and industry factors may materially reduce the market price of our Class A common stock or Class B common stock, regardless of our operating performance. In addition, price volatility may be greater if the public float and trading volume of our Class A common stock and Class B common stock is low.

Because we have no current plans to pay cash dividends on our Class A common stock or Class B common stock following the Pre-Distribution Dividend and for the foreseeable future, our stockholders may not receive any return on investment unless they sell their Class A common stock or Class B common stock.

        As a condition to the Distribution, pursuant to authority delegated by our Board, our Audit Committee declared a one-time $1.5 billion dividend to Altice USA stockholders as of a record date of May 22, 2018 payable two business days prior to the Distribution, provided that the Master Separation Agreement has not been terminated on or prior to the payment date. Holders of Altice N.V. shares that are entitled to receive shares of Altice USA common stock in the Distribution are not entitled to receive any portion of the Pre-Distribution Dividend. Other than this dividend, we intend to retain future earnings, if any, for future operations, expansion and debt repayment and have no other current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of Class A common stock and shares of Class B common stock will be at the sole discretion of our Board. Our Board may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us and such other factors as our Board may deem relevant. In addition, our ability to pay dividends is limited by covenants contained in the agreements governing our existing indebtedness and may be limited by covenants contained in any future indebtedness we or our subsidiaries incur. As a result, our stockholders may not receive any return on an investment in our Class A common stock or Class B common stock unless our stockholders sell our Class A common stock or Class B common stock. For more information, see "Dividend Policy."

Future sales, or the perception of future sales, by us or our existing stockholders in the public market following the Distribution could cause the market price for our Class A common stock or Class B common stock to decline.

        After the Distribution, the sale of substantial amounts of shares of our Class A common stock or Class B common stock, or the perception that such sales could occur, could cause the prevailing market price of shares of our Class A common stock or Class B common stock to decline. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

        As of the date of this prospectus, we have a total of 246,982,292 shares of Class A common stock outstanding and 490,086,674 shares of Class B common stock outstanding. All of the shares of Class A common stock and Class B common stock distributed in the Distribution will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the "Securities Act"), except for shares received by individuals who are our affiliates.

46


Table of Contents

        Any shares held by our affiliates, as that term is defined under Rule 144 of the Securities Act ("Rule 144"), including Next Alt and its affiliates, may be sold only in compliance with the limitations described in "Shares Eligible for Future Sale."

        The remaining shares will be "restricted securities" within the meaning of Rule 144 and subject to certain restrictions on resale following the Distribution. Restricted securities may be sold in the public market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration such as Rule 144, as described in "Shares Eligible for Future Sale."

        In addition, pursuant to a stockholders and registration rights agreement, our existing owners have the right, subject to certain conditions, to require us to register the sale of their shares of our Class A common stock, or shares of Class A common stock issuable on conversion of shares of Class B common stock under the Securities Act. By exercising their registration rights and selling a large number of shares, our existing owners could cause the prevailing market price of our Class A common stock to decline. In connection with the Distribution, we will amend and restate our stockholders and registration rights agreement with Altice N.V., funds advised by BC Partners LLP ("BCP") and entities affiliated with the Canada Pension Plan Investment Board ("CPPIB" and together with BCP, the "Sponsors") to include Next Alt as a party. We do not expect there will be any other material changes made to this agreement in connection with the Distribution. See "Certain Relationships and Related-Party Transactions." Following completion of the Distribution and based on Next Alt's intended election in the Distribution, the shares covered by registration rights would represent approximately          % of our outstanding capital. Registration of any of these outstanding shares of capital stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement, except for shares received by individuals who are our affiliates. See "Shares Eligible for Future Sale."

        As restrictions on resale end or if these stockholders exercise their registration rights, the market price of our Class A common stock or Class B common stock could drop significantly if the holders of Class A common stock or Class B common stock sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our Class A common stock or Class B common stock or other securities. In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our Class A common stock, Class B common stock or Class C common stock issued in connection with an investment or acquisition could constitute a material portion of the then-outstanding shares of our Class A common stock and Class B common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.

The tri-class structure of Altice USA common stock will have the effect of concentrating voting control with Next Alt. This will limit or preclude our stockholders' ability to influence corporate matters, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction requiring stockholder approval. Shares of Class B common stock will not automatically convert to shares of Class A common stock upon transfer to a third party.

        Each share of Class B common stock is entitled to twenty-five votes per share and each share of Class A common stock is entitled to one vote per share. If we issue any shares of Class C common stock, they will be non-voting.

        Because of the twenty-five to one voting ratio between our Class B common stock and Class A common stock, a majority of the combined voting power of our capital stock will be controlled by Altice N.V. prior to the Distribution and owned or controlled (through the Concert Group voting agreements and the Holding LP voting agreement) by Mr. Drahi following the Distribution. This will

47


Table of Contents

allow Altice N.V. and Next Alt to control all matters submitted to our stockholders for approval until the Distribution, in the case of Altice N.V., and until such date as Next Alt ceases to own, or to have the right to vote, shares of our capital stock representing a majority of the outstanding votes. This concentrated control will limit or preclude our stockholders' ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction requiring stockholder approval. The disparate voting rights of Altice USA common stock may also prevent or discourage unsolicited acquisition proposals or offers for our capital stock that our stockholders may feel are in their best interest as one of our stockholders. For additional information, see "Description of Capital Stock."

        Shares of our Class B common stock are convertible into shares of our Class A common stock at the option of the holder at any time. Our third amended and restated certificate of incorporation does not provide for the automatic conversion of shares of Class B common stock upon transfer under any circumstances. The holders of Class B common stock thus will be free to transfer them without converting them into shares of Class A common stock.

Mr. Drahi will control us after the Distribution and its interests may conflict with ours or our stockholders in the future.

        The aggregate voting power of Mr. Drahi following the Distribution will depend on the number of shares of Class B common stock distributed in the Distribution. If the number of shares of Class B common stock distributed to Altice N.V. shareholders including Next Alt and the Concert Group is maximized up to the Class B Cap, Mr. Drahi will own or control (through entities controlled directly or indirectly by Mr. Drahi or his family (including Next Alt, Uppernext and A4 S.A.) and the Concert Group voting agreements and the Holding LP voting agreement) a combined          % of our issued and outstanding Class A and Class B common stock which will represent approximately          % of the voting power of our outstanding capital stock. If no shares of Class B common stock are distributed to Altice N.V. shareholders other than Next Alt and the Concert Group, Mr. Drahi will own or control (through entities controlled directly or indirectly by Mr. Drahi or his family (including Next Alt, Uppernext and A4 S.A.) and the Concert Group voting agreements and the Holding LP voting agreement) a combined          % of our issued and outstanding Class A and Class B common stock which will represent approximately          % of the voting power of our outstanding capital stock. So long as Next Alt continues to control a majority of the voting power of our capital stock, Next Alt and, through his control of Next Alt, Mr. Drahi, will be able to significantly influence the composition of our Board of Directors and thereby influence our policies and operations, including the appointment of management, future issuances of Altice USA common stock or other securities, the payment of dividends, if any, on Altice USA common stock, the incurrence or modification of debt by us, amendments to our third amended and restated certificate of incorporation and second amended and restated bylaws and the entering into extraordinary transactions, and their interests may not in all cases be aligned with our stockholders' interests. In addition, Next Alt may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment or improve its financial condition, even though such transactions might involve risks to our stockholders. For example, Next Alt could cause us to make acquisitions that increase our indebtedness or cause us to sell revenue-generating assets.

        In addition, Next Alt will be able to determine the outcome of all matters requiring stockholder approval and will be able to cause or prevent a change of control of the Company or a change in the composition of our Board and could preclude any unsolicited acquisition of the Company. The concentration of ownership could deprive our stockholders of an opportunity to receive a premium for their shares of our Class A common stock or Class B common stock as part of a sale of the Company and ultimately might affect the market price of our Class A common stock or Class B common stock.

48


Table of Contents

        If conflicts arise between us and Next Alt, these conflicts could be resolved in a manner that is unfavorable to us and as a result, our business, financial condition and results of operations could be materially adversely affected. See "Certain Relationships and Related-Party Transactions." In addition, if Next Alt ceases to control us, our business, financial condition and results of operations could be adversely affected.

Anti-takeover provisions in our organizational documents could delay or prevent a change of control transaction.

        Certain provisions of our third amended and restated certificate of incorporation and second amended and restated bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.

        These provisions provide for, among other things:

        These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third-party's offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares of our Class A common stock. See "Description of Capital Stock." In addition, so long as Next Alt controls a majority of our combined voting power it will be able to prevent a change of control of the Company.

Holders of a single class of Altice USA common stock may not have any remedies if an action by our directors has an adverse effect on only that class of Altice USA common stock.

        Under Delaware law, the board of directors has a duty to act with due care and in the best interests of all of our stockholders, including the holders of all classes of Altice USA common stock. Principles of Delaware law established in cases involving differing treatment of multiple classes of stock provide that a board of directors owes an equal duty to all common stockholders regardless of class and does not have separate or additional duties to any group of stockholders. As a result, in some circumstances, our Board may be required to make a decision that could be viewed as adverse to the holders of one class of Altice USA common stock. Under the principles of Delaware law and the business judgment rule, holders may not be able to successfully challenge decisions that they believe have a disparate impact upon the holders of one class of our stock if our Board is disinterested and independent with respect to the action taken, is adequately informed with respect to the action taken and acts in good faith and in the honest belief that the board is acting in the best interest of all of our stockholders.

49


Table of Contents

Following the Distribution, we will continue to be a "controlled company" within the meaning of the rules of the NYSE. As a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that would otherwise provide protection to stockholders of other companies.

        After completion of the Distribution, Mr. Drahi will own or control (through entities controlled directly or indirectly by Mr. Drahi or his family (including Next Alt, Uppernext and A4 S.A.) and the Concert Group voting agreements and the Holding LP voting agreement) a majority of the voting power of our capital stock. As a result, we will continue to be a "controlled company" within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain corporate governance requirements, including:

        Consistent with these exemptions, we will continue not to have a majority of independent directors on our Board or a nominating and governance committee. Accordingly, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our Class A common stock or Class B common stock, or if our operating results do not meet their expectations, the market price of our Class A common stock or Class B common stock could decline.

        The trading market for our Class A common stock and Class B common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrades our Class A common stock or Class B common stock, or if our operating results do not meet their expectations, the market price of our Class A common stock or Class B common stock could decline.

We could be subject to securities class action litigation.

        In the past, securities class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in the price of our Class A common stock or Class B common stock, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and results of operations and divert management's attention and resources from our business.

Our second amended and restated bylaws provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other stockholders.

        Our second amended and restated bylaws provides that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state or federal court located in the State of Delaware) is the exclusive forum for: (i) any derivative action or proceeding brought in our name or on our behalf; (ii) any action asserting a breach of fiduciary duty; (iii) any

50


Table of Contents

action asserting a claim against us arising under the General Corporation Law of the State of Delaware ("DGCL"); (iv) any action regarding our third amended and restated certificate of incorporation or our second amended and restated bylaws; or (v) any action asserting a claim against us that is governed by the internal affairs doctrine. Our second amended and restated bylaws permits our Board to approve the selection of an alternative forum. Unless waived, this exclusive forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other stockholders, which may discourage such lawsuits against us and our directors, officers and other stockholders. Alternatively, if a court were to find this provision in our second amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition and results of operations.

51


Table of Contents


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, "forward-looking statements." These "forward-looking statements" appear throughout this prospectus, including in sections entitled "Prospectus Summary," Risk Factors," "Management's Discussion of Analysis of Financial Condition and Results of Operations" and "Business" and relate to matters such as anticipated future growth in revenues, operating income, cash provided by operating activities and other financial measures. Words such as "expects," "anticipates," "believes," "estimates," "may," "will," "should," "could," "seeks," "potential," "continue," "intends," "plans" and similar words and terms used in the discussion of future operating results, future financial performance and future events identify forward-looking statements in this prospectus. All of these forward-looking statements are based on management's current expectations and beliefs about future events. As with any projection or forecast, they are susceptible to uncertainty and changes in circumstances.

        We operate in a highly competitive, consumer and technology driven and rapidly changing business that is affected by government regulation and economic, strategic, technological, political and social conditions. Various factors could adversely affect our operations, business or financial results in the future and cause our actual results to differ materially from those contained in the forward-looking statements, including those factors discussed under "Risk Factors" in this prospectus. In addition, important factors that could cause our actual results to differ materially from those in our forward-looking statements include:

52


Table of Contents

        Additional risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from those expressed or implied in our forward-looking statements may be found under "Risk Factors" contained in this prospectus. These factors and other risk factors disclosed in this prospectus are not necessarily all of the important factors that could cause our actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could cause our actual results to differ materially from those expressed in any of our forward-looking statements.

        Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this prospectus are made only as of the date of this prospectus. Except to the extent required by law, we do not undertake, and specifically decline any obligation, to update any forward-looking statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

        You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. We qualify all forward-looking statements by these cautionary statements.

53


Table of Contents


THE DISTRIBUTION

         The discussion in this prospectus of the Distribution and the principal terms of the Master Separation Agreement is subject to, and qualified by reference to, the Master Separation Agreement, a copy of which is filed as Exhibit 10.25 to the registration statement of which this prospectus forms a part.

Background

        On January 8, 2018, Altice N.V. announced plans for the separation of Altice USA from Altice N.V. Altice N.V. will distribute substantially all of its equity interest in us through a distribution in kind to holders of Altice N.V.'s common shares A and common shares B. Following the Distribution, Altice N.V. will no longer own a controlling equity interest in us, and we will operate independently from Altice N.V. The implementation of the Distribution is expected to be subject to certain conditions precedent being satisfied or waived. See "—Conditions to the Distribution" below.

Reasons For the Distribution

        Altice N.V. believes the proposed separation of Altice N.V. and Altice USA through the Distribution will unlock more of the value of Altice USA and allow Altice N.V. management to effect a turnaround of its French business more expeditiously. In addition, the Distribution and resulting separation of Altice N.V. and Altice USA are expected to help Altice N.V. and Altice USA focus on their core businesses. Altice N.V. believes that the Distribution will enhance management accountability, transparency and focus for both Altice USA's business and Altice N.V.'s remaining businesses. Altice N.V. also believes the Distribution will better enable investors to invest specifically in the geographic regions in which they are interested and allow for better geographic alignment between investors and securities analysts and the companies.

Ownership Structure of Altice USA Before and After the Distribution

        As of May 21, 2018, Altice USA was owned 74.5% by Mr. Drahi on a combined basis; 14.6% by BCP and CPPIB; and 0.7% by Altice USA executive officers and directors.

        The following chart sets out the current ownership and control structure of Altice USA as of May 21, 2018 (due to rounding, the percentages in the chart may exceed 100%):

GRAPHIC


*
Excludes Mr. Drahi, a director nominee to the Altice USA board of directors.

        As of the date of this prospectus, Altice USA has 246,982,292 shares of Class A common stock and 490,086,674 shares of Class B common stock issued and outstanding. 495,366,932 shares in aggregate of our Class A common stock and Class B common stock will be distributed in the Distribution. The Distribution will not increase the number of outstanding shares of Altice USA.

54


Table of Contents

        The actual number of shares of our Class A common stock and our Class B common stock to be distributed in the Distribution will depend upon the election of each Altice N.V. shareholder as of the Record Date regarding the mix of Altice USA common stock to be received in the Distribution and any proration as a result of the Class B Cap.

        As of the date of the prospectus, we had seven holders of record of our Class A common stock and two holders of record of our Class B common stock. The number of beneficial owners of our Class A common stock is substantially greater than the number of record holders, because a large portion of our Class A common stock is held in "street name" by banks and brokers.

Separation Arrangements

        In connection with the Distribution, on May 18, 2018 we entered into the Master Separation Agreement, and we will enter into certain agreements regarding, among other things, the license of the Altice brand and amendments to certain commercial agreements between the Company, on the one hand, and Altice N.V. and its affiliates, on the other hand. See "The Master Separation Agreement" and "Ancillary Agreements."

Conditions to the Distribution

        The implementation of the Distribution is subject to the following conditions precedent being satisfied or waived:

55


Table of Contents

        As of the date of this prospectus, all of the foregoing conditions have been satisfied except: (i) the entry into the post-Distribution stockholders' agreement and the entry into, amendments to or termination of various arrangements between Altice N.V. and Altice USA, (ii) the filing of the third amended and restated certificate of incorporation with the Secretary of State of the State of Delaware following the completion of the 20-day waiting period under Regulation 14C under the Exchange Act, (iii) the absence of any law or governmental order issued by a governmental authority of competent jurisdiction being in effect that enjoins or makes the Separation illegal, and (iv) the payment of the Pre-Distribution Dividend. Holders of Altice N.V. shares that are entitled to receive shares of Altice USA common stock in the Distribution are not entitled to receive any portion of the Pre-Distribution Dividend.

        Altice N.V. shall, in its sole and absolute discretion, determine the Record Date, the Distribution Date and all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition and notwithstanding anything to the contrary set forth in this prospectus, Altice N.V. may at any time and from time to time until the Distribution decide to abandon or modify the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution or modifying or changing the terms of the Distribution if, at any time, the Altice N.V. board of directors determines, in its sole and absolute discretion, that the Distribution is not in the best interests of Altice N.V. or its shareholders or is otherwise not advisable. Entering into, terminating or modifying any agreements between Altice N.V. and Altice USA require prior approval of our audit committee pursuant to our Related-Party Transaction Approval Policy. See "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions."

Manner of Effecting the Distribution

        The Distribution will be structured as a distribution in kind to holders of Altice N.V.'s common shares A and common shares B. The number of shares of Altice USA common stock to be distributed to each Altice N.V. shareholder as of the Record Date will be based on such shareholder's ownership of Altice N.V. common shares. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution. The number of shares of Class B common stock distributed will be subject to the Class B Cap. If the Class B Cap is exceeded, the shares of Class B common stock delivered to Altice N.V. shareholders of record who elect to receive them will be subject to proration, and such shareholders will receive shares of Class A common stock in lieu of the portion of shares of Class B common stock that is cut back.

        If an Altice N.V. shareholder of record does not make an election by the Election Deadline, such shareholder will receive the Default Election. Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution.

        Altice N.V. is ultimately controlled by Mr. Drahi through Next Alt. As of May 22, 2018, Next Alt held          % of the outstanding share capital and voting rights of Altice N.V., representing          % of the economic rights and          % of the voting power in general meetings. Mr. Drahi has informed us that Next Alt will elect to receive 100% of the shares of Altice USA to which it is entitled in the Distribution in the form of Class B common stock and will be subject to proration, in the same manner as other Altice N.V. shareholders, in the event the Class B Cap is exceeded. In addition, the Concert Group members who are Altice USA directors or officers have informed us that they intend to elect to receive 100% of the shares of Altice USA to which such members are entitled in the Distribution in the form of Class B common stock. It is also expected that the other members of the Concert Group intend to elect to receive 100% of the shares of Altice USA to which such members are entitled in the Distribution in the form of Class B common stock. As a result of Next Alt's and the Concert Group's

56


Table of Contents

intended election, the Concert Group voting agreements and the Holding LP voting agreement, Mr. Drahi (through entities controlled directly or indirectly by him or his family (including Next Alt, Uppernext and A4 S.A.)) will control Altice USA immediately after giving effect to the Distribution regardless of the elections made by the other Altice N.V. shareholders. For more information regarding the Concert Group voting agreements, see "Certain Relationships and Related-Party Transactions—Right of First Refusal and Concert Group Voting Agreement" and on the Holding LP voting agreement, see "Ancillary Agreements—Voting Agreement relating to Holding LP."

        After having considered all the possible options and having obtained advice from external financial and legal advisers, the board of Altice N.V. believes this transaction structure to be the most effective and expedient way to implement the Distribution. The Distribution is expected to be completed by the end of the second quarter of 2018.

        The completion of the Distribution is within Altice N.V.'s discretion and remains subject to various conditions, including the conditions set forth above as well as market conditions. See "—Conditions to the Distribution."

        Under Altice N.V.'s articles of association, Altice N.V. is required to submit the distribution in kind as contemplated by the Distribution to a shareholder vote at the AGM. At the AGM, the Altice N.V. shareholders will be asked to approve (i) the distribution in kind and (ii) the board resolution approving the change in identity and character of the business of Altice N.V. resulting from the Distribution.

        The Altice N.V. board of directors conditioned the approval of the Distribution on the receipt of the applicable approvals of our Board with respect to the Pre-Distribution Dividend. Based on our financial profile and liquidity position, we determined that a one-time special dividend to our stockholders would be appropriate. Our Board delegated the approval or disapproval of the Pre-Distribution Dividend to our Audit Committee which is comprised entirely of independent directors, and following such delegation, our Audit Committee approved, among other things, the Pre-Distribution Dividend in connection with the Distribution. No additional approval by our Board or the shareholders of Altice USA is required for the Distribution. In addition, certain other transactions contemplated in connection with the Distribution will require prior approval of our Audit Committee pursuant to our Related-Party Transaction Approval Policy, including the post-Distribution stockholders' agreement and entering into the Master Separation Agreement and certain ancillary agreements relating thereto regarding, among other things, the license of the Altice brand and amendments to certain commercial agreements between the Company, on the one hand, and Altice N.V. and its affiliates, on the other hand. As of the date of this prospectus, the Master Separation Agreement and each of the agreements or transactions described in "Ancillary Agreements" (other than the trademark license agreement) have been approved by our Audit Committee pursuant to the Company's Related-Party Transaction Approval Policy. See "The Master Separation Agreement," "Ancillary Agreements" and "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions.

What Altice N.V. Shareholders Need to do to Receive Shares of Altice USA Common Stock

        Holders of Altice N.V. common shares on the Record Date are not required to pay any cash or deliver any other consideration or give up any Altice N.V. common shares to receive the shares of Altice USA common stock in the Distribution. Pursuant to the terms of the Distribution, each Altice N.V. shareholder will be given the right to elect the percentage of shares of Class A common stock and shares of Class B common stock such shareholder receives in the Distribution until the Election Deadline, subject to the Class B Cap. Altice N.V. shareholders who hold their shares through a broker-dealer or financial institution will need to instruct such broker-dealer or financial institution to

57


Table of Contents

effect the election in accordance with its policies. Delivery of the shares in the Distribution will be made in book-entry form.

        If an Altice N.V. shareholder of record does not make an election by the Election Deadline, such shareholder will receive the Default Election. Based on the final results of the election and any proration, immediately prior to the Distribution, Altice N.V. will convert shares of Class B common stock into the requisite number of shares of Class A common stock for the Distribution.

        Holders of Altice N.V. common shares who sell those shares prior to the Record Date, so that they are not the record holder of such shares on the Record Date, will also be selling the right to receive the shares of Altice USA common stock that would have been distributed to them in the Distribution with respect to the Altice N.V. common shares they sell. Holders of Altice N.V. common shares on the Record Date will be entitled to receive the shares of Altice USA common stock issuable in respect of those shares even if such holders sell those Altice N.V. common shares prior to the Distribution Date.

Treatment of Fractional Shares

        Fractional shares of Altice USA common stock will not be distributed in the Distribution. Fractional shares of Class A common stock and Class B common stock (after conversion into shares of Class A common stock) will be aggregated into whole shares of Class A common stock, which will be sold in the open market at prevailing market prices. The aggregate cash proceeds from such sales, net of any brokerage fees and other costs, will be distributed pro rata to holders who would have otherwise been entitled to receive a fractional share in the Distribution.

Management of Altice USA after the Distribution

        After the Distribution, our executive officers will be the same as our executive officers immediately before the Distribution and will remain in office until their respective successors are duly elected or appointed and qualified in accordance with our third amended and restated certificate of incorporation and our second amended and restated bylaws or as otherwise provided by law.

        For further information regarding our management, see "Management."

Board of Altice USA after the Distribution

        Following the consummation of the Distribution, our Board will consist of nine members, six of whom, including Mr. Drahi, will be designated by Next Alt pursuant to the post-Distribution stockholders' agreement. Mr. Drahi is expected to join the Altice USA board of directors as Chairman and Director and two additional directors are expected to be designated for nomination to the Altice USA board of directors by Next Alt. The current six members of our Board will continue to serve as directors after the Distribution and will remain in office until their respective successors are duly elected or appointed and qualified in accordance with our third amended and restated certificate of incorporation and our second amended and restated bylaws or as otherwise provided by law.

        For further information regarding our Board, see "Management."

Interests of Altice N.V. / Altice USA Directors and Executive Officers in the Distribution

        As of May 22, 2018, Altice N.V.'s executive officers and directors beneficially owned shares of Altice USA common stock representing in the aggregate approximately          % of the outstanding shares of Altice USA common stock. Altice USA's executive officers and directors beneficially owned          % of shares in Altice N.V. and will be entitled to receive Altice USA shares in the Distribution.

        Furthermore the executive officers of Altice N.V. and Altice USA are entitled to indemnification with respect to actions taken by them in connection with the Distribution under the organizational

58


Table of Contents

documents of Altice N.V. and Altice USA and pursuant to the indemnification agreement entered into between Altice N.V. and Altice USA. For more information, see "Ancillary Agreements—Indemnification Agreement."

        See also "Management—Conflicts of Interest."

Transferability of Altice USA Common Stock

        The shares of Altice USA common stock distributed to Altice N.V. shareholders will be freely transferable, except for shares received by individuals who are our affiliates. Individuals who may be considered our affiliates after the Distribution include individuals who control, are controlled by or are under common control with us, as those terms generally are interpreted for federal securities law purposes. These individuals may include some or all of our directors and executive officers. Individuals who are our affiliates will be permitted to sell their shares of Altice USA common stock only pursuant to an effective registration statement under the Securities Act, or an exemption from the registration requirements of the Securities Act, such as those afforded by Section 4(1) of the Securities Act or Rule 144 thereunder.

Conversion of Class B Common Stock

        Each share of Class B common stock is convertible at any time upon written notice to Altice USA at the option of the holder into one share of Class A common stock.

        Our third amended and restated certificate of incorporation provides that we will, no later than ten (10) calendar days after receipt by us of written notice from a holder of our Class B common stock, issue and take action to deliver a certificate or certificates representing the number of shares of our Class A common stock to which a converting holder is entitled (if such shares are certificated) or, if such shares are uncertificated, register such shares in book-entry form. The date of conversion will be the date of such issuance, in the case of certificated shares, or registration, in the case of uncertificated shares. Our third amended and restated certificate of incorporation further provides that we will not be liable for any losses incurred by any person resulting from any delay in effecting any such conversion. Our third amended and restated certificate of incorporation does not provide for the automatic conversion of shares of our Class B common stock upon transfer under any circumstances. As a result, the holders of Class B common stock are free to transfer them without converting them into shares of our Class A common stock. Any shares of Class B common stock that are converted into Class A common stock may not be reissued. The disparate voting rights of the shares of our Class B common stock will not change upon transfer unless first converted into shares of Class A common stock.

        Immediately prior to any conversion of all outstanding shares of Class B common stock into Class A common stock, the holders of majority of the voting power of the Class B common stock at the time of such conversion may, in connection with such conversion, require that each share of Class C common stock shall automatically be converted into one share of Class A common stock on a date fixed by our Board, which date shall be no less than 61 days and no more than 180 days following the conversion of all outstanding shares of Class B common stock.

Listing and Markets for Altice USA Common Stock

        Our Class A common stock trades on the New York Stock Exchange under the symbol "ATUS". Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange. Because the Class B common stock is unlisted, an active trading market may not develop.

59


Table of Contents

        Neither we nor Altice N.V. can assure Altice N.V. shareholders as to the trading price of Altice N.V. common shares or Altice USA common stock after the Distribution, or as to whether the combined trading prices of Altice USA common stock and the Altice N.V. common shares after the Distribution will be less than, equal to or greater than the trading prices of Altice N.V. common shares prior to the Distribution. The trading price of Altice USA common stock may fluctuate significantly following the Distribution.

        See "Risk Factors—Risk Factors Relating to Ownership of Our Class A Common Stock and Class B Common Stock" for more detail.

Transfer Agents, Registrars and Conversion Agent

        The transfer agent and registrar for our Class A common stock and Class B common stock is AST. The conversion agent with respect to any conversions of Class B common stock to Class A common Stock is also AST. The transfer agent and registrar for Altice N.V.'s common shares A and common shares B is ING Bank N.V.

Expenses

        It is expected that we will incur an aggregate of approximately $4,300,000 in expenses in connection with the Distribution. These expenses will be comprised of:

        These expenses will be paid by us from our existing cash balances. These fees and expenses, however, do not include the payment of cash in lieu of the issuance of fractional shares of Altice USA common stock.

Appraisal Rights

        Under Dutch law, Altice N.V.'s shareholders will not have appraisal rights in connection with the Distribution.

Reasons for Furnishing this Prospectus

        This prospectus is being furnished solely to provide information to Altice N.V. shareholders as of the Record Date who will receive shares of Altice USA common stock in the Distribution. We believe that the information contained in this prospectus is accurate as of the date set forth on the cover. Changes to the information contained in this prospectus may occur after that date, and neither we nor Altice N.V. undertakes any obligation to update the information except in the normal course of our respective public disclosure obligations and practices.

60


Table of Contents


MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

        The following is a summary of the material U.S. federal income tax consequences to the shareholders of Altice N.V. associated with the Distribution and their ownership of our Class A and Class B common stock as a result of the Distribution, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Code, Treasury regulations promulgated thereunder ("Treasury Regulations"), administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, and any changes may result in U.S. federal income tax consequences different from those set forth below. We have not sought any ruling from the IRS with respect to the statements made and the conclusions reached in the following summary. The authorities on which this discussion is based are subject to various interpretations and there can be no assurance that the IRS or the courts will agree with such statements and conclusions.

        This summary also does not address the tax considerations arising under the laws of any state, local or non-U.S. jurisdiction or under U.S. federal gift and estate tax laws, except to the limited extent set forth below. This summary is limited to persons who hold our Class A or Class B common stock as a capital asset for U.S. federal income tax purposes (within the meaning of section 1221 of the Code). In addition, because this section is a general summary, it does not address all aspects of taxation that may be relevant to particular stockholders in light of their personal investment or tax circumstances, or to certain types of stockholders that are subject to special treatment under the U.S. federal income tax laws, including, without limitation, brokers or dealers in securities, insurance companies, banks or other financial institutions, hybrid entities, regulated investment companies, real estate investment trusts, tax-exempt organizations or accounts, persons holding Class A or Class B common stock as a part of a hedging, integrated, conversion transaction, straddle or other risk reduction transaction, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, persons subject to the alternative minimum tax or the Medicare tax on net investment income, entities or arrangements treated as partnerships for U.S. federal income tax purposes or investors in such entities, persons who acquired our Class A or Class B common stock through the exercise of employee stock options or otherwise as compensation for services, certain former U.S. citizens or long-term residents, U.S. expatriates, "controlled foreign corporations" or "passive foreign investment companies" within the meaning of the Code, and persons deemed to sell our Class A or Class B common stock under the constructive sale provisions of the Code. If a partnership, including any entity or arrangement treated as a partnership for U.S. federal income tax purposes, holds shares of our Class A or Class B common stock, the U.S. federal income tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Such partners and partnerships should consult their tax advisors regarding the tax consequences of the purchase, ownership or disposition of our Class A or Class B common stock.

         The shareholders of Altice N.V. are urged to consult their tax advisors with respect to the application of the U.S. federal income tax laws to their particular situations, as well as any tax consequences of the ownership of our Class A or Class B common stock arising under the U.S. federal estate or gift tax rules or under the laws of any state, local, non-U.S. or other taxing jurisdiction or under any applicable tax treaty.

U.S. Holder and Non-U.S. Holder Defined

        As used in this discussion, the term "U.S. Holder" means a beneficial owner of Altice N.V. shares that will ultimately acquire, pursuant to the Distribution, shares of our Class A and/or Class B common stock and that is, for U.S. federal income tax purposes:

61


Table of Contents

        As used in this discussion, the term "Non-U.S. Holder" means a beneficial owner of Altice N.V. shares other than a U.S. Holder.

The One-Time Dividend Prior to the Distribution

        As a condition to the Distribution, pursuant to authority delegated by our Board, our Audit Committee declared a one-time $1.5 billion dividend to Altice USA stockholders as of a record date of May 22, 2018 payable two business days prior to the Distribution, provided that the Master Separation Agreement has not been terminated on or prior to the payment date. Holders of Altice N.V. shares that are entitled to receive shares of Altice USA common stock in the Distribution are not entitled to receive any portion of the Pre-Distribution Dividend. The Pre-Distribution Dividend is expected to be funded via a $1.0 billion mix of fixed and floating-rate guaranteed debt at Cablevision plus a $500 million revolving credit facility draw at Cablevision. The Pre-Distribution Dividend will be treated as described below under "—Distributions on Altice USA Common Stock."

        Any amount of the Pre-Distribution Dividend that is treated as a dividend and is received by a U.S. Holder that is a corporation may, depending on the circumstances, constitute an "extraordinary dividend" subject to the provisions of Section 1059 of the Code. Under Section 1059 of the Code, a corporate holder generally must reduce the tax basis of all of the holder's shares (but not below zero) by the "non-taxed portion" of any "extraordinary dividend" and, if the non-taxed portion exceeds the holder's tax basis for the shares, must treat any excess as gain from the sale or exchange of the shares in the year the payment is received. Generally, there is an "extraordinary dividend" on common stock when (1) all dividends received by a corporate shareholder which have ex-dividend dates within a period of 85 consecutive days exceed, in the aggregate, 10% of the shareholder's basis in the stock, or (2) all dividends received by a corporate shareholder which have ex-dividend dates within a period of 365 consecutive days exceed, in the aggregate, 20% of the taxpayer's basis in the stock (in each case, unless the shareholder has held the shares for more than two years before the dividend announcement date). The "non-taxed portion" of the dividend is the amount of the dividend that is not taxable to the shareholder as a result of the "dividends received deduction."

        A U.S. Holder of Altice USA common stock that is a corporation should consult its tax advisors as to the application of Section 1059 of the Code in light of its particular facts and circumstances.

The Distribution

        Each shareholder of Altice N.V. will be treated as receiving a distribution on its Altice N.V. shares in an amount equal to the fair market value of the Altice U.S. shares received by such shareholder and any cash received in lieu of fractional shares.

        For the U.S. Holders of Altice N.V. shares, the Distribution will be taxable as a foreign-source dividend to the extent of the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder. The current earnings and profits of Altice N.V. for the year of the Distribution will include, but are not limited to, any earnings and profits resulting from the portion of the Pre-Distribution Dividend distributed to Altice N.V., as well as from the recognition of gain by Altice N.V. with respect to its Altice U.S. shares pursuant to the Distribution.

        U.S. Holders of Altice N.V. shares that are corporations will not benefit from a dividend-received deduction with respect to the dividend resulting from the Distribution unless such holder owns 10% of

62


Table of Contents

the vote or value of Altice N.V. Non-corporate U.S. Holders of Altice N.V. shares may benefit from the preferential long-term capital gains rate with respect to the dividend resulting from the Distribution to the extent they have held their Altice N.V. shares for at least 61 days during the 121-day period beginning on the date which is 61 days before the ex-dividend date for the Distribution.

        To the extent the fair market value of the Altice U.S. shares distributed to a U.S. Holder of Altice N.V. shares pursuant to the Distribution and any cash received in lieu of fractional shares exceeds the current and accumulated earnings and profits of Altice N.V. allocable to the Altice N.V. shares held by such U.S. Holder, such excess will be treated as a non-taxable return of capital to the extent of the U.S. Holder's basis in the Altice N.V. shares, and as a capital gain thereafter.

        The shareholders of Altice N.V. will have a tax basis in each share of Altice US Class A common stock and Class B common stock received in the Distribution equal to the fair market value of the share at the time of the Distribution, and the holding period for those shares generally would begin on the day after the Distribution. Except to the extent that the distribution resulting from the Distribution is treated as a return of capital as described above, the distribution would generally not affect a U.S. Holder's tax basis in its Altice N.V. shares.

        Altice N.V. believes, and the discussion in this section regarding the tax consequences of the Distribution is based on the determination, that Altice N.V. is not and has not been a passive foreign investment company ("PFIC") for U.S. federal income tax purposes for the taxable year of the Distribution or any prior taxable year. Because the determination of whether a non-U.S. corporation is a PFIC is primarily factual and there is little administrative or judicial authority on which to rely to make a determination, the IRS might not agree that Altice N.V. is not a PFIC. If this determination were incorrect, the tax consequences of the Distribution to U.S. Holders of Altice N.V. shares could be different and could be materially more adverse than described herein.

        U.S. Holders should consult their tax advisors as to the application of the rules discussed above.

        The Non-U.S. Holders of Altice N.V. shares will not be subject to U.S. federal income tax on the Distribution (unless the Distribution is effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or business, and if an applicable income tax treaty requires, is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder in the United States).

Conversion of Our Class B Common Stock into Our Class A Common Stock

        As noted above, our Class B common stock is convertible at any time upon written notice to Altice USA, without cost to our stockholders, into our Class A common stock on a share-for-share basis. It is expected that any such conversion would qualify as a tax-free exchange for U.S. federal income tax purposes, and that the exchanging shareholders would take a tax basis in the shares of Class A common stock equal to their tax basis in the surrendered shares of Class B common stock.

Distributions on Altice USA Common Stock

        We do not anticipate making distributions on Altice USA common stock in the foreseeable future. However, if distributions of cash or property (other than certain pro rata stock distributions) are made on shares of our Class A or Class B common stock, such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first reduce a shareholder's basis in Altice USA common stock (determined separately with respect to each share of Altice USA common stock), but not below zero, and then will be treated as gain from the sale of that share common stock as described below under "—Gain on Disposition of Altice USA Common Stock."

63


Table of Contents

        Any dividend paid on Altice USA common stock to a U.S. Holder will be included in the U.S. Holder's gross income. Dividends paid to a corporate U.S. Holder will generally qualify for the dividends received deduction if the requisite holding period and other requirements are satisfied. Dividends paid to non-corporate U.S. Holders may be subject to tax at the preferential long-term capital gains rate if the requisite holding period and other requirements are satisfied.

        Except as described in the next paragraph and subject to the discussion of FATCA, any dividend paid to a Non-U.S. Holder generally will be subject to U.S. federal withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, the Non-U.S. Holder must provide the applicable withholding agent in a timely manner a properly completed IRS Form W-8BEN or W-8BEN-E, whichever is applicable, or other appropriate version of IRS Form W-8, certifying qualification for the reduced rate. A Non-U.S. Holder of shares of Altice USA common stock eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS in a timely manner. If the Non-U.S. Holder holds the Altice USA common stock through a financial institution or other agent acting on the Non-U.S. Holder's behalf, the Non-U.S. Holder will be required to provide appropriate documentation to the agent, which then will be required to provide certification to the applicable withholding agent, either directly or through other intermediaries.

        The withholding tax shall not apply to any dividend paid to a Non-U.S. Holder if such dividend is effectively connected with a U.S. trade or business conducted by such non-U.S. Holder. In order to claim this exemption, the Non-U.S. Holder must provide the applicable withholding agent with a properly completed IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to U.S. federal withholding tax, will generally be subject to U.S. federal income tax on a net income basis at applicable graduated U.S. federal income tax rates, subject to an applicable income tax treaty providing otherwise. In addition, dividends received by a Non-U.S. Holder that is treated as a corporation for U.S. federal income tax purposes that are effectively connected with such Non-U.S. Holder's conduct of a U.S. trade or business may also be subject to a "branch profits tax" at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty.

Gain on Disposition of Altice USA Common Stock

        Gain or loss realized by a U.S. Holder on the sale or other disposition of Altice USA common stock will be capital gain or loss for U.S. federal income tax purposes, and will be long-term capital gain or loss if the U.S. Holder held the Altice USA common stock for more than one year. The amount of the U.S. Holder's gain or loss will be equal to the difference between the U.S. Holder's tax basis in the Altice USA common stock disposed of and the amount realized on the disposition. The deductibility of capital losses is subject to limitations.

        Subject to the discussion of FATCA and backup withholding, Non-U.S. Holders generally will not be required to pay U.S. federal income tax, including by way of withholding, on any gain realized upon the sale or other disposition of Altice USA common stock unless:

64


Table of Contents

        Generally, a corporation is a USRPHC if the fair market value of its U.S. real property interests (within the meaning of the Code and applicable Treasury Regulations) equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. We believe that we are not currently a USRPHC and, based on our business plan and anticipated operations, do not expect to become a USRPHC in the future. However USRPHC status is an inherently factual determination that involves complex legal considerations. We have not sought an IRS ruling with respect to whether we are a USRPHC and we cannot give definitive assurance regarding our non-USRPHC status. Additionally, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we are or become a USRPHC, as long as our Class A common stock is regularly traded on an established securities market (within the meaning of the Code and applicable Treasury Regulations), such Class A common stock will not be treated as a U.S. real property interest in the hands of any Non-U.S. Holder who does not hold (actually or constructively) more than 5% of our Class A common stock at any time during the shorter of the five-year period preceding the Non-U.S. Holder's disposition of, or the Non-U.S. Holder's holding period for, our Class A common stock. Non-U.S. Holders should be aware that no prediction can be made as to whether our Class A common stock will be regularly traded on an established securities market (within the meaning of the Code and applicable Treasury Regulations).

        Non-U.S. Holders described in the first bullet above will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and a corporate Non-U.S. Holder described in the first bullet above also may be subject to the branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty. Individual Non-U.S. Holders described in the second bullet above will be required to pay a flat 30% tax on the gain derived from the sale, which gain may be offset by U.S.-source capital losses for that year.

Medicare Tax

        A U.S. Holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, is subject to a 3.8% tax on the lesser of (1) the U.S. Holder's "net investment income" (or "undistributed net investment income" in the case of an estate or trust) for the relevant taxable year and (2) the excess of the U.S. holder's modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals is between $125,000 and $250,000, depending on the individual's circumstances). A holder's net investment income generally includes its dividend income and its net gains with respect to its Altice shares, unless such dividend income or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). A U.S. Holder that is an individual, estate or trust, is urged to consult his or her tax advisors regarding the applicability of the Medicare tax to his or her income and gains in respect of the Distribution, the distributions on Altice USA common stock and/or the gains from the disposition of Altice USA common stock.

U.S. Federal Estate Taxes

        If shares of Altice USA common stock are included in the gross estate of an individual that is a U.S. citizen or resident for U.S. federal estate tax purposes, then U.S. federal estate tax might be payable with respect to such shares in connection with the death of such holder.

65


Table of Contents

        If shares of Altice USA common stock are included in the gross estate of an individual that is not a U.S. citizen or resident for U.S. federal estate tax purposes, such shares may be subject to U.S. federal estate tax because they will be considered U.S. situs assets, unless an applicable estate tax treaty or other treaty provides otherwise.

Backup Withholding and Information Reporting

        For noncorporate U.S. Holders of Altice N.V. shares, information reporting requirements, on IRS Form 1099, generally will apply to dividend payments or other taxable distributions made to them within the United States. Additionally, backup withholding may apply to such payments if a U.S. Holder fails to comply with applicable certification requirements or are notified by the IRS that such U.S. Holder has failed to report all interest and dividends required to be shown on its federal income tax returns. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against the applicable U.S. Holder's U.S. federal income tax liability, provided that such U.S. Holder furnishes the required information to the IRS.

        Generally, we must report annually to the IRS the amount of dividends paid to a Non-U.S. Holder, the Non-U.S. Holder's name and address, and the amount of U.S. federal income tax withheld, if any. A similar report will be sent to the Non-U.S. Holder. These information reporting requirements apply even if withholding was not required because the dividends were effectively connected to the conduct of a Non-U.S. Holder's trade or business within the United States or withholding was reduced by an applicable income tax treaty. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in the Non-U.S. Holder's country of residence. Payments of dividends on, or of proceeds from the disposition of, Altice USA common stock made to Non-U.S. Holders may be subject to additional information reporting and backup withholding unless the Non-U.S. Holder establishes an exemption, for example, by properly certifying its non-U.S. status on an IRS Form W-8BEN or W-8BEN-E, whichever is applicable, or another appropriate version of IRS Form W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if the applicable withholding agent has actual knowledge, or reason to know, that a holder claiming to be a Non-U.S. Holder is a U.S. person.

        U.S. information reporting and backup withholding generally will not apply to a payment of proceeds of a disposition of common stock where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. However, information reporting requirements, but not backup withholding, generally will apply to such a payment if the broker is (i) a U.S. person; or (ii) a foreign person with certain U.S. connections, unless the broker has documentary evidence in its records that the holder is a Non-U.S. Holder and certain conditions are met or the holder otherwise establishes an exemption. As noted above, backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.

        Shareholders of Altice N.V. shares should consult their own tax advisors regarding the application of backup withholding in their particular circumstances and the availability of and procedure for obtaining an exemption from backup withholding under current Treasury Regulations.

FATCA

        Legislation commonly known as FATCA (under Sections 1471 to 1474 of the Code) generally will impose a U.S. federal withholding tax of 30% on dividends on and the gross proceeds of a disposition of Altice USA common stock paid to a "foreign financial institution" (as defined under FATCA and the applicable Treasury Regulations), unless such institution enters into an agreement with the U.S.

66


Table of Contents

government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding the U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise establishes an exemption. The legislation also generally will impose a U.S. federal withholding tax of 30% on dividends on and the gross proceeds of a disposition of common stock paid to a non-financial foreign entity unless such entity provides the applicable withholding agent with a certification identifying certain substantial direct and indirect U.S. owners of the entity, certifies that there are none or otherwise establishes an exemption. The withholding taxes described above will apply to any dividend payments on Altice USA common stock and, after December 31, 2018, to payments of gross proceeds from dispositions of Altice USA common stock. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph. Non-U.S. Holders of Altice N.V. shares are urged to consult with their own tax advisors regarding the possible implications of this legislation on their ownership in Altice USA common stock.

67


Table of Contents


USE OF PROCEEDS

        Neither we nor Altice N.V. will receive any proceeds from the distribution of our Class A common stock or Class B common stock in the Distribution.

68


Table of Contents


MARKET PRICE OF CLASS A COMMON STOCK

        Shares of our Class A common stock began trading on the NYSE under the symbol "ATUS" on June 22, 2017. Prior to that, there was no public market for shares our Class A common stock. Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange.

        The table below sets forth the intraday high and low sales prices for shares of our Class A common stock for each full quarterly period since our initial public offering on June 22, 2017.

 
  High   Low  

Second Quarter 2018 (through May 22, 2018)

  $     $    

First Quarter 2018

  $ 25.15   $ 17.58  

Fourth Quarter 2017

  $ 28.45   $ 17.80  

Third Quarter 2017

  $ 34.86   $ 26.11  

        As of May 22, 2018, we had seven registered holders of record of our Class A common stock and two registered holders of record of our Class B common stock. The number of beneficial owners of our Class A common stock is substantially greater than the number of record holders, because a large portion of our Class A common stock is held in "street name" by banks and brokers.

69


Table of Contents


DIVIDEND POLICY

        During fiscal year 2015, Cablevision, our predecessor company, paid a regular quarterly cash dividend of $0.15 per share to holders of both Cablevision's Class A common stock and Class B common stock on April 3, 2015, June 12, 2015 and September 10, 2015. In the fourth quarter of 2016, we declared combined cash dividends of approximately $445 million to our stockholders of which approximately $365 million was paid in the fourth quarter of 2016 and approximately $80 million was paid in the first quarter of 2017. In addition, we made cash distributions of $839.7 million during the second quarter of 2017, $500 million of which were funded with borrowings under CSC Holdings' revolving credit facility. We have not declared or paid any dividends since our initial public offering in June 2017.

        As a condition to the Distribution, pursuant to authority delegated by our Board, our Audit Committee declared a one-time $1.5 billion dividend to Altice USA stockholders as of a record date of May 22, 2018 payable two business days prior to the Distribution, provided that the Master Separation Agreement has not been terminated on or prior to the payment date. Holders of Altice N.V. shares that are entitled to receive shares of Altice USA common stock in the Distribution are not entitled to receive any portion of the Pre-Distribution Dividend. Other than this dividend, we currently intend to retain any future earnings to fund the operation, development and expansion of our business and do not intend to pay any other dividends on Altice USA common stock. Any future determination relating to our dividend policy will be made in the sole and absolute discretion of our Board and will depend upon then existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors that our Board may deem relevant. See "Risk Factors—Risk Factors Relating to Ownership of Our Class A Common Stock and Class B Common Stock—Because we have no current plans to pay cash dividends on our Class A common stock or Class B common stock following the Distribution and for the foreseeable future, our stockholders may not receive any return on investment unless they sell their Class A common stock or Class B common stock."

        In addition, we are a holding company that does not conduct any business operations of our own. As a result, our ability to pay cash dividends on our Class A common stock is dependent upon cash dividends and distributions and other transfers from our subsidiaries. The terms of certain debt instruments to which our subsidiaries are a party currently limit, subject to certain exceptions and qualifications, their ability and the ability of their restricted subsidiaries to: (i) pay dividends or make other distributions or repurchase or redeem our capital stock or subordinated debt, (ii) engage in certain transactions with affiliates and (iii) enter into agreements that restrict the payment of dividends by subsidiaries or the repayment of intercompany loans and advances. See "Description of Certain Indebtedness."

        Although we do not currently intend to pay dividends other than as described above, our Board has authorized a share repurchase program of up to $2 billion for a three-year period following the Distribution with respect to our Class A common stock as a means to return capital to our stockholders, among other reasons.

70


Table of Contents


CAPITALIZATION

 
  March 31, 2018  
(Dollars in thousands, except share data)
  Actual   As adjusted(1)  

Cash and cash equivalents

  $ 1,427,651   $ 27,651  

Debt:

             

Short-term debt:

             

Credit facility debt, senior notes and debentures, capital lease obligations and notes payable

    1,172,826     1,172,826  

Long-term debt:

             

Credit facility debt, senior guaranteed notes, senior notes and debentures, capital lease obligations and notes payable

    20,449,797     20,549,797  

Collateralized indebtedness

    1,351,271     1,351,271  

Total debt

    22,973,894     23,073,894  

Redeemable equity

    234,637     234,637  

Equity:

             

Preferred Stock, $0.01 par value, 100,000,000 shares authorized, no shares issued and outstanding

         

Class A common stock: $0.01 par value, 4,000,000,000 shares authorized, 246,982,292 issued and outstanding

    2,470     2,470  

Class B common stock: $0.01 par value, 1,000,000,000 shares authorized, 490,086,674 issued and outstanding

    4,901     4,901  

Class C common stock: $0.01 par value, 4,000,000,000 shares authorized, no shares issued and outstanding

         

Paid-in capital

    4,682,646     3,182,646  

Retained earnings

    713,848     713,848  

Accumulated other comprehensive loss

    (8,420 )   (8,420 )

Noncontrolling interest

    1,541     1,541  

Total equity

    5,396,986     3,896,986  

Total capitalization

  $ 28,605,517   $ 27,205,517  

Total debt excluding collateralized indebtedness

  $ 21,622,623   $ 21,722,623  

Net debt excluding collateralized indebtedness(2)

  $ 20,194,972   $ 21,694,972  

(1)
The as adjusted amount reflects an increase of debt of $100,000 and the use of $1,400,000 of cash on hand to fund the Pre-Distribution Dividend. The as adjusted amount does not reflect the April 2018 issuance of $1,050,000 aggregate principal amount of 7.5% senior notes due 2028 by Cequel Communications Holdings I, LLC and Cequel Capital Corporation, each an indirect wholly owned subsidiary of Altice USA, and redemption of $1,050,000 aggregate principal amount of $6.375% senior notes due 2020.

(2)
Net debt is total debt less cash and cash equivalents.

71


Table of Contents


SELECTED HISTORICAL FINANCIAL DATA

        The selected consolidated historical balance sheet data of Altice USA as of March 31, 2018 and the operating data of Altice USA for the three months ended March 31, 2018 and 2017 presented below have been derived from the unaudited condensed consolidated financial statements of Altice USA included elsewhere herein. The operating data of Altice USA for the year ended December 31, 2016 include the operating results of Cequel for the year ended December 31, 2016 and the operating results of Cablevision for the period from the date of acquisition, June 21, 2016, through December 31, 2016.

        The selected consolidated historical balance sheet and operating data of Altice USA for the three months ended March 31, 2018 presented below reflects the adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers ("ASC 606") and ASU No. 2017-07 Compensation-Retirement Benefits (Topic 715) ("ASU 2017-07"). It also gives effect to the acquisition of Altice Technical Services US Corp. ("ATS") as the Company became the owner of 100% of the equity interests in ATS in March 2018. ATS was previously owned by Altice N.V. and a member of ATS's management through a holding company. As the acquisition is a combination of businesses under common control, the Company combined the results of operations and related assets and liabilities of ATS for all periods since its commencement of operations in April 2017.

        The selected consolidated historical balance sheet and operating data of Altice USA as of and for the three months ended March 31, 2017 and as of and for the years ended December 31, 2017 and 2016 presented below have been amended to retrospectively apply the adoption of ASC 606 and ASU No. 2017-07. The balance sheet data of Altice USA as of December 31, 2017 and operating data for the year ended December 31, 2017, also give effect to the ATS acquisition.

        The selected consolidated historical balance sheet and operating data of Cablevision has been presented for the periods prior to the Cablevision Acquisition as Cablevision is deemed to be the predecessor entity. The selected consolidated historical operating data of Cablevision presented below have been derived from the audited consolidated financial statements of Cablevision.

        The selected historical results presented below are not necessarily indicative of the results to be expected for any future period. This information should be read in conjunction with the audited

72


Table of Contents

consolidated financial statements of Altice USA and the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations of Altice USA.

 
  Altice USA    
   
   
   
 
 
  Cablevision(a)  
 
  Three Months Ended
March 31,
  Years Ended
December 31,
 
 
  January 1,
2016 to
June 20,
2016(e)
  Years Ended December 31,  
 
  2018   2017   2017   2016   2015(e)   2014(e)   2013(e)  
 
  (Unaudited)
  (dollars in thousands)
 

Revenue

  $ 2,329,714   $ 2,302,259   $ 9,306,950   $ 6,017,212   $ 3,137,604   $ 6,545,545   $ 6,508,557   $ 6,287,383  

Operating expenses

    2,016,676     2,052,149     8,465,942     5,554,403     2,662,298     5,697,074     5,587,299     5,588,159  

Operating income

    313,038     250,110     841,008     462,809     475,306     848,471     921,258     699,224  

Other income (expense):

                                                 

Interest expense, net

    (374,155 )   (433,062 )   (1,601,211 )   (1,442,730 )   (285,508 )   (584,839 )   (575,580 )   (600,637 )

Gain (loss) on investments and sale of affiliate interests, net

    (248,602 )   131,658     237,354     141,896     129,990     (30,208 )   129,659     313,167  

Gain (loss) on derivative contracts, net

    168,352     (71,044 )   (236,330 )   (53,696 )   (36,283 )   104,927     (45,055 )   (198,688 )

Gain (loss) on interest rate swap contracts, net

    (31,922 )   2,342     5,482     (72,961 )                

Loss on extinguishment of debt and write-off of deferred financing costs

    (4,705 )       (600,240 )   (127,649 )       (1,735 )   (10,120 )   (22,542 )

Other income (expense), net

    (11,658 )   (2,100 )   (13,651 )   1,186     4,855     6,045     4,988     2,436  

Income (loss) from continuing operations before income taxes

    (189,652 )   (122,096 )   (1,367,588 )   (1,091,145 )   288,360     342,661     425,150     192,960  

Income tax benefit (expense)(b)

    60,703     45,908     2,862,352     259,666     (124,848 )   (154,872 )   (115,768 )   (65,635 )

Income (loss) from continuing operations, net of income taxes

    (128,949 )   (76,188 )   1,494,764     (831,479 )   163,512     187,789     309,382     127,325  

Income (loss) from discontinued operations, net of income taxes(c)

                        (12,541 )   2,822     338,316  

Net income (loss)

    (128,949 )   (76,188 )   1,494,764     (831,479 )   163,512     175,248     312,204     465,641  

Net loss (income) attributable to noncontrolling interests

    (2 )   (237 )   (1,587 )   (551 )   236     201     (765 )   20  

Net income (loss) attributable to Altice USA / Cablevision stockholders

  $ (128,951 ) $ (76,425 ) $ 1,493,177   $ (832,030 ) $ 163,748   $ 175,449   $ 311,439   $ 465,661  

INCOME (LOSS) PER SHARE:

                                                 

Basic income (loss) per share attributable to Altice USA / Cablevision stockholders:

                                                 

Income (loss) from continuing operations, net of income taxes

    (0.17 )   (0.12 ) $ 2.15   $ (1.28 ) $ 0.60   $ 0.70   $ 1.17   $ 0.49  

Income (loss) from discontinued operations, net of income taxes(c)

  $   $   $   $   $   $ (0.05 ) $ 0.01   $ 1.30  

Net income (loss)

    (0.17 )   (0.12 ) $ 2.15   $ (1.28 ) $ 0.60   $ 0.65   $ 1.18   $ 1.79  

Basic weighted average common shares (in thousands)

    737,069     649,525     696,055     649,525     272,035     269,388     264,623     260,763  

Diluted income (loss) per share attributable to Altice USA / Cablevision stockholders:

                                                 

Income (loss) from continuing operations, net of income taxes

    (0.17 )   (0.12 ) $ 2.15   $ (1.28 ) $ 0.58   $ 0.68   $ 1.14   $ 0.48  

Income (loss) from discontinued operations, net of income taxes(c)

  $   $   $   $   $   $ (0.05 ) $ 0.01   $ 1.27  

Net income (loss)

    (0.17 )   (0.12 ) $ 2.15   $ (1.28 ) $ 0.58   $ 0.63   $ 1.15   $ 1.75  

Diluted weighted average common shares (in thousands)

    737,069     649,525     696,055     649,525     280,199     276,339     270,703     265,935  

Cash dividends declared per common share (d)

  $   $   $ 1.29   $ 0.69   $   $ 0.45   $ 0.60   $ 0.60  

Amounts attributable to Altice USA / Cablevision stockholders:

                                                 

Income (loss) from continuing operations, net of income taxes

  $ (128,951 ) $ (76,425 ) $ 1,493,177   $ (832,030 ) $ 163,748   $ 187,990   $ 308,617   $ 127,345  

Income (loss) from discontinued operations, net of income taxes(c)

                        (12,541 )   2,822     338,316  

Net income (loss)

  $ (128,951 ) $ (76,425 ) $ 1,493,177   $ (832,030 ) $ 163,748   $ 175,449   $ 311,439   $ 465,661  

(a)
Represents the operating results of Cablevision for the period prior to the Cablevision Acquisition (Predecessor periods).

73


Table of Contents

(b)
Pursuant to the enactment of the Tax Cuts and Jobs Act on December 22, 2017, the Company recorded a noncash deferred tax benefit of $2,332,677 to remeasure the net deferred tax liability to adjust for the reduction in the corporate income tax rate from 35% to 21% which is effective on January 1, 2018.

(c)
Loss from discontinued operations for 2015 primarily reflects an expense related to the decision in a case relating to Rainbow Media Holdings LLC, a business whose operations were previously discontinued. Income from discontinued operations for 2014 resulted primarily from the settlement of a contingency related to Montana property taxes related to Bresnan Cable. Income from discontinued operations for 2013 primarily relates to (i) the operating results and related gain on the sale of Bresnan Cable of $259,692, (ii) the operating results and related loss on the sale of Clearview Cinemas of $(25,012), and (iii) the proceeds and costs related to the settlement of litigation with DISH Network, LLC of $103,636.

(d)
Represent distributions declared prior to the Company's initial public offering ("IPO") of $839,700 and $445,176 in 2017 and 2016, respectively, divided by the number of shares of common stock outstanding adjusted to reflect the retroactive impact of the organizational transactions, discussed in Note 1 to the Altice USA audited consolidated financial statements, that occurred prior to the IPO.

(e)
Amounts have not been adjusted to reflect the adoption of ASU No. 2014-09, Revenue from Contracts with Customers and ASU No. 2017-07 Compensation-Retirement Benefits (Topic 715) .

Balance Sheet Data:

 
  Altice USA   Cablevision  
 
  March 31,   December 31,   December 31,  
 
  2018   2017   2016   2015 (a)   2014(a)   2013(a)  
 
  (Unaudited)
  (dollars in thousands)
   
 

Total assets

  $ 35,279,409   $ 34,812,082   $ 36,498,578   $ 6,800,174   $ 6,682,021   $ 6,500,967  

Notes payable to affiliates and related parties

            1,750,000              

Credit facility debt

    5,690,002     4,643,523     3,444,790     2,514,454     2,769,153     3,745,625  

Collateralized indebtedness

    1,351,271     1,349,474     1,286,069     1,191,324     986,183     817,950  

Senior guaranteed notes

    3,283,283     2,291,185     2,289,494              

Senior notes and debentures

    12,526,683     13,569,247     15,217,831     5,801,011     5,784,213     5,068,926  

Notes payable

    103,087     65,902     13,726     14,544     23,911     5,334  

Capital leases and other obligations

    19,568     21,980     28,155     45,966     46,412     31,290  

Total debt

    22,973,894     21,941,311     24,030,065     9,567,299     9,609,872     9,669,125  

Redeemable equity

    234,637     231,290     68,147         8,676     9,294  

Stockholders' equity (deficiency)

    5,395,445     5,503,214     2,042,221     (4,911,316 )   (5,041,469 )   (5,284,330 )

Noncontrolling interest

    1,541     1,539     287     (268 )   779     786  

Total equity (deficiency)

    5,396,986     5,504,753     2,042,508     (4,911,584 )   (5,040,690 )   (5,283,544 )

(a)
Amounts have not been adjusted to reflect the adoption of ASU No. 2014-09, Revenue from Contracts with Customers and ASU No. 2017-07 Compensation-Retirement Benefits (Topic 715) .

74


Table of Contents

        The following table sets forth certain customer metrics by segment (unaudited):

 
  As of March 31, 2018   As of December 31, 2017   As of December 31, 2016  
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total   Cablevision   Cequel   Total  
 
  (in thousands, except per customer amounts)
 

Homes passed(a)

    5,174     3,468     8,642     5,164     3,457     8,621     5,116     3,407     8,524  

Total customer relationships(b)(c)

    3,151     1,765     4,917     3,156     1,750     4,906     3,141     1,751     4,892  

Residential

    2,888     1,655     4,543     2,893     1,642     4,535     2,879     1,649     4,528  

SMB

    263     110     373     263     109     371     262     102     364  

Residential customers:

                                                       

Pay TV

    2,340     1,035     3,375     2,363     1,042     3,406     2,428     1,107     3,535  

Broadband

    2,673     1,399     4,073     2,670     1,376     4,046     2,619     1,344     3,963  

Telephony

    1,954     596     2,550     1,965     592     2,557     1,962     597     2,559  

Residential triple product customer penetration(d):

    63.8 %   25.7 %   49.9 %   64.2 %   25.7 %   50.2 %   64.8 %   25.5 %   50.5 %

Penetration of homes passed(e):

    60.9 %   50.9 %   56.9 %   61.1 %   50.6 %   56.9 %   61.4 %   51.4 %   57.4 %

ARPU(f)

  $ 154.48   $ 113.58   $ 139.63   $ 155.39   $ 112.12   $ 139.75   $ 154.49   $ 109.30   $ 138.07  

(a)
Represents the estimated number of single residence homes, apartments and condominium units passed by the cable distribution network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our cable distribution network. For Cequel, broadband services were not available to approximately 100 homes passed and telephony services were not available to approximately 500 homes passed.

(b)
Represents number of households/businesses that receive at least one of the Company's services.

(c)
Customers represent each customer account (set up and segregated by customer name and address), weighted equally and counted as one customer, regardless of size, revenue generated, or number of boxes, units, or outlets. In calculating the number of customers, we count all customers other than inactive/disconnected customers. Free accounts are included in the customer counts along with all active accounts, but they are limited to a prescribed group. Most of these accounts are also not entirely free, as they typically generate revenue through pay-per-view or other pay services and certain equipment fees. Free status is not granted to regular customers as a promotion. In counting bulk residential customers, such as an apartment building, we count each subscribing family unit within the building as one customer, but do not count the master account for the entire building as a customer. We count a bulk commercial customer, such as a hotel, as one customer, and do not count individual room units at that hotel.

(d)
Represents the number of customers that subscribe to three of our services divided by total residential customer relationships.

(e)
Represents the number of total customer relationships divided by homes passed.

(f)
Calculated by dividing the average monthly revenue for the respective quarter (fourth quarter for annual periods) presented derived from the sale of broadband, pay television and telephony services to residential customers for the respective quarter by the average number of total residential customers for the same period.

75


Table of Contents


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         All dollar amounts, except per customer and per share data, included in the following discussion are presented in thousands.

Our Business

        We deliver broadband, pay television, telephony services, proprietary content and advertising services to approximately 4.9 million residential and business customers. Our footprint extends across 21 states through a fiber-rich broadband network with approximately 8.6 million homes passed as of March 31, 2018. We have two reportable segments: Cablevision and Cequel. Cablevision provides broadband, pay television and telephony services to residential and business customers in and around the New York metropolitan area. Cequel provides broadband, pay television and telephony services to residential and business customers in the south-central United States, with the majority of its customers located in the ten states of Texas, West Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, Arizona, California, Missouri and Ohio.

Key Factors Impacting Operating Results and Financial Condition

        Our future performance is dependent, to a large extent, on the impact of direct competition, general economic conditions (including capital and credit market conditions), our ability to manage our businesses effectively, and our relative strength and leverage in the marketplace, both with suppliers and customers. For more information see "Risk Factors," and "Business-Competition" included herein.

        We derive revenue principally through monthly charges to residential customers of our pay television, broadband, and telephony services. We also derive revenue from DVR, VOD, pay-per-view, installation and home shopping commissions. Our residential pay television, broadband, and telephony services accounted for approximately 44%, 30% and 7%, respectively, of our consolidated revenue for the three months ended March 31, 2018 and approximately 46%, 28% and 8%, respectively, of our consolidated revenue for the year ended December 31, 2017. We also derive revenue from the sale of a wide and growing variety of products and services to both large enterprise and small and medium sized business ("SMB") customers, including broadband, telephony, networking and pay television services. For the three months ended March 31, 2018 and the year ended December 31, 2017, 14% of our consolidated revenue was derived from these business services and wholesale. In addition, we derive revenues from the sale of advertising time available on the programming carried on our cable television systems, which accounted for approximately 4% of our consolidated revenue for the three months ended March 31, 2018 and the year ended December 31, 2017. Our other revenue for the three months ended March 31, 2018 and the year ended December 31, 2017 accounted for less than 1% of our consolidated revenue.

        Revenue is impacted by rate increases, changes in the number of customers to our services, including additional services sold to our existing customers, programming package changes by our pay television customers, speed tier changes by our broadband customers, and acquisitions of cable systems that result in the addition of new customers.

        Our ability to increase the number of customers to our services is significantly related to our penetration rates.

        We operate in a highly competitive consumer-driven industry and we compete against a variety of broadband, pay television and telephony providers and delivery systems, including broadband communications companies, wireless data and telephony providers, satellite-delivered video signals, Internet-delivered video content and broadcast television signals available to residential and business customers in our service areas. Our competitors include AT&T and its DirecTV subsidiary,

76


Table of Contents

CenturyLink, DISH Network, Frontier and Verizon. Consumers' selection of an alternate source of service, whether due to economic constraints, technological advances or preference, negatively impacts the demand for our services. For more information on our competitive landscape, see "Risk Factors," and "Business-Competition" included herein.

        Our programming costs, which are the most significant component of our operating expenses, have increased and are expected to continue to increase primarily as a result of contractual rate increases and new channel launches. See "—Results of Operations" below for more information regarding our key factors impacting our revenues and operating expenses.

        Historically, we have made substantial investments in our network and the development of new and innovative products and other service offerings for our customers as a way of differentiating ourselves from our competitors and may continue to do so in the future. We have commenced a five-year plan to build a FTTH network, which will enable us to deliver more than 10 Gbps broadband speeds across our entire Optimum footprint and part of our Suddenlink footprint. We may incur greater than anticipated capital expenditures in connection with this initiative, fail to realize anticipated benefits, experience delays and business disruptions or encounter other challenges to executing it as planned. See "—Liquidity and Capital Resources—Capital Expenditures" for additional information regarding our capital expenditures.

Financial Outlook

        In connection with the Distribution, we will publish a prospectus in Europe that will be approved by the Netherlands Authority for the Financial Markets ("AFM"). We are required under the laws of the European Union (the "EU") to include the following previously published financial outlook for fiscal year 2018 in this prospectus.

        For the full year 2018 Altice USA expects:

        Altice USA also reiterates its plan to expand its Adjusted EBITDA and cash flow margins over the medium- to long-term.

        Statements regarding our financial outlook or guidance are forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements" in this prospectus for more information. Any forward-looking statements or guidance in this prospectus is made as of the date of this prospectus, and we undertake no duty to update or revise any such statements. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in this prospectus, including in the section entitled "Risk Factors."

Certain Transactions

        The following transactions occurred during the periods covered by this Management's Discussion and Analysis of Financial Condition and Results of Operations:

        In January 2018, the Company acquired 70% of the equity interests in ATS for $1.00 (the "ATS Acquisition") and the Company became the owner of 100% of the equity interests in ATS in March 2018. ATS was previously owned by Altice N.V. and a member of ATS's management through a holding company. As the acquisition is a combination of businesses under common control, the Company

77


Table of Contents

combined the results of operations and related assets and liabilities of ATS for all periods since its commencement of operations in April 2017.

        On June 21, 2016, Altice USA acquired Cablevision for a total purchase price of approximately $9,958,323. The Altice USA operating results include the operating results of Cablevision from the date of acquisition.

        In July 2016, we completed the sale of a 75% interest in Newsday and retained the remaining 25% ownership interest. Effective July 7, 2016, the operating results of Newsday are no longer consolidated with our results and our 25% interest in the operating results of Newsday is recorded on the equity basis.

Non-GAAP Financial Measures

        We define Adjusted EBITDA, which is a non-GAAP financial measure, as net income (loss) excluding income taxes, income (loss) from discontinued operations, other non-operating income or expenses, loss on extinguishment of debt and write-off of deferred financing costs, gain (loss) on interest rate swap contracts, gain (loss) on 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. We believe Adjusted EBITDA is an appropriate measure for evaluating the operating performance of the Company. Adjusted EBITDA and similar measures with similar titles are common performance measures used by investors, analysts and peers to compare performance in our industry. Internally, we use revenue and Adjusted EBITDA measures as important indicators of our business performance, and evaluate management's effectiveness with specific reference to these indicators. We believe Adjusted EBITDA provides management and investors a useful measure for period-to-period comparisons of our core business and operating results by excluding items that are not comparable across reporting periods or that do not otherwise relate to the Company's ongoing operating results. Adjusted EBITDA should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), and other measures of performance presented in accordance with GAAP. Since Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies.

78


Table of Contents

Results of Operations for the Three Months Ended March 31, 2018 and 2017—Altice USA

 
  Altice USA  
 
  Three Months Ended
March 31,
 
 
  2018   2017  
 
  (Unaudited)
 

Revenue:

             

Residential:

             

Pay TV

  $ 1,033,708   $ 1,083,878  

Broadband

    701,621     625,918  

Telephony

    166,038     180,961  

Business services and wholesale

    333,090     319,420  

Advertising

    87,582     83,361  

Other

    7,675     8,721  

Total revenue

  $ 2,329,714   $ 2,302,259  

Operating expenses:

             

Programming and other direct costs

    787,361     758,352  

Other operating expenses

    583,023     608,144  

Restructuring and other expense

    3,587     76,929  

Depreciation and amortization (including impairments)

    642,705     608,724  

Operating income

    313,038     250,110  

Other income (expense):

             

Interest expense, net

    (374,155 )   (433,062 )

Gain (loss) on investments and sale of affiliate interests, net

    (248,602 )   131,658  

Gain (loss) on derivative contracts, net

    168,352     (71,044 )

Gain (loss) on interest rate swap contracts

    (31,922 )   2,342  

Loss on extinguishment of debt and write-off of deferred financing costs

    (4,705 )    

Other income (loss), net

    (11,658 )   (2,100 )

Loss before income taxes

    (189,652 )   (122,096 )

Income tax benefit

    60,703     45,908  

Net loss

    (128,949 )   (76,188 )

Net income attributable to noncontrolling interests

    (2 )   (237 )

Net loss attributable to Altice USA stockholders

  $ (128,951 ) $ (76,425 )

79


Table of Contents

The following is a reconciliation of net income (loss) to Adjusted EBITDA:

 
  Altice USA  
 
  Three Months Ended
March 31,
 
 
  2018   2017  
 
  (Unaudited)
 

Net loss

  $ (128,949 ) $ (76,188 )

Income tax benefit

    (60,703 )   (45,908 )

Other expense (income), net(a)

    11,658     2,100  

Loss (gain) on interest rate swap contracts

    31,922     (2,342 )

Loss (gain) on derivative contracts, net(b)

    (168,352 )   71,044  

Loss (gain) on investments and sale of affiliate interests, net

    248,602     (131,658 )

Loss on extinguishment of debt and write-off of deferred financing costs

    4,705      

Interest expense, net

    374,155     433,062  

Depreciation and amortization

    642,705     608,724  

Restructuring and other expense

    3,587     76,929  

Share-based compensation

    21,623     7,848  

Adjusted EBITDA

  $ 980,953   $ 943,611  

(a)
Includes primarily dividends received on Comcast common stock owned by the Company.

(b)
Consists of unrealized and realized losses (gains) due to the change in the fair value of derivative contracts.

        The following table sets forth certain customer metrics by segment (unaudited):

 
  As of March 31, 2018   As of December 31, 2017   As of March 31, 2017  
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total   Cablevision   Cequel   Total  
 
  (Unaudited)
   
   
   
   
   
   
   
 
 
  (in thousands, except per customer amounts)
 

Homes passed(a)

    5,174     3,468     8,642     5,164     3,457     8,621     5,128     3,419     8,547  

Total customer relationships(b)(c)

    3,151     1,765     4,917     3,156     1,750     4,906     3,148     1,765     4,913  

Residential

    2,888     1,655     4,543     2,893     1,642     4,535     2,887     1,661     4,548  

SMB

    263     110     373     263     109     371     261     103     365  

Residential customers:

                                                       

Pay TV

    2,340     1,035     3,375     2,363     1,042     3,406     2,413     1,087     3,500  

Broadband

    2,673     1,399     4,073     2,670     1,376     4,046     2,636     1,366     4,003  

Telephony

    1,954     596     2,550     1,965     592     2,557     1,955     596     2,551  

Residential triple product customer penetration(d):

    63.8 %   25.7 %   49.9 %   64.2 %   25.7 %   50.2 %   64.4 %   25.4 %   50.2 %

Penetration of homes passed(e):

    60.9 %   50.9 %   56.9 %   61.1 %   50.6 %   56.9 %   61.4 %   51.6 %   57.5 %

ARPU(f)

  $ 154.48   $ 113.58   $ 139.63   $ 155.39   $ 112.21   $ 139.75   $ 155.52   $ 109.88   $ 138.87  

(a)
Represents the estimated number of single residence homes, apartments and condominium units passed by the cable distribution network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our cable distribution network. For Cequel, broadband services were not available to approximately 100 homes passed and telephony services were not available to approximately 500 homes passed.

(b)
Represents number of households/businesses that receive at least one of the Company's services.

(c)
Customers represent each customer account (set up and segregated by customer name and address), weighted equally and counted as one customer, regardless of size, revenue generated, or number of boxes, units, or outlets. In calculating the number of customers, we count all customers other than inactive/disconnected customers. Free accounts are included in the customer counts along with all active accounts, but they are limited to a prescribed group. Most of these accounts are also not entirely free, as they typically generate revenue through pay-per-view or other pay services and certain equipment fees. Free status is not granted to regular customers as a promotion. In counting bulk residential customers, such as an

80


Table of Contents

    apartment building, we count each subscribing family unit within the building as one customer, but do not count the master account for the entire building as a customer. We count a bulk commercial customer, such as a hotel, as one customer, and do not count individual room units at that hotel.

(d)
Represents the number of customers that subscribe to three of our services divided by total residential customer relationships.

(e)
Represents the number of total customer relationships divided by homes passed.

(f)
Calculated by dividing the average monthly revenue for the respective quarter (fourth quarter for annual periods) derived from the sale of broadband, pay television and telephony services to residential customers for the respective quarter by the average number of total residential customers for the same period.
 
  Segment Results  
 
  Three Months Ended
March 31, 2018
  Three Months Ended
March 31, 2017
 
 
  Cablevision   Cequel   Eliminations   Total   Cablevision   Cequel   Total  
 
   
   
  (Unaudited)
   
   
   
   
 

Revenue:

                                           

Residential:

                                           

Pay TV

  $ 763,720   $ 269,988       $ 1,033,708   $ 802,194   $ 281,684   $ 1,083,878  

Broadband

    440,351     261,270         701,621     396,333     229,585     625,918  

Telephony

    135,585     30,453         166,038     146,557     34,404     180,961  

Business services and wholesale

    234,172     98,918         333,090     228,544     90,876     319,420  

Advertising

    74,643     17,068     (4,129 )   87,582     65,132     18,229     83,361  

Other

    2,823     4,852         7,675     3,227     5,494     8,721  

Total revenue

    1,651,294     682,549     (4,129 )   2,329,714     1,641,987     660,272     2,302,259  

Operating expenses:

                                           

Programming and other direct costs

    588,581     202,624     (3,844 )   787,361     568,311     190,041     758,352  

Other operating expenses

    403,573     179,735     (285 )   583,023     449,809     158,335     608,144  

Restructuring and other expense

    3,083     504         3,587     58,647     18,282     76,929  

Depreciation and amortization

    485,364     157,341         642,705     443,176     165,548     608,724  

Operating income

  $ 170,693   $ 142,345       $ 313,038   $ 122,044   $ 128,066   $ 250,110  

    Altice USA—Comparison of Results for the Three Months Ended March 31, 2018 compared to the Three Months Ended March 31, 2017

Pay Television Revenue

        Pay television revenue for the three months ended March 31, 2018 and 2017 was $1,033,708 and $1,083,878, respectively, of which $763,720 and $802,194 was derived from the Cablevision segment and $269,988 and $281,684 relates to our Cequel segment. Pay television revenue is derived principally through monthly charges to residential customers of our pay television services. Revenue is impacted by rate increases, changes in the number of customers including additional services sold to our existing customers, and changes in programming packages.

        Pay television revenue for our Cablevision segment decreased $38,474 (5%) for the three months ended March 31, 2018 as compared to the same period in the prior year. The decrease was due primarily due to a decline in pay television customers and lower average revenue per pay television customer.

        Pay television revenue for our Cequel segment decreased $11,696 (4%) for the three months ended March 31, 2018 as compared to the same period in the prior year. The decrease was due primarily to a decline in the number of pay television customers, partially offset by an increase in average revenue per pay television customer.

81


Table of Contents

        We believe our pay television customer declines noted in the table above are largely attributable to competition, particularly from Verizon in our Cablevision footprint and DBS providers in our Cequel footprint, as well as competition from companies that deliver video content over the Internet directly to customers. These factors are expected to continue to impact our ability to maintain or increase our existing customers and revenue in the future.

Broadband Revenue

        Broadband revenue for the three months ended March 31, 2018 and 2017 was $701,621 and $625,918, respectively, of which $440,351 and $396,333 was derived from our Cablevision segment and $261,270 and $229,585 was derived from our Cequel segment. Broadband revenue is derived principally through monthly charges to residential subscribers of our broadband services. Revenue is impacted by rate increases, changes in the number of customers, including additional services sold to our existing subscribers, and changes in speed tiers.

        Broadband revenue for our Cablevision segment increased $44,018 (11%) for the three months ended March 31, 2018 compared to the three months ended March 31, 2017. The increase was due primarily to higher average recurring broadband revenue per broadband customer, primarily driven by certain rate increases, and an increase in broadband customers.

        Broadband revenue for our Cequel segment increased $31,685 (14%) for the three months ended March 31, 2018 compared to the same period in the prior year. The increase was due primarily to higher average recurring broadband revenue per broadband customer, primarily driven by certain rate increases and service level changes, and an increase in broadband customers.

Telephony Revenue

        Telephony revenue for the three months ended March 31, 2018 and 2017 was $166,038 and $180,961 of which $135,585 and $146,557 was derived from the Cablevision segment and $30,453 and $34,404 was derived from our Cequel segment. Telephony revenue is derived principally through monthly charges to residential customers of our telephony services. Revenue is impacted by changes in rates for services, changes in the number of customers, and additional services sold to our existing customers.

        Telephony revenue for our Cablevision segment decreased $10,972 (7%) for the three months ended March 31, 2018 compared to the three months ended March 31, 2017. The decrease was due primarily to lower rates offered to customers.

        Telephony revenue for our Cequel segment decreased $3,951 (11%) for the three months ended March 31, 2018 compared to the three months ended March 31, 2017. The decrease was due primarily to lower rates offered to customers.

Business Services and Wholesale Revenue

        Business services and wholesale revenue for the three months ended March 31, 2018 and 2017 was $333,090 and $319,420, respectively of which $234,172 and $228,544 was derived from the Cablevision segment and $98,918 and $90,876 was derived from our Cequel segment. Business services and wholesale revenue is derived primarily from the sale of fiber based telecommunications services to the business market, and the sale of broadband, pay television and telephony services to SMB customers.

        Business services and wholesale revenue for our Cablevision segment increased $5,628 (2%) for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017. The increase was primarily due to higher average recurring broadband revenue per SMB customer and higher Ethernet revenue, partially offset by reduced traditional voice and data services for commercial customers.

82


Table of Contents

        Business services and wholesale revenue for our Cequel segment increased $8,042 (9%) for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017. The increase was primarily due to higher commercial rates and customers for broadband services, an increase in certain pay television rates and increases in wholesale data and telephony services.

Advertising Revenue

        Advertising revenue for the three months ended March 31, 2018 and 2017, net of inter-segment revenue, was $87,582 and $83,361, respectively, of which $74,643 and $65,132 was derived from our Cablevision segment and $17,068 and $18,229 was derived from our Cequel segment. Advertising revenue is primarily derived from the sale of advertising time available on the programming carried on our cable television systems.

        Advertising revenue for our Cablevision segment increased $9,511 (15%) for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017. The increase is primarily due to an increase in digital advertising.

        Advertising revenue for our Cequel segment decreased $1,161 (6%) for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017.

Other Revenue

        Other revenue for the three months ended March 31, 2018 and 2017 was $7,675 and $8,721, respectively, of which $2,823 and $3,227 was derived from our Cablevision segment and $4,852 and $5,494 was derived from our Cequel segment. Other revenue includes other miscellaneous revenue streams.

Programming and Other Direct Costs

        Programming and other direct costs for the three months ended March 31, 2018 and 2017 amounted to $787,361 and $758,352, respectively, of which $588,581 and $568,311 relate to our Cablevision segment and $202,624 and $190,041 relate to our Cequel segment. Programming and other direct costs include cable programming costs, which are costs paid to programmers (net of amortization of any incentives received from programmers for carriage) for cable content (including costs of VOD and pay-per-view) and are generally paid on a per-customer basis. These costs typically rise due to increases in contractual rates and new channel launches and are also impacted by changes in the number of customers receiving certain programming services. These costs also include interconnection, call completion, circuit and transport fees paid to other telecommunication companies for the transport and termination of voice and data services, which typically vary based on rate changes and the level of usage by our customers. These costs also include franchise fees which are payable to the state governments and local municipalities where we operate and are primarily based on a percentage of certain categories of revenue derived from the provision of pay television service over our cable systems, which vary by state and municipality. These costs change in relation to changes in such categories of revenues or rate changes.

83


Table of Contents

        The increase of $29,009 (4%) in programming and other direct costs for the three months ended March 31, 2018, net of inter-segment eliminations, as compared to the prior year period is attributable to the following:

Cablevision segment:

       

Increase in costs of digital media advertising spots for resale

  $ 14,026  

Increase in programming costs due primarily to contractual rate increases, partially offset by lower pay television customers and lower video-on-demand and pay-per-view costs

    4,475  

Other net increases

    1,769  

    20,270  

 

Cequel segment:

       

Increase in programming costs due primarily to contractual rate increases and new channel launches, partially offset by lower pay television customers and lower video-on-demand and pay-per-view costs

    11,719  

Other net increases

    864  

    12,583  

Inter-segment eliminations

    (3,844 )

  $ 29,009  

Programming costs

        Programming costs aggregated $652,428 and $636,232 for the three months ended March 31, 2018 and 2017, respectively. Our programming costs in 2018 will continue to be impacted by changes in programming rates, which we expect to increase by high single digits, and by changes in the number of pay television customers.

Other Operating Expenses

        Other operating expenses for the three months ended March 31, 2018 and 2017 amounted to $583,023, and $608,144, respectively, of which $403,573 and $449,809 relate to our Cablevision segment and $179,735 and $158,335 relate to our Cequel segment. Other operating expenses include staff costs and employee benefits including salaries of company employees and related taxes, benefits and other employee related expenses. Other operating expenses also include network management and field service costs, which represent costs associated with the maintenance of our broadband network, including costs of certain customer connections and other costs associated with providing and maintaining services to our customers.

        Customer installation and repair and maintenance costs may fluctuate as a result of changes in the level of activities and the utilization of contractors as compared to employees. Also, customer installation costs fluctuate as the portion of our expenses that we are able to capitalize changes. Costs associated with the initial deployment of new customer premise equipment necessary to provide broadband, pay television and telephony services are capitalized (asset-based). Network repair and maintenance and utility costs also fluctuate as capitalizable network upgrade and enhancement activity changes.

        Other operating expenses also include costs related to the operation and maintenance of our call center facilities that handle customer inquiries and billing and collection activities and sales and marketing costs, which include advertising production and placement costs associated with acquiring and retaining customers. These costs vary period to period and certain of these costs, such as sales and

84


Table of Contents

marketing, may increase with intense competition. Additionally, other operating expenses include various other administrative costs, including legal fees, and product development costs.

        The decrease of $25,121 (4%) in other operating expenses for the three months ended March 31, 2018, net of inter-segment eliminations, as compared to the prior year period is attributable to the following:

Cablevision segment:

       

Decrease in salaries and benefits, and an increase in capitalizable activity

  $ (82,117 )

Increase in contractor costs

    18,040  

Increase in share-based compensation and long-term incentive plan awards expense

    10,131  

Increase in sales and marketing costs

    3,297  

Increase in facility costs

    2,800  

Other net increases

    1,613  

    (46,236 )

Cequel segment:

       

Decrease primarily in salaries partially offset by lower capitalizable activity

    (7,031 )

Increase in general and administrative costs

    8,581  

Increase in product development costs and product consulting fees

    6,659  

Increase in sales and marketing costs

    4,615  

Increase in repairs and maintenance costs

    4,295  

Other net increases

    4,281  

    21,400  

Inter-segment eliminations

    (285 )

  $ (25,121 )

Restructuring and Other Expense

        Restructuring and other expense for the three months ended March 31, 2018 of $3,587 ($3,083 for our Cablevision segment and $504 for our Cequel segment) as compared to $76,929 for the three months ended March 31, 2017 ($58,647 for our Cablevision segment and $18,282 for our Cequel segment). These amounts primarily relate to costs incurred in connection with severance and other employee related costs resulting from headcount reductions related to initiatives which commenced in 2016 that are intended to simplify the Company's organizational structure. We currently anticipate that additional restructuring expenses will be recognized as we continue to analyze our organizational structure.

Depreciation and Amortization

        Depreciation and amortization for the three months ended March 31, 2018 and 2017 amounted to $642,705 and $608,724, respectively, of which $485,364 and $443,176 relates to our Cablevision segment and $157,341 and $165,548 relates to our Cequel segment.

        Depreciation and amortization for our Cablevision segment increased of $42,188 (10%) for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017. The increase is due primarily to the acceleration of amortization on its trade name intangible assets in connection with the announcement, on May 23, 2017, of the adoption of a global brand that will replace the Optimum brand in the future, as well as depreciation on new asset additions.

        Depreciation and amortization for our Cequel segment decreased $8,207 (5%) for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017. The decrease

85


Table of Contents

is due primarily to lower amortization expense for certain intangible assets that are being amortized using an accelerated method.

Adjusted EBITDA

        Adjusted EBITDA amounted to $980,953 and $943,611 for the three months ended March 31, 2018 and 2017, respectively, of which $675,312 and $628,949 relates to our Cablevision segment and $305,641 and $314,662 relates to our Cequel segment.

        Adjusted EBITDA is a non-GAAP measure that is defined as net loss excluding income taxes, loss from discontinued operations, other non-operating income or expenses, loss on extinguishment of debt and write-off of deferred financing costs, gain (loss) on interest rate swap contracts, gain (loss) on derivative contracts, gain (loss) on investments, interest expense (including cash interest expense), interest income, depreciation and amortization (including impairments), share-based compensation expense, restructuring expense or credits and transaction expenses. See reconciliation of net loss to adjusted EBITDA above.

        The increase in adjusted EBITDA of our Cablevision segment for the three months ended March 31, 2018 as compared to the prior year period was due to an increase in revenue, partially offset by an increase in operating expenses (excluding depreciation and amortization expense, restructuring expense, share-based compensation and transaction expenses) as discussed above.

        The decrease in adjusted EBITDA of our Cequel segment for the three months ended March 31, 2018 as compared to the prior year period was due primarily to an increase in operating expenses (excluding depreciation and amortization expense, restructuring expense, share-based compensation and transaction expenses), partially offset by an increase in revenue as discussed above.

Interest Expense, net

        Interest expense, net was $374,155 and $433,062, for the three months ended March 31, 2018 and 2017, respectively. The decrease of $58,907 (14%) for the three months ended March 31, 2018 as compared to the prior year period is attributable to the following:

Decrease due to changes in average debt balances and interest rates on our indebtedness and collateralized debt

  $ (68,376 )

Higher interest income

    (2,872 )

Other net increases, primarily amortization of deferred financing costs and original issue discounts

    12,341  

  $ (58,907 )

See "Liquidity and Capital Resources" discussion below for a detail of our borrower groups.

Gain (loss) on Investments and Sale of Affiliate Interests, net

        Gain (loss) on investments, net for the three months ended March 31, 2018 and 2017 of $(248,602) and $131,658, respectively, consists primarily of the increase (decrease) in the fair value of Comcast common stock owned by the Company for the periods. The effects of these gains are partially offset by the losses on the related equity derivative contracts, net described below. The amount for the three months ended March 31, 2018 includes a net gain of $3,974 related to the sale of affiliate interests.

Gain (loss) on Derivative Contracts, net

        Gain (loss) on derivative contracts, net for the three months ended March 31, 2018 and 2017 amounted to $168,352 and $(71,044), respectively and includes realized and unrealized gains or losses

86


Table of Contents

due to the change in fair value of equity derivative contracts relating to the Comcast common stock owned by the Company. The effects of these gains or losses are offset by gains and losses on investment securities pledged as collateral, which are included in gain (loss) on investments, net discussed above.

Gain (loss) on interest rate swap contracts

        Gain (loss) on interest rate swap contracts was $(31,922) and $2,342 for the three months ended March 31, 2018 and 2017, respectively. These amounts represent the increase or decrease in fair value of the fixed to floating interest rate swaps entered into by our Cequel segment. The objective of these swaps is to adjust the proportion of total debt that is subject to fixed and variable interest rates. These swap contracts are not designated as hedges for accounting purposes.

Loss on extinguishment of debt and write-off of deferred financing costs

        Loss on extinguishment of debt and write-off of deferred financing costs amounted to $4,705 for the three months ended March 31, 2018 and includes the write-off of unamortized premium and deferred financing costs and the premium paid in connection with early redemption of the $750,000 7.75% Cablevision senior notes that were due in April 2018.

Income Tax Benefit

        The Company recorded income tax benefit of $60,703 and $45,908 for the three months ended March 31, 2018 and 2017, respectively, reflecting an effective tax rate of 32% and 38%, respectively. The effective tax rate for the three months ended March 31, 2018 has declined compared to previous years primarily as a result of the enactment of the Tax Cuts and Jobs Act in December 2017 which lowered the corporate federal income tax rate from 35% to 21%.

87


Table of Contents

Results of Operations for the Year Ended December 31, 2017 and 2016—Altice USA

 
  Altice USA  
 
  Years Ended December 31,  
 
  2017   2016  

Revenue:

             

Residential:

             

Pay TV

  $ 4,274,122   $ 2,788,873  

Broadband

    2,608,595     1,651,574  

Telephony

    700,765     465,771  

Business services and wholesale

    1,298,213     819,541  

Advertising

    391,866     252,049  

Other

    33,389     39,404  

Total revenue

    9,306,950     6,017,212  

Operating expenses:

             

Programming and other direct costs

    3,035,655     1,911,230  

Other operating expenses

    2,347,315     1,702,472  

Restructuring and other expense

    152,401     240,395  

Depreciation and amortization (including impairments)

    2,930,571     1,700,306  

Operating income

    841,008     462,809  

Other income (expense):

             

Interest expense, net

    (1,601,211 )   (1,442,730 )

Gain on investments, net

    237,354     141,896  

Loss on derivative contracts, net

    (236,330 )   (53,696 )

Gain (loss) on interest rate swap contracts

    5,482     (72,961 )

Loss on extinguishment of debt and write-off of deferred financing costs

    (600,240 )   (127,649 )

Other income (loss), net

    (13,651 )   1,186  

Loss from continuing operations before income taxes

    (1,367,588 )   (1,091,145 )

Income tax benefit

    2,862,352     259,666  

Net income (loss)

    1,494,764     (831,479 )

Net income attributable to noncontrolling interests

    (1,587 )   (551 )

Net income (loss) attributable to Altice USA stockholders

  $ 1,493,177   $ (832,030 )

88


Table of Contents

The following is a reconciliation of net income (loss) to Adjusted EBITDA:

 
  Altice USA  
 
  Year Ended December 31,  
 
  2017   2016  

Net income (loss)

  $ 1,494,764   $ (831,479 )

Income tax benefit

    (2,862,352 )   (259,666 )

Other expense (income), net(a)

    13,651     (1,186 )

Loss (gain) on interest rate swap contracts

    (5,482 )   72,961  

Loss on derivative contracts, net(b)

    236,330     53,696  

Gain on investments, net

    (237,354 )   (141,896 )

Loss on extinguishment of debt and write-off of deferred financing costs

    600,240     127,649  

Interest expense, net

    1,601,211     1,442,730  

Depreciation and amortization

    2,930,571     1,700,306  

Restructuring and other expense

    152,401     240,395  

Share-based compensation

    57,430     14,368  

Adjusted EBITDA

  $ 3,981,410   $ 2,417,878  

(a)
Includes primarily dividends received on Comcast common stock owned by the Company.

(b)
Consists of unrealized and realized losses (gains) due to the change in the fair value of derivative contracts.

        The following table sets forth certain customer metrics by segment (unaudited):

 
  As of December 31, 2017   As of December 31, 2016    
 
 
  Increase
(Decrease)
 
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total  
 
  (in thousands, except per customer amounts)
 

Homes passed(a)

    5,164     3,457     8,621     5,116     3,407     8,524     97  

Total customer relationships(b)(c)

    3,156     1,750     4,906     3,141     1,751     4,892     14  

Residential

    2,893     1,642     4,535     2,879     1,649     4,528     7  

SMB

    263     109     371     262     102     364     7  

Residential customers:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Pay TV

    2,363     1,042     3,406     2,428     1,107     3,535     (129 )

Broadband

    2,670     1,376     4,046     2,619     1,344     3,963     83  

Telephony

    1,965     592     2,557     1,962     597     2,559     (2 )

Residential triple product customer penetration(d):

    64.2 %   25.7 %   50.2 %   64.8 %   25.5 %   50.5 %      

Penetration of homes passed(e):

    61.1 %   50.6 %   56.9 %   61.4 %   51.4 %   57.4 %      

ARPU(f)

  $ 155.39   $ 112.21   $ 139.75   $ 154.49   $ 109.30   $ 138.07        

(a)
Represents the estimated number of single residence homes, apartments and condominium units passed by the cable distribution network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our cable distribution network. For Cequel, broadband services were not available to approximately 100 homes passed and telephony services were not available to approximately 500 homes passed.

(b)
Represents number of households/businesses that receive at least one of the Company's services.

(c)
Customers represent each customer account (set up and segregated by customer name and address), weighted equally and counted as one customer, regardless of size, revenue generated, or number of boxes, units, or outlets. In calculating the number of customers, we count all customers other than inactive/disconnected customers. Free accounts are included in the customer counts along with all active accounts, but they are limited to a prescribed group. Most of these accounts are also not entirely free, as they typically generate

89


Table of Contents

    revenue through pay-per-view or other pay services and certain equipment fees. Free status is not granted to regular customers as a promotion. In counting bulk residential customers, such as an apartment building, we count each subscribing family unit within the building as one customer, but do not count the master account for the entire building as a customer. We count a bulk commercial customer, such as a hotel, as one customer, and do not count individual room units at that hotel.

(d)
Represents the number of customers that subscribe to three of our services divided by total residential customer relationships.

(e)
Represents the number of total customer relationships divided by homes passed.

(f)
Calculated by dividing the average monthly revenue for the respective quarter (fourth quarter for annual periods) derived from the sale of broadband, pay television and telephony services to residential customers for the respective quarter by the average number of total residential customers for the same period.
 
  Segment Results   January 1,
2016 to
June 20,
2016(1)
 
 
  December 31, 2017   December 31, 2016  
 
  Cablevision   Cequel   Eliminations   Total   Cablevision   Cequel   Total   Cablevision  

Revenue:

                                                 

Residential:

                                                 

Pay TV

  $ 3,175,097   $ 1,099,025   $   $ 4,274,122   $ 1,668,348   $ 1,120,525   $ 2,788,873   $ 1,494,186  

Broadband

    1,649,771     958,824         2,608,595     817,160     834,414     1,651,574     702,811  

Telephony

    570,871     129,894         700,765     311,832     153,939     465,771     286,161  

Business services and wholesale

    922,691     375,522         1,298,213     468,632     350,909     819,541     411,102  

Advertising

    321,149     73,509     (2,792 )   391,866     163,678     88,371     252,049     125,419  

Other

    10,747     22,642         33,389     14,402     25,002     39,404     117,925  

Total revenue

    6,650,326     2,659,416     (2,792 )   9,306,950     3,444,052     2,573,160     6,017,212     3,137,604  

Operating expenses:

                                                 

Programming and other direct costs

    2,280,062     758,190     (2,597 )   3,035,655     1,164,925     746,305     1,911,230     1,088,555  

Other operating expenses

    1,685,484     662,026     (195 )   2,347,315     1,025,304     677,168     1,702,472     1,133,339  

Restructuring and other expense

    112,384     40,017         152,401     212,150     28,245     240,395     22,223  

Depreciation and amortization

    2,251,710     678,861         2,930,571     963,665     736,641     1,700,306     414,550  

Operating income

  $ 320,686   $ 520,322   $   $ 841,008   $ 78,008   $ 384,801   $ 462,809   $ 478,937  

(1)
Reflects certain reclassifications to conform to the Altice USA presentation as a result of the adoption of ASC 606 and ASU No. 2017-07 which have not been reflected in the historical results presented in the Cablevision Systems Corporation's financial statements included herein.

    Altice USA—Comparison of Results for the Year Ended December 31, 2017 compared to the Year Ended December 31, 2016

Pay Television Revenue

        Pay television revenue for the years ended December 31, 2017 and 2016 was $4,274,122 and $2,788,873, respectively, of which $3,175,097 and $1,668,348 was derived from the Cablevision segment and $1,099,025 and $1,120,525 relates to our Cequel segment, respectively. Pay television is derived principally through monthly charges to residential customers of our pay television services. Revenue increases are derived primarily from rate increases, increases in the number of customers, including additional services sold to our existing customers, and programming package upgrades.

        Pay television revenue for our Cablevision segment increased $1,506,749 for the year ended December 31, 2017 compared to the year ended December 31, 2016. The increase is primarily due to the consolidation of the Cablevision results as of June 21, 2016, the date of the Cablevision Acquisition.

90


Table of Contents

Our 2016 results do not include pay television revenue of $1,494,186 recognized by Cablevision for the period from January 1, 2016 through June 20, 2016. Pay television revenue was also impacted by rate increases for certain video services implemented in the fourth quarter of 2016 and 2017, an increase in late fees and an increase in pay-per-view revenue. Partially offsetting these increases was a decrease in revenue as compared to the prior year due to a decline in pay television customers.

        Pay television revenue for our Cequel segment decreased $21,500 (2%) for the year ended December 31, 2017 compared to the year ended December 31, 2016. The decrease was due primarily to a decline in the number of pay television customers and a decrease in premium video services revenue, partially offset by certain rate increases, and an increase in late fees.

        We believe our pay television customer declines noted in the table above are largely attributable to competition, particularly from Verizon in our Cablevision footprint and DBS providers in our Cequel footprint, as well as competition from companies that deliver video content over the Internet directly to customers. These factors are expected to continue to impact our ability to maintain or increase our existing customers and revenue in the future.

Broadband Revenue

        Broadband revenue for the years ended December 31, 2017 and 2016 was $2,608,595 and $1,651,574, respectively, of which $1,649,771 and $817,160 was derived from our Cablevision segment and $958,824 and $834,414 was derived from our Cequel segment. Broadband revenue is derived principally through monthly charges to residential customers of our broadband services. Revenue increases are derived primarily from rate increases, increases in the number of customers, including additional services sold to our existing customers, and speed tier upgrades.

        Broadband revenue for our Cablevision segment increased $832,611 for the year ended December 31, 2017 compared to the year ended December 31, 2016. The increase is primarily due to the consolidation of the Cablevision results as of June 21, 2016, the date of the Cablevision Acquisition. Our 2016 results do not include broadband revenue of $702,811 recognized by Cablevision for the period January 1, 2016 through June 20, 2016. Broadband revenue also increased $129,800 as a result of higher average recurring broadband revenue per broadband customer (driven by rate increases, the impact of service level changes, and an increase in late fees) and an increase in broadband customers.

        Broadband revenue for our Cequel segment increased $124,410 (15%) for the year ended December 31, 2017 compared to the same period in the prior year. The increase was due primarily to higher average recurring broadband revenue per broadband customer (driven by rate increases, the impact of service level changes, and an increase in late fees) and an increase in broadband customers.

Telephony Revenue

        Telephony revenue for the years ended December 31, 2017 and 2016 was $700,765 and $465,771 of which $570,871 and $311,832 was derived from the Cablevision segment and $129,894 and $153,939 was derived from our Cequel segment. Telephony revenue is derived principally through monthly charges to residential customers of our telephony services. Revenue increases are derived primarily from rate increases, increases in the number of customers, and additional services sold to our existing customers.

        Telephony revenue for our Cablevision segment increased $259,039 for the year ended December 31, 2017 compared to the year ended December 31, 2016. The increase is primarily due to the consolidation of the Cablevision results as of June 21, 2016, the date of the Cablevision Acquisition. Our 2016 results do not include telephony revenue of $286,161 recognized by Cablevision for the period January 1, 2016 through June 20, 2016. Offsetting this increase was a net decrease of $27,122 due primarily to lower average revenue per telephony customer and a decline in international calling.

91


Table of Contents

        Telephony revenue for our Cequel segment decreased $24,045 (16%) for the year ended December 31, 2017 compared to the year ended December 31, 2016. The decrease was due primarily to lower average revenue per telephony customer and a decline in telephony customers.

Business Services and Wholesale Revenue

        Business services and wholesale revenue for the years ended December 31, 2017 and 2016 was $1,298,213 and $819,541, respectively of which $922,691 and $468,632 was derived from the Cablevision segment and $375,522 and $350,909 was derived from our Cequel segment. Business services and wholesale revenue is derived primarily from the sale of fiber based telecommunications services to the business market, and the sale of broadband, pay television and telephony services to SMB customers.

        Business services and wholesale revenue for our Cablevision segment increased $454,059 for the year ended December 31, 2017 compared to the year ended December 31, 2016. The increase is primarily due to the consolidation of the Cablevision results as of June 21, 2016, the date of the Cablevision Acquisition. Our 2016 results do not include revenue of $411,102 recognized by Cablevision for the period January 1, 2016 through June 20, 2016. Business services revenue also increased $42,957 primarily due to higher average recurring telephony and broadband revenue per SMB customer and an increase in Ethernet revenue resulting from a larger number of services installed, partially offset by reduced traditional voice and data services for commercial customers.

        Business services and wholesale revenue for our Cequel segment increased $24,613 (7%) for the year ended December 31, 2017 as compared to the year ended December 31, 2016. The increase was primarily due to higher commercial rates and customers for broadband services, an increase in certain pay television rates and increases in commercial carrier services.

Advertising Revenue

        Advertising revenue for the years ended December 31, 2017 and 2016, net of inter-segment revenue, was $391,866 and $252,049, respectively, of which $321,149 and $163,678 was derived from our Cablevision segment and $73,509 and $88,371 was derived from our Cequel segment. Advertising revenue is primarily derived from the sale of advertising time available on the programming carried on our cable television systems.

        Advertising revenue for our Cablevision segment increased $157,471 for the year ended December 31, 2017 compared to the year ended December 31, 2016. The increase is primarily due to the consolidation of the Cablevision results as of June 21, 2016, the date of the Cablevision Acquisition. Our 2016 results do not include advertising revenue of $125,419 recognized by Cablevision for the period January 1, 2016 through June 20, 2016. The remaining increase in advertising revenue of $32,052 was due primarily to an increase in digital advertising revenue and an increase in data and analytics revenue, partially offset by a decrease in political advertising.

        Advertising revenue for our Cequel segment decreased $14,862 (17%) for the year ended December 31, 2017 as compared to the year ended December 31, 2016. The decrease is due to declines in political, auto, retail, and restaurant advertising.

Other Revenue

        Other revenue for the years ended December 31, 2017 and 2016 was $33,389 and $39,404, respectively, of which $10,747 and $14,402 was derived from our Cablevision segment and $22,642 and $25,002 was derived from our Cequel segment. Other revenue includes other miscellaneous revenue streams.

92


Table of Contents

Programming and Other Direct Costs

        Programming and other direct costs, net of intersegment eliminations, for the years ended December 31, 2017 and 2016 amounted to $3,035,655 and $1,911,230, respectively, of which $2,280,062 and $1,164,925 relate to our Cablevision segment and $758,190 and $746,305 relate to our Cequel segment. Programming and other direct costs include cable programming costs, which are costs paid to programmers (net of amortization of any incentives received from programmers for carriage) for cable content (including costs of VOD and pay-per-view) and are generally paid on a per-customer basis. These costs typically rise due to increases in contractual rates and new channel launches and are also impacted by changes in the number of customers receiving certain programming services. These costs also include interconnection, call completion, circuit and transport fees paid to other telecommunication companies for the transport and termination of voice and data services, which typically vary based on rate changes and the level of usage by our customers. These costs also include franchise fees which are payable to the state governments and local municipalities where we operate and are primarily based on a percentage of certain categories of revenue derived from the provision of pay television service over our cable systems, which vary by state and municipality. These costs change in relation to changes in such categories of revenues or rate changes.

        The increase of $1,115,137 related to our Cablevision segment for the year ended December 31, 2017, as compared to the prior year is primarily due to the consolidation of the Cablevision results as of June 21, 2016, the date of the Cablevision Acquisition. Our 2016 results do not include $1,088,555 of programming and other direct costs recognized by Cablevision for the period January 1, 2016 through June 20, 2016. The remaining increase of $26,582 is attributable to the following:

Cablevision segment:

       

Increase in programming costs due primarily to contractual rate increases and an increase in pay-per-view costs primarily from an event in August 2017, partially offset by lower pay television customers and lower video-on-demand costs

  $ 61,623  

Increase in costs of digital media advertising spots for resale

    23,601  

Decrease in costs primarily related to the sale of Newsday in July 2016

    (33,888 )

Decrease in call completion and transport costs primarily due to lower level of activity

    (17,881 )

Decrease in cost of sales (which includes the bulk sale of handset inventory of $5,445 during the first quarter of 2016)

    (9,945 )

Other net increases

    3,072  

  $ 26,582  

        The increase of $11,885 related to our Cequel segment for the year ended December 31, 2017, as compared to the prior year period is attributable to the following:

Cequel segment:

Increase in programming costs due primarily to contractual rate increases and an increase in pay-per-view costs primarily from an event in August 2017, partially offset by lower pay television customers and lower video-on-demand costs

  $ 20,141  

Decrease in franchise costs due to lower pay television customers

    (5,159 )

Decrease in media cost of sales

    (1,634 )

Net decrease in call completion and interconnection costs due to lower level of activity

    (1,803 )

Other net increases

    340  

  $ 11,885  

93


Table of Contents

Programming costs

        Programming costs aggregated $2,533,244 and $1,567,688 for the years ended December 31, 2017 and 2016, respectively. The 2016 amount does not include programming costs of $883,792 recognized by Cablevision for the period January 1, 2016 through June 20, 2016. Our programming costs in 2018 will continue to be impacted by changes in programming rates, which we expect to increase by high single digits, and by changes in the number of pay television customers.

Other Operating Expenses

        Other operating expenses for the years ended December 31, 2017 and 2016 amounted to $2,347,315 and $1,702,472, respectively, of which $1,685,484 and $1,025,304 relate to our Cablevision segment and $662,026 and $677,168 relate to our Cequel segment. Other operating expenses include staff costs and employee benefits including salaries of company employees and related taxes, benefits and other employee related expenses. Other operating expenses also include network management and field service costs, which represent costs associated with the maintenance of our broadband network, including costs of certain customer connections and other costs associated with providing and maintaining services to our customers.

        Customer installation and repair and maintenance costs may fluctuate as a result of changes in the level of activities and the utilization of contractors as compared to employees. Also, customer installation costs fluctuate as the portion of our expenses that we are able to capitalize changes. Costs associated with the initial deployment of new customer premise equipment necessary to provide broadband, pay television and telephony services are capitalized (asset-based). In circumstances where customer premise equipment 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, (premise-based). Network repair and maintenance and utility costs also fluctuate as capitalizable network upgrade and enhancement activity changes.

        Other operating expenses also include costs related to the operation and maintenance of our call center facilities that handle customer inquiries and billing and collection activities and sales and marketing costs, which include advertising production and placement costs associated with acquiring and retaining customers. These costs vary period to period and certain of these costs, such as sales and marketing, may increase with intense competition. Additionally, other operating expenses include various other administrative costs, including legal fees, and product development costs.

        The increase of $660,180 related to our Cablevision segment for the year ended December 31, 2017, net of inter-segment eliminations, as compared to the prior year is primarily due to the consolidation of the Cablevision results as of June 21, 2016, the date of the Cablevision Acquisition. Our 2016 results do not include $1,133,339 of other operating expenses recognized by Cablevision for

94


Table of Contents

the period January 1, 2016 through June 20, 2016. The remaining decrease of $473,159 is attributable to the following:

Cablevision segment:

Decrease primarily in employee related costs related to the elimination of certain positions, and lower net benefits, partially offset by merit increases

  $ (362,128 )

Decrease in costs primarily related to the sale of Newsday in July 2016

    (95,262 )

Decrease primarily related to maintenance agreements for equipment, as well as lower repairs and maintenance costs relating to our operations

    (55,847 )

Decrease in rent and insurance

    (18,052 )

Increase in contractor costs

    18,354  

Increase in professional fees

    16,567  

Increase in bad debt expense

    10,325  

Increase in fees for certain executive services provided by our parent entity (twelve months in 2017 compared to approximately six months in 2016)

    9,444  

Increase in sales and marketing costs

    4,677  

Increase in share-based compensation and long-term incentive plan awards expense

    4,103  

Other net decreases

    (5,340 )

  $ (473,159 )

        The decrease of $15,142 related to our Cequel segment for the year ended December 31, 2017, net of inter-segment eliminations, as compared to the prior year period is attributable to the following:

Cequel segment:

Decrease primarily in salaries and benefits related to the elimination of certain positions in connection with the initiatives to simplify the Company's organizational structure, partially offset by a decrease in capitalizable activity

  $ (56,381 )

Decrease in insurance costs

    (6,255 )

Decrease in contract labor costs

    (2,171 )

Increase in consulting and professional fees

    22,023  

Increase in share-based compensation and long-term incentive plan awards expense

    18,754  

Increase in sales and marketing costs

    3,267  

Increase in worker's compensation expenses

    2,082  

Net increase in property, general and sales and use taxes

    1,539  

Other net increases

    2,000  

  $ (15,142 )

Restructuring and Other Expense

        Restructuring and other expense for the year ended December 31, 2017 of $152,401 ($112,384 for our Cablevision segment and $40,017 for our Cequel segment) as compared to $240,395 for the year ended December 31, 2016 ($212,150 for our Cablevision segment and $28,245 for our Cequel segment). These amounts primarily relate to severance and other employee related costs resulting from headcount reductions related to initiatives which commenced in 2016 that are intended to simplify the Company's organizational structure. We currently anticipate that additional restructuring expenses will be recognized as we continue to analyze our organizational structure.

95


Table of Contents

Depreciation and Amortization

        Depreciation and amortization for the years ended December 31, 2017 and 2016 amounted to $2,930,571 and $1,700,306, respectively, of which $2,251,710 and $963,665 relates to our Cablevision segment and $678,861 and $736,641 relates to our Cequel segment.

        The increase in depreciation and amortization related to our Cablevision segment of $1,288,045 is primarily due to the consolidation of the Cablevision results as of June 21, 2016, the date of the Cablevision Acquisition. Our 2016 results do not include $414,550 of depreciation and amortization recognized by Cablevision for the period January 1, 2016 through June 20, 2016. The remaining increase of $873,495 is primarily attributable to the acceleration of amortization of its trade name intangible assets in connection with the announcement, on May 23, 2017, of the adoption of a global brand to replace the Optimum brand in the future, as well as depreciation on new asset additions. In December 2017, the Company made a decision to postpone the adoption of a global brand that would have replaced the Optimum brand, increasing the useful life of the Optimum trade name intangible asset to 5 years, which will reduce the future annual amortization expense related to the Optimum trade name.

        The decrease in depreciation and amortization related to our Cequel segment of $57,780 (8%) is due primarily to lower amortization expense for certain intangible assets that are being amortized using an accelerated method, partially offset by an increase resulting from revisions made to the fair value of assets acquired resulting from the finalization in the fourth quarter of 2016 of the purchase price allocation in connection with the Cequel Acquisition.

Adjusted EBITDA

        Adjusted EBITDA amounted to $3,981,410 and $2,417,878 for the years ended December 31, 2017 and 2016, of which $2,726,841 and $1,262,987 relates to our Cablevision segment and $1,254,569 and $1,154,891 relates to our Cequel segment.

        Adjusted EBITDA is a non-GAAP measure that is defined as net loss excluding income taxes, loss from discontinued operations, other non-operating income or expenses, loss on extinguishment of debt and write-off of deferred financing costs, gain (loss) on interest rate swap contracts, gain (loss) on derivative contracts, gain (loss) on investments, interest expense (including cash interest expense), interest income, depreciation and amortization (including impairments), share-based compensation expense, restructuring expense or credits and transaction expenses. See reconciliation of net loss to adjusted EBITDA above.

        The increase in adjusted EBITDA for the year ended December 31, 2017 as compare to the prior year was due to the consolidation of the Cablevision results as of June 21, 2016, the date of the Cablevision Acquisition and the increases in revenue and decreases in operating expenses (excluding depreciation and amortization, restructuring and other expense and share-based compensation), as discussed above.

Interest Expense, net

        Interest expense, net was $1,601,211 and $1,442,730, for the years ended December 31, 2017 and 2016, respectively, and includes interest on debt issued to finance the Cablevision Acquisition and Cequel Acquisition, as well as interest on debt assumed in connection with these acquisitions.

96


Table of Contents

        The increase of $158,481 for the year ended December 31, 2017 as compared to the prior year is attributable to the following:

Increase due to changes in average debt balances and interest rates on our indebtedness and collateralized debt

  $ 142,236  

Lower interest income

    11,890  

Other net increases, primarily amortization of deferred financing costs and original issue discounts

    4,355  

  $ 158,481  

        See "Liquidity and Capital Resources" discussion below for a detail of our borrower groups.

Gain on Investments, net

        Gain on investments, net for the years ended December 31, 2017 and 2016, of $237,354 and $141,896 consists primarily of the increase in the fair value of Comcast common stock owned by the Company for the periods. For 2016, the gain is for the period June 21, 2016 through December 31, 2016. The effects of these gains are partially offset by the losses on the related equity derivative contracts, net described below.

Loss on Derivative Contracts, net

        Loss on derivative contracts, net for the year ended December 31, 2017 amounted to $236,330 compared to $53,696 for the year ended December 31, 2016, and includes realized and unrealized losses due to the change in fair value of equity derivative contracts relating to the Comcast common stock owned by the Company. For 2016, the loss is for the period June 21, 2016 through December 31, 2016. The effects of these losses are offset by gains on investment securities pledged as collateral, which are included in gain on investments, net discussed above. The loss for the year ended December 31, 2017 also includes the realized loss on the settlement of certain put-call options of $97,410.

Gain (loss) on interest rate swap contracts

        Gain (loss) on interest rate swap contracts was $5,482 and $(72,961) for the years ended December 31, 2017 and 2016. These amounts represent the increase or decrease in fair value of the fixed to floating interest rate swaps entered into by our Cequel segment in September 2016. The objective of these swaps is to adjust the proportion of total debt that is subject to fixed and variable interest rates. These swap contracts are not designated as hedges for accounting purposes.

Loss on extinguishment of debt and write-off of deferred financing costs

        Loss on extinguishment of debt and write-off of deferred financing costs amounted to $600,240 and $127,649 for the year ended December 31, 2017 and 2016, respectively. The 2017 amount includes the premium of $513,723 related to the notes payable to affiliates and related parties that were converted into shares of the Company's common stock, $18,976 related to the Cablevision Extension Amendment and the redemption of senior notes, $28,684 related to the Cequel Extension Amendment and the redemption of senior notes and $38,858 related to premiums paid upon the early repayment of certain senior notes outstanding.

        Loss on extinguishment of debt amounted to $127,649 for the year ended December 31, 2016 and includes primarily the write-off of unamortized deferred financing costs and the unamortized discount relating to the prepayment of $1,290,500 outstanding under the term credit facility at Cablevision.

97


Table of Contents

Other Income (Loss), net

        Other income (loss), net was $(13,651) and $1,186, for the years ended December 31, 2017 and 2016, respectively. The 2017 amount includes the non-service cost components of the Company's pension expense of $11,863.

Income Tax Benefit

        The Company recorded income tax benefit of $2,862,352 for the year ended December 31, 2017. Pursuant to the enactment of the Tax Cuts and Jobs Act on December 22, 2017, the Company recorded a noncash deferred tax benefit of $2,332,677 to remeasure the net deferred tax liability to adjust for the reduction in the corporate federal income tax rate from 35% to 21% which is effective on January 1, 2018. Nondeductible share-based compensation expense for the year ended December 31, 2017 reduced income tax benefit by $22,938.

        The Company recorded income tax benefit of $259,666 for the year ended December 31, 2016. Nondeductible share-based compensation expense for the year ended December 31, 2016 reduced income tax benefit by $5,747.

        On June 9, 2016 the common stock of Cequel was contributed to the Company. On June 21, 2016, the Company completed its acquisition of Cablevision. Accordingly, Cequel and Cablevision joined the federal consolidated and certain state combined income tax returns of the Company. As a result, the applicate tax rate used to measure deferred tax assets and liabilities increased, resulting in a non-cash deferred income tax charge of $153,660 in the second quarter of 2016. In addition, there was no state income tax benefit on the pre-merger accrued interest at Neptune Finco Corp. ("Finco"), an indirect wholly-owned subsidiary of Altice N.V. formed to complete the financing for the Cablevision Acquisition and the merger with CSC Holdings, resulting in additional deferred tax expense of $18,542 for the year ended December 31, 2016.

98


Table of Contents

Results of Operations—Cablevision Systems Corporation

 
  Cablevision Systems Corporation(a)  
 
  Successor    
  Predecessor  
 
  June 21, 2016
to
December 31, 2016
   
  January 1, 2016
to
June 20, 2016
  Year Ended
December 31, 2015
 
 
   
 
 
   
 
 
  (Unaudited)
   
  (Unaudited)
 

Revenue(a):

                       

Residential:

                       

Pay TV

  $ 1,668,348       $ 1,494,186   $ 3,174,059  

Broadband

    817,160         702,811     1,389,447  

Telephony

    311,832         286,161     631,584  

Business services and wholesale

    468,632         411,102     834,154  

Advertising

    163,678         125,419     263,839  

Other

    14,402         117,925     252,462  

Total revenue

    3,444,052         3,137,604     6,545,545  

Operating expenses:

                       

Programming and other direct costs

    1,164,925         1,088,555     2,269,290  

Other operating expenses

    1,025,304         1,133,339     2,533,958  

Restructuring and other expense

    212,150         22,223     16,213  

Depreciation and amortization (including impairments)

    963,665         414,550     865,252  

Operating income

    78,008         478,937     860,832  

Other income (expense):

                       

Interest expense, net

    (606,347 )       (285,508 )   (584,839 )

Gain (loss) on investments, net

    141,896         129,990     (30,208 )

Gain (loss) on equity derivative contracts, net

    (53,696 )       (36,283 )   104,927  

Loss on extinguishment of debt and write-off of deferred financing costs

    (102,894 )           (1,735 )

Other income (expense), net

    1,186         1,224     (6,316 )

Income (loss) from continuing operations before income taxes

    (541,847 )       288,360     342,661  

Income tax benefit (expense)

    213,065         (124,848 )   (154,872 )

Income (loss) from continuing operations, net of income taxes

    (328,782 )       163,512     187,789  

Loss from discontinued operations, net of income taxes

                (12,541 )

Net income (loss)

    (328,782 )       163,512     175,248  

Net loss (income) attributable to noncontrolling interests

    (551 )       236     201  

Net income (loss) attributable to Cablevision stockholder(s)

  $ (329,333 )     $ 163,748   $ 175,449  

(a)
Reflects certain reclassifications to conform to the Altice USA presentation as a result of the adoption of ASC 606 and ASU No. 2017-07, which have not been reflected in the historical results presented in the Cablevision Systems Corporation's financial statements included herein.

(a)
Includes primarily dividends received on Comcast common stock owned by the Company.

(b)
Consists of unrealized and realized losses (gains) due to the change in fair value of equity derivative contracts relating to the Comcast common stock owned by the Company.

99


Table of Contents

The following is a reconciliation of net income (loss) to Adjusted EBITDA:

 
  Cablevision  
 
  Successor    
  Predecessor  
 
  June 21, 2016
to
December 31, 2016
   
  January 1, 2016
to
June 20, 2016
  Year Ended
December 31,
2015
 
 
  (Unaudited)
   
  (Unaudited)
   
 

Net income (loss)

  $ (328,782 )     $ 163,512   $ 175,248  

Loss from discontinued operations, net of income taxes

                12,541  

Income tax (benefit) expense

    (213,065 )       124,848     154,872  

Other income(a)

    (1,186 )       (1,224 )   6,316  

Loss on extinguishment of debt and write-off of deferred financing costs

    102,894             1,735  

Loss (gain) on equity derivative contracts, net(b)

    53,696         36,283     (104,927 )

Loss (gain) on investments, net

    (141,896 )       (129,990 )   30,208  

Interest expense, net

    606,347         285,508     584,839  

Depreciation and amortization (including impairments)

    963,665         414,550     865,252  

Restructuring and other expense

    212,150         22,223     16,213  

Share-based compensation

    9,164         25,231     65,286  

Adjusted EBITDA

  $ 1,262,987       $ 940,941   $ 1,807,583  

        The following table sets forth certain customer metrics (unaudited):

 
  Cablevision Systems Corporation  
 
  Years Ended
December 31,
  Net Increase
(Decrease)
 
 
  2016   2015   2016  
 
  (in thousands, except per customer amounts)
 

Homes passed(a)

    5,116     5,076     40  

Total customers relationships(b)

    3,141     3,115     26  

Residential

    2,879     2,858     21  

SMB

    262     258     4  

Residential customers(c):

                   

Pay TV

    2,428     2,487     (59 )

Broadband

    2,619     2,562     57  

Telephony

    1,962     2,007     (45 )

Residential triple product customer penetration(d):

    64.8 %   67.6 %      

Penetration of homes passed(e):

    61.4 %   61.4 %      

ARPU(f)

  $ 154.49   $ 150.61        

(a)
Represents the estimated number of single residence homes, apartments and condominium units passed by the cable distribution network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our cable distribution network.

(b)
Represents number of households/businesses that receive at least one of the Company's services.

(c)
Customers represent each customer account (set up and segregated by customer name and address), weighted equally and counted as one customer, regardless of size, revenue generated, or number of boxes, units, or outlets. In calculating the number of customers, we count all customers other than inactive/disconnected customers. Free accounts are included in the customer counts

100


Table of Contents

    along with all active accounts, but they are limited to a prescribed group. Most of these accounts are also not entirely free, as they typically generate revenue through pay-per-view or other pay services and certain equipment fees. Free status is not granted to regular customers as a promotion. In counting bulk residential customers, such as an apartment building, we count each subscribing family unit within the building as one customer, but do not count the master account for the entire building as a customer. We count a bulk commercial customer, such as a hotel, as one customer, and do not count individual room units at that hotel.

(d)
Represents the number of customers that subscribe to three of our services divided by total residential customer relationships.

(e)
Represents the number of total customer relationships divided by homes passed.

(f)
Calculated by dividing the average monthly revenue for the respective quarter (fourth quarter for annual periods) presented derived from the sale of broadband, pay television and telephony services to residential customers for the respective quarter by the average number of total residential customers for the same period.

Cablevision—Comparison of Results for the Periods June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016 to Results for the Year Ended December 31, 2015

Pay Television Revenue

        Pay television revenue amounted to $1,668,348 and $1,494,186 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $3,174,059 for the year ended December 31, 2015. Pay television revenue for the Successor and Predecessor periods in 2016 was impacted by a decline in pay television customers, a decrease due to a pay-per-view boxing event that took place in 2015, partially offset by increases in revenue due primarily to rate increases for certain pay television services implemented during the first quarter of 2016 and an increase in fees charged to restore suspended services.

        We believe our pay television customer declines noted in the table above are largely attributable to intense competition, particularly from Verizon, as well as competition from companies that deliver video content over the Internet directly to customers. Also, the declines are attributable to our disciplined pricing and credit policies. These factors are expected to continue to impact our ability to maintain or increase our existing customers and revenue in the future.

Broadband Revenue

        Broadband revenue amounted to $817,160 and $702,811 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $1,389,447 for the year ended December 31, 2015. Broadband revenue for the Successor and Predecessor periods in 2016 was impacted by rate increases for certain broadband services implemented during the first quarter of 2016, an increase in broadband customers, and an increase in fees charged to restore suspended services.

Telephony Revenue

        Telephony revenue amounted to $311,832 and $286,161 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $631,584 for the year ended December 31, 2015. Telephony revenue for the Successor and Predecessor periods in 2016 was impacted by a decline in telephony customers and a decline in international calling.

101


Table of Contents

Business Services Revenue

        Business services and wholesale revenue amounted to $468,632 and $411,102 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $834,154 for the year ended December 31, 2015. Business services and wholesale revenue for the Successor and Predecessor periods in 2016 was impacted by rate increases for certain broadband services implemented during the first quarter of 2016, an increase in broadband customers and an increase in Ethernet revenue from an increase in services installed, partially offset by reduced traditional voice and data services.

Advertising Revenue

        Advertising revenue amounted to $163,678 and $125,419 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $263,839 for the year ended December 31, 2015. Advertising revenue for the Successor and Predecessor periods in 2016 was impacted by an increase in advertising sales to the political sector.

Other Revenue

        Other revenue amounted to $14,402 and $117,925 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $252,462 for the year ended December 31, 2015. Other revenue for the Successor and Predecessor periods in 2016 includes revenue recognized by Newsday through July 7, 2016, affiliation fees paid by cable operators for carriage of our News 12 Networks and other revenue sources. On July 7, 2016, the Company sold a 75% interest in Newsday and as a result no longer consolidates its operating results. As of July 7, 2016, the Company's 25% interest in the operating results of Newsday is recorded on the equity basis.

Programming and Other Direct Costs

        Programming and other direct costs include cable programming costs, which are costs paid to programmers (net of amortization of any incentives received from programmers for carriage) for cable content (including costs of VOD and pay-per-view) and are generally paid on a per-customer basis.

        These costs typically rise due to increases in contractual rates and new channel launches and are also impacted by changes in the number of customers receiving certain programming services. These costs also include interconnection, call completion, circuit and transport fees paid to other telecommunication companies for the transport and termination of voice and data services, which typically vary based on rate changes and the level of usage by our customers. These costs also include franchise fees which are payable to the state governments and local municipalities where we operate and are primarily based on a percentage of certain categories of revenue derived from the provision of pay television service over our cable systems, which vary by state and municipality. These costs change in relation to changes in such categories of revenues or rate changes. These costs also included content, production and distribution costs of the Newsday business.

        Programming and other direct costs amounted to $1,164,925 and $1,088,555 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $2,269,290 for the year ended December 31, 2015. Programming and other direct costs for the Successor and Predecessor periods in 2016 were impacted by an increase in programming costs due primarily to contractual rate increases, partially offset by lower video customers. These costs were also impacted by the lower costs related to Newsday (due to the sale of our 75% interest in Newsday in July 2016), lower call completion and transport costs primarily due to lower level of activity, lower cost of sales related to wireless handset inventory and higher franchise and other fees due primarily to increases in rates in certain areas, partially offset by lower pay television customers.

102


Table of Contents

        Programming costs aggregated $978,120 and $883,792 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $1,796,021 for the year ended December 31, 2015. Our programming costs increased 4% for the 2016 periods due primarily to an increase in contractual programming rates and a pay-per-view boxing event in 2015, partially offset by a decrease in telephony customers.

Other Operating Expenses

        Other operating expenses include staff costs and employee benefits including salaries of company employees and related taxes, benefits and other employee-related expenses. Other operating expenses also include network management and field service costs, which represent costs associated with the maintenance of our broadband network, including costs of certain customer connections and other costs associated with providing and maintaining services to our customers which are impacted by general cost increases for contractors, insurance and other various expenses.

        Customer installation and repair and maintenance costs may fluctuate as a result of changes in the level of activities and the utilization of contractors as compared to employees. Also, customer installation costs fluctuate as the portion of our expenses that we are able to capitalize changes. Network repair and maintenance and utility costs also fluctuate as capitalizable network upgrade and enhancement activity changes.

        Other operating expenses also include costs related to the operation and maintenance of our call center facilities that handle customer inquiries and billing and collection activities and sales and marketing costs, which include advertising production and placement costs associated with acquiring and retaining customers. These costs vary period to period and certain costs, such as sales and marketing, may increase with intense competition. Additionally, other operating expenses include various other administrative costs, including legal fees, and product development costs.

        Other operating expenses amounted to $1,025,304 and $1,133,339 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $2,533,958 for the year ended December 31, 2015. Other operating expenses for the Successor and Predecessor periods in 2016 were impacted by a decrease in employee-related costs related to the elimination of certain positions, lower benefits and an increase in capitalizable activity, partially offset by merit increases. These costs were also impacted by the lower costs related to Newsday (due to the sale of our 75% interest in Newsday in July 2016), a decrease in share based compensation, a decrease in long-term incentive plan awards, lower legal costs, lower sales and marketing costs, lower repair and maintenance expenses, lower contractor costs, a settlement of a class action legal matter in 2015, partially offset by an increase in the management fee to Altice N.V.

Restructuring and Other Expense

        Restructuring and other expense amounted to $212,150 and $22,223 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $16,213 for the year ended December 31, 2015. Restructuring and other expense for the Successor 2016 period is primarily related to severance and other employee related costs resulting from headcount reductions related to initiatives which commenced in the Successor period that are intended to simplify the Company's organizational structure.

        The restructuring and other expense for the Predecessor 2016 period is primarily related to transaction costs of $19,924 incurred in connection with the Cablevision Acquisition and adjustments related to prior restructuring plans of $2,299. Restructuring and other expense for 2015 includes transaction costs incurred in connection with the Cablevision Acquisition of $17,862, net of adjustments related to prior restructuring plans of $1,649.

103


Table of Contents

Depreciation and Amortization

        Depreciation and amortization (including impairments) amounted to $963,665 and $414,550 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $865,252 for the year ended December 31, 2015. Depreciation and amortization for the Successor period in 2016 was impacted by an increase in related to the step-up in the carrying value of property, plant and equipment and amortizable intangible assets recorded in connection with the Cablevision Acquisition on June 21, 2016, partially offset by certain assets being retired or becoming fully depreciated.

Adjusted EBITDA

        Adjusted EBITDA amounted to $1,262,987 and $940,941 for the periods June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $1,807,583 for the year ended December 31, 2015. Adjusted EBITDA for the 2016 periods was impacted by an increase in revenue, and a decrease in operating expenses (excluding depreciation and amortization, restructuring and other expense and share-based compensation), as discussed above.

Interest Expense, net

        Interest expense amounted to $606,347 and $285,508 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, compared to $584,839 for the year ended December 31, 2015. Interest expense for the Successor 2016 period includes additional interest related to the debt incurred to finance the Cablevision Acquisition.

Gain (Loss) on Investments, net

        Gain (loss) on investments, net amounted to $141,896 and $129,990 for the period June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, and $(30,208) for the year ended December 31, 2015 and reflect the increase or decrease in the fair value of Comcast common stock owned by the Company. The effects of these gains (losses) are partially offset by the (losses) gains on the related equity derivative contracts, net described below.

Gain (Loss) on Equity Derivative Contracts, net

        Gain (loss) on equity derivative contracts, net amounted to $(53,696) and $(36,283) for the periods June 21, 2016 through December 31, 2016 and January 1, 2016 through June 20, 2016, respectively, and $104,927 for the year ended December 31, 2015.

        Gain (loss) on equity derivative contracts, net consists of unrealized and realized gains (losses) due to the change in fair value of the Company's equity derivative contracts relating to the Comcast common stock owned by the Company. The effects of these gains (losses) are offset by the (losses) gains on investment securities pledged as collateral, which are included in gain (loss) on investments, net discussed above.

Loss on Extinguishment of Debt and Write-off of Deferred Financing Costs

        Loss on extinguishment of debt and write-off of deferred financing costs amounted to $102,894 for the period June 21, 2016 through December 31, 2016 and $1,735 for the year ended December 31, 2015. The Successor 2016 amount includes the write-off of unamortized deferred financing costs and the unamortized discount related to the prepayment of $1,290,500 outstanding under the CSC Holdings, a wholly-owned subsidiary of Cablevision, term credit facility. The 2015 amount includes the write-off of unamortized deferred financing costs and the unamortized discount related to the $200,000 repayment of CSC Holdings term B loan facility.

104


Table of Contents

Income Tax Expense

        Income tax benefit (expense) amounted to $213,065 for the periods from June 21, 2016 through December 31, 2016 and $(124,848) for the period from January 1, 2016 through June 20, 2016. In the Successor period, excluding the impact of the nondeductible share-based compensation of $3,208, the effective tax rate would have been 40%. In the Predecessor period, certain acquisition-related costs were determined to be nondeductible, resulting in additional deferred tax expense of $9,392. Absent this item, the effective tax rate would have been 40%.

        Income tax expense of $154,872 for the year ended December 31, 2015, reflected an effective tax rate of 45%. In April 2015, corporate income tax changes were enacted for both New York State and the City of New York. Those changes included a provision whereby investment income will be subject to higher taxes. Accordingly, in the second quarter of 2015, Cablevision recorded deferred tax expense of $16,334 to remeasure the deferred tax liability for the investment in Comcast common stock and associated derivative securities. Also in 2015, Cablevision recorded tax benefit of $2,630 related to research credits. Absent these items, the effective tax rate for the year ended December 31, 2015 would have been 41%.

Loss From Discontinued Operations

        Loss from discontinued operations for the year ended December 31, 2015 amounted to $12,541, net of income taxes, and primarily reflects an expense related to the settlement of a legal matter relating to Rainbow Media Holdings LLC, a business whose operations were previously discontinued.

Supplemental Information—Unaudited Pro Forma Results for Altice USA

        We are providing the following information on a supplemental basis. The unaudited pro forma consolidated statements of operations for Altice USA are for informational purposes only. This information is the same as that presented in the final prospectus for our IPO. We believe that the Altice USA pro forma information is useful as it provides additional information given the significant impact of the acquisitions and a reflection of how the combined business performed year over year that is not readily discernible from the actual year over year comparison. We believe that a comparison of the Altice USA actual results and pro forma for the year ended December 31, 2016 to the Altice USA pro forma results for the year ended December 31, 2015 provides useful information because it reflects the business operations on a more comparable basis. The Altice USA pro forma statements of operations are unaudited and do not purport to reflect the results of operations that would have occurred if the Cequel Acquisition and Cablevision Acquisition had been consummated on the dates indicated above, nor does it purport to represent the results of operations of the Company for any future dates or periods.

Unaudited Pro Forma Results for the Year Ended December 31, 2016

        The following unaudited pro forma consolidated statement of operations of Altice USA, Inc. for the year ended December 31, 2016 is based on the audited historical consolidated financial statements of the Company and gives effect to the Cablevision Acquisition (as defined below) as if it had occurred on January 1, 2016. The unaudited pro forma net loss per share data for the year ended December 31, 2016 give effect to the issuances of common stock in connection with the organizational transactions that occurred prior to the Company's IPO, as discussed in Note 1 to the Company's audited consolidated financial statements, as if they occurred at January 1, 2016. The Company's historical consolidated results of operations for the year ended December 31, 2016 include the operating results of Cequel for the year ended December 31, 2016 and Cablevision for the period subsequent to the Cablevision Acquisition, June 21, 2016 to December 31, 2016, the "Cablevision Successor" period.

105


Table of Contents

        The accompanying unaudited pro forma consolidated statement of operations of Altice USA includes the accounts of Altice USA and its wholly-owned subsidiaries. All significant intercompany transactions and balances are eliminated in the consolidated financial statements.

        The accompanying unaudited pro forma consolidated statement of operations has been prepared based on assumptions deemed appropriate by the Company. The pro forma adjustments are described in the accompanying notes. The unaudited pro forma consolidated statement of operations is for informational purposes only and is supplemental information. The pro forma statement of operations is unaudited and does not purport to reflect the results of operations that would have occurred if the Cablevision Acquisition had been consummated on the date indicated above, nor does it purport to represent the results of operations of the Company for any future dates or periods.

        Future results may vary significantly from the information reflected in the unaudited pro forma consolidated statement of operations set forth below due to factors beyond the control of the Company.

        The unaudited pro forma consolidated statement of operations does not include any adjustment for costs that may result from integration activities or for synergies resulting from the acquisitions. In 2016, the Company recorded restructuring expenses resulting from initiatives that are intended to simplify the Company's organizational structure. No adjustments have been made to the pro forma statement of operations for these restructuring expenses. The unaudited pro forma statement of operations for the year ended December 31, 2016 does not include an estimated $33,501 of transaction costs incurred in connection with the Cablevision Acquisition.

Management Advisory and Consulting Services Agreement

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

Optimum Acquisition

        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 ("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 "Optimum Acquisition Consideration").

        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, Finco, an indirect wholly-owned subsidiary of Altice formed to complete the financing described herein and the merger with CSC

106


Table of Contents

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 following table provides the allocation of the total purchase price of $9,958,323 to the identifiable tangible and intangible assets and liabilities of Cablevision based on their respective fair values.

 
  Cablevision  
 
  Fair Values  
 
  (dollars in thousands)
 

Current assets

  $ 1,923,071  

Accounts receivable

    271,305  

Property, plant and equipment

    4,864,621  

Goodwill

    5,842,172  

Cable television franchise rights

    8,113,575  

Customer relationships

    4,850,000  

Trade names

    1,010,000  

Amortizable intangible assets

    23,296  

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  

107


Table of Contents


ALTICE USA, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2016
(dollars in thousands, except per share amounts)

 
  Historical(1)   Cablevision(2)   Pro Forma
Adjustments
  Pro forma  

Revenue

  $ 6,017,212   $ 3,137,604   $   $ 9,154,816  

Operating expenses:

                         

Programming and other direct costs

    1,899,994     1,088,555         2,988,549  

Other operating expenses

    1,713,708     1,133,339         2,847,047  

Restructuring and other expense          

    240,395     22,223     (32,844) (3)   229,774  

Depreciation and amortization (including impairments)

    1,700,306     414,550     369,428 (4)   2,484,284  

    5,554,403     2,658,667     336,584     8,549,654  

Operating income

    462,809     478,937     (336,584 )   605,162  

Other income (expense):

                         

Interest expense

    (1,456,541 )   (287,098 )   (20,032) (5)   (1,763,671 )

Interest income

    13,811     1,590     (12,151) (6)   3,250  

Gain on investments, net

    141,896     129,990         271,886  

Loss on equity derivative contracts, net

    (53,696 )   (36,283 )       (89,979 )

Loss on interest rate swap contracts

    (72,961 )           (72,961 )

Loss on extinguishment of debt and write-off of deferred financing costs

    (127,649 )           (127,649 )

Other income, net

    1,186     1,224         2,410  

    (1,153,954 )   (190,577 )   (32,183 )   (1,176,714 )

Income (loss) from continuing operations before income taxes

    (1,091,145 )   288,360     (368,767 )   (1,171,552 )

Income tax benefit (expense)

    259,666     (124,848 )   315,477 (7)   450,295  

Net income (loss)

    (831,479 )   163,512     (53,290 )   (721,257 )

Net loss (income) attributable to noncontrolling interests

    (551 )   236         (315 )

Net income (loss) attributable to Altice USA stockholders

  $ (832,030 ) $ 163,748   $ (53,290 ) $ (721,572 )

Pro forma basic and diluted net loss per share attributable to Altice USA stockholders(8)

                    $ (1.11 )

Pro forma basic and diluted weighted average common shares in thousands(8)

                      649,525  

Notes to Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2016

(1)
The Company's historical consolidated results of operations for the year ended December 31, 2016 include the operating results of Cablevision for the period subsequent to the Cablevision Acquisition, June 21, 2016 to December 31, 2016 (Successor period), and the operating results of Cequel for the year ended December 31, 2016.

108


Table of Contents

(2)
Represents the results of operations of Cablevision for the period prior to the Cablevision Acquisition, January 1, 2016 to June 20, 2016 (Predecessor period), based on the audited historical statement of operations and reflects certain reclassifications to conform to the Altice USA presentation as a result of the adoption of ASC 606 and ASU No. 2017-07 which have not been reflected in the historical results presented in the Cablevision Systems Corporation's financial statements included herein.

(3)
Restructuring and other expense.     Represents the elimination of incremental transaction costs of $32,844 which were directly related to the Cablevision Acquisition.

(4)
Depreciation and amortization.     Represents incremental depreciation and amortization that would have been recognized if the Cablevision Acquisition was completed on January 1, 2016 resulting from the step up in fair value of Cablevision's property, plant and equipment and identifiable intangible assets resulting from the application of business combinations accounting.

Full year 2016 pro forma depreciation and amortization based on fair value related to the Cablevision Acquisition

  $ 1,747,643  

Historical expense for period January 1 to June 20, 2016

    (414,550 )

Historical expense for June 21 to December 31, 2016 included in "Historical" column (based on fair value)

    (963,665 )

Total adjustment

  $ 369,428  

The adjustment for depreciation was estimated using an average useful life of approximately seven years calculated on a straight line basis for property, plant and equipment.


Customer relationships are amortized using an accelerated method (sum of the years' digits) to reflect the period over which the relationships are expected to generate cash flows. The following table summarizes the amortization expense related to customer relationships of $4,850,000 for Cablevision.
 
  Cablevision  

Pro forma Amortization of Customer Relationships:

       

Year 1

  $ 636,043  

Year 2

    590,163  

Year 3

    544,284  

Year 4

    498,404  

Year 5

    452,524  

Thereafter

    2,128,582  

The amortization of trade names related to Cablevision reflect an average useful life of 12 years, calculated on a straight line basis.

(5)
Interest expense.     Primarily represents the following adjustments:

(i)
the incremental increase in interest expense of $87,755 for the period January 1, 2016 through June 20, 2016 related to notes payable to affiliates aggregating $1,750,000 ($875,000 at 10.75% and $875,000 at 11.0%) to finance the Cablevision Acquisition.

(ii)
the reversal of $37,407 of interest expense and $3,194 of amortization of deferred financing costs associated with the CSC Holdings and Newsday credit facilities that were repaid on the Cablevision Acquisition Date.

(iii)
the decrease of $32,502 reflecting the accretion/amortization of fair value adjustments associated with the long-term debt assumed in connection with the Cablevision Acquisition

109


Table of Contents

      resulting from the application of business combinations accounting and the reversal of amortization of deferred financing cost associated with the long-term debt assumed. The long-term debt assumed was adjusted to fair value based on quoted market prices. The difference between the fair value and the face amount of each borrowing is accreted/amortized over the remaining term of each borrowing. This adjustment results in interest expense that effectively reflects current market interest rates rather than the stated interest rates.

(6)
Interest income.     Represents the elimination of interest income on the proceeds of the Cablevision Acquisition Notes that were held in escrow from the date of issuance to the Cablevision Acquisition Date.

(7)
Income tax expense.     The pro forma income tax adjustments represent (i) the income tax impact related to the pro forma adjustment discussed above of $147,507 at the combined federal and state statutory rate in effect during the period of 40%, (ii) the elimination of the one-time deferred tax expense of $153,660, included in the historical results resulting from the remeasurement of Cequel's deferred tax liabilities as a result of Cablevision joining the Altice USA consolidated tax group, (iii) the elimination of the one-time tax impact of $13,849 associated with the non-deductible transaction costs, included in the historical results and (iv) tax benefit of $461 associated with the Company not being subject to Section 162(m) of the Internal Revenue Code.

(8)
The basic weighted average number of shares used to compute basic and diluted net loss per share reflect the retroactive impact of the organizational transactions that occurred prior to the Company's IPO, as discussed in Note 1 to the September 30, 2017 financial statements.

Altice USA—Comparison of Actual Results for the Year Ended December 31, 2016 and Pro Forma Results for the Year Ended December 31, 2016 to Pro Forma Results for the Year Ended December 31, 2015.

Basis of Presentation

        The actual results of Altice USA for the year ended December 31, 2016 include the operating results of Cequel for the year ended December 31, 2016 and the operating results of Cablevision for the period from the date of the Cablevision Acquisition, June 21, 2016 through December 31, 2016. The consolidated pro forma results of Altice USA for the year ended December 31, 2016 have been derived from the unaudited pro forma consolidated statements of operations included elsewhere herein and give effect to the Cablevision Acquisition as if it had occurred on January 1, 2016. The consolidated pro forma results of Altice USA for the year ended December 31, 2015 give effect to the Cablevision Acquisition and the Cequel Acquisition as if they had occurred on January 1, 2015.

110


Table of Contents

Results of Operations for the Year Ended December 31, 2016 and 2015—Altice USA

 
  Altice USA  
 
  Historical   Pro Forma (Unaudited)  
 
  Year Ended
December 31,
2016
  Year Ended
December 31,
2016(a)
  Year Ended
December 31,
2015(a)
 

Revenue:

                   

Residential:

                   

Pay TV

  $ 2,788,873   $ 4,283,059   $ 4,291,699  

Broadband

    1,651,574     2,354,385     2,090,542  

Telephony

    465,771     751,932     795,406  

Business services and wholesale

    819,541     1,230,643     1,158,840  

Advertising

    252,049     377,468     351,505  

Other

    39,404     157,329     277,867  

Total revenue

    6,017,212     9,154,816     8,965,857  

Operating expenses:

                   

Programming and other direct costs

    1,911,230     2,988,549     2,982,005  

Other operating expenses

    1,702,472     2,847,047     3,487,308  

Restructuring and other expense (credits)

    240,395     229,774     (1,649 )

Depreciation and amortization (including impairments)          

    1,700,306     2,484,284     2,442,235  

Operating income

    462,809     605,162     55,958  

Other income (expense):

                   

Interest expense, net

    (1,442,730 )   (1,760,421 )   (1,715,950 )

Gain (loss) on investments, net

    141,896     271,886     (30,208 )

Gain (loss) on equity derivative contracts, net

    (53,696 )   (89,979 )   104,927  

Loss on interest rate swap contracts

    (72,961 )   (72,961 )    

Loss on extinguishment of debt and write-off of deferred financing costs

    (127,649 )   (127,649 )   (1,735 )

Other income, net

    1,186     2,410     (6,316 )

Loss from continuing operations before income taxes

    (1,091,145 )   (1,171,552 )   (1,593,324 )

Income tax benefit

    259,666     450,295     498,567  

Loss from continuing operations, net of income taxes

    (831,479 )   (721,257 )   (1,094,757 )

Loss from discontinued operations, net of income taxes

            (12,541 )

Net loss

    (831,479 )   (721,257 )   (1,107,298 )

Net loss (income) attributable to noncontrolling interests

    (551 )   (315 )   201  

Net loss attributable to Altice USA stockholders

  $ (832,030 ) $ (721,572 ) $ (1,107,097 )

(a)
Reflects certain reclassifications to conform to the Altice USA presentation as a result of the adoption of ASC 606 and ASU No. 2017-07 which have not been reflected in the historical results presented in the Cablevision Systems Corporation's financial statements included herein.

111


Table of Contents

The following is a reconciliation of net loss to Adjusted EBITDA:

 
  Altice USA  
 
  Historical   Pro Forma (Unaudited)  
 
  Year Ended
December 31,
2016
  Year Ended
December 31,
2016(c)
  Year Ended
December 31,
2015(c)
 

Net loss

  $ (831,479 ) $ (721,257 ) $ (1,107,298 )

Loss from discontinued operations, net of income taxes

            12,541  

Income tax benefit

    (259,666 )   (450,295 )   (498,567 )

Other income, net(a)

    (1,186 )   (2,410 )   6,315  

Loss on extinguishment of debt and write-off of deferred financing costs

    127,649     127,649     1,735  

Loss on interest rate swap contracts

    72,961     72,961      

Loss (gain) on equity derivative contracts, net(b)

    53,696     89,979     (104,927 )

Loss (gain) on investments, net

    (141,896 )   (271,886 )   30,208  

Interest expense, net

    1,442,730     1,760,421     1,715,950  

Depreciation and amortization (including impairments)

    1,700,306     2,484,284     2,442,235  

Restructuring and other expenses (credits)

    240,395     229,774     (1,649 )

Share-based compensation

    14,368     39,599     285,337  

Adjusted EBITDA

  $ 2,417,878   $ 3,358,819   $ 2,781,880  

(a)
Includes primarily dividends received on Comcast common stock owned by the Company.

(b)
Consists of unrealized and realized losses (gains) due to the change in fair value of equity derivative contracts relating to the Comcast common stock owned by the Company.

(c)
Reflects certain reclassifications to conform to the Altice USA presentation as a result of the adoption of ASC 606 and ASU No. 2017-07 which have not been reflected in the historical results presented in the Cablevision Systems Corporation's financial statements included herein.

        The following table sets forth certain customer metrics by segment (unaudited):

 
   
   
   
  Pro Forma as of December 31,
2015
   
 
 
  As of December 31, 2016    
 
 
  Net
Increase
(Decrease)
 
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total  

Homes passed(a)

    5,116     3,407     8,524     5,076     3,352     8,428     96  

Total customer relationships(b)(c)

    3,141     1,751     4,892     3,115     1,712     4,827     65  

Residential

    2,879     1,649     4,528     2,858     1,618     4,475     53  

SMB

    262     102     364     258     94     352     12  

Residential customers:

                                           

Pay TV

    2,428     1,107     3,535     2,487     1,154     3,640     (105 )

Broadband

    2,619     1,344     3,963     2,562     1,276     3,838     125  

Telephony

    1,962     597     2,559     2,007     581     2,588     (29 )

Residential triple product customer penetration(d):

    64.8 %   25.5 %   50.5 %   67.6 %   25.4 %   52.3 %   (1.8 )%

Penetration of homes passed(e):

    61.4 %   51.4 %   57.4 %   61.4 %   51.1 %   57.3 %   0.1 %

ARPU(f)

  $ 154.49   $ 109.30   $ 138.07   $ 150.61   $ 104.04   $ 133.79   $ 4.28  

(a)
Represents the estimated number of single residence homes, apartments and condominium units passed by the cable distribution network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our

112


Table of Contents

    cable distribution network. For Cequel, broadband services were not available to approximately 100 homes passed and telephony services were not available to approximately 500 homes passed.

(b)
Represents number of households/businesses that receive at least one of the Company's services.

(c)
Customers represent each customer account (set up and segregated by customer name and address), weighted equally and counted as one customer, regardless of size, revenue generated, or number of boxes, units, or outlets. In calculating the number of customers, we count all customers other than inactive/disconnected customers. Free accounts are included in the customer counts along with all active accounts, but they are limited to a prescribed group. Most of these accounts are also not entirely free, as they typically generate revenue through pay-per-view or other pay services and certain equipment fees. Free status is not granted to regular customers as a promotion. In counting bulk residential customers, such as an apartment building, we count each subscribing family unit within the building as one customer, but do not count the master account for the entire building as a customer. We count a bulk commercial customer, such as a hotel, as one customer, and do not count individual room units at that hotel.

(d)
Represents the number of customers that subscribe to three of our services divided by total residential customer relationships.

(e)
Represents the number of total customer relationships divided by homes passed.

(f)
Calculated by dividing the average monthly revenue for the respective quarter (fourth quarter for annual periods) presented derived from the sale of broadband, pay television and telephony services to residential customers for the respective quarter by the average number of total residential customers for the same period.

The following table sets forth certain operating information by segment for the year ended December 31, 2016:

 
  December 31, 2016  
 
  Cablevision   Cequel   Total  

Revenue(a):

                   

Residential:

                   

Pay TV

  $ 1,668,348   $ 1,120,525   $ 2,788,873  

Broadband

    817,160     834,414     1,651,574  

Telephony

    311,832     153,939     465,771  

Business services and wholesale

    468,632     350,909     819,541  

Advertising

    163,678     88,371     252,049  

Other

    14,402     25,002     39,404  

Total revenue

    3,444,052     2,573,160     6,017,212  

Operating expenses:

                   

Programming and other direct costs

    1,164,925     746,305     1,911,230  

Other operating expenses

    1,025,304     677,168     1,702,472  

Restructuring and other expense

    212,150     28,245     240,395  

Depreciation and amortization (including impairments)

    963,665     736,641     1,700,306  

Operating income

  $ 78,008   $ 384,801   $ 462,809  

(a)
Certain reclassifications have been made to previously reported amounts by product to reflect the current presentation.

113


Table of Contents

        The following table sets forth certain operating information by segment on a pro forma basis (unaudited):

 
  Pro forma December 31, 2016   Pro forma December 31, 2015  
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total  

Revenue:

                                     

Residential:

                                     

Pay TV

  $ 3,162,534   $ 1,120,525   $ 4,283,059   $ 3,174,059   $ 1,117,640   $ 4,291,699  

Broadband

    1,519,971     834,414     2,354,385     1,389,447     701,094     2,090,541  

Telephony

    597,993     153,939     751,932     631,584     163,821     795,405  

Business services and wholesale

    879,734     350,909     1,230,643     834,154     324,686     1,158,840  

Advertising

    289,097     88,371     377,468     263,839     87,666     351,505  

Other

    132,327     25,002     157,329     252,462     25,405     277,867  

Total revenue

    6,581,656     2,573,160     9,154,816     6,545,545     2,420,312     8,965,857  

Operating expenses:

                                     

Programming and other direct costs

    2,253,480     735,069     2,988,549     2,269,290     712,715     2,982,005  

Other operating expenses

    2,158,643     688,404     2,847,047     2,533,958     953,350     3,487,308  

Restructuring and other expense (credits)

    201,529     28,245     229,774     (1,649 )       (1,649 )

Depreciation and amortization (including impairments)

    1,747,643     736,641     2,484,284     1,740,996     701,239     2,442,235  

Operating income (loss)

  $ 220,361   $ 384,801   $ 605,162   $ 2,950   $ 53,008   $ 55,958  

         Altice USA—Comparison of Actual Results for the Year Ended December 31, 2016 and Pro Forma Results for the Year Ended December 31, 2016 to Pro Forma Results for the Year Ended December 31, 2015

Pay Television Revenue

    Actual 2016

        Pay television revenue for the year ended December 31, 2016 was $2,788,873, of which $1,668,348 was derived from the Cablevision segment from the date of its acquisition and $1,120,525 relates to our Cequel segment. Pay television is derived principally through monthly charges to residential subscribers of our pay television services. Revenue increases are derived primarily from rate increases, increases in the number of subscribers, including additional services sold to our existing subscribers, and programming package upgrades.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, pay television revenue amounted to $4,283,059 and $4,291,699 for the year ended December 31, 2016 and 2015, respectively. The decrease of $8,640 is comprised of a pro forma decrease of $11,525 for our Cablevision segment, partially offset by a pro forma increase of $2,885 for our Cequel segment.

114


Table of Contents

        On a pro forma basis, pay television revenue for our Cablevision segment amounted to $3,162,534 and $3,174,059 for the years ended December 31, 2016 and 2015, respectively. The pro forma decrease of $11,525 was due primarily to a decline in pay television customers and a decrease due to a pay-per-view boxing event that took place in 2015. Partially offsetting these decreases were increases in revenue as compared to the prior year due primarily to rate increases for certain pay television services implemented during the first quarter of 2016 and an increase in fees charged to restore suspended services.

        On a pro forma basis, pay television revenue for our Cequel segment amounted to $1,120,525 and $1,117,640 for the years ended December 31, 2016 and 2015, respectively. The pro forma increase of $2,885 was due primarily to increases in revenue resulting from certain rate increases (including an increase for retransmission programming and sports programming charges), the impact of incremental pay television service level changes and an increase in HD/DVR service revenue, partially offset by a decline in pay television customers, a decrease in premium, pay-per-view and VOD purchases, and a decrease in converter rental revenue as compared to the 2015 period.

        We believe our pay television customer declines noted in the table above are largely attributable to competition, particularly from Verizon in our Cablevision footprint and DBS providers in our Cequel footprint, as well as competition from companies that deliver video content over the Internet directly to customers. These factors are expected to continue to impact our ability to maintain or increase our existing customers and revenue in the future.

Broadband Revenue

    Actual 2016

        Broadband revenue for the year ended December 31, 2016 was $1,651,574 of which $817,160 was derived from the Cablevision segment from the date of its acquisition and $834,414 relates to Cequel. Broadband revenue is derived principally through monthly charges to residential subscribers of our broadband services. Revenue increases are derived primarily from rate increases, increases in the number of subscribers, including additional services sold to our existing subscribers, and speed tier upgrades.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, broadband revenue amounted to $2,354,385 and $2,090,542 for the years ended December 31, 2016 and 2015, respectively. On a pro forma basis, broadband revenue increased $263,843 (13%) for the year ended December 31, 2016 as compared the prior year and is comprised of a pro forma increase of $130,524 (9%) for our Cablevision segment and a pro forma increase of $133,320 (19%) for our Cequel segment.

        On a pro forma basis, broadband revenue for our Cablevision segment amounted to $1,519,971 and $1,389,447 for the years ended December 31, 2016 and 2015, respectively. The pro forma increase of $130,524 (9%) was due to rate increases for certain broadband services implemented during the first quarter of 2016, an increase in broadband customers, and an increase in fees charged to restore suspended services.

        On a pro forma basis, broadband revenue for our Cequel segment amounted to $834,414 and $701,094 for the years ended December 31, 2016 and 2015, respectively. The pro forma increase of $133,320 (19%) was due primarily to an increase in broadband customers, an increase in rates, an increase resulting from the impact of service level changes and an increase in residential home networking revenue.

115


Table of Contents

Telephony Revenue

    Actual 2016

        Telephony revenue for the year ended December 31, 2016 was $465,771 of which $311,832 was derived from the Cablevision segment from the date of its acquisition and $153,939 relates to Cequel. Telephony revenue is derived principally through monthly charges to residential subscribers of our telephony services. Revenue increases are derived primarily from rate increases, increases in the number of subscribers, and additional services sold to our existing subscribers.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, telephony revenue amounted to $751,932 and $795,406 for the years ended December 31, 2016 and 2015, respectively. On a pro forma basis, telephony revenue decreased $43,474 (5%) for the year ended December 31, 2016 as compared to 2015 and is comprised of a pro forma decrease of $33,591 (5%) and $9,882 (6%) for our Cablevision and Cequel segment, respectively.

        On a pro forma basis, telephony revenue for our Cablevision segment amounted to $597,993 and $631,584 for the years ended December 31, 2016 and 2015, respectively. The pro forma decrease of $33,591 (5%) was due primarily to a decline in telephony customers and a decline in international calling.

        On a pro forma basis, telephony revenue for our Cequel segment amounted to $153,939 and $163,821 for the years ended December 31, 2016 and 2015, respectively. The pro forma decrease of $9,882 (6%) was due primarily to lower rates offered to customers.

Business Services and Wholesale Revenue

    Actual 2016

        Business services and wholesale revenue for the year ended December 31, 2016 was $819,541 of which $468,632 was derived from the Cablevision segment from the date of its acquisition and $350,909 relates to Cequel. Business services and wholesale revenue is derived primarily from the sale of fiber based telecommunications services to the business market, and the sale of broadband, pay television and telephony services to SMBs.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, business services and wholesale revenue amounted to $1,230,643 and $1,158,840 for the years ended December 31, 2016 and 2015, respectively. On a pro forma basis, business services and wholesale revenue increased $71,803 (6%) for year ended December 31, 2016 as compared to 2015 and is comprised of a pro forma increase of $45,580 (5%) for our Cablevision segment and a pro forma increase of $26,223 (8%) for our Cequel segment.

        On a pro forma basis, business services and wholesale revenue for our Cablevision segment amounted to $879,734 and $834,154 for the years ended December 31, 2016 and 2015, respectively. The pro forma increase of $45,580 (5%) was due primarily to rate increases for certain broadband services implemented during the first quarter of 2016, and increase in broadband customers and an increase in Ethernet revenue resulting from a larger number of services installed, partially offset by reduced traditional voice and data services.

        On a pro forma basis, business services and wholesale revenue for our Cequel segment amounted to $350,909 and $324,686 for the years ended December 31, 2016 and 2015, respectively. The pro forma increase of $26,223 (8%) was primarily due to higher rates and a larger number of customers for broadband services, higher rates and a larger number of customers for telephony services, an increase in certain video rates (including an increase for retransmission programming charges), and an increase

116


Table of Contents

in revenue from premium, pay-per-view and VOD purchases. Offsetting these increases was a decrease in high-speed commercial carrier services.

Advertising Revenue

    Actual 2016

        Advertising services revenue for the year ended December 31, 2016 was $252,049 of which $163,678 was derived from the Cablevision segment from the date of its acquisition and $88,371 was derived from our Cequel segment. Advertising services revenue is primarily derived from the sale of advertising time available on the programming carried on our cable television systems.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, advertising revenue amounted to $377,468 and $351,505 for the years ended December 31, 2016 and 2015, respectively. On a pro forma basis, advertising revenue increased $25,963 (7%) for the year ended December 31, 2016 as compared to 2015 and is comprised of a pro forma increase of $25,258 (10%) for our Cablevision segment and a pro forma increase of $705 (1%) for our Cequel segment.

        On a pro forma basis, advertising revenue for our Cablevision segment amounted to $289,097 and $263,839 for the years ended December 31, 2016 and 2015, respectively. The pro forma increase in advertising revenue of $25,258 (10%) for our Cablevision segment was due primarily to an increase in advertising sales to the political sector.

        On a pro forma basis, advertising revenue for our Cequel segment amounted to $88,371 and $87,666 for the years ended December 31, 2016 and 2015, respectively, a pro forma increase of $705 (1%).

Other Revenue

    Actual 2016

        Other revenue for the year ended December 31, 2016 was $39,404 of which $14,402 was derived from the Cablevision segment from the date of its acquisition and $25,002 was derived from our Cequel segment. Other revenue primarily includes revenue recognized by Newsday, which was consolidated through July 7, 2016, affiliation fees paid by cable operators for carriage of our News 12 Networks, and other miscellaneous revenue streams.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, other revenue amounted to $157,329 and $277,867 for the years ended December 31, 2016 and 2015, respectively. On a pro forma basis, other revenue decreased $120,538 (43%) for the year ended December 31, 2016 as compared to 2015 and is comprised of a pro forma decrease of $120,135 (48%) for our Cablevision segment and a pro forma decrease of $403 (2%) for our Cequel segment.

        On a pro forma basis other revenue for our Cablevision segment amounted to $132,327 and $252,462 for the years ended December 31, 2016 and 2015, respectively. The pro forma decrease of $120,135 (48%) was primarily due to Cablevision no longer consolidating the operating results of Newsday as a result of the sale of a 75% interest in Newsday, effective July 7, 2016. The Company's 25% interest in the operating results of Newsday is recorded on the equity basis.

        On a pro forma basis, other revenue for our Cequel segment amounted to $25,002 and $25,405 for the years ended December 31, 2016 and 2015, respectively, a pro forma decrease of $403 (2%).

117


Table of Contents

Programming and Other Direct Costs

    Actual 2016

        Programming and other direct costs for the year ended December 31, 2016 amounted to $1,911,230 of which $1,164,925 relate to our Cablevision segment from the date of acquisition and $746,305 relate to our Cequel segment. Programming and other direct costs include cable programming costs, which are costs paid to programmers (net of amortization of any incentives received from programmers for carriage) for cable content (including costs of VOD and pay-per-view) and are generally paid on a per-subscriber basis. These costs typically rise due to increases in contractual rates and new channel launches and are also impacted by changes in the number of customers receiving certain programming services. These costs also include interconnection, call completion, circuit and transport fees paid to other telecommunication companies for the transport and termination of voice and data services, which typically vary based on rate changes and the level of usage by our customers. These costs also include franchise fees which are payable to the state governments and local municipalities where we operate and are primarily based on a percentage of certain categories of revenue derived from the provision of pay television service over our cable systems, which vary by state and municipality. These costs change in relation to changes in such categories of revenues or rate changes.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, programming and other direct costs amounted to $2,988,549 and $2,982,005 for the years ended December 31, 2016 and 2015, respectively. Programming and other direct costs on a pro forma basis amounted to $2,253,480 and $2,269,290 for our Cablevision segment and amounted to $735,069 and $712,715 for our Cequel segment for the years ended December 31, 2016 and 2015, respectively. The pro forma increase of $6,544 is attributable to the following:

Cablevision segment:

       

Decrease in costs primarily related to the sale of Newsday in July 2016

  $ (54,133 )

Decrease in call completion and transport costs primarily due to lower level of activity

    (20,443 )

Decrease in cost of sales (which includes a lower cost or market valuation adjustment of $17,382 related to wireless handset inventory from 2015, partially offset by the bulk sale of handset inventory of $5,445 during the first quarter of 2016)

    (10,238 )

Increase in franchise and other fees due primarily to increases in rates in certain areas, partially offset by lower video customers

    3,140  

Increase in programming costs due primarily to contractual rate increases, partially offset by lower video customers

    65,760  

Other net increases

    104  

    (15,810 )

Cequel segment:

       

Increase in programming costs due primarily to contractual rate increases, partially offset by lower video customers. 

    42,325  

Decrease in digital programming, premium channels and pay-per-view

    (8,932 )

Decrease in costs associated with carrier circuits and local exchange carrier costs

    (7,015 )

Decrease in subscriber line costs associated with Operation Reliant (as later defined)

    (330 )

Other net decreases

    (3,694 )

    22,354  

  $ 6,544  

118


Table of Contents

    Programming costs

        Programming costs aggregated $1,567,688 for the year ended December 31, 2016 on an actual basis and on a pro forma basis aggregated $2,451,480 and $2,353,936 for the years ended December 31, 2016 and 2015, respectively. Our programming costs increased 4% on a pro forma basis for the year ended December 31, 2016 due primarily to an increase in contractual programming rates, partially offset by a decrease in pay television customers. Our programming costs in 2017 will continue to be impacted by changes in programming rates, which we expect to increase by high single digits, and by changes in the number of pay television customers.

Other Operating Expenses

    Actual 2016

        Other operating expenses for the year ended December 31, 2016 were $1,702,472, of which $1,025,304 relate to our Cablevision segment from the date of acquisition and $677,168 relate to our Cequel segment. Other operating expenses include staff costs and employee benefits including salaries of company employees and related taxes, benefits and other employee related expenses. Other operating expenses also include network management and field service costs, which represent costs associated with the maintenance of our broadband network, including costs of certain customer connections and other costs associated with providing and maintaining services to our customers which are impacted by general cost increases for contractors, insurance and other various expenses.

        Customer installation and repair and maintenance costs may fluctuate as a result of changes in the level of activities and the utilization of contractors as compared to employees. Also, customer installation costs fluctuate as the portion of our expenses that we are able to capitalize changes. Network repair and maintenance and utility costs also fluctuate as capitalizable network upgrade and enhancement activity changes.

        Other operating expenses also include costs related to the operation and maintenance of our call center facilities that handle customer inquiries and billing and collection activities and sales and marketing costs, which include advertising production and placement costs associated with acquiring and retaining customers. These costs vary period to period and certain of these costs, such as sales and marketing, may increase with intense competition. Additionally, other operating expenses include various other administrative costs, including legal fees, and product development costs.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, other operating expenses amounted to $2,847,047 and $3,487,308 for the years ended December 31, 2016 and 2015, respectively. Other operating expenses on a pro forma basis amounted to $2,158,643 and $2,533,958 for our Cablevision segment and amounted to $688,404 and $953,350 for our Cequel segment for the years ended December 31, 2016 and 2015, respectively. The

119


Table of Contents

pro forma decrease of $640,261 (18%) for the year ended December 31, 2016 is attributable to the following:

Cablevision segment:

       

Decrease primarily in employee related costs related to the elimination of certain positions, lower net benefits and an increase in capitalizable activity, partially offset by merit increases

  $ (184,687 )

Decrease in costs primarily related to the sale of Newsday in July 2016

    (73,650 )

Decrease in share-based compensation

    (26,788 )

Decrease in expenses related to long-term incentive plan awards

    (14,827 )

Decrease in legal costs

    (23,878 )

Decrease in sales and marketing costs

    (20,875 )

Decrease in repairs and maintenance costs relating to our operations and facilities

    (17,153 )

Decrease in contractor costs due primarily to lower truck rolls

    (10,611 )

Settlement of a class action legal matter in 2015

    (9,500 )

Decrease in product development costs and product consulting fees

    (4,215 )

Increase in Altice management fee for certain executive services

    10,556  

Other net increases

    313  

    (375,315 )

Cequel segment:

       

Decrease in share-based compensation

    (214,848 )

Decrease in employee salaries and benefits including bonus, overtime and other employee related costs primarily relating to the decrease in headcount occurring subsequent to the Cequel Acquisition

    (17,984 )

Decrease in the cost of residential customer installations

    (10,120 )

Decrease in consulting and professional fees

    (9,847 )

Decrease in management fee relating to certain executive, administrative and managerial services provided to the Company prior to the Cequel Acquisition

    (9,987 )

Decrease in marketing costs

    (9,424 )

Decrease in general and administrative costs

    (8,194 )

Decrease in fleet operating costs

    (2,261 )

Increase in group health insurance costs

    9,829  

Increase in Altice management fee for certain executive services

    9,704  

Other net decreases

    (1,814 )

    (264,946 )

  $ (640,261 )

Restructuring and Other Expense (Credits)

    Actual 2016

        Restructuring and other expense for the year ended December 31, 2016 of $240,395 ($212,150 for our Cablevision segment and $28,245 for our Cequel segment) primarily relate to severance and other employee related costs resulting from headcount reductions related to initiatives which commenced in 2016 that are intended to simplify the Company's organizational structure. We currently anticipate that additional restructuring expenses will be recognized as we continue to analyze our organizational structure.

120


Table of Contents

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, restructuring and other expense (credits) for the years ended December 31, 2016 and 2015 amounted to $229,774 ($201,529 for our Cablevision segment and $28,245 for our Cequel segment) and $(1,649) for our Cablevision segment, respectively.

        The pro forma restructuring expense for 2016 is primarily related to severance and other employee related costs resulting from headcount reductions related to initiatives which commenced in 2016 that are intended to simplify the Company's organizational structure at both Cablevision and Cequel. The restructuring credit for 2015 related to prior restructuring plans at Cablevision.

Depreciation and Amortization

    Actual 2016

        Depreciation and amortization (including impairments) for the year ended December 31, 2016 amounted to $1,700,306, of which $963,665 related to our Cablevision segment from the date of acquisition and $736,641 related to our Cequel segment. Depreciation and amortization for 2016 includes depreciation and amortization related to the step-up in the carrying value of property, plant and equipment and amortizable intangible assets recorded in connection with the Cablevision Acquisition on June 21, 2016 and the Cequel Acquisition on December 21, 2015, partially offset by certain assets being retired or becoming fully depreciated.

        On May 23, 2017, Altice N.V. announced the adoption of a global brand which will replace the Optimum and Suddenlink brands in the future, reducing the remaining useful lives of our trade name intangibles, which will increase amortization expense.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, depreciation and amortization (including impairments) amounted to $2,484,284 and $2,442,235 for the years ended December 31, 2016 and 2015, respectively. The pro forma increase of $42,049 (2%) for the year ended December 31, 2016 is comprised of a $6,647 pro forma increase for our Cablevision segment and a pro forma increase of $35,402 (5%) for our Cequel segment. The pro forma increase for both segments is primarily due to depreciation on new asset additions, partially offset by lower depreciation for certain assets being retired or becoming fully depreciated.

Adjusted EBITDA

    Actual 2016

        Adjusted EBITDA for the year ended December 31, 2016 amounted to $2,417,878. Adjusted EBITDA is a non-GAAP measure that is defined as net loss excluding income taxes, loss from discontinued operations, other non-operating income or expenses, loss on extinguishment of debt and write-off of deferred financing costs, loss on interest rate swap contracts, 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, restructuring expense or credits and transaction expenses. See reconciliation of net loss to adjusted EBITDA above.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, adjusted EBITDA amounted to $3,358,819 and $2,781,880 for the years ended December 31, 2016 and 2015, respectively. The pro forma increase of $576,939 (21%) consists of a pro forma increase of $371,115 (21%) for our Cablevision segment and a pro forma increase of

121


Table of Contents

$205,824 (21%) for our Cequel segment. The pro forma increase was due primarily to an increase in revenue, and a decrease in operating expenses (excluding depreciation and amortization, restructuring and other expense and share-based compensation), as discussed above.

Interest Expense, net

    Actual 2016

        Interest expense, net was $1,442,730 for the year ended December 31, 2016 and includes interest on debt issued to finance the Cablevision Acquisition and Cequel Acquisition, as well as interest on debt assumed in connection with these acquisitions.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, interest expense, net amounted to $1,760,421 and $1,715,950 for the years ended December 31, 2016 and 2015, respectively. The pro forma increase of $44,471 (3%) is primarily attributable to an increase of $33,549 due to the change in average debt balances, $792 due primarily to an increase in the amortization of deferred financing costs and discounts/premiums resulting recording debt at fair value in connection with the Cablevision and Cequel Acquisitions, partially offset by an increase in interest income of $2,068.

        See "Liquidity and Capital Resources" discussion below for a detail of our borrower groups.

Gain on Investments, net

    Actual 2016

        Gain on investments, net for the year ended December 31, 2016 of $141,896 consists primarily of the increase in the fair value of Comcast common stock owned by the Company for the period from the date of the Cablevision Acquisition. The effects of these gains are partially offset by the losses on the related equity derivative contracts, net described below.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, gain (loss) on investments, net for the years ended December 31, 2016 and 2015 amounted to $271,886 and $(30,208), respectively, assuming the Cablevision Acquisition occurred on January 1, 2015 and consists primarily of the increase or decrease in the fair value of Comcast common stock owned by the Company. The effects of these gains (losses) are partially offset by the (losses) gains on the related equity derivative contracts, net described below.

Gain (Loss) on Equity Derivative Contracts, net

    Actual 2016

        Loss on equity derivative contracts, net for the year ended December 31, 2016 of $(53,696) consists of unrealized and realized gains (losses) due to the change in fair value of equity derivative contracts relating to the Comcast common stock owned by the Company for the period from the date of the Cablevision Acquisition. The effects of these loss are offset by the gain on investment securities pledged as collateral, which are included in gain (loss) on investments, net discussed above.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, gain (loss) on equity derivative contracts, net for the years ended December 31, 2016 and 2015 amounted to $(89,979) and $104,927, respectively, assuming the Cablevision Acquisition occurred on January 1, 2015 and consists of unrealized and realized gains

122


Table of Contents

(losses) due to the change in fair value of equity derivative contracts relating to the Comcast common stock owned by the Company.

Loss on interest rate swap contracts

        Loss on interest rate swap contracts was $72,961 for the year ended December 31, 2016 on an actual and pro forma basis and represents the decrease in fair value of the fixed to floating interest rate swaps entered into by our Cequel segment in June 2016. The objective of these swaps is to cover the exposure to changes in the market interest rate of the $1,500,000 principal amount of the Cequel 2026 Senior Secured Notes (as defined below). These swap contracts are not designated as hedges for accounting purposes.

Loss on Extinguishment of Debt and Write-off of Deferred Financing Costs

        Loss on extinguishment of debt and write-off of deferred financing costs for the year ended December 31, 2016 of $127,649 includes primarily the write-off of unamortized deferred financing costs and the unamortized discount related to the prepayment of $1,290,500 outstanding under the term credit facility at Cablevision. On a pro forma basis, loss on extinguishment of debt and write-off of deferred financing costs for the year ended December 31, 2015 was $1,735.

Income Tax Expense

    Actual 2016

        Income tax benefit for the year ended December 31, 2016 amounted to $259,666. In connection with the acquisition of Cablevision in June 2016, the Company was required to re-measure deferred taxes of Cequel at a higher overall rate, resulting in additional deferred tax expense of $153,660. The impact of the nondeductible share-based compensation related to the Company's carried unit plan resulted in additional tax expense of $5,029. Absent these items, the effective tax rate would have been 38%.

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, income tax benefit for the year ended December 31, 2016 amounted to $450,295. The impact of the nondeductible share-based compensation related to the Company's carried unit plan resulted in additional tax expense of $5,029. Absent this item, the effective tax rate would have been 39%.

        On a pro forma basis, income tax benefit for the year ended December 31, 2015 amounted to $498,567. In April 2015, corporate income tax changes were enacted for both New York State and the City of New York. Those changes included a provision whereby investment income will be subject to higher taxes. Accordingly, in the second quarter of 2015, Cablevision recorded deferred tax expense of $16,334 to remeasure the deferred tax liability for the investment in Comcast common stock and associated derivative securities. During 2015, Cequel recorded tax expense related to equity compensation of $107,143. Absent these items, the effective tax rate would have been 39%.

Loss From Discontinued Operations

    Pro Forma 2016 Compared to Pro Forma 2015

        On a pro forma basis, loss from discontinued operations for the year ended December 31, 2015 amounted to $12,541, net of income taxes, and primarily reflects an expense related to the settlement of a legal matter relating to Rainbow Media Holdings LLC, a business whose operations were previously discontinued.

123


Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

        Altice USA has no operations independent of its subsidiaries, Cablevision and Cequel. Funding for our subsidiaries has generally been provided by cash flow from their respective operations, cash on hand and borrowings under their revolving credit facilities and the proceeds from the issuance of securities and borrowings under syndicated term loans in the capital markets. Our decision as to the use of cash generated from operating activities, cash on hand, borrowings under the revolving credit facilities or accessing the capital markets has been based upon an ongoing review of the funding needs of the business, the optimal allocation of cash resources, the timing of cash flow generation and the cost of borrowing under the revolving credit facilities, debt securities and syndicated term loans. We manage our business to a long-term net leverage ratio target of 4.5x to 5.0x. We calculate our consolidated net leverage ratio as net debt to L2QA EBITDA (Adjusted EBITDA for the two most recent consecutive fiscal quarters multiplied by 2.0).

        We expect to utilize free cash flow and availability under the revolving credit facilities, as well as future refinancing transactions, to further extend the maturities of, or reduce the principal on, our debt obligations. The timing and terms of any refinancing transactions will be subject to, among other factors, market conditions. Additionally, we may, from time to time, depending on market conditions and other factors, use cash on hand and the proceeds from other borrowings to repay the outstanding debt securities through open market purchases, privately negotiated purchases, tender offers, or redemptions.

        We believe existing cash balances, operating cash flows and availability under our revolving credit facilities will provide adequate funds to support our current operating plan, make planned capital expenditures and fulfill our debt service requirements for the next twelve months. However, our ability to fund our operations, make planned capital expenditures, make scheduled payments on our indebtedness and repay our indebtedness depends on our future operating performance and cash flows and our ability to access the capital markets, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control. Our collateralized debt maturing in the next 12 months will be settled with proceeds from monetization contracts entered into pursuant to the Synthetic Monetization Closeout discussed below. However, competition, market disruptions or a deterioration in economic conditions could lead to lower demand for our products, as well as lower levels of advertising, and increased incidence of customers' inability to pay for the services we provide. These events would adversely impact our results of operations, cash flows and financial position. Although we currently believe that amounts available under the revolving credit facilities will be available when, and if, needed, we can provide no assurance that access to such funds will not be impacted by adverse conditions in the financial markets or other conditions. The obligations of the financial institutions under the revolving credit facilities are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others.

        In the longer term, we may not be able to generate sufficient cash from operations to fund anticipated capital expenditures, meet all existing future contractual payment obligations and repay our debt at maturity. As a result, we could be dependent upon our continued access to the capital and credit markets to issue additional debt or equity or refinance existing debt obligations. We intend to raise significant amounts of funding over the next several years to fund capital expenditures, repay existing obligations and meet other obligations and the failure to do so successfully could adversely affect our business. If we are unable to do so, we will need to take other actions including deferring capital expenditures, selling assets, seeking strategic investments from third parties or reducing or eliminating discretionary uses of cash.

124


Table of Contents

Initial Public Offering

        In June 2017, the Company completed its IPO of 71,724,139 shares of its Class A common stock (12,068,966 shares sold by the Company and 59,655,173 shares sold by existing stockholders) at a price to the public of $30.00 per share, including the underwriters full exercise of their option to purchase 7,781,110 shares to cover overallotments. The Company's Class A common stock began trading on June 22, 2017, on the New York Stock Exchange under the symbol "ATUS".

        In connection with the sale of its Class A common stock, the Company received proceeds of approximately $362,069, before deducting the underwriting discount and expenses directly related to the issuance of the securities of $12,998. The Company did not receive any proceeds from the sale of shares by the selling stockholders. In July 2017, the Company used approximately $350,120 of the proceeds to fund the redemption of $315,779 principal amount of 10.875% senior notes that mature in 2025 issued by CSC Holdings, an indirect wholly-owned subsidiary of the Company, and the related call premium of approximately $34,341.

Debt Outstanding

        The following tables summarize the carrying value of our outstanding debt, net of eliminations, deferred financing costs, discounts and premiums (excluding accrued interest), as well as interest expense.

 
  As of March 31, 2018  
 
  Cablevision   Cequel   Total  

Debt outstanding:

                   

Credit facility debt

  $ 4,442,684   $ 1,247,318   $ 5,690,002  

Senior guaranteed notes

    3,283,283         3,283,283  

Senior secured notes

        2,571,465     2,571,465  

Senior notes and debentures

    7,176,170     2,779,048     9,955,218  

Subtotal

    14,902,137     6,597,831     21,499,968  

Capital lease obligations

    18,063     1,505     19,568  

Notes payable (includes $30,108 related to collateralized debt)

    78,938     24,149     103,087  

Subtotal

    14,999,138     6,623,485     21,622,623  

Collateralized indebtedness relating to stock monetizations(a)

    1,351,271         1,351,271  

Total debt

  $ 16,350,409   $ 6,623,485   $ 22,973,894  

Interest expense:

 
  Three Months Ended March 31, 2018  

Credit facility debt, senior notes, capital leases and notes payable

  $ 260,667   $ 102,568   $ 363,235  

Notes payable to affiliates and related parties

               

Collateralized indebtedness and notes payable relating to stock monetizations(a)

    14,023         14,023  

Total interest expense

  $ 274,690   $ 102,568   $ 377,258  

(a)
This indebtedness is collateralized by shares of Comcast common stock. We intend to settle this debt by (i) delivering shares of Comcast common stock and the related equity contracts, (ii) delivering cash from the net proceeds on new monetization contracts, or (iii) delivering cash

125


Table of Contents

    from the proceeds of monetization contracts entered into pursuant to the Synthetic Monetization Closeout discussed below.

    Synthetic Monetization Closeout

    In April 2017, the Company entered into new monetization contracts related to 32,153,118 shares of Comcast common stock, held by Cablevision, which synthetically reversed the existing contracts related to these shares (the "Synthetic Monetization Closeout"). As the existing collateralized debt matures, the Company will settle the contracts with proceeds received from the new monetization contracts. The new monetization contracts mature on April 28, 2021. The new monetization contracts provide the Company with downside protection below the hedge price of $35.47 and upside benefit of stock price appreciation up to $44.72 per share.

        The following table provides details of our outstanding credit facility debt as of March 31, 2018:

 
  Maturity Date   Interest Rate   Principal   Carrying Value(a)  

Cablevision:

                       

CSC Holdings Revolving Credit Facility(b)

  $20,000 on October 9, 2020, remaining balance on November 30, 2021     % $   $  

CSC Holdings Term Loan Facility

  July 17, 2025     4.04 %   2,977,500     2,960,859  

CSC Holdings Incremental Term Loan Facility

  January 25, 2026     4.28 %   1,500,000     1,481,825  

Cequel:

                       

Revolving Credit Facility(c)

  $65,000 on November 30, 2021, and remaining balance on April 5, 2023              

Term Loan Facility

  July 28, 2025     4.13 %   1,255,513     1,247,318  

            $ 5,733,013   $ 5,690,002  

(a)
Carrying amounts are net of unamortized discounts and deferred financing costs.

(b)
At March 31, 2018, $115,973 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $2,184,027 of the facility was undrawn and available, subject to covenant limitations.

(c)
At March 31, 2018, $13,500 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $336,500 of the facility was undrawn and available, subject to covenant limitations.

        At the end of first quarter 2018, the Company's reported net debt position was $20.6 billion and the Company's net leverage was 5.1x last 12 months EBITDA. As adjusted for the Pre-Distribution Dividend, the Company's net debt position as of the end of first quarter 2018 would have been approximately $22.1 billion with a weighted average life of approximately 6.4 years and a weighted average cost of debt of approximately 6.3%. Pro forma leverage as of the end of first quarter 2018 would have been 5.5x last 12 months EBITDA. See "Capitalization" for more information.

        As adjusted for the Pre-Distribution Dividend, Cablevision's net debt position as of the end of first quarter 2018 would have been approximately $15.3 billion with a weighted average life of approximately

126


Table of Contents

6.2 years and a weighted average cost of debt of approximately 6.6%. Pro forma leverage as of the end of first quarter 2018 would have been 5.5x last 12 months EBITDA (vs. 5.0x as reported). During first quarter 2018, Cablevision repaid $600 million of its drawn revolving credit facility. Near-term maturities at Cablevision are covered by available revolving credit facilities pro forma for the Pre-Distribution Dividend payment.

        As adjusted for the Pre-Distribution Dividend, Cequel's net debt position as of the end of first quarter 2018 would have been approximately $6.7 billion with a weighted average life of approximately 6.8 years and a weighted average cost of debt of approximately 5.8%. Pro forma leverage as of the end of first quarter 2018 would have been 5.4x last 12 months EBITDA (vs. 5.2x as reported). There are no material maturities at Cequel until 2021.

        The Company notes the significant and rapid deleveraging at both Cablevision and Cequel since the completion of their respective acquisitions as a result of underlying growth and improved cash flow generation.

        As of the date of this prospectus, Altice USA continues to target leverage at 4.5-5.0x net debt to EBITDA.

Payment Obligations Related to Debt

        As of March 31, 2018, total amounts payable by us in connection with our outstanding obligations, including related interest, as well as capital lease obligations, notes payable, and the value deliverable at maturity under monetization contracts are as follows:

 
  Cablevision(a)   Cequel   Total  

2018

  $ 1,268,928   $ 287,631   $ 1,556,559  

2019

    1,563,607     405,904     1,969,511  

2020

    1,487,002     1,435,063     2,922,065  

2021

    3,406,339     1,567,455     4,973,794  

2022

    1,507,732     252,857     1,760,589  

Thereafter

    13,910,877     5,035,769     18,946,646  

Total

  $ 23,144,485   $ 8,984,679   $ 32,129,164  

(a)
Includes $1,566,792 related to the Company's collateralized indebtedness (including related interest). This indebtedness is collateralized by shares of Comcast common stock. We intend to settle this debt by (i) delivering shares of Comcast common stock and the related equity contracts, (ii) delivering cash from the net proceeds on new monetization contracts, or (iii) delivering cash from the proceeds of monetization contracts entered into pursuant to the Synthetic Monetization Closeout discussed above.

        The amounts in the table above do not include the effects of the debt transactions discussed in Note 20 to the Company's audited consolidated financial statements.

CSC Holdings Restricted Group

        CSC Holdings and those of its subsidiaries which conduct our broadband, pay television and telephony services operations, as well as Lightpath, which provides Ethernet-based data, Internet, voice and video transport and managed services to the business market, comprise the "Restricted Group" as they are subject to the covenants and restrictions of the credit facility and indentures governing the notes and debentures issued by CSC Holdings. In addition, the Restricted Group is also subject to the covenants of the debt issued by Cablevision.

127


Table of Contents

        Sources of cash for the Restricted Group include primarily cash flow from the operations of the businesses in the Restricted Group, borrowings under its credit facility and issuance of securities in the capital markets, contributions from its parent, and, from time to time, distributions or loans from its subsidiaries. The Restricted Group's principal uses of cash include: capital spending, in particular, the capital requirements associated with the upgrade of its digital broadband, pay television and telephony services, including costs to build a FTTH network and enhancements to its service offerings such as Wi-Fi; debt service, including distributions made to Cablevision to service interest expense and principal repayments on its debt securities; other corporate expenses and changes in working capital; and investments that it may fund from time to time.

Cablevision Credit Facilities

        On October 9, 2015, Finco, which merged with and into CSC Holdings on June 21, 2016, entered into a senior secured credit facility, which currently provides U.S. dollar term loans currently in an aggregate principal amount of $3,000,000 ($2,977,500 outstanding at March 31, 2018) (the "CVC Term Loan Facility", and the term loans extended under the CVC Term Loan Facility, the "CVC Term Loans") and U.S. dollar revolving loan commitments in an aggregate principal amount of $2,300,000 (the "CVC Revolving Credit Facility" and, together with the CVC Term Loan Facility, the "CVC Credit Facilities"), which are governed by a credit facilities agreement entered into by, inter alios , CSC Holdings certain lenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent and security agent (as amended, restated, supplemented or otherwise modified on June 20, 2016, June 21, 2016, July 21, 2016, September 9, 2016, December 9, 2016 and March 15, 2017, respectively, and as further amended, restated, supplemented or otherwise modified from time to time, the "CVC Credit Facilities Agreement").

        In January 2018, CSC Holdings borrowed $150,000 under its revolving credit facility and entered into a new $1,500,000 incremental term loan facility (the "Incremental Term Loan") under its existing CVC Credit Facilities Agreement. The Incremental Term Loan was priced at 99.50% and will mature on January 25, 2026. The Incremental Term Loan is comprised of eurodollar borrowings or alternate base rate borrowings, and bears interest at a rate per annum equal to the adjusted LIBO rate or the alternate base rate, as applicable, plus the applicable margin, where the applicable margin is (i) with respect to any alternate base rate loan, 1.50% per annum and (ii) with respect to any eurodollar loan, 2.50% per annum. See discussion below regarding use of proceeds from the Incremental Term Loan.

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

        The Company was in compliance with all of its financial covenants under the CVC Credit Facilities Agreement as of March 31, 2018.

        See Note 9 to our consolidated financial statements for further information regarding the CVC Credit Facilities Agreement.

Cequel Credit Facilities

        On June 12, 2015, Altice US Finance I Corporation, a wholly-owned subsidiary of Cequel, entered into a senior secured credit facility which currently provides U.S. dollar term loans in an aggregate principal amount of $1,265,000 ($1,255,513 outstanding at March 31, 2018) (the "Cequel Term Loan Facility" and the term loans extended under the Cequel Term Loan Facility, the "Cequel Term Loans") and U.S. dollar revolving loan commitments in an aggregate principal amount of $350,000 which are governed by a credit facilities agreement entered into by, inter alios, Altice US Finance I Corporation, certain lenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent and security agent (as amended, restated, supplemented or otherwise modified on October 25, 2016, December 9, 2016, March 15, 2017 and March 22, 2018, and as further amended, restated, supplemented or modified from time to time, the "Cequel Credit Facilities Agreement").

128


Table of Contents

        The Company was in compliance with all of its financial covenants under the Cequel Credit Facilities Agreement as of March 31, 2018.

        See Note 9 to our consolidated financial statements for further information regarding the Cequel Credit Facilities Agreement.

Senior Notes

Cablevision Notes

        On September 23, 2009, Cablevision issued $900,000 aggregate principal amount of its 8 5 / 8 % Senior Notes due 2017 and 8 5 / 8 % Series B Senior Notes due 2017 (together, the "Cablevision 2017 Senior Notes"). In April 2017, Cablevision redeemed $500,000 aggregate principal amount of its Cablevision 2017 Senior Notes with certain of the proceeds of the term loans incurred under the CVC Credit Facilities Agreement, and in September 2017, Cablevision repaid the remaining $400,000 from borrowings under its revolving credit facility.

        On April 15, 2010, Cablevision issued $750,000 aggregate principal amount of its 7 3 / 4 % Senior Notes due 2018 and $500,000 aggregate principal amount of its 8% Senior Notes due 2020. On September 27, 2012, Cablevision issued $750,000 aggregate principal amount of its 5 7 / 8 % Senior Notes due 2022 ($649,024 outstanding at March 31, 2018).

        As of March 31, 2018, Cablevision was in compliance with all of its financial covenants under the indentures under which the Cablevision Notes were issued.

CSC Holdings Notes

    CSC Holdings Senior Guaranteed Notes

        On October 9, 2015, Finco issued $1,000,000 aggregate principal amount of its 6 5 / 8 % Senior Guaranteed Notes due 2025 (the "CSC 2025 Senior Guaranteed Notes"). CSC Holdings assumed the obligations as issuer of the CSC 2025 Senior Guaranteed Notes upon the merger of Finco and CSC Holdings on June 21, 2016. On September 23, 2016, CSC Holdings issued $1,310,000 aggregate principal amount of its 5 1 / 2 % Senior Guaranteed Notes due 2027.

        In January 2018, CSC Holdings issued $1,000,000 aggregate principal amount of 5 3 / 8 % senior guaranteed notes due February 1, 2028 (the "2028 Guaranteed Notes"). The 2028 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. The proceeds from the 2028 Guaranteed Notes, together with proceeds from the Incremental Term Loan, borrowings under CSC Holdings' revolving credit facility and cash on hand, were used in February 2018 to repay certain senior notes ($300,000 principal amount of CSC Holdings' senior notes due in February 2018 and $750,000 principal amount of Cablevision senior notes due in April 2018) and will be used to fund a dividend of $1,500,000 to the Company's stockholders immediately prior to and in connection with the Distribution.

        As of March 31, 2018, CSC Holdings was in compliance with all of its financial covenants under the indentures under which the CSC Holdings senior guaranteed notes were issued.

    CSC Holdings Senior Notes

        On February 6, 1998, CSC Holdings issued $300,000 aggregate principal amount of its 7 7 / 8 % Senior Debentures which matured and were repaid on February 15, 2018. On July 21, 1998, CSC Holdings issued $500,000 aggregate principal amount of its 7 5 / 8 % Senior Debentures due 2018. On February 12, 2009, CSC Holdings issued $526,000 aggregate principal amount of its 8 5 / 8 % Senior Notes due 2019 and 8 5 / 8 % Series B Senior Notes due 2019. On November 15, 2011, CSC Holdings issued $1,000,000 aggregate principal amount of its 6 3 / 4 % Senior Notes due 2021 and 6 3 / 4 % Series B Senior Notes due

129


Table of Contents

2021. On May 23, 2014, CSC Holdings issued $750,000 aggregate principal amount of its 5 1 / 4 % Senior Notes due 2024 and 5 1 / 4 % Series B Senior Notes due 2024.

        On October 9, 2015, Finco issued $1,800,000 aggregate principal amount of its 10 1 / 8 % Senior Notes due 2023 (the "CSC 2023 Senior Notes") and $2,000,000 ($1,684,221 outstanding at March 31, 2018) 10 7 / 8 % Senior Notes due 2025 (the "CSC 2025 Senior Notes). CSC Holdings assumed the obligations as issuer of the CSC 2023 Senior Notes and the CSC 2025 Senior Notes upon the merger of Finco and CSC Holdings on June 21, 2016. In July 2017, the Company used approximately $350,120 of the proceeds from the Company's IPO discussed above to fund the redemption of $315,779 principal amount of the CSC 2025 Senior Notes and the related call premium of approximately $34,341. See Note 9 of our consolidated financial statements for further details.

        As of March 31, 2018, CSC Holdings was in compliance with all of its financial covenants under the indentures under which the CSC Holdings senior notes were issued.

Cequel Notes

Cequel Senior Secured Notes

        On June 12, 2015, Altice US Finance I Corporation issued $1,100,000 aggregate principal amount of its 5 3 / 8 % Senior Secured Notes due 2023. On April 26, 2016, Altice US Finance I Corporation issued $1,500,000 aggregate principal amount of its 5 1 / 2 % Senior Secured Notes due 2026.

        As of March 31, 2018, Cequel was in compliance with all of its financial covenants under the indentures under which the Cequel senior secured notes were issued.

Cequel Senior Notes

        On October 25, 2012, Cequel Capital Corporation and Cequel Communications Holdings I, LLC (collectively, the "Cequel Senior Notes Co-Issuers") issued $500,000 aggregate principal amount of their 6 3 / 8 % Senior Notes due 2020 (the "Cequel 2020 Senior Notes"). On December 28, 2012, the Cequel Senior Notes Issuers issued an additional $1,000,000 aggregate principal amount of their Cequel 2020 Senior Notes. In April 2017, the Company redeemed $450,000 of the Cequel 2020 Senior Notes from proceeds of the Cequel Term Loan pursuant to the March 15, 2017 amendment. In April 2018, the Company redeemed the remaining $1,050,000 aggregate principal amount of Cequel 2020 Senior Notes with the proceeds from the issuance of Cequel 2028 Senior Notes (as defined below).

        On May 16, 2013, the Cequel Senior Notes Co-Issuers issued $750,000 aggregate principal amount of their 5 1 / 8 % Senior Notes due 2021. On September 9, 2014, the Cequel Senior Notes Co-Issuers issued $500,000 aggregate principal amount of their 5 1 / 8 % Senior Notes due 2021.

        On June 12, 2015, Altice US Finance II Corporation issued $300,000 aggregate principal amount of its 7 3 / 4 % Senior Notes due 2025 (the "Cequel 2025 Senior Notes"). Following the Cequel Acquisition, Altice US Finance II Corporation was merged into Cequel and the Cequel 2025 Senior Notes became the obligation of the Cequel Senior Notes Co-Issuers.

        Also on June 12, 2015, Altice US Finance S.A., an indirect subsidiary of Altice, issued $320,000 principal amount of 7 3 / 4 % Senior Notes due 2025 (the "Cequel Holdco Notes"), the proceeds from which were placed in escrow, to finance a portion of the purchase price for the Cequel Acquisition. The Cequel Holdco Notes were automatically exchanged into an equal aggregate principal amount of Cequel 2025 Senior Notes during the second quarter of 2016.

        On April 5, 2018, the Cequel Senior Notes Co-Issuers issued $1,050,000 aggregate principal amount of their 7.500% Senior Notes due 2028 (the "Cequel 2028 Senior Notes").

        As of March 31, 2018, Cequel was in compliance with all of its financial covenants under the indentures under which the Cequel senior notes were issued.

130


Table of Contents

Capital Expenditures

        The following tables provide details of the Company's capital expenditures:

 
  Altice USA  
 
  Three Months Ended March 31, 2018   Three Months Ended March 31, 2017  
 
  Cablevision(a)   Cequel   Total   Cablevision   Cequel   Total  
 
  (Unaudited)
 

Customer premise equipment

  $ 62,306   $ 18,421   $ 80,727   $ 47,675   $ 28,279   $ 75,954  

Network infrastructure

    34,717     38,124     72,841     74,948     26,028     100,976  

Support and other

    41,589     21,253     62,842     38,198     8,454     46,652  

Business services

    28,189     13,016     41,205     23,578     10,267     33,845  

Capital purchases (cash basis)

  $ 166,801   $ 90,814   $ 257,615   $ 184,399   $ 73,028   $ 257,427  

Capital purchases (including accrued not paid)(a)

  $ 135,758   $ 80,907   $ 216,665   $ 115,620   $ 47,324   $ 162,944  
 
  Altice USA   Cablevision  
 
  Year ended December 31, 2017   Year ended December 31, 2016   January 1,
2016 to
June 20,
2016
   
 
 
  Year Ended
December 31,
2015
 
 
  Cablevision(a)   Cequel   Total   Cablevision   Cequel   Total  

Customer premise equipment

  $ 188,798   $ 119,702   $ 308,500   $ 77,536   $ 154,718   $ 232,254   $ 68,418   $ 212,350  

Network infrastructure

    221,182     90,548     311,730     91,952     76,926     168,878     149,252     312,711  

Support and other

    157,566     31,643     189,209     83,153     45,336     128,489     68,324     194,930  

Business services

    103,871     38,039     141,910     45,716     50,204     95,920     44,137     96,405  

Capital purchases (cash basis)

  $ 671,417   $ 279,932   $ 951,349   $ 298,357   $ 327,184   $ 625,541   $ 330,131   $ 816,396  

Capital purchases (including accrued not paid)(a)

  $ 700,586   $ 320,175   $ 1,020,761   $ 348,852   $ 351,827   $ 700,679   $ 334,863   $ 853,115  

(a)
The Cablevision 2017 amount excludes advance payments aggregating $16,363 made to ATS for the FTTH project.

        Customer premise equipment includes expenditures for set-top boxes, cable modems, routers and other equipment that is placed in a customer's home, as well as installation costs for placing the assets into service. Network infrastructure includes: (i) scalable infrastructure, such as headend equipment, (ii) line extensions, such as fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering, and (iii) upgrade and rebuild, including costs to modify or replace existing fiber/coaxial cable networks, including enhancements. Support and other capital expenditures includes costs associated with the replacement or enhancement of non-network assets, such as office equipment, buildings and vehicles. Business services capital expenditures include primarily equipment, installation, support, and other costs related to our fiber based telecommunications business.

Cash Flow Discussion

Three Months Ended March 31, 2018 and 2017

Operating Activities

        Net cash provided by operating activities amounted to $430,952 for the three months ended March 31, 2018 compared to $244,086 for the three months ended March 31, 2017. The 2018 cash provided by operating activities resulted from $595,999 of income before depreciation and amortization

131


Table of Contents

and non-cash items and a decrease in accounts receivable of $25,207, an increase in liabilities related to interest rate swap contract of $31,922, and an increase in deferred revenue of $11,929, partially offset by a net decrease in accounts payable and accrued liabilities of $213,490 and an increase in other assets of $20,615.

        The 2017 cash provided by operating activities resulted from $447,849 of income before depreciation and amortization and non-cash items, a $34,707 decrease in accounts receivable, an increase in deferred revenue of $11,257, partially offset by $105,708 resulting from a decrease in accounts payable and accrued expenses, a net decrease of $131,564 in amounts due to affiliates, an increase in current and other assets of $10,113, and a decrease in liability related to interest rate swap contracts of $2,342.

Investing Activities

        Net cash used in investing activities for the three months ended March 31, 2018 was $291,627 compared to $301,172 for the three months ended March 31, 2017. The 2018 investing activities consisted primarily of capital expenditures of $257,615, payments for acquisitions, net of cash acquired of $28,940, and $5,072 in other net cash payments.

        The 2017 investing activities consisted primarily of capital expenditures of $257,427, payments for acquisitions, net of cash acquired of $43,608, and $137 in other cash payments.

Financing Activities

        Net cash provided by financing activities amounted to $958,479 for the three months ended March 31, 2018 compared to $42,267 for the three months ended March 31, 2017. In 2018, the Company's financing activities consisted primarily of proceeds from credit facility debt of $1,642,500, proceeds from the issuance of senior notes of $1,000,000 and other net cash receipts of $2,886, partially offset by the redemption and repurchase of senior notes, including premiums and fees of $1,057,019, the repayment of credit facility debt of $610,663, and additions to deferred financing costs of $19,225.

        In 2017, the Company's financing activities consisted primarily of proceeds from credit facility debt of $225,000 and collateralized indebtedness of $156,136, partially offset by repayments credit facility debt of $183,288, payments of collateralized indebtedness and related derivative contracts of $150,084, principal payments on capital lease obligations of $4,207 and additions to deferred financing costs of $1,290.

For the Year Ended December 31, 2017 and 2016

Operating Activities

        Net cash provided by operating activities amounted to $2,018,247 for the year ended December 31, 2017 compared to $1,184,455 for the year ended December 31, 2016. The 2017 cash provided by operating activities resulted from $2,318,941 of income before depreciation and amortization and non-cash items and an increase in deferred revenue of $12,310, partially offset by a decrease in accounts payable and accrued expenses of $167,813, a net increase in current and other assets of $109,944, a net decrease in amounts due to affiliates of $34,326, and a decrease in liabilities related to interest rate swap contracts of $921.

        The 2016 cash provided by operating activities resulted from $746,341 of income before depreciation and amortization and non-cash items, $310,892 as a result of an increase in accounts payable, deferred revenue and other liabilities, $78,823 resulting from an increase in liabilities related to interest rate swap contracts and $48,399 resulting from a net decrease in current and other assets.

132


Table of Contents

Investing Activities

        Net cash used in investing activities for the year ended December 31, 2017 was $1,092,199 compared to $9,599,319 for the year ended December 31, 2016. The 2017 investing activities consisted primarily of capital expenditures of $951,349, payments of $97,410 related to the settlement of put-call options, and payments for acquisitions, net of cash acquired of $46,703, partially offset by $3,263 in other net cash proceeds.

        The 2016 investing activities consisted primarily of $8,988,774 payment for the Cablevision Acquisition, net of cash acquired, $625,541 of capital expenditures, net payments related to other investments of $4,608, and additions to other intangible assets of $106, partially offset by other net cash receipts of $19,710, including $13,825 from the sale of an affiliate interest.

Financing Activities

        Net cash used in financing activities amounted to $1,099,041 for the year ended December 31, 2017 compared to net cash provided by financing activities of $131,421 for the year ended December 31, 2016. In 2017, the Company's financing activities consisted primarily of the repayment of senior notes, including premiums and fees, of $1,729,400, cash distributions paid to stockholders of $919,317, principal payments on capital lease obligations of $15,157, additions to deferred financing costs of $8,600 and distributions to noncontrolling interests of $335, partially offset by net proceeds from credit facility debt of $1,182,094, net proceeds from collateralized indebtedness and related derivative contracts of $7,735, net proceeds from the Company's IPO of $349,071, proceeds from notes payable of $33,733, and contributions from stockholders of $1,135.

        In 2016, the Company's financing activities consisted of proceeds of $1,750,000 from the issuance of notes to affiliates and related parties, $1,310,000 from the issuance of senior notes, contribution from stockholders of $1,246,499, net proceeds from collateralized indebtedness of $36,286, and an excess tax benefit related to share-based awards of $31. Partially offsetting these increases were net repayments of credit facility debt of $3,623,287, distributions to stockholders of $365,559, payments of deferred financing costs of $203,712, and principal payments on capital lease obligations of $18,837.

Settlements of Collateralized Indebtedness

        There were no settlements of collateralized indebtedness that occurred during the three months ended March 31, 2018.

        The following table summarizes the settlement of the Company's collateralized indebtedness relating to Comcast shares that was settled by delivering cash equal to the collateralized loan value, net of the value of the related equity derivative contracts during the year ended December 31, 2017:

Number of shares(a)

    26,815,368  

Collateralized indebtedness settled

  $ (774,703 )

Derivative contracts settled

    (56,356 )

    (831,059 )

Proceeds from new monetization contracts

    838,794  

Net cash received

  $ 7,735  

(a)
Share amounts are adjusted for the 2 for 1 stock split in February 2017.

        The cash to settle the collateralized indebtedness was obtained from the proceeds of new monetization contracts covering an equivalent number of Comcast shares. The terms of the new

133


Table of Contents

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 April 2017, the Company entered into new monetization contracts related to 32,153,118 shares of Comcast common stock held by Cablevision, which synthetically reversed the existing contracts related to these shares (the "Synthetic Monetization Closeout"). As the existing collateralized debt matures, the Company will settle the contracts with proceeds received from the new monetization contracts. The new monetization contracts mature on April 28, 2021. The new monetization contracts provide the Company with downside protection below the hedge price of $35.47 and upside benefit of stock price appreciation up to $44.72 per share. In connection with the execution of these contracts, the Company recorded (i) the fair value of the equity derivative contracts of $53,316 (in a net asset position), (ii) notes payable of $111,657, representing the fair value of the existing equity derivative contracts, in a liability position, and (iii) a discount on debt of $58,341.

Contractual Obligations and Off Balance Sheet Commitments

        As of March 31, 2018, the Company's commitments and contingencies not reflected in the Company's balance sheet decreased to approximately $8,425,000 as compared to approximately $9,069,000 at December 31, 2017. This decrease relates primarily to payments made pursuant to programming commitments, offset by renewed multi-year programming agreements entered into during the three months ended March 31, 2018.

        Our contractual obligations to affiliates and non-affiliates as of December 31, 2017, which consist primarily of our debt obligations and the effect such obligations are expected to have on our liquidity and cash flow in future periods, are summarized in the following table:

 
  Payments Due by Period  
 
  Total   Year 1   Years 2 - 3   Years 4 - 5   More than
5 years
  Other  

Off balance sheet arrangements:

                                     

Purchase obligations(a)

  $ 8,427,609   $ 3,072,083   $ 4,181,199   $ 1,094,508   $ 79,819   $  

Operating lease obligations(b)

    475,712     74,992     141,345     118,969     140,406      

Guarantees(c)

    36,224     34,716     1,508              

Letters of credit(d)

    129,473     200     120     129,153          

    9,069,018     3,181,991     4,324,172     1,342,630     220,225      

Contractual obligations reflected on the balance sheet:

                                     

Debt obligations(e)

    30,390,463     2,976,207     4,642,299     6,896,733     15,875,224      

Capital lease obligations(f)

    24,349     10,322     7,731     3,947     2,349      

Taxes(g)

    8,479                     8,479  

    30,423,291     2,986,529     4,650,030     6,900,680     15,877,573     8,479  

Total

  $ 39,492,309   $ 6,168,520   $ 8,974,202   $ 8,243,310   $ 16,097,798   $ 8,479  

(a)
Purchase obligations primarily include contractual commitments with various programming vendors to provide video services to our 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 customers receiving the programming. Amounts reflected above related to programming agreements are based on the number of customers receiving the

134


Table of Contents

    programming as of December 31, 2017 multiplied by the per customer rates or the stated annual fee, as applicable, contained in the executed agreements in effect as of December 31, 2017. See Note 15 to our consolidated financial statements for a discussion of our program rights obligations.

(b)
Operating lease obligations represent primarily future minimum payment commitments on various long-term, noncancelable leases, at rates now in force, for office, production and storage space, and rental space on utility poles. See Note 7 to our consolidated financial statements for a discussion of our operating leases.

(c)
Includes franchise and performance surety bonds primarily for our cable television systems. Also includes outstanding guarantees primarily by CSC Holdings in favor of certain financial institutions in respect of ongoing interest expense obligations in connection with the monetization of our holdings of shares of Comcast common stock. Payments due by period for these arrangements represent the year in which the commitment expires.

(d)
Consists primarily of letters of credit obtained by CSC Holdings and Cequel in favor of insurance providers and certain governmental authorities. Payments due by period for these arrangements represent the year in which the commitment expires.

(e)
Includes interest and principal payments due on our (i) credit facility debt, (ii) senior guaranteed notes, senior secured notes, and senior notes and debentures, (iii) notes payable and (iv) collateralized indebtedness. See Notes 9 and 10 to our consolidated financial statements for a discussion of our long-term debt. These amounts do not include the effects of the debt transactions discussed in Note 20 to our consolidated financial statements.

(f)
Reflects the principal amount of capital lease obligations, including related interest.

(g)
Represents tax liabilities, including accrued interest, relating to uncertain tax positions. See Note 12 to our consolidated financial statements for a discussion of our income taxes.

        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 pay television services per year. For the years ended December 31, 2017 and 2016, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $259,075 and $154,732, respectively.

Dividends and Distributions

        In the second quarter of 2017, prior to the Company's IPO, the Company declared and paid cash distributions aggregating $839,700, $500,000 of which were funded with proceeds from borrowings under CSC Holdings' revolving credit facility.

        In 2016, the Company declared cash distributions of $445,176, of which $365,559 were paid in 2016 and $79,617 were paid in the first quarter of 2017.

Managing our Interest Rate and Equity Price Risk

Interest Rate Risk

        Interest rate risk is primarily a result of exposures to changes in the level, slope and curvature of the yield curve, the volatility of interest rates and credit spreads. Our exposure to interest rate risk results from changes in short-term interest rates. Interest rate risk exists primarily with respect to our credit facility debt, which bears interest at variable rates. The carrying value of our outstanding credit facility debt at March 31, 2018 amounted to $5,690,002.

135


Table of Contents

        To manage interest rate risk, we have from time to time entered into interest rate swap contracts to adjust the proportion of total debt that is subject to variable and fixed interest rates. Such contracts effectively fix the borrowing rates on floating rate debt to provide an economic hedge against the risk of rising rates and/or effectively convert fixed rate borrowings to variable rates to permit the Company to realize lower interest expense in a declining interest rate environment. We monitor the financial institutions that are counterparties to our interest rate swap contracts and we only enter into interest rate swap contracts with financial institutions that are rated investment grade. All such contracts are carried at their fair market values on our consolidated balance sheet, with changes in fair value reflected in the consolidated statement of operations.

        In June 2016, a subsidiary of Cequel entered into two fixed to floating interest rate swaps. One fixed to floating interest rate swap is converting $750,000 from a fixed rate of 1.6655% to six-month LIBOR and a second tranche of $750,000 from a fixed rate of 1.68% to six-month LIBOR. The objective of these swaps is to adjust the proportion of total debt that is subject to fixed and variable interest rates.

        These swap contracts are 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. For the three months ended March 31, 2018, the Company recorded a loss on interest rate swap contracts of $31,922.

        As of March 31, 2018, our outstanding interest rate swap contracts had an aggregate fair value and carrying value of $109,824 reflected in "liabilities under derivative contracts" in our consolidated balance sheet.

        We do not hold or issue derivative instruments for trading or speculative purposes.

        See discussion above for further details of our credit facility debt and see "Description of Certain Indebtedness" below for a discussion regarding the fair value of our debt.

Equity Price Risk

        We have entered into derivative contracts to hedge our equity price risk and monetize the value of our shares of common stock of Comcast. These contracts, at maturity, are expected to offset declines in the fair value of these securities below the hedge price per share while allowing us to retain upside appreciation from the hedge price per share to the relevant cap price. If any one of these contracts is terminated prior to its scheduled maturity date due to the occurrence of an event specified in the contract, we would be obligated to repay the fair value of the collateralized indebtedness less the sum of the fair values of the underlying stock and equity collar, calculated at the termination date. As of March 31, 2018 we did not have an early termination shortfall relating to any of these contracts. The underlying stock and the equity collars are carried at fair value in our consolidated balance sheets and the collateralized indebtedness is carried at its principal value, net of discounts and the unamortized fair value adjustment for contracts that existed at the date of the Cablevision Acquisition. See "Quantitative and Qualitative Disclosures About Market Risk" for information on how we participate in changes in the market price of the stocks underlying these derivative contracts.

        All of our monetization transactions are obligations of our wholly-owned subsidiaries that are not part of the Restricted Group; however, CSC Holdings provides 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). The guarantee exposure approximates the net sum of the fair value of the collateralized indebtedness less the sum of the fair values of the underlying stock and the equity collar. All of our equity derivative contracts are carried at their current fair value in our consolidated balance sheets with changes in value reflected in our consolidated statements of

136


Table of Contents

operations, and all of the counterparties to such transactions currently carry investment grade credit ratings.

Critical Accounting Policies

        In preparing its financial statements, the Company is required to make certain estimates, judgments and assumptions that it believes are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented.

        The significant accounting policies, which we believe are the most critical to aid in fully understanding and evaluating our reported financial results, include the following:

Business Combinations

        The Company applied business combination accounting for the Cablevision Acquisition and the Cequel Acquisition. Business combination accounting requires that the assets acquired and liabilities assumed be recorded at their respective estimated fair values at the date of acquisition. The excess purchase price over fair value of the net assets acquired is recorded as goodwill. In determining estimated fair values, we are required to make estimates and assumptions that affect the recorded amounts, including, but not limited to, expected future cash flows, discount rates, remaining useful lives of long-lived assets, useful lives of identified intangible assets, replacement or reproduction costs of property and equipment and the amounts to be recovered in future periods from acquired net operating losses and other deferred tax assets. Our estimates in this area impact, among other items, the amount of depreciation and amortization, impairment charges in certain instances if the asset becomes impaired, and income tax expense or benefit that we report. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain. See Note 3 for a summary of the application of business combination accounting.

Impairment of Long-Lived and Indefinite-Lived Assets

        The Company's long-lived and indefinite-lived assets at March 31, 2018 include goodwill of $8,019,849, other intangible assets of $17,854,718 ($13,020,081 of which are indefinite-lived intangible assets), and $5,819,544 of property, plant and equipment. Such assets accounted for approximately 92% of the Company's consolidated total assets. Goodwill and identifiable indefinite-lived intangible assets, which primarily represent the Company's cable television franchises are tested annually for impairment during the fourth quarter ("annual impairment test date") and upon the occurrence of certain events or substantive changes in circumstances.

        The Company is operated as three reporting units for the goodwill impairment test and two units of accounting for the indefinite-lived asset impairment test. We assess qualitative factors and other relevant events and circumstances that affect the fair value of the reporting unit and its identifiable indefinite-lived intangible assets, such as:

    macroeconomic conditions;

    industry and market conditions;

    cost factors;

    overall financial performance;

    changes in management, strategy or customers;

137


Table of Contents

    relevant specific events such as a change in the carrying amount of net assets, a more-likely-than-not expectation of selling or disposing all, or a portion, of a reporting unit or unit of accounting; and

    sustained decrease in share price, as applicable.

        The Company assesses these qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. This quantitative test is required only if the Company concludes that it is more likely than not that the reporting unit'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 Company is required to determine goodwill impairment using a two-step process. 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 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 that would be recognized in a business combination.

        The Company assesses the qualitative factors discussed above 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 identifiable indefinite-lived intangible assets requires a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. At March 31, 2018 the Company had indefinite-lived cable television franchises of $13,020,081 ($8,113,575 at Cablevision and $4,906,506 at Cequel), reflecting agreements we have with state and local governments that allow us to construct and operate a cable business within a specified geographic area and allow us to solicit and service potential customers in the service areas defined by the franchise rights currently held by the Company.

        For other long-lived assets, including intangible assets that are amortized such as customer relationships and trade names, the Company evaluates assets for recoverability when there is an indication of potential impairment. If the undiscounted cash flows from a group of assets being evaluated is less than the carrying value of that group of assets, the fair value of the asset group is determined and the carrying value of the asset group is written down to fair value.

        In assessing the recoverability of the Company's goodwill and other long-lived assets, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is recognized and also the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. 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. Estimates of fair value are primarily determined using discounted cash flows and comparable market transactions. These valuations are based on estimates and assumptions including projected future cash flows, discount rate, determination of appropriate market comparables and determination of whether a premium or discount should be applied to comparables. These valuations also include assumptions for average annual revenue per customer, number of homes passed, operating margin and market

138


Table of Contents

penetration as a percentage of homes passed, among other assumptions. Further, the projected cash flow assumptions consider contractual relationships, customer attrition, eventual development of new technologies and market competition. If these estimates or material related assumptions change in the future, the Company may be required to record impairment charges related to its long-lived assets.

        During the fourth quarter of 2017, the Company assessed the qualitative factors described above to determine whether it was necessary to perform the two-step quantitative goodwill impairment test and concluded that it was not more likely than not that the reporting unit's fair value was less than its carrying amount. The Company also assessed these qualitative factors to determine whether it was necessary to perform the one-step quantitative identifiable indefinite-lived intangible assets impairment test and concluded that it was not more likely than not that the unit of accounting's fair value was less than its carrying amount.

Plant and Equipment

        Costs incurred in the construction of the Company's cable systems, including line extensions to, and upgrade of, the Company's HFC 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 the initial deployment of new customer premise equipment necessary to provide broadband, pay television and telephony 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 broadband, pay television and telephony 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 3-5 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.

        Refer to Note 2 to our consolidated financial statements in our December 31, 2017 annual report for a discussion of our accounting policies.

Equity Awards

        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. 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. In addition these units are presented as temporary equity on our consolidated balance sheet at

139


Table of Contents

fair value. For carry unit awards granted in 2016, 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 was estimated using the historical weekly volatility of publicly traded comparable companies. The risk-free rate assumed 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 was based on Finnerty's (2012) average-strike put option model.

        For carry unit awards granted in the first and second quarter of 2017, the Company estimated the grant date fair value based on the value established in the Company's IPO.

Recently Adopted Accounting Pronouncements

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

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

        In March 2017, the FASB issued ASU No. 2017-07 Compensation-Retirement Benefits (Topic 715). ASU No. 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. It also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and what component of net benefit cost is eligible for capitalization. ASU No. 2017-07 was adopted by the Company on January 1, 2018 and was applied retrospectively. As a result of the adoption, the Company reclassified the non-service cost components of the Company's pension expense for the three months ended March 31, 2017 and years ended December 31, 2017 and 2016 from other operating expenses to other income (expense), net. The Company elected to apply the practical expedient which allowed it to reclassify amounts disclosed previously in the benefits plan note as the basis for applying retrospective presentation for comparative periods, as the Company determined it was impracticable to disaggregate the cost components for amounts capitalized and amortized in those periods. See Note 3 to our condensed consolidated financial statements for the three months ended March 31, 2018 and Note 20 to our consolidated financial statements for the year ended December 31, 2017 for information on the impact of the adoption of ASU No. 2017-07.

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

        In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. ASU

140


Table of Contents

No. 2016-01 modifies how entities measure certain equity investments and also modifies the recognition of changes in the fair value of financial liabilities measured under the fair value option. Entities will be required to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. For financial liabilities measured using the fair value option, entities will be required to record changes in fair value caused by a change in instrument-specific credit risk (own credit risk) separately in other comprehensive income. ASU No. 2016-01 was adopted by the Company on January 1, 2018.

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

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

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

Recently Issued But Not Yet Adopted Accounting Pronouncements

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

        In February 2016, the FASB issued ASU No. 2016-02, Leases, which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019 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.

Quantitative and Qualitative Disclosures About Market Risk

        All dollar amounts, except per share data, included in the following discussion are presented in thousands.

141


Table of Contents

Equity Price Risk

        We are exposed to market risks from changes in certain equity security prices. Our exposure to changes in equity security prices stems primarily from the shares of Comcast common stock we hold. We have entered into equity derivative contracts consisting of a collateralized loan and an equity collar to hedge our equity price risk and to monetize the value of these securities. These contracts, at maturity, are expected to offset declines in the fair value of these securities below the hedge price per share while allowing us to retain upside appreciation from the hedge price per share to the relevant cap price. The contracts' actual hedge prices per share vary depending on average stock prices in effect at the time the contracts were executed. The contracts' actual cap prices vary depending on the maturity and terms of each contract, among other factors. If any one of these contracts is terminated prior to its scheduled maturity date due to the occurrence of an event specified in the contract, we would be obligated to repay the fair value of the collateralized indebtedness less the sum of the fair values of the underlying stock and equity collar, calculated at the termination date. As of March 31, 2018, we did not have an early termination shortfall relating to any of these contracts.

        The underlying stock and the equity collars are carried at fair value on our condensed consolidated balance sheet and the collateralized indebtedness is carried at its principal value, net of discounts and the unamortized fair value adjustment for contracts that existed at the date of the Cablevision Acquisition. The fair value adjustment is being amortized over the term of the related indebtedness. The carrying value of our collateralized indebtedness amounted to $1,351,271 at March 31, 2018. At maturity, the contracts provide for the option to deliver cash or shares of Comcast common stock, with a value determined by reference to the applicable stock price at maturity.

        As of March 31, 2018, the fair value and the carrying value of our holdings of Comcast common stock aggregated $1,467,781. Assuming a 10% change in price, the potential change in the fair value of these investments would be approximately $146,778. As of March 31, 2018, the net fair value and the carrying value of the equity collar component of the equity derivative contracts entered into to partially hedge the equity price risk of our holdings of Comcast common stock aggregated $58,848, a net asset position. For the three months ended March 31, 2018, we recorded a net gain of $168,352 related to our outstanding equity derivative contracts and recorded an unrealized loss of $252,576 related to the Comcast common stock that we held.

Fair Value of Equity Derivative Contracts

       

Fair value as of December 31, 2017, net liability position

  $ (109,504 )

Change in fair value, net

    (168,352 )

Fair value as of March 31, 2018, net asset position

  $ (58,848 )

        The maturity, number of shares deliverable at the relevant maturity, hedge price per share, and the lowest and highest cap prices received for the Comcast common stock monetized via an equity derivative prepaid forward contract are summarized in the following table:

 
   
   
  Cap Price(b)  
# of Shares
Deliverable(a)
   
  Hedge Price
per Share(a)
 
  Maturity   Low   High  
16,139,868   2018   $30.84 - $33.61   $ 37.00   $ 40.33  
26,815,368   2021   $29.25 - $35.47   $ 43.88   $ 44.80  

(a)
Represents the price below which we are provided with downside protection and above which we retain upside appreciation. Also represents the price used in determining the cash proceeds payable to us at inception of the contracts.

(b)
Represents the price up to which we receive the benefit of stock price appreciation.

142


Table of Contents

Fair Value of Debt

        At March 31, 2018, the fair value of our fixed rate debt of $18,168,414 was higher than its carrying value of $17,264,324 by $904,090. The fair value of these financial instruments is estimated based on reference to quoted market prices for these or comparable securities. Our floating rate borrowings bear interest in reference to current LIBOR-based market rates and thus their principal values approximate fair value. The effect of a hypothetical 100 basis point decrease in interest rates prevailing at March 31, 2018 would increase the estimated fair value of our fixed rate debt by $483,406 to $18,651,820. This estimate is based on the assumption of an immediate and parallel shift in interest rates across all maturities.

Interest Rate Risk

        In June 2016, a subsidiary of Cequel entered into two fixed to floating interest rate swaps. One fixed to floating interest rate swap is converting $750,000 from a fixed rate of 1.6655% to six-month LIBOR and a second tranche of $750,000 from a fixed rate of 1.68% to six-month LIBOR. The objective of these swaps is to adjust the proportion of total debt that is subject to fixed and variable interest rates.

        These swap contracts are 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. For the three months ended March 31, 2018, the Company recorded a loss on interest rate swap contracts of $31,922.

        As of March 31, 2018, our outstanding interest rate swap contracts had an aggregate fair value and carrying value of $109,824 reflected in "Liabilities under derivative contracts" on our condensed consolidated balance sheet.

        We do not hold or issue derivative instruments for trading or speculative purposes.

143


Table of Contents


BUSINESS

Overview

        Altice USA is one of the largest broadband communications and video services providers in the United States. We deliver broadband, pay television, telephony services, proprietary content and advertising services to approximately 4.9 million residential and business customers. Our footprint extends across 21 states through a fiber-rich broadband network with more than 8.6 million homes passed as of March 31, 2018.

        We acquired Suddenlink on December 21, 2015 and Optimum on June 21, 2016. We are a holding company that does not conduct any business operations of our own. We serve our customers through two business segments: Optimum, which operates in the New York metropolitan area, and Suddenlink, which principally operates in markets in the south-central United States.

        Following the Acquisitions, we began to simplify our organizational structure, reduce management layers, streamline decision-making processes and redeploy resources with a focus on network investment, customer service enhancements and marketing support. As a result, we have made significant progress in integrating the operations of Optimum and Suddenlink, centralizing our business functions, reorganizing our procurement processes, eliminating duplicative management functions, terminating lower-return projects and non-essential consulting and third-party service arrangements, and investing in our employee relations and our culture. Improved operational efficiency has allowed us to redeploy physical, technical and financial resources towards upgrading our network and enhancing the customer experience to drive customer growth. This focus is demonstrated by reduced network outages since the Acquisitions, which we believe improves the consistency and quality of the customer experience. In addition, we have expanded, and intend to continue expanding, our e-commerce channels for sales and marketing.

        Since the Acquisitions, we have quadrupled the maximum available broadband speeds we are offering to our Optimum customers from 101 Mbps to 400 Mbps for residential customers and 450 Mbps for business customers and expanded our 1 Gbps broadband service to approximately 72% of our Suddenlink footprint from approximately 40% prior to the Suddenlink Acquisition. In addition, we have commenced a plan to build a FTTH network, which will enable us to deliver more than 10 Gbps broadband speeds across our entire Optimum footprint and part of our Suddenlink footprint. We believe this FTTH network will be more resilient with reduced maintenance requirements, fewer service outages and lower power usage, which we expect will drive further cost efficiencies in our business. In order to further enhance the customer experience during the fourth quarter, we introduced a new home communications hub, Altice One, and we have begun rolling it out across our Optimum footprint. Our new home communications hub is an innovative, integrated platform with a dynamic and sophisticated user interface, combining a set-top box, Internet wireless router and cable modem in one device, and is our most advanced home communications hub. We are also beginning to offer managed data and communications services to our business customers and more advanced advertising services, such as targeted multi-screen advertising and data analytics, to our advertising and other business clients. In the fourth quarter of 2017, we and Sprint entered into a multi-year strategic agreement pursuant to which we will utilize Sprint's network to provide mobile voice and data services to our customers throughout the nation, and our broadband network will be utilized to accelerate the densification of Sprint's network. We believe this additional product offering will enable us to deliver greater value and more benefits to our customers.

        Following the Distribution, we intend to continue to make significant investments in our customer experience and improve our products and services. This includes expanding the availability of our high-speed broadband services, launching our new integrated entertainment platform Altice One, continuing the rollout of our FTTH network, developing and deploying mobile voice and data services pursuant to the agreement we entered into with Sprint and investing in a multiscreen addressable and

144


Table of Contents

national advertising platform. We will remain focused on investing for growth in innovation, superior service and an advanced network. In addition, we will continue to evaluate and pursue value-accretive acquisitions to opportunistically grow.

        The following table presents certain financial data and metrics for the Company and its segments:

 
  Years ended December 31,  
 
   
   
  Altice USA
Predecessor(d)
   
   
   
   
 
 
  Altice USA   Cablevision   Cequel  
(in thousands except percentage data)
 
  2017   2016(c)   2015   2017   2016(c)   2017   2016  

Customer Relationships

    4,906     4,892     3,115     3,156     3,141     1,750     1,751  

% growth

    0.3 %               0.5 %         (0.1 )%      

Revenue

  $ 9,306,950   $ 6,017,212   $ 6,545,545   $ 6,650,326   $ 3,444,052   $ 2,659,416   $ 2,573,160  

Adjusted EBITDA(a)

  $ 3,981,410   $ 2,417,878   $ 1,807,583   $ 2,726,841   $ 1,262,987   $ 1,254,569   $ 1,154,891  

% of Revenue

    42.8 %   40.2 %   27.6 %   41.0 %   36.7 %   47.2 %   44.9 %

Adjusted EBITDA less capital expenditures(a)

  $ 3,030,061   $ 1,792,337   $ 991,187   $ 2,055,424   $ 964,630   $ 974,637   $ 827,707  

% of Revenue

    32.6 %   29.8 %   15.1 %   30.9 %   28.0 %   36.6 %   32.2 %

Net income (loss) attributable to stockholders(b)

  $ 1,493,177   $ (832,030 )                              

(a)
For additional information regarding Adjusted EBITDA, including a reconciliation of Adjusted EBITDA to Net Income (Loss), please refer to "Summary—Summary Historical Financial Data."

(b)
Pursuant to the enactment of the Tax Cuts and Jobs Act on December 22, 2017, the Company recorded a noncash deferred tax benefit of $2,337,900 to remeasure the net deferred tax liability to adjust for the reduction in the corporate federal income tax rate from 35% to 21% which is effective on January 1, 2018.

(c)
Amounts reflect the operating results of Cablevision from the date of the Cablevision Acquisition and include results for Newsday. Altice USA sold a 75% stake in Newsday in July 2016. Newsday's revenue for the period from June 21, 2016 through its sale in July 2016 was approximately $8.8 million.

(d)
Cablevision is deemed to be the predecessor entity of Altice USA. Reflects certain reclassifications to conform to the Altice USA presentation as a result of the adoption of ASC 606 and ASU No. 2017-07 which have not been reflected in the historical results presented in the Cablevision Systems Corporation's financial statements included herein.

Our Products and Services

        We provide broadband, pay television and telephony services to both residential and business customers. We also provide enterprise-grade fiber connectivity, bandwidth and managed services to enterprise customers through Optimum's Lightpath business (also marketed as Altice Business) and advertising time to advertisers.

        The prices we charge for our services vary based on the number of services and associated service level or tier our customers choose, coupled with any promotions we may offer. As part of our marketing strategy our customers are increasingly choosing to bundle their subscriptions to two ("double product") or three ("triple product") of our services at the same time. Customers who subscribe to a bundle generally receive a discount from the price of buying each of these services separately, as well as the convenience of receiving multiple services from a single provider, all on a single monthly bill. For example, we offer an "Optimum Triple Play" package that is a special promotion for new customers or eligible current customers where Optimum broadband, pay television and telephony services are each available at a reduced rate for a specified period when purchased together. Approximately 50% of our residential customers were triple product customers as of March 31, 2018.

145


Table of Contents

Residential Services

        We offer broadband, pay television and telephony services to residential customers through both our Optimum and Suddenlink segments. The following tables show our residential customer relationships and revenues by service offerings for each of our Optimum and Suddenlink segments as well as on a combined basis.

 
   
   
   
   
   
   
   
   
   
  December 31,
2015
 
 
  As of March 31, 2018   As of December 31, 2017   As of December 31, 2016  
 
  Altice USA
Predecessor(a)
 
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total   Cablevision   Cequel   Total  
 
  (Unaudited)
   
   
   
   
   
   
   
 
 
  (in thousands)
 

Total residential customer relationships

    2,888     1,655     4,543     2,893     1,642     4,535     2,879     1,649     4,528     2,858  

Pay TV

    2,340     1,035     3,375     2,363     1,042     3,406     2,428     1,107     3,535     2,487  

Broadband

    2,673     1,399     4,073     2,670     1,376     4,046     2,619     1,344     3,963     2,562  

Telephony

    1,954     596     2,550     1,965     592     2,557     1,962     597     2,559     2,007  

 

 
   
   
   
   
   
   
  December 31,
2015
 
 
  December 31, 2017   December 31, 2016  
 
  Altice USA
Predecessor(a)
 
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total  
 
  (dollars in thousands)
 

Residential revenue:

                                           

Pay TV

  $ 3,175,097   $ 1,099,025   $ 4,274,122   $ 1,668,348   $ 1,120,525   $ 2,788,873   $ 3,174,059  

Broadband

    1,649,771     958,824     2,608,595     817,160     834,414     1,651,574     1,389,447  

Telephony

    570,871     129,894     700,765     311,832     153,939     465,771     631,584  

 

 
  Three Months Ended March 31, 2018  
 
  Cablevision   Cequel   Total  
 
  (Unaudited) (dollars in thousands)
 

Residential revenue:

                   

Pay TV

  $ 763,720   $ 269,988   $ 1,033,708  

Broadband

    440,351     261,270     701,621  

Telephony

    135,585     30,453     166,038  

(a)
Cablevision is deemed to be the predecessor entity of Altice USA.

    Broadband Services

        We offer a variety of broadband service tiers tailored to meet the different needs of our residential customers. Current customer offers include four tiers with download speeds ranging from 60 Mbps to 400 Mbps for our Optimum residential customers and 50 Mbps to 1 Gbps for our Suddenlink residential customers. Our broadband services also include the Optimum wireless router, as well as Internet security software, including anti-virus, anti-spyware, personal firewall and anti-spam protection. Substantially all of our HFC network is digital and DOCSIS 3.0 compatible, with approximately 275 homes per node and a bandwidth capacity of at least 750 MHz throughout. This network allows us to provide our customers with advanced broadband, pay television and telephony services. Since the Acquisitions, we have quadrupled the maximum available broadband speeds we are offering to our Optimum customers from 101 Mbps to 400 Mbps for residential customers and 450 Mbps for business customers and expanded our 1 Gbps broadband service to approximately 72% of our Suddenlink footprint from approximately 40% prior to the Suddenlink Acquisition. We have also commenced a

146


Table of Contents

plan to build a FTTH network, which will enable us to deliver more than 10 Gbps broadband speeds across our entire Optimum footprint and part of our Suddenlink footprint.

        In addition, we have deployed Wi-Fi across our Optimum service area with approximately 2.1 million Wi-Fi hotspots as of December 31, 2017. The Optimum Wi-Fi network allows Optimum broadband customers to access the service while they are away from their home or office. Wi-Fi is delivered via wireless access points mounted on our Optimum broadband network, in certain retail partner locations, certain NJ Transit rail stations, New York City parks and other public venues. Similarly, our "Optimum wireless router" product includes a second network that enables all Optimum broadband customers to access the Optimum Wi-Fi network. Access to the Optimum Wi-Fi network is offered as a free value-added benefit to Optimum broadband customers and for a fee to non-customers in certain locations. Our Wi-Fi service also allows our Optimum broadband customers to access the Wi-Fi networks of Comcast, Charter Communications (within the legacy Time Warner Cable and Bright House Networks footprints) and Cox Communications. Through these relationships we offer our Optimum customers access to approximately 350,000 additional hotspots nationwide.

    Pay Television Services

        We currently offer a variety of pay television services, which include delivery of broadcast stations and cable networks, and advanced digital pay television services, such as VOD, HD channels, DVR and pay-per-view, to our residential markets. Depending on the market and level of service, our pay television services include, among other programming, local broadcast networks and independent television stations, news, information, sports and entertainment channels, regional sports networks, international channels and premium services such as HBO, Showtime, Cinemax and The Movie Channel. Our residential customers pay a monthly charge based on the pay television programming level of service, tier or package they receive and the type of equipment they select. Customers who subscribe to seasonal sports packages, international channels and premium services may be charged an additional monthly amount. We may also charge additional fees for pay-per-view programming, DVR and certain VOD services.

        As of December 31, 2017, Optimum residential customers were able to receive up to 605 digital channels and Suddenlink residential customers were able to receive up to 438 digital channels depending on their market and level of service. Optimum offers up to 174 HD channels and Suddenlink offers up to 139 HD channels, which represent the most widely watched programming, including all major broadcast networks, as well as most leading national cable networks, premium channels and regional sports networks. HDTV features high-resolution picture quality, digital sound quality and a wide-screen, theater-like display when using an HDTV set and an HD-capable converter. We also continue to launch additional HD channels to continuously improve our customer's viewing experience. As of December 31, 2017, approximately 95% of our residential Optimum pay television customers subscribe to HDTV services. As of December 31, 2017, approximately 81% of Suddenlink pay television customers were digital pay television customers and approximately 95% of those digital pay television customers subscribe to HDTV services.

        We also provide advanced services, such as pay-per-view and VOD, that give residential pay television customers control over when they watch their favorite programming. Our pay-per-view service allows customers to pay to view single showings of programming on an unedited, commercial-free basis, including feature films, live sporting events, concerts and other special events. Our VOD service provides on-demand access to movies, special events, free prime time content and general interest titles. Subscription-based VOD premium content such as HBO and Showtime is made available to customers who subscribe to one of our premium programming packages. Our customers have the ability to start the programs at whatever time is convenient, as well as pause, rewind and (for most content) fast forward both standard definition and HD VOD programming. As of December 31, 2017, pay-per-view services were available for all Optimum and 99% of Suddenlink pay television customers

147


Table of Contents

and VOD services were available to all of our Optimum pay television customers and 95% of our Suddenlink pay television customers, and we offered thousands of HD titles on-demand for Optimum and Suddenlink customers, respectively.

        For a monthly fee, we offer DVR services through the use of digital converters, the majority of which are HDTV-capable and have video recording capability. As of December 31, 2017, approximately 50% of our residential Optimum pay television customers and 37% of our Suddenlink pay television customers utilized DVR services. Optimum customers can choose either a set-top box DVR with the ability to record, pause and rewind live television or the Cloud DVR Plus with remote-storage capability to record 15 shows simultaneously while watching any live or pre-recorded show, and pause and rewind live television. Depending on the market, Suddenlink customers have the option to use a set-top box DVR or a TiVo HD/DVR converter, which delivers multi-room DVR capability using TiVo Mini devices that allow customers to pause and rewind live television, manage recordings from different television locations and play them back throughout the home. In addition, TiVo Stream service, which allows customers to stream live television channels and recorded programming wirelessly throughout their home to Android and iOS devices, and, subject to copyright restrictions, download previously recorded content to these devices so that it can be viewed outside the home, is provided to current TiVo DVR customers.

        We also introduced a new home communications and entertainment hub during the fourth quarter of 2017, Altice One, which is our most advanced home hub, and we have begun rolling it out across our Optimum footprint. This new hub is an innovative, integrated platform with a dynamic and sophisticated user interface, combining a set-top box, Internet wireless router and cable modem in one device. It is based on LaBox, which Altice N.V. has successfully deployed in France, the Dominican Republic and Israel, and is initially offered to new customers subscribing to our double and triple-product packages. It is capable of delivering broadband Internet, Wi-Fi, digital television services, OTT services and fixed-line telephony and supports 4K video and a remote-storage DVR with the capacity to record 15 television programs simultaneously and the ability to rewind live television on the last two channels watched. Additional features include a point-anywhere voice-command remote control and a companion mobile app that allows viewing of all television content including DVR streaming. Additional televisions will be paired with "minis," which can also act as Wi-Fi extenders for an advanced Wi-Fi experience throughout the home.

        We also offer alternative viewing platforms for our pay television programming through mobile applications. Our Optimum customers have access to Optimum App, available for the iPad, iPhone, iPod touch, personal computers, Kindle Fire and select Android phones and tablets, and our Suddenlink customers have access to Suddenlink2GO, available for personal computers and select phones and tablets. Depending on the platform, the Optimum App features include the ability to watch live television, stream on-demand titles from various networks and use the device as a remote to control the customer's digital set-top box while inside the home. Suddenlink2GO enables Suddenlink customers to watch over 300,000 movies, shows and clips from over 200 networks on a personal computer once authenticated via the Suddenlink customer portal and select television shows and movies on their mobile devices.

    Telephony Services

        Through VoIP telephone service we also offer unlimited local, regional and long-distance calling within the United States, Puerto Rico, Virgin Islands and Canada for a flat monthly rate, including popular calling features such as caller ID with name and number, call waiting, three-way calling, enhanced emergency 911 dialing and television caller ID. We also offer additional options designed to meet our customers' needs, including directory assistance, voicemail services and international calling. Discount and promotional pricing are available when our telephony services are combined with our other service offerings.

148


Table of Contents

    Mobile

        In the fourth quarter of 2017, we and Sprint entered into a multi-year strategic agreement pursuant to which we will utilize Sprint's network to provide mobile voice and data services to our customers throughout the nation, and our broadband network will be utilized to accelerate the densification of Sprint's network. We believe this additional product offering will enable us to deliver greater value and more benefits to our customers, including by offering "quad play" offerings that bundle broadband, pay television, telephony and mobile voice and data services to our customers.

Business Services

        Both our Optimum and Suddenlink segments offer a wide and growing variety of products and services to both large enterprise and SMB customers, including broadband, telephony, networking and pay television services. For the year ended December 31, 2017, business services accounted for approximately 14% of the revenue for both our Optimum and Suddenlink segments, respectively, and accounted for approximately 14% of our consolidated revenue. As of December 31, 2017, our Optimum segment served approximately 263,000 SMB customers and our Suddenlink segment served 109,000 SMB customers. We serve enterprise customers primarily through our Lightpath business, a subsidiary of Cablevision.

    Enterprise Customers

        Lightpath provides Ethernet, data transport, IP-based virtual private networks, Internet access, telephony services, including SIP trunking and VoIP services to the business market. Our Lightpath bandwidth connectivity service offers download speeds up to 100 Gbps. Lightpath also provides managed services to businesses, including hosted telephony services (cloud based SIP-based private branch exchange), managed Wi-Fi, managed desktop and server backup and managed collaboration services including audio and web conferencing. Through Lightpath, we also offer FTTT services to wireless carriers for cell tower backhaul and enable wireline communications service providers to connect to customers that their own networks do not reach. Lightpath's customers include companies in health care, financial, education, legal and professional services, and other industries, as well as the public sector and communication providers (ILECs and CLECs). As of December 31, 2017, Lightpath had over 9,100 locations connected to its fiber network. Our Lightpath advanced fiber optic network extends more than 7,100 route miles, which includes approximately 361,000 miles of fiber, throughout the New York metropolitan area.

        For enterprise and larger commercial customers, Suddenlink offers high capacity data services, including wide area networking and dedicated data access and advanced services such as wireless mesh networks. Suddenlink also offers enterprise class telephone services which include traditional multi-line phone service over DOCSIS and trunking solutions via SIP for our Primary Rate Interface and SIP trunking applications. Similar to Lightpath, Suddenlink also offers FTTT services. These Suddenlink services are offered on a standalone basis or in bundles that are developed specifically for our commercial customers.

    SMB Customers

        Both our Optimum and Suddenlink segments provide broadband, pay television and telephony services to SMB customers. In addition to these services, we also offer managed services, including business e-mail, hosted private branch exchange, web space storage and network security monitoring for SMB customers. We also offer Optimum Voice for Business, providing for up to 24 voice lines for SMB customers and 20 business calling features at no additional charge. Optimum Voice for Business offers business trunking services with support for application programming interfaces. Optional add-on

149


Table of Contents

services, such as international calling, toll free calling and virtual receptionists, are also available for business customers.

Advertising Sales

        As part of the agreements under which we acquire pay television programming, we typically receive an allocation of scheduled advertising time during such programming, generally two minutes per hour, into which our systems can insert commercials, subject, in some instances, to certain subject matter limitations. Our advertising sales infrastructure includes in-house production facilities, production and administrative employees and a locally-based sales force, and is part of Altice Media Solutions ("AMS"), the advertising sales division of Altice USA.

        AMS offers data-driven television, digital and other multi-platform advertising to clients ranging from Fortune 500 brands to local businesses. AMS provides national and local businesses with television and digital advertising opportunities targeted within specific geographies, including in New York City, and throughout the Suddenlink footprint. AMS offers clients opportunities to use interactive television products to reach their customers and provide a deeper level of audience engagement.

        In several of the markets in which we operate, we have entered into agreements commonly referred to as interconnects with other cable operators to jointly sell local advertising, simplifying our clients' purchase of local advertising and expanding their geographic reach. In some of these markets, we represent the advertising sales efforts of other cable operators; in other markets, other cable operators represent us. For instance, AMS manages the New York Interconnect, a partnership between AMS and Comcast that provides national brands with television and digital advertising opportunities over a broader portion of the New York DMA than AMS's local offerings. The New York Interconnect is the largest interconnect in the country, with a footprint of over 3.2 million households. In the larger DMAs in the Suddenlink footprint, we participate in a number of interconnects managed by others, such as the Houston and Dallas interconnects. In December 2017, Altice USA, Charter Communications and Comcast announced a preliminary agreement to form a new Interconnect in the New York market that would provide a single solution to reach more than 6.2 million households across the New York DMA. The new New York Interconnect is expected to launch in early second quarter 2018.

        For the year ended December 31, 2017, advertising sales accounted for approximately 5% and 3% of the revenue for our Optimum and Suddenlink segments, respectively, and accounted for approximately 4% of our consolidated revenue.

Data Analytics

        The Advanced Data Analytics business, which was launched by Optimum in 2013, provides data-driven, audience-based advertising solutions to the media industry, including AMS, programmers and MVPDs. Total Audience Data, its flagship portfolio of products, consists of advanced analytics tools providing granular measurement of consumer groups, accurate hyper-local ratings and other insights into target audience behavior not available through traditional sample-based measurement services. These tools allow us and our clients to more precisely optimize our product offerings, target and deliver ads more efficiently, and provide accurate measurement to our clients and partners.

        Our March 2017 acquisition of Audience Partners, a leading provider of data-driven, audience-based digital advertising solutions, expands the scope of targeted advertising solutions we offer from television to include digital, mobile and tablets. In addition, the acquisition expands our audience-based advertising services to include further advanced analytics tools within key and growing segments, including political, advocacy, healthcare, automotive, and programming.

150


Table of Contents

News 12 Networks

        Our News 12 Networks consists of seven 24-hour local news channels in the New York metropolitan area—the Bronx, Brooklyn, Connecticut, Hudson Valley, Long Island, New Jersey and Westchester—providing each with complete access to hyper-local breaking news, traffic, weather, sports, and more. In addition, News 12 Networks also includes five traffic and weather channels that offer constantly updated information; the award-winning News12.com, the premier destination for local news on the web; News 12 Interactive, channel 612 on Optimum TV, providing local news on demand; and News 12 To Go, the network's mobile app for phones and tablets. Since launching in 1986, News 12 Networks has been widely recognized by the news industry with numerous prestigious honors and awards, including over 230 Emmy Awards, plus multiple Edward R. Murrow Awards, NY Press Club Awards, and more. We derive revenue from our News 12 Networks for the sale of advertising and affiliation fees paid by cable operators. Advertising revenue is included in "Advertising" and affiliation fees charged for the programming are included in "Other."

Franchises

        As of December 31, 2017, our systems operated in more than 1,300 communities pursuant to franchises, permits and similar authorizations issued by state and local governmental authorities. Franchise agreements typically require the payment of franchise fees and contain regulatory provisions addressing, among other things, service quality, cable service to schools and other public institutions, insurance and indemnity. Franchise authorities generally charge a franchise fee of not more than 5% of certain of our cable service revenues that are derived from the operation of the system within such locality. We generally pass the franchise fee on to our customers.

        Franchise agreements are usually for a term of 5 to 15 years from the date of grant (a majority of which are for 10 years), however, approximately 400 of Altice's communities are located in states (Connecticut, Missouri, North Carolina and Texas) where by law franchise agreements do not have an expiration date. Franchise agreements are usually terminable only if the cable operator fails to comply with material provisions and then only after the franchising authority complies with substantive and procedural protections afforded by the franchise agreement and federal and state law. Prior to the scheduled expiration of most franchises, we generally initiate renewal proceedings with the granting authorities. This process usually takes less than three years but can take a longer period of time. The Communications Act, which is the primary federal statute regulating interstate communications, provides for an orderly franchise renewal process in which granting authorities may not unreasonably withhold renewals. See "Regulation—Cable Television—Franchising." In connection with the franchise renewal process, many governmental authorities require the cable operator to make certain commitments, such as building out certain franchise areas, meeting customer service requirements and supporting and carrying public access channels.

        Historically, we have been able to renew our franchises without incurring significant costs, although any particular franchise may not be renewed on commercially favorable terms or otherwise. We expect to renew or continue to operate under all or substantially all of these franchises. For more information regarding risks related to our franchises, see "Risk Factors—Risk Factors Relating to Regulatory and Legislative Matters—Our cable system franchises are subject to non-renewal or termination. The failure to renew a franchise in one or more key markets could adversely affect our business." Proposals to streamline cable franchising recently have been adopted at both the federal and state levels. For more information see "Regulation—Cable Television—Franchising."

Programming

        We design our channel line-ups for each system according to demographics, programming contract requirements, market research, viewership, local programming preferences, channel capacity,

151


Table of Contents

competition, price sensitivity and local regulation. We believe offering a wide variety of programming influences a customer's decision to subscribe to and retain our pay television services. We obtain programming, including basic, expanded basic, digital, HD, VOD and broadband content, from a number of suppliers, including broadcast and cable networks.

        We generally carry cable networks pursuant to written programming contracts, which continue for a fixed period of time, usually from three to five years, and are subject to negotiated renewal. Cable network programming is usually made available to us for a license fee, which is generally paid based on the number of customers who subscribe to the level of service that provides such programming. Such license fees may include "volume" discounts available for higher numbers of customers, as well as discounts for channel placement or service penetration. Where possible, we negotiate volume discount pricing structures. For home shopping channels, we receive a percentage of the revenue attributable to our customers' purchases, as well as, in some instances, incentives for channel placement.

        We typically seek flexible distribution terms that would permit services to be made available in a variety of retail packages and on a variety of platforms and devices in order to maximize consumer choice. Suppliers typically insist that their most popular and attractive services be distributed to a minimum number or percentage of customers, which limits our ability to provide consumers full purchasing flexibility. Suppliers also typically seek to control or limit the terms on which we are able to make their services available on various platforms and devices yet this has become more flexible each year.

        Our cable programming costs have increased in excess of customary inflationary and cost-of-living type increases. We expect programming costs to continue to increase due to a variety of factors including annual increases imposed by stations and programmers and additional programming being provided to customers, including HD, digital and VOD programming. In particular, broadcast and sports programming costs have increased significantly over the past several years. In addition, contracts to purchase sports programming sometimes provide for optional additional programming to be available on a surcharge basis during the term of the contract. These increases have coincided with a significant increase in the quality of the programming, from high production value original cable series to enhanced camera and statistical data technology in sports broadcasts, and more flexible rights to make the content available on various platforms and devices.

        We have programming contracts that have expired and others that will expire in the near term. We will seek to renegotiate the terms of these agreements, but there can be no assurance that these agreements will be renewed on favorable or comparable terms. To the extent that we are unable to reach agreement with certain programmers on terms that we believe are reasonable, we have been, and may in the future be, forced to remove such programming channels from our line-up, which may result in a loss of customers. For example, in 2017, we were unable to reach agreement with Starz on acceptable economic terms, and effective January 1, 2018, all Starz services were removed from our lineups in our Optimum and Suddenlink segments, and we launched alternative networks offered by other programmers under new long-term contracts. On February 13, 2018, we and Starz reached a new carriage agreement and we started restoring the Starz services previously offered by Optimum and Suddenlink. Also in our Suddenlink segment, we were unable to reach agreement with Viacom on acceptable economic terms for a long-term contract renewal, and effective October 1, 2014, all Viacom networks were removed from our channel lineups in our Suddenlink segment, and we launched alternative networks offered by other programmers under new long-term contracts. We and Viacom did not reach a new agreement to include certain Viacom networks in the Suddenlink channel lineup until May 2017. For more information, see "Risk Factors—Risk Factors Relating to Our Business—Programming and retransmission costs are increasing and we may not have the ability to pass these increases on to our customers. Disputes with programmers and the inability to retain or obtain popular programming can adversely affect our relationship with customers and lead to customer losses."

152


Table of Contents

Sales and Marketing

        Sales are managed centrally and multiple sales channels are leveraged to reach current and potential customers, including in-bound customer care centers, outbound telemarketing, stores, field technician sales and door-to-door sales. E-commerce is also managed centrally on behalf of the organization and is a growing and dynamic part of our business and is our fastest growing sales channel. For the three months ended December 31, 2017, 27% of our gross adds were via our online sales channel, compared to 14% for the three months ended December 31, 2016. We also use mass media, including broadcast television, digital media, radio, newspaper and outdoor advertising, to attract customers and direct them to our in-bound customer care centers or website. Our sales and service employees use a variety of sales tools as they work to match customers' needs with our best-in-class products, with a focus on building and enhancing customer relationships.

        Because of our local presence and market knowledge, we invest heavily in targeted marketing. Our strategic focus is on building new customer relationships and bundling broadband, pay television and telephony services. Our promotional materials and messaging focus on how our products and services deliver innovative solutions to customer pain points. Much of our advertising is developed centrally and customized for our regions. Among other factors, we monitor customer perceptions, marketing tactic impact and competition, to increase our responsiveness and the effectiveness of our efforts. Our footprint has several large college markets where we market specialized products and services to students for MDUs, such as dormitories and apartment complexes.

        We have separate dedicated sales teams for our SMB and enterprise offerings and dedicated service teams to support SMB and enterprise clients.

Altice Technical Services

        We acquired 100% of the equity interests in ATS for a de minimis amount in the first quarter of 2018. ATS was previously owned by Altice N.V. and a member of ATS's management through a holding company. In light of Altice N.V.'s determination to focus on businesses other than the Company, we and Altice N.V. concluded it is in the Company's and Altice N.V.'s interests for Altice USA to own and operate ATS. The ATS Acquisition was approved by our Audit Committee pursuant to the Company's related-party transaction approval policy. See "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions."

        ATS has and will continue to provide technical operating services to the Company, including field services, such as dispatch, customer installations, disconnects, service changes and other customer service visits, outside plant maintenance services and design and construction services for HFC and FTTH infrastructure pursuant to an Independent Contractor Agreement and Transition Services Agreement with the Company.

Customer Experience

        We believe customer service is the cornerstone of our business. Accordingly, we make a concerted effort to continually improve each customer's experience and have made significant investments in our people, processes and technology to enhance our customers' experience and to reduce the number of times customers need to contact us. The insights from operational metrics help us focus our improvement efforts. For example, we link internal sales incentives to early churn and product mix, as opposed to more traditional criteria of new sales, in order to refocus our organization away from churn retention to churn prevention.

        Our customer care centers are managed and operated locally, with the deployment and execution of end-to-end care strategies and initiatives conducted on a site-by-site basis. We have residential and commercial customer care centers located throughout our footprint, including in Newark, NJ; Jericho,

153


Table of Contents

NY; Bronx, NY; Melville, NY; Tyler, TX; and Lubbock, TX. Our customer care centers function as an integrated system and utilize software programs that provide increased efficiencies and limited wait-times for customers requiring support.

        We provide technical service to our customers 24 hours a day, seven days a week, and we have systems that allow our customer care centers to be accessed and managed remotely in the event that systems functionality is temporarily lost, which provides our customers access to customer service with limited disruption.

        We also utilize our customer portal to enable our customers to view and pay their bills online, obtain useful information and perform various equipment troubleshooting procedures. Our customers may also obtain support through our online chat, e-mail functionality and social media websites, including Twitter and Facebook.

Network Management

        Our cable systems are generally designed with an HFC architecture that has proven to be highly flexible in meeting the increasing needs of our customers. We deliver our signals via laser-fed fiber optic cable from control centers known as headends and hubs to individual nodes. Each node is connected to the individual homes served by us. A primary benefit of this design is that it pushes fiber optics closer to our customers' homes, which allows us to subdivide our systems into smaller service groups and make capital investments only in service groups experiencing higher than average service growth.

        As of December 31, 2017, approximately 96% of our basic pay television customers were served by systems with a capacity of at least 750 MHz and approximately 275 homes per node. Our Optimum network has been upgraded to nearly four times the maximum available broadband speeds and we have expanded our Gbps broadband service to approximately 72% of our Suddenlink footprint, compared to approximately 40% prior to the Suddenlink Acquisition. More than 99% of our residential broadband Internet customers are connected to our national backbone with a presence in major carrier access points in New York, Dallas, Chicago, San Jose, Washington D.C. and Phoenix. This presence allows us to avoid significant Internet transit costs by establishing peering relationships with major Internet service and content providers enabling direct connectivity with them at these access points.

        We also have a networking caching architecture that places highly viewed Internet traffic from the largest Internet-based content providers at the edge of the network closest to the customer to reduce bandwidth requirements across our national backbone, thus reducing operating expense. This collective network architecture also provides us with the capability to manage traffic across several Internet access points, thus helping to ensure Internet access redundancy and quality of service for our customers. Additionally, our national backbone connects most of our systems, which allows for an efficient and economical deployment of services from our centralized platforms that include telephone, VOD, network DVR, common pay television content, broadband Internet, hosted business solutions, provisioning, e-mail and other related services.

        We have also commenced a plan to build a FTTH network, which will enable us to deliver more than 10 Gbps broadband speeds across our entire Optimum footprint and part of our Suddenlink footprint. We believe this FTTH network will be more resilient with reduced maintenance requirements, fewer service outages and lower power usage, which we expect will drive further structural cost efficiencies.

        We have also focused on system reliability and disaster recovery as part of our national backbone and primary system strategy. For example, to help ensure a high level of reliability of our services, we implemented redundant power capability, as well as fiber route and carrier diversity in our networks serving most of our customers. With respect to disaster recovery, we invested in our telephone platform

154


Table of Contents

architecture for geo-redundancy to minimize downtime in the event of a disaster to any single facility. Additionally, we are working to implement a geo-redundant disaster recovery environment for our network operations center supporting both residential and business customers.

        In addition, we have expanded and refined our bandwidth utilization in capacity constrained systems in order to meet demand for new and improved advanced services. A key component to reclaim bandwidth was the digital delivery of pay television channels that were previously distributed in analog through the launch of digital simulcast, which duplicates analog channels as digital channels. Additionally, the deployment of lower-cost digital customer premises equipment, such as HD digital transport adapters, enabled the use of more efficient digital channels instead of analog channels, thus allowing the reclamation of expanded basic analog bandwidth in the targeted systems. This reclaimed analog bandwidth could then be repurposed for other advanced services such as additional HDTV services and faster Internet access speeds. This technology has the added benefit of providing improved picture and sound quality to customers for most of their pay television programming.

Information Technology

        Our IT systems consist of billing, customer relationship management, business and operational support and sales force management systems. We are updating and simplifying our IT infrastructure through further investments, focusing on cost efficiencies, improved system reliability, functionality and scalability and enhancing the ability of our IT infrastructure to meet our ongoing business objectives. Further, we have made significant progress in integrating and consolidating the IT platforms and systems and streamlining the processes of Optimum and Suddenlink, which has driven operating efficiencies. Additionally, through investment in our IT platforms and focus on process improvement, we have simplified and harmonized our service offering bundles, optimized our technical service delivery and improved customer service.

Suppliers

Customer Premise and Network Equipment

        We purchase set-top boxes and other customer premise equipment from a limited number of vendors because each of our cable systems uses one or two proprietary technology architectures. We also buy HD, HD/DVRs and VOD equipment, routers, including the components of our new home communications hub, and other network equipment from a limited number of suppliers, including Altice Labs, Altice N.V.'s technology, services and innovation center. See "Risk Factors—Risk Factors Relating to Our Business—We rely on network and information systems for our operations and a disruption or failure of, or defects in, those systems may disrupt our operations, damage our reputation with customers and adversely affect our results of operations."

Broadband and Telephone Connectivity

        We deliver broadband and telephony services through our HFC network. We use circuits that are either owned by us or leased from third parties to connect to the Internet and the public switched telephone network. We pay fees for leased circuits based on the amount of capacity available to it and pay for Internet connectivity based on the amount of IP-based traffic received from and sent over the other carrier's network.

Competition

        We operate in a highly competitive, consumer-driven industry and we compete against a variety of broadband, pay television and telephony providers and delivery systems, including broadband communications companies, wireless data and telephony providers, satellite delivered video signals, Internet-delivered video content and broadcast television signals available to residential and business

155


Table of Contents

customers in our service areas. We believe our leading market position in our footprint, technologically advanced network infrastructure, including our FTTH build-out, our new home communications hub and our focus on enhancing the customer experience favorably positions us to compete in our industry. See also "Risk Factors—Risk Factors Relating to Our Business—We operate in a highly competitive business environment which could materially adversely affect our business, financial condition, results of operations and liquidity."

Broadband Services Competition

        Our broadband services face competition from broadband communications companies' DSL, FTTH and wireless broadband offerings as well as from a variety of companies that offer other forms of online services, including satellite-based broadband services. Current and future fixed and wireless Internet services, such as 3G, 4G and 5G fixed and wireless broadband services and Wi-Fi networks, and devices such as wireless data cards, tablets and smartphones, and mobile wireless routers that connect to such devices, may compete with our broadband services.

Pay Television Services Competition

        We face intense competition from broadband communications companies with fiber-based networks, primarily Verizon, which has constructed a FTTH network plant that passes a significant number of households in our Optimum service area. We estimate that Verizon is currently able to sell a fiber-based pay television service, as well as broadband and VoIP services, to at least half of the households in our Optimum service area. In addition, Frontier offers pay television service in competition with us in most of our Connecticut service area.

        We also compete with DBS providers, such as DirecTV (a subsidiary of AT&T Inc.) and DISH. DirecTV and DISH offer one-way satellite-delivered pre-packaged programming services that are received by relatively small and inexpensive receiving dishes. DirecTV has exclusive arrangements with the National Football League that give it access to programming that we cannot offer. AT&T also has an agreement to acquire Time Warner Inc., which owns a number of cable networks, including TBS, CNN and HBO, and Warner Bros. Entertainment, which produces television, film and home-video content. However, we believe cable-delivered VOD services, which include HD programming, offer a competitive advantage to DBS service because cable headends can provide two-way communication to deliver a large volume of programming which customers can access and control independently, whereas DBS technology can only make available a much smaller amount of programming with DVR-like customer control.

        Our pay television services also face competition from a number of other sources, including companies that deliver movies, television shows and other pay television programming over broadband Internet connections to televisions, computers, tablets and mobile devices, such as Hulu, iTunes, Amazon Prime, Netflix, YouTube, Playstation Vue, DirecTV Now and Sling TV.

Telephony Services Competition

        Our telephony service competes with wireline, wireless and OTT phone providers, such as Vonage, Skype, GoogleTalk, Facetime, WhatsApp and magicJack, as well as companies that sell phone cards at a cost per minute for both national and international service. In addition, we compete with other forms of communication, such as text messaging on cellular phones, instant messaging, social networking services, video conferencing and email. The increase in the number of different technologies capable of carrying telephony services and the number of alternative communication options available to customers as well as the replacement of wireline services by wireless have intensified the competitive environment in which we operate our telephony services.

156


Table of Contents

Business Services Competition

        We operate in highly competitive business telecommunications market and compete primarily with local incumbent telephone companies, especially AT&T, CenturyLink, Frontier and Verizon, as well as from a variety of other national and regional business services competitors.

Advertising Sales Competition

        We face intense competition for advertising revenue across many different platforms and from a wide range of local and national competitors. Advertising competition has increased and will likely continue to increase as new formats seek to attract the same advertisers. We compete for advertising revenue against, among others, local broadcast stations, national cable and broadcast networks, radio stations, print media and online advertising companies and content providers.

Properties

        Our headquarters are located in Long Island City, New York, where we currently lease approximately 170,000 square feet of office space under a lease expiring in 2021. We also own our former headquarters building located in Bethpage, New York, with approximately 558,000 square feet of space, where we continue to maintain administrative offices. In addition, we own or lease real estate throughout our operating areas where certain of our call centers, corporate facilities, business offices, earth stations, transponders, microwave towers, warehouses, headend equipment, hub sites, access studios and microwave receiving antennae are located.

        Our principal physical assets consist of cable operating plant and equipment, including signal receiving, encoding and decoding devices, headend facilities, fiber optic transport networks, coaxial and distribution systems and equipment at or near customers' homes or places of business for each of the systems. The signal receiving apparatus typically includes a tower, antenna, ancillary electronic equipment and earth stations for reception of satellite signals. Headend facilities are located near the receiving devices. Our distribution system consists primarily of coaxial and fiber optic cables and related electronic equipment. Customer premise equipment consists of set-top devices, cable modems, Internet routers, wireless devices and media terminal adapters for telephone. Our cable plant and related equipment generally are attached to utility poles under pole rental agreements with local public utilities; although in some areas the distribution cable is buried in underground ducts or directly in trenches. The physical components of the cable systems require maintenance and periodic upgrading to improve system performance and capacity. In addition, we operate a network operations center that monitors our network 24 hours a day, seven days a week, helping to ensure a high quality of service and reliability for both our residential and commercial customers. We own most of our service vehicles.

        We believe our properties, both owned and leased, are in good condition and are suitable and adequate for our operations.

Intellectual Property

        We rely on our patents, copyrights, trademarks and trade secrets, as well as licenses and other agreements with our vendors and other parties, to use our technologies, conduct our operations and sell our products and services. We also rely on our access to the proprietary technology of Altice N.V., including through Altice Labs. However, no single patent, copyright, trademark, trade secret or content license is material to our business. We believe we own or have the right to use all of the intellectual property that is necessary for the operation of our business as we currently conduct it.

157


Table of Contents

Employees and Labor Relations

        As of December 31, 2017, we had 9,047 full-time (5,962 in our Cablevision segment and 3,085 in our Suddenlink segment), 72 part-time (63 in our Cablevision segment and 9 in our Suddenlink segment) and 295 temporary employees (294 in our Cablevision segment and 1 in our Suddenlink segment). 208 employees (in our Cablevision segment) were covered under collective bargaining agreements and an additional 94 (in our Cablevision segment) were represented by a union. As of December 31, 2017, ATS had approximately 3,250 employees, none of which were covered under collective bargaining agreements or represented by a union. We believe our relations with employees are satisfactory.

Legal Proceedings

        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 Cablevision, and as a result, those stations and networks were unavailable on Cablevision's cable television systems. On October 30, 2010, Cablevision and Fox reached an agreement on new affiliation agreements for these stations and networks, and carriage was restored. Several purported class action lawsuits alleging breach of contract, unjust enrichment, and consumer fraud and seeking unspecified compensatory damages, punitive damages and attorneys' fees were subsequently filed on behalf of Cablevision'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. On March 28, 2012, in ruling on Cablevision's motion to dismiss, the Court dismissed all of plaintiffs' claims, except for breach of contract. On March 30, 2014, the Court granted plaintiffs' motion for class certification. The parties have entered into a settlement agreement, which is subject to Court approval. As of December 31, 2017, the Company had an estimated liability associated with a potential settlement totaling $5,200. The amount ultimately paid in connection with the proposed settlement could exceed the amount recorded.

        In October 2015, the New York Attorney General began an investigation into whether the major Internet Service Providers in New York State deliver advertised Internet speeds. The Company is cooperating with this investigation and is currently in discussions with the New York Attorney General about resolving the investigation as to the Company, which resolution may involve operational and or financial components. While the Company is unable to predict the outcome of the investigation or these discussions, at this time it does not expect that the outcome will have a material adverse effect on its operations, financial conditions or cash flows.

        The Company receives notices from third parties and, in some cases, 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 matters 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.

158


Table of Contents


REGULATION

        Our cable and related services are subject to a variety of federal, state and local law and regulations. The Communications Act, and the rules, regulations and policies of the FCC, as well as other federal and state laws governing cable television, communications, consumer protection, privacy and related matters, affect significant aspects of our cable system and services operations.

        The following paragraphs describe the existing legal and regulatory requirements we believe are most significant to our cable system operations today. Our business can be dramatically impacted by changes to the existing regulatory framework, whether triggered by legislative, administrative or judicial rulings.

Cable Television

        Franchising.     The Communications Act requires cable operators to obtain a non-exclusive franchise from state or local franchising authorities to provide cable service. Although the terms of franchise agreements differ from jurisdiction to jurisdiction, they typically require payment of franchise fees and contain regulatory provisions addressing, among other things, use of the right of way, service quality, cable service to schools and other public institutions, insurance, indemnity and sales of assets or changes in ownership. State and local franchising authority, however, must be exercised consistent with the Communications Act, which sets limits on franchising authorities' powers, including limiting franchise fees to no more than 5% of gross revenues from the provision of cable service, prohibiting franchising authorities from requiring us to carry specific programming services, and protecting the renewal expectation of franchisees by limiting the factors a franchising authority may consider and requiring a due process hearing before denying renewal. Even when franchises are renewed, however, the franchise authority may, except where prohibited by applicable law, seek to impose new and more onerous requirements as a condition of renewal. Similarly, if a franchising authority's consent is required for the purchase or sale of a cable system, the franchising authority may attempt to impose more burdensome requirements as a condition for providing its consent. Cable franchises generally are granted for fixed terms and in many cases include monetary penalties for noncompliance. They may also be terminable if the franchisee fails to comply with material provisions.

        In recent years, the traditional local cable franchising regime underwent significant change as a result of various federal and state actions. Several states have reduced or eliminated the role of local, municipal government in franchising in favor of state or system-wide franchises, and the trend has been toward consolidation of franchising authority at the state level, in part to accommodate the interests of new broadband and cable entrants over the last decade. At the same time, the FCC has adopted rules that streamline entry for new competitors (such as those affiliated with broadband communications companies) and reduce certain franchising burdens for these new entrants. The FCC adopted more modest relief for existing cable operators, but a recent federal court decision curtailed a portion of this relief that relates to the cap on in-kind payments to franchising authorities.

        Pricing and Packaging.     The Communications Act and the FCC's rules limit the scope of price regulation for cable television services. Among other limitations, franchising authorities may regulate rates for only "basic" cable service. In 2015, the FCC adopted an order reversing its historic approach to this local rate regulation. Previously, rate regulation was in effect in a community unless and until a cable operator successfully petitioned the FCC for relief by showing the existence of "effective competition" (as defined under federal law) in the community. The FCC reversed that presumption, barring franchise authority rate regulation absent an affirmative showing by the franchising authority that there is an absence of effective competition. As none of our franchise authorities have filed the necessary rate regulation certification, none of our pay television customers are currently subject to rate regulation.

159


Table of Contents

        There have been frequent calls to impose further rate regulation on the cable industry. It is possible that Congress or the FCC may adopt new constraints on the retail pricing or packaging of cable programming. For example, there has been legislative and regulatory interest in requiring cable operators to offer historically bundled programming services on an à la carte basis. In addition, the FCC recently initiated a proceeding exploring how programming practices involving MVPDs affect the availability of diverse and independent programming. As we attempt to respond to a changing marketplace with competitive marketing and pricing practices, we may face regulations that impede our ability to compete.

        Must-Carry/Retransmission Consent.     Cable operators are required to carry, without compensation, programming transmitted by most local commercial and noncommercial broadcast television stations that elect "must carry" status.

        Alternatively, local commercial broadcast television stations may elect "retransmission consent," giving up their must-carry right and instead negotiating with cable systems the terms on which the cable systems may carry the station's programming content. Cable systems generally may not carry a broadcast station that has elected retransmission consent without the station's consent. The terms of retransmission consent agreements frequently include the payment of compensation to the station.

        Broadcast stations must elect "must carry" or retransmission consent every three years. A substantial number of local broadcast stations currently carried by our cable systems have elected to negotiate for retransmission consent. In the most recent retransmission consent negotiations, popular television stations have demanded substantial compensation increases, thereby increasing our operating costs.

        Ownership Limitations.     Federal regulation of the communications field traditionally included a host of ownership restrictions, which limited the size of certain media entities and restricted their ability to enter into competing enterprises. Through a series of legislative, regulatory, and judicial actions, most of these restrictions have been either eliminated or substantially relaxed. The FCC is currently considering substantial changes in this area, which could alter the business environment in which we operate.

        Set-Top Boxes.     The Communications Act includes a provision that requires the FCC to take certain steps to support the development of a retail market for "navigation devices," such as cable set-top boxes. As a result, the FCC has adopted certain mandates, from time to time, to require cable operators to accommodate third party navigation devices, sometimes imposing substantial development and operating requirements on the industry. From time to time, the FCC has proposed additional rules to effectuate this mandate, though there is no currently active effort to advance these proposals. Nevertheless, the FCC may in the future consider implementing other measures to promote the competitive availability of retail set-top boxes or third party navigation options that could impact our customers' experience, our ability to capture user interactions to refine and enhance our services, and our ability to provide a consistent customer support environment.

        PEG and Leased Access.     Franchising authorities may require that we support the delivery and support for public, educational, or governmental ("PEG") channels on our cable systems. In addition to providing PEG channels, we must make a limited number of commercial leased access channels available to third parties (including parties with potentially competitive pay television services) at regulated rates. The FCC adopted revised rules several years ago mandating a significant reduction in the rates that operators can charge commercial leased access users. These rules were stayed, however, by a federal court, pending a cable industry appeal. This matter currently remains pending, and the revised rules are not yet in effect. Although commercial leased access activity historically has been relatively limited, increased activity in this area could further burden the channel capacity of our cable systems.

160


Table of Contents

        Pole Attachments.     The company makes extensive use of utility poles and conduit owned by other utilities to attach and install the facilities that are integral to our network and services. The Communications Act requires most utilities to provide cable systems with access to poles and conduits for access to attach such facilities at regulated rates. States (or, where states choose not to regulate, the FCC) regulate utility company rates for the rental of pole and conduit space used by companies, including operators like us, to provide cable, telecommunications services, and Internet access services, unless states establish their own regulations in this area. Many states in which we operate have elected to set their own pole attachment rules.

        In 2011 and again in 2015, the FCC amended its pole attachment rules to promote broadband deployment. The 2011 order allows for new penalties in certain cases involving unauthorized attachments, but generally strengthens the cable industry's ability to access investor-owned utility poles on reasonable rates, terms and conditions. Additionally, the 2011 order reduces the federal rate formula previously applicable to "telecommunications" attachments to closely approximate the more favorable rate formula applicable to "cable" attachments. The 2015 Order continues this rate reconciliation, effectively closing a remaining "loophole" that potentially allowed for significantly higher rates for telecommunications attachments in certain scenarios. Neither the 2011 order nor the 2015 Order directly affects the rate in states that self-regulate (rather than allowing the FCC to regulate) pole rates, but many of those states have substantially the same rate for cable and telecommunications attachments. Adverse changes to the pole attachment rate structure, rate, and classifications could significantly increase our annual pole attachment costs.

        Program Access.     The program access rules generally prohibit a cable operator from improperly influencing an affiliated satellite-delivered cable programming service to discriminate unfairly against an unaffiliated distributor where the purpose or effect of such influence is to significantly hinder or prevent the competitor from providing satellite-delivered cable programming. FCC rules also allow a competing distributor to bring a complaint against a cable-affiliated terrestrially-delivered programmer or its affiliated cable operator for alleged violations of this rule, and seek reformed terms of carriage as remedy.

        Program Carriage.     The FCC's program carriage rules prohibit us from requiring that an unaffiliated programmer grant us a financial interest or exclusive carriage rights as a condition of its carriage on our cable systems and prohibit us from unfairly discriminating against unaffiliated programmers in the terms and conditions of carriage on the basis of their nonaffiliation.

        On October 12, 2011, Game Show Network ("GSN") filed a program carriage complaint against Cablevision, alleging that we discriminated against it in the terms and conditions of carriage based on GSN's lack of affiliation with us. Although the Enforcement Bureau of the FCC recommended on October 15, 2015, that the administrative law judge adjudicating this dispute find in our favor because GSN had not satisfied its burden of proving that we discriminated against it on the basis of affiliation, the administrative law judge issued his initial decision in GSN's favor on November 23, 2016, requiring that we restore GSN to the expanded basic tier. The FCC reversed that decision and denied GSN's complaint on July 13, 2017. GSN initiated review of that decision in a federal appeals court on September 11, 2017. We believe GSN's claims are without merit and intervened in GSN's appeal to support the FCC's decision on October 11, 2017. On December 28, 2017, we entered into a binding settlement agreement with GSN. On January 25, 2018, the federal court of appeals entered dismissal of the action.

        Exclusive Access to Multitenant Buildings.     The FCC has prohibited cable operators from entering into or enforcing exclusive agreements with owners of multitenant buildings under which the operator is the only MVPD with access to the building.

161


Table of Contents

        CALM Act.     The FCC's rules require us to ensure that all commercials carried on our cable service comply with specified volume standards.

        Privacy and Data Security.     In the course of providing our services, we collect certain information about our customers and their use of our services. We also collect certain information regarding potential customers and other individuals. Our collection, use, disclosure and other handling of information is subject to a variety of federal and state privacy requirements, including those imposed specifically on cable operators and telecommunications service providers by the Communications Act. We are also subject to data security obligations, as well as requirements to provide notice to individuals and governmental entities in the event of certain data security breaches, and such breaches, depending on their scope and consequences, may lead to litigation and enforcement actions with the potential of substantial monetary forfeitures or to adversely affect our brand.

        As cable operators provide interactive and other advanced services, additional privacy and data security requirements may arise through legislation, regulation or judicial decisions. For example, the Video Privacy Protection Act of 1988 has been extended to cover online interactive services through which customers can buy or rent movies. In addition, Congress, the FTC, and other lawmakers and regulators are all considering whether to adopt additional measures that could impact the collection, use, and disclosure of customer information in connection with the delivery of advertising and other services to consumers customized to their interests. In October 2016, the FCC adopted new privacy and data security rules governing the use of customer information by broadband ISPs, including cable ISPs and providers of VoIP. These new rules permit the collection and use of non-sensitive customer information subject to the customers' ability to opt out, but require the customers' opt-in before access, use or disclosure of sensitive proprietary information. These new rules are more stringent than the FTC's privacy standards. The FCC suspended the data security portion of these rules in February. In March, both houses of Congress voted to overturn all of the rules. This legislation was signed by the President in April and it is now effective. Some states are now considering imposing similar rules, however.

        Federal Copyright Regulation.     We are required to pay copyright royalty fees on a semi-annual basis to receive a statutory compulsory license to carry broadcast television content. These fees are subject to periodic audit by the content owners. The amount of a cable operator's royalty fee payments are determined by a statutory formula that takes into account various factors, including the amount of "gross receipts" received from customers for "basic" service, the number of "distant" broadcast signals carried and the characteristics of those distant signals (e.g., network, independent or noncommercial). Certain elements of the royalty formula are subject to adjustment from time to time, which can lead to increases in the amount of our semi-annual royalty payments. The U.S. Copyright Office, which administers the collection of royalty fees, has made recommendations to Congress for changes in or elimination of the statutory compulsory licenses for cable television carriage of broadcast signals and the U.S. Government Accountability Office is conducting a statutorily-mandated inquiry into whether the cable compulsory license should be phased out. Changes to copyright regulations could adversely affect the ability of our cable systems to obtain such programming, and could increase the cost of such programming. Similarly, we must obtain music rights for locally originated programming and advertising from the major music performing rights organizations. These licensing fees have been the source of litigation in the past, and we cannot predict with certainty whether license fee disputes may arise in the future.

        Access for Persons with Disabilities.     The FCC's rules require us to ensure that persons with disabilities can more fully access the programming we carry. We are required to provide closed captions and pass through video description to customers on some networks we carry, and to provide an easy means of activating closed captioning and to ensure the audio accessibility of emergency information navigation capabilities of our video offerings.

162


Table of Contents

        Other Regulation.     We are subject to various other regulations, including those related to political broadcasting; home wiring; the blackout of certain network and syndicated programming; prohibitions on transmitting obscene programming; limitations on advertising in children's programming; and standards for emergency alerts, as well as telemarketing and general consumer protection laws and equal employment opportunity obligations. The FCC also imposes various technical standards on our operations. In the aftermath of Superstorm Sandy, the FCC and the states are examining whether new requirements are necessary to improve the resiliency of communications networks, potentially including cable networks. Each of these regulations restricts our business practices to varying degrees. The FCC can aggressively enforce compliance with its regulations and consumer protection policies, including the imposition of substantial monetary sanctions. It is possible that Congress or the FCC will expand or modify its regulations of cable systems in the future, and we cannot predict at this time how that might impact our business.

Broadband

        Regulatory Classification.     Broadband Internet access services were traditionally classified by the FCC as "information services" for regulatory purposes, a type of service that is subject to a lesser degree of regulation than "telecommunications services." In 2015, the FCC reversed this determination and classified broadband Internet access services as "telecommunications services." This reclassification had subjected our broadband Internet access service to greater regulation, although the FCC did not apply all telecommunications service obligations to broadband Internet access service. The 2015 Order could have had a material adverse impact on our business. In December 2017, the FCC adopted an order that in large part reversed again the 2015 Order and reestablished the "information service" classification for broadband Internet access service. The 2017 Order has not yet gone into effect, however, and the 2015 Order will remain binding until the 2017 Order takes effect. The 2017 Order is expected to be subject to legal challenge that may delay its effect or overturn it.

        Net Neutrality.     The 2015 Order also established a new "Open Internet" framework that expanded disclosure requirements on Internet service providers ("ISPs") such as cable companies, prohibited blocking, throttling, and paid prioritization of Internet traffic on the basis of the content, and imposed a "general conduct standard" that prohibits unreasonable interference with the ability of end users and edge providers to reach each other. The FCC's 2017 Order eliminates these rules except for certain disclosure requirements. As noted above, however, we cannot be certain when or if the 2017 Order will take effect. Additionally, Congress and some states are considering legislation that may codify "net neutrality" rules.

        Access for Persons with Disabilities.     The FCC's rules require us to ensure that persons with disabilities have access to "advanced communications services" ("ACS"), such as electronic messaging and interoperable video conferencing. They also require that certain pay television programming delivered via Internet Protocol include closed captioning and require entities distributing such programming to end users to pass through such captions and identify programming that should be captioned.

        Other Regulation.     The 2015 Order also subjected broadband providers' Internet traffic exchange rates and practices to potential FCC oversight and created a mechanism for third parties to file complaints regarding these matters. In addition, our provision of Internet services also subjects us to the limitations on use and disclosure of user communications and records contained in the Electronic Communications Privacy Act of 1986. Broadband Internet access service is also subject to other federal and state privacy laws applicable to electronic communications.

        Additionally, providers of broadband Internet access services must comply with CALEA, which requires providers to make their services and facilities accessible for law enforcement intercept requests. Various other federal and state laws apply to providers of services that are accessible through

163


Table of Contents

broadband Internet access service, including copyright laws, telemarketing laws, prohibitions on obscenity, and a ban on unsolicited commercial e-mail, and privacy and data security laws. Online content we provide is also subject to some of these laws.

        Other forms of regulation of broadband Internet access service currently being considered by the FCC, Congress or state legislatures include consumer protection requirements, cyber security requirements, consumer service standards, requirements to contribute to universal service programs and requirements to protect personally identifiable customer data from theft. Pending and future legislation in this area could adversely affect our operations as an Internet service provider and our relationship with our Internet customers.

        Additionally, from time to time the FCC and Congress have considered whether to subject broadband Internet access services to the federal Universal Service Fund ("USF") contribution requirements. Any contribution requirements adopted for Internet access services would impose significant new costs on our broadband Internet service. At the same time, the FCC is changing the manner in which Universal Service funds are distributed. By focusing on broadband and wireless deployment, rather than traditional telephone service, the changes could assist some of our competitors in more effectively competing with our service offerings.

Telephony Services—VoIP

        We provide telephony services using VoIP technology ("interconnected VoIP"). The FCC has adopted several regulations for interconnected VoIP services, as have several states, especially as it relates to core customer and safety issues such as E911, local number portability, disability access, outage reporting, universal service contributions, and regulatory reporting requirements. The FCC has not, however, formally classified interconnected VoIP services as either information services or telecommunications services. In this vacuum, some states have asserted more expansive rights to regulate interconnected VoIP services, while others have adopted laws that bar the state commission from regulating VoIP service.

        Universal Service.     Interconnected VoIP services must contribute to the USF used to subsidize communication services provided to low income households, to customers in rural and high cost areas, and to schools, libraries, and rural health care providers. The amount of universal service contribution required of interconnected VoIP service providers is based on a percentage of revenues earned from interstate and international services provided to end users. We allocate our end user revenues and remit payments to the universal service fund in accordance with FCC rules. The FCC has ruled that states may impose state universal service fees on interconnected VoIP providers.

        Local Number Portability.     The FCC requires interconnected VoIP service providers and their "numbering partners" to ensure that their customers have the ability to port their telephone numbers when changing providers. We also contribute to federal funds to meet the shared costs of local number portability and the costs of North American Numbering Plan Administration.

        Intercarrier Compensation.     In an October 2011 reform order and subsequent clarifying orders, the FCC revised the regime governing payments among providers of telephony services for the exchange of calls between and among different networks ("intercarrier compensation") to, among other things, explicitly include interconnected VoIP. In that Order, the FCC determined that intercarrier compensation for all terminating traffic, including VoIP traffic exchanged in TDM format, will be phased down over several years to a "bill-and-keep" regime, with no compensation between carriers for most terminating traffic by 2018. The FCC is considering further reform in this area, which could reduce or eliminate compensation for originating traffic as well.

        Other Regulation.     Interconnected VoIP service providers are required to provide enhanced 911 emergency services to their customers; protect customer proprietary network information from

164


Table of Contents

unauthorized disclosure to third parties; report to the FCC on service outages; comply with telemarketing regulations and other privacy and data security requirements; comply with disabilities access requirements and service discontinuance obligations; comply with call signaling requirements; and comply with CALEA standards. In August 2015, the FCC adopted new rules to improve the resiliency of the communications network. Under the new rules, providers of telephony services, including interconnected VoIP service providers, must make available eight hours of standby backup power for consumers to purchase at the point of sale. The rules also require that providers inform new and current customers about service limitations during power outages and steps that consumers can take to address those risks.

Telephony Services—Traditional

        We operate traditional telecommunications services under the trade name Lightpath in various state subsidiaries, and those services are largely governed under rules established for CLECs under the Communications Act. The Communications Act entitles our CLEC subsidiaries to certain rights, but as telecommunications carriers, it also subjects them to regulation by the FCC and the states. Their designation as telecommunications carriers also results in other regulations that may affect them and the services they offer.

        Interconnection and Intercarrier Compensation.     The Communications Act requires telecommunications carriers to interconnect directly or indirectly with other telecommunications carriers. Under the FCC's intercarrier compensation rules, we are entitled, in some cases, to compensation from carriers when they use our network to terminate or originate calls and in other cases are required to compensate another carrier for using its network to originate or terminate traffic. The FCC and state regulatory commissions, including those in the states in which we operate, have adopted limits on the amounts of compensation that may be charged for certain types of traffic. As noted above, the FCC has determined that intercarrier compensation for all terminating traffic will be phased down over several years to a "bill-and-keep" regime, with no compensation between carriers for most terminating traffic by 2018, and is considering further reform that could reduce or eliminate compensation for originating traffic as well.

        Universal Service.     Our CLEC subsidiaries are required to contribute to the USF. The amount of universal service contribution required of us is based on a percentage of revenues earned from interstate and international services provided to end users. We allocate our end user revenues and remit payments to the universal service fund in accordance with FCC rules. The FCC has ruled that states may impose state universal service fees on CLEC telecommunications services.

        Other Regulation.     Our CLEC subsidiaries' telecommunications services are subject to other FCC requirements, including protecting the use and disclosure of customer proprietary network information; meeting certain notice requirements in the event of service termination; compliance with disabilities access requirements; compliance with CALEA standards; outage reporting; and the payment of fees to fund local number portability administration and the North American Numbering Plan. As noted above, the FCC and states are examining whether new requirements are necessary to improve the resiliency of communications networks. Communications with our customers are also subject to FCC, FTC and state regulations on telemarketing and the sending of unsolicited commercial e-mail and fax messages, as well as additional privacy and data security requirements.

        State Regulation.     Our CLEC subsidiaries' telecommunications services are subject to regulation by state commissions in each state where we provide services. In order to provide our services, we must seek approval from the state regulatory commission or be registered to provide services in each state where we operate and may at times require local approval to construct facilities. Regulatory obligations vary from state to state and include some or all of the following requirements: filing tariffs (rates, terms and conditions); filing operational, financial, and customer service reports; seeking approval to transfer

165


Table of Contents

the assets or capital stock of the broadband communications company; seeking approval to issue stocks, bonds and other forms of indebtedness of the broadband communications company; reporting customer service and quality of service requirements; outage reporting; making contributions to state universal service support programs; paying regulatory and state Telecommunications Relay Service and E911 fees; geographic build-out; and other matters relating to competition.

Other Services

        We may provide other services and features over our cable system, such as games and interactive advertising that may be subject to a range of federal, state and local laws such as privacy and consumer protection regulations. We also maintain various websites that provide information and content regarding our businesses. The operation of these websites is also subject to a similar range of regulations.

Environmental Regulations

        Our business operations are subject to environmental laws and regulations, including regulations governing the use, storage, disposal of, and exposure to, hazardous materials, the release of pollutants into the environment and the remediation of contamination. In part as a result of the increasing public awareness concerning the importance of environmental regulations, these regulations have become more stringent over time. Amended or new regulations could impact our operations and costs.

166


Table of Contents


MANAGEMENT

        The following table sets forth the names, ages as of the date of this prospectus, and positions of the individuals who are expected to constitute directors and executive officers as of the completion of the Distribution. The individuals listed below, other than Mr. Drahi, currently constitute the directors and executive officers of Altice USA. Following the consummation of the Distribution, Mr. Drahi and two additional directors designated for nomination by Next Alt will be appointed to the Altice USA board of directors. In the table below, directors and the director nominee of Altice USA are designated with a + and executive officers of Altice USA are designated with a *. Only Mr. Goei is both an employee and a director of Altice USA.

Name
  Age   Position

Patrick Drahi

    54   Chairman and Director Nominee+

Dexter Goei

    46   Chief Executive Officer and Director*+

Dennis Okhuijsen

    47   Director+

Jérémie Bonnin

    44   Director+

Raymond Svider

    55   Director+

Mark Mullen

    53   Director+

Manon Brouillette

    49   Director+

Charles Stewart

    48   Co-President and Chief Financial Officer*

Abdelhakim Boubazine

    42   Co-President and Chief Operating Officer*

Lisa Rosenblum

    64   Vice Chairman*

David Connolly

    46   Executive Vice President, General Counsel and Secretary*

         Patrick Drahi is expected to join Altice USA as Chairman and Director and rejoin the board of directors of Altice N.V. upon the completion of the Distribution. Mr. Drahi founded Altice in 2002. Mr. Drahi is a graduate from the Ecole Polytechnique and Ecole Nationale Supérieure de Télécommunications and began his professional career with the Philips Group in 1988 where he was in charge of international marketing (UK, Ireland, Scandinavia, Asia) in satellite and cable TV (DTH, CATV, MMDS). In 1991, Mr. Drahi joined the US/Scandinavian group Kinnevik-Millisat, where he was in charge of the development of private cable networks in Spain and France and was involved in the launch of commercial TV stations in Eastern Europe. In 1993, Mr. Drahi founded CMA, a consulting firm specialised in telecommunications and media, which was awarded a mandate from BCTV for the implementation of Beijing's full service cable network. In addition, Mr. Drahi founded two Cable companies, Sud Câble Services (1994) and Médiaréseaux (1995), where he was involved in several network deployments and buy-outs. When Médiaréseaux was taken over by UPC at the end of 1999, Mr. Drahi advised UPC on its M&A activities until mid-2001.

         Dexter Goei has served as Chairman and Chief Executive Officer of Altice USA, and President of the board of directors of Altice N.V., since 2016. Mr. Goei will remain a Director of Altice USA and Altice N.V. following the Distribution. Mr. Goei first joined the Altice Group as Chief Executive Officer in 2009, helping to lead its development and growth from a French cable operator to a multinational telecoms operator with fixed and mobile assets across six different territories serving both residential and enterprise clients. Prior to joining the Altice Group, Mr. Goei spent 15 years in investment banking first with JP Morgan and then Morgan Stanley in their Media & Communications Group in New York, Los Angeles and London. Prior to that, he was Co-Head of Morgan Stanley's European Media & Communications Group when he left to join Altice. Mr. Goei is a graduate of Georgetown University's School of Foreign Service with cum laude honors.

         Dennis Okhuijsen joined Altice USA as a director in 2017. Mr. Okhuijsen will serve as the Chief Executive Officer of Altice N.V. following the Distribution. He joined the Altice Group in September 2012 as the CFO. Before joining the Altice Group, he was a Treasurer for Liberty Global since 2005. From 1993 until 1996 he was a senior accountant at Arthur Andersen. Mr. Okhuijsen joined UPC in

167


Table of Contents

1996 where he was responsible for accounting, treasury and investor relations up to 2005. His experience includes raising and maintaining non-investment grade capital across both the loan markets as well as the bond/equity capital market. In his previous capacities he was also responsible for financial risk management, treasury and operational financing. He holds a Master's of Business Economics from the Erasmus University Rotterdam.

         Jérémie Bonnin joined Altice USA as a director in 2017. He is the representative of A4 S.A. on the Altice N.V. board of directors and he is General Secretary of Altice N.V., which he joined in May 2005 as Corporate Finance director. Before joining Altice N.V., he was a Manager in the Transaction Services department at KPMG, which he joined in 1998. Since his appointment at Altice N.V., he has been involved in all of the Altice Group's acquisitions which have increased its footprint (in France, Belgium, Luxembourg, Switzerland, Israel, the French Overseas Territories, the Dominican Republic, Portugal and the United States). He has a long track record of successful cross-border transactions, and in financial management within the telecom sector. Mr. Bonnin received his engineering degree from the Institut d'Informatique d'Entreprises in France in 1998. He also graduated from the DECF in France (an equivalent to the CPA) in 1998.

         Raymond Svider joined Altice USA as a director in 2017. Mr. Svider is the Co-Chairman and a Managing Partner of BC Partners. He joined the firm in 1992 and is currently based in New York. Over the years, Mr. Svider has participated and led investments in a number of sectors including TMT, healthcare, industrials, business services, consumer and retail. He is currently Non-Executive Chairman of PetSmart, Chairman of the Board of Accudyne Industries, and also serves on the boards of Intelsat (NYSE "I") and Teneo Global. Mr. Svider previously served as a Director of Office Depot, Multiplan, Unity Media, Neuf Cegetel, Polyconcept, Neopost, Nutreco, UTL and Chantemur. Mr. Svider received an MBA from the University of Chicago and an MS in Engineering from both Ecole Polytechnique and Ecole Nationale Superieure des Telecommunications in France.

         Mark Mullen joined Altice USA as a director in 2017. Mr. Mullen is co-founder and Managing Director of Bonfire Ventures, founded in 2017. Mr. Mullen also founded Double M Partners in 2012 and has since served as Managing Partner. Both Bonfire and Double M manage early stage capital funds in Los Angeles. Mr. Mullen also founded Mull Capital in 2005, an evergreen fund that invests directly in startups and in other investment funds. All of the funds focus on investing in internet, media and technology with primary emphasis on business to business solutions, security and software. Prior to Double M Partners, Mr. Mullen served as COO of the City of Los Angeles (Economic Policy) and Senior Advisor to the then-Mayor Antonio Villaraigosa where he oversaw several of the City's assets including the LA International Airport (LAX), LA Convention Center, the Planning and Building & Safety Departments, as well as the Office of Small Business Services. From 1993-2007, Mr. Mullen ran the international M&A and private equity group for Daniels & Associates, an investment bank focused on the cable TV and broadband industry. Mr. Mullen was a senior partner of Daniels when it was acquired by RBC Capital Markets in 2007 where he stayed until 2010 as Managing Director. Mr. Mullen earned his BSBA with cum laude honors from the University of Denver in 1986 and earned his MBA in international business from the Thunderbird School of Global Management in 1992.

         Manon Brouillette joined Altice USA as a director in 2017. Ms. Brouillette has been the President and Chief Executive Officer of Vidéotron, which includes Videotron Business Solutions, Vidéotron Le Superclub, 4Degrees and Fibrenoire, since 2013. Ms. Brouillette sits on the board of the École de technologie supérieure (ÉTS) in Montréal. She is also Executive Vice-Chair of the Quartier de l'innovation and a director of the Sainte-Justine Hospital Foundation. Ms. Brouillette received a bachelor's degree in communications and marketing from Université Laval and completed the University of Western Ontario's Ivey Executive Program.

168


Table of Contents

         Charles Stewart has served as Co-President and Chief Financial Officer of Altice USA since 2015. Mr. Stewart joined Altice USA after 21 years of corporate, finance and investment banking experience in the United States, Latin America and Europe. Most recently, Mr. Stewart served as Chief Executive Officer of Itau BBA International plc from 2013 to 2015, where he oversaw Itau-Unibanco's wholesale banking activities in Europe, the United States and Asia. Prior to that, he spent nineteen years at Morgan Stanley as an investment banker in various roles, including nine years focusing on the U.S. cable, broadcast and publishing industries. Mr. Stewart also acted as Deputy Head of Investment Banking for EMEA and was a member of the global investment banking management committee. Mr. Stewart is a graduate of Yale University.

         Abdelhakim Boubazine has served as Co-President and Chief Operating Officer of Altice USA since 2016. He joined the Altice Group in 2014 as CEO of Altice in the Dominican Republic. There he oversaw cable television, broadband and mobile operations, serving more than 4 million customers. Prior to Altice, Mr. Boubazine was CEO of ERT, a company specializing in the design, construction and operation of the latest-generation cable and fiber networks in France, Belgium, Luxembourg and the French West Indies and which was one of the main sub-contractors of Altice in these regions. Prior to joining the telecommunications industry, he had an international career of more than 10 years in the oil and gas industry, where he occupied various operations, business and senior management roles in Europe, Asia, North America, Africa and the Middle East. Mr. Boubazine holds an engineering degree from the École Centrale de Lyon and a Master's degree in Theoretical Physics from the University of Strasbourg. He is also a post-graduate in Petroleum Engineering & Management from Imperial College of London.

         David Connolly is Executive Vice President, General Counsel and Secretary of Altice USA. In this role he is responsible for all legal affairs for Altice USA. Previously, Mr. Connolly was a Mergers & Acquisitions partner at Shearman & Sterling LLP, where he advised Altice N.V. on the Optimum Acquisition. While at Shearman & Sterling LLP, he represented multinational corporations, financial institutions and professional sports franchises in a wide variety of matters. Mr. Connolly holds a B.A. from the College of the Holy Cross and a J.D. from Fordham University School of Law.

         Lisa Rosenblum is Vice Chairman of Altice USA. In this role, she advises the CEO as requested on selected legislative, regulatory and public policy matters. Previously, Ms. Rosenblum was responsible for helping to shape corporate strategy on all legislative, regulatory and public policy activities and related business matters, as well as for establishing our presence with government, in the marketplace and the communities we serve. Ms. Rosenblum previously served as Executive Vice President and General Counsel, with responsibility for all legal, government relations and public and community affairs for Altice USA. She joined Optimum in 1996, and prior to the Optimum Acquisition she held the position of Executive Vice President, Government and Public Affairs, where she was responsible for directing the company's local, state and federal government relations, as well as all legislative, regulatory and policy matters. Ms. Rosenblum currently serves on the board of directors of Citymeals-on-Wheels in New York City, an organization devoted to serving the elderly. Ms. Rosenblum holds a B.A., cum laude, from Yale University and a J.D. from the Connecticut School of Law, where she served as an editor of the Law Review.

General Information About Our Directors and Executive Management

        As of the date of this prospectus, none of the members of our Board and executive management for at least the previous five years:

169


Table of Contents

Composition and Meetings of our Board

        Upon the completion of the Distribution, our Board will consist of nine members, three of whom, Ms. Brouillette, Mr. Mullen and Mr. Svider, have been determined by the Board to be independent directors under applicable NYSE corporate governance standards and six of whom, including Mr. Drahi, who is expected to join our Board as Chairman following the Distribution, will be designated by Next Alt pursuant to the post-Distribution stockholders' agreement. Our third amended and restated certificate of incorporation provides that our Board must consist of no less than seven members and no more than twelve. Our third amended and restated certificate of incorporation gives our Board the ability to increase or decrease the number of sitting directors within this range and to fill any vacancies or newly created directorships if the number of directors is expanded. Any increase or decrease in the outer limits of this range requires approval by our stockholders.

        Our third amended and restated certificate of incorporation will require a majority of the directors then in office to constitute a quorum. So long as Next Alt is entitled to nominate three or more directors to the Board pursuant to the post-Distribution stockholders' agreement, such quorum must include (i) the Chairman of the board of managers of Next Alt and two other directors nominated to the Board by Next Alt pursuant to the post-Distribution stockholders' agreement or (ii) in the event the Chairman of the board of managers of Next Alt is not a member of the Board, three directors nominated to the Board by Next Alt pursuant to the post-Distribution stockholders' agreement; provided, however, that, in the case of clause (i), if consented to in writing (including by email) by Next Alt prior to the applicable meeting of the Board, three directors nominated to the Board by Next Alt pursuant to the post-Distribution stockholders' agreement shall be required to constitute a quorum, none of which need to be the Chairman of the board of managers of Next Alt. In the event Next Alt is entitled to nominate one or two directors to the Board pursuant to the post-Distribution stockholders' agreement and such director or directors are elected to the Board by the stockholders, a quorum must include each director nominated to the Board pursuant to the post-Distribution stockholders' agreement by Next Alt. Our third amended and restated certificate of incorporation provides that a majority of the votes cast is required for a director nominee to be duly elected to the Board in any uncontested election. Therefore, following the date that the PDR Group (as defined below in "The Master Separation Agreement—General—Exchange of Information") ceases to hold a majority of the voting power of our capital stock, Next Alt will not be able to ensure that a director nominee of Next Alt will be elected to the Board. The stockholders and registration rights agreement that we entered into with Altice N.V., BCP and CPPIB also gives each of the Sponsors the right to designate one non-voting board observer for so long as such Sponsor and certain of its affiliates own a certain percentage of the issued and outstanding shares of Class A and Class B common stock and there is no director who is a designee of such Sponsor on our Board. We expect to amend and restate our stockholders and registration rights agreement to include Next Alt as a party. We do not expect there will be any other material changes made to this agreement in connection with the Distribution. See "Certain Relationships and Related-Party Transactions—Stockholders' Agreement" and "—Stockholders and Registration Rights Agreement."

Controlled Company

        Our Class A common stock is listed on the NYSE. Because Mr. Drahi will own or control (through entities controlled directly or indirectly by Mr. Drahi or his family (including Next Alt,

170


Table of Contents

Uppernext and A4 S.A.) and the Concert Group voting agreements and the Holding LP voting agreement) shares representing a majority of the voting power of our outstanding common stock following the Distribution, we will continue to be a "controlled company" under the NYSE corporate governance rules. As a controlled company, we are eligible for exemptions from some of the requirements of these rules, including:

        Consistent with these exemptions, we do not have (i) a majority of independent directors on our Board or (ii) a nominating and governance committee. The responsibilities that would otherwise be undertaken by a nominating and governance committee are undertaken by the full Board, or at its discretion, by a special committee established under the direction of the full Board.

Committees of the Board

        The standing committees of our Board are as described below.

Audit Committee

        The Audit Committee is composed of Ms. Brouillette, Mr. Mullen and Mr. Svider, with Mr. Mullen as Chair. The Audit Committee performs the duties set forth in its written charter, which is available on our website. The primary responsibilities of the Audit Committee include:

        The Audit Committee is comprised of three directors, all of whom are "independent" under the listing standards of the NYSE and the requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), financially literate and have accounting or related financial management expertise, as such qualifications are defined under the rules of the NYSE. At least one member of our Audit Committee is a "financial expert" within the meaning of SEC rules and regulations.

Compensation Committee

        The Compensation Committee is composed of Ms. Brouillette, Mr. Mullen and Mr. Svider, with Mr. Svider as Chair. The Compensation Committee performs the duties set forth in its written charter, which is available on our website. The primary responsibilities of the Compensation Committee include:

171


Table of Contents

        The Compensation Committee is comprised of three directors, all of whom are "independent" under the listing standards of the NYSE and the requirements of Rule 10A-3 under the Exchange Act.

Director Compensation

        Compensation for our non-employee directors is determined by our Board with the assistance of the Compensation Committee. See "Executive Compensation—Director Compensation" for further information on our director compensation program.

Compensation Committee Interlocks and Insider Participation

        Other than Dexter Goei, who has served as a director of Altice N.V. since 2015, none of our executive officers currently serve, or in the past year have served, as a member of the Board or Compensation Committee of any entity that has one or more executive officers serving on our Board or Compensation Committee.

Role of Our Board in Risk Oversight

        One of the key functions of our Board is informed oversight of our risk management process. Our Board administers this oversight function directly, with support from the Audit and Compensation Committees, each of which addresses risks specific to its respective areas of oversight. In particular, our Audit Committee is responsible for considering and discussing our major financial risk exposures and the steps our management takes to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. Our Audit Committee also monitors compliance with legal and regulatory requirements, in addition to oversight of the performance of our internal audit function. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. Board committees report to the full board as appropriate, including when a matter rises to the level of a material or enterprise-level risk. In addition, the Board receives detailed regular reports from members of our senior management and other personnel that include assessments and potential mitigation of the risks and exposures involved with their respective areas of responsibility.

Code of Ethics

        We have adopted Standards of Business Conduct for all of our employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of our Standards of Business Conduct is available on our website. Our Standards of Business Conduct is a "code of ethics" as defined in Item 406(b) of Regulation S-K. We will make any legally required disclosures regarding amendments to or waivers of provisions of our code of ethics on our website. The information on our website is not a part of this prospectus.

Corporate Governance Guidelines

        We are committed to adhering to corporate governance practices that meet applicable U.S. corporate governance standards. We believe we are in compliance with all applicable corporate governance requirements under the Delaware General Corporation Law and NYSE corporate governance rules. Our Board has adopted corporate governance guidelines that serve as a flexible framework within which our Board and its committees operate. These guidelines cover a number of areas including the size and composition of the board, board membership criteria and director qualifications, director responsibilities, board agenda, role of the chief executive officer, meetings of independent directors, committee responsibilities and assignments, board member access to

172


Table of Contents

management and independent advisors, director communications with third parties, director compensation, director orientation and continuing education, evaluation of senior management and management succession planning. A copy of our corporate governance guidelines is available on our website. The information on our website is not part of this prospectus.

Conflicts of Interest

        Following the Distribution, four of our directors, Messrs. Drahi, Goei, Okhuijsen and Bonnin, will be affiliated with Next Alt, Altice N.V. or A4 S.A. These directors have fiduciary duties to us and, in addition, they have duties to Next Alt, Altice N.V. or A4 S.A. As a result, these directors and officers may face real or apparent conflicts of interest with respect to matters affecting both us and Next Alt, Altice N.V. or A4 S.A., whose interests may be adverse to ours in some circumstances. Messrs. Goei, Okhuijsen and Bonnin currently serve on the board of directors of Altice N.V. and may face real or apparent conflicts of interest with respect to matters affecting both us and Altice N.V. We are not aware of any conflicts of interest relating to any of our other directors or any of our other executive officers. See also "Description of Capital Stock—Corporate Opportunities."

173


Table of Contents


EXECUTIVE COMPENSATION

Compensation Discussion & Analysis

Overview

        This section discusses the material components of our executive compensation program for each of our named executive officers. Our named executive officers are:

        The compensation discussed in this section is the compensation paid to our named executive officers with respect to their service to Altice USA in 2017.

Executive Compensation Philosophy

        The Company's executive compensation philosophy is based on the following principles:

Determination of Compensation

        2017 compensation for the CEO was determined by the Altice N.V. board of directors, and by the CEO for all other named executive officers, as discussed below, prior to our initial offering, except with respect to stock options granted on December 30, 2017 to the CEO and certain named executive officers under the Altice USA 2017 Long Term Incentive Plan (the "2017 LTIP"), which were approved by an equity award subcommittee of the Compensation Committee. The Compensation Committee will be making compensation decisions for our named executive officers for 2018.

        The CEO's 2017 compensation was determined by the Altice N.V. board of directors, a board consisting of three executive board members and three non-executive board members and approved by Altice N.V. stockholders. The Altice N.V. board is counseled by the Altice N.V. Remuneration Committee, which consists of non-executive board members and is chaired by an independent non-executive board member. The Altice N.V. board generally sets elements of pay at levels it considers appropriate, taking into account various factors such as the nature of the role, the experience and performance of the individual, and local and sector market practice amongst peers of a similar size and scope to the Altice Group.

174


Table of Contents

        The compensation for all other named executive officers was set by Mr. Goei based on the compensation of individuals employed in the Altice Group in comparable positions and validated by the Altice Group Management Board.

Role of Compensation Committee

        The Altice USA Compensation Committee was formed on the consummation of our offering on June 22, 2017 and consists of independent directors. Director Manon Brouillette became a member of the Compensation Committee when she joined our Board on October 31, 2017, and the Compensation Committee began making compensation decisions with respect to our named executive officers in November 2017.

        The responsibilities of the Compensation Committee are set forth in its charter. Among other responsibilities, the Compensation Committee (1) establishes our general compensation philosophy and, in consultation with management, oversees the development and implementation of compensation programs; (2) reviews and approves corporate goals and objectives relevant to the compensation of our Chief Executive Officer and the other executive officers of the Company who are required to file reports under Section 16(a) of the Exchange Act, evaluates such executive officers' performance in light of those goals and objectives and determines and approves their compensation levels based upon those evaluations; and (3) administers our stockholder approved compensation plans. For additional discussion on the role of our Compensation Committee, see "Management."

Benchmarking

        In November 2017, the Compensation Committee reviewed and compared compensation for a core peer group of companies in the same general industry or industries as the Company as well as companies of similar size and business mix to evaluate the competitiveness and appropriateness of our compensation program. The Compensation Committee selected the following list of companies that would comprise our initial peer group, which was used to assess the value of the stock options granted under the 2017 LTIP on December 30, 2017 and will be used to make 2018 compensation decisions:

   


*
On November 1, 2017, CenturyLink, Inc. completed an acquisition of Level 3 Communications, Inc.

175


Table of Contents

        The Compensation Committee determined that the peer group currently represented an appropriate benchmark for the competitive market for our senior executive talent, based on our business operations and competitive labor markets.

        Management presented to the Compensation Committee a comparison of 2016 actual base salary, bonus, total cash compensation (defined as base salary plus bonus), long-term incentives and total direct compensation (defined as total cash compensation plus the value of long-term incentives) of our named executive officers with the 25th, median and 75th percentile of the peer group.

        The Compensation Committee also received information from management comparing actual 2016 and projected 2017 compensation levels for the named executive officers to comparable positions among the peer companies. Compensation of the Company's Chief Executive Officer, Mr. Goei, was compared to chief executive officers at the peer group companies. Compensation of Mr. Stewart, Co-President and Chief Financial Officer of the Company, was compared to Chief Financial Officers at the peer group companies. Compensation of Mr. Boubazine, Co-President and Chief Operating Officer, was compared to Chief Operating Officers at the peer group companies. Compensation of Mr. Connolly, Executive Vice President, General Counsel, was compared to General Counsels at the peer group companies. In this analysis, it was noted that there was limited market information regarding the role and compensation of Ms. Rosenblum, Vice Chairman.

        Based on the total compensation review, the Compensation Committee set a general guideline for target total direct compensation at the median of the peer group based on a combination of internal and market considerations. Internal factors include experience, skills, position, level of responsibility, historic and current compensation levels, internal relationship of compensation levels between executives, as well as attraction and retention of executive talent. Market considerations include referencing market pay levels and pay practices among a peer group of companies with a reference to the median of the peer group. The Compensation Committee's decisions are based upon a combination of these considerations and may exceed or fall below the median of the peer group. The Compensation Committee believed that this range was appropriate in light of the dynamics, diversity, complexities and competitive nature of the Company's businesses as well as the Company's performance. The Compensation Committee believed that the guideline for target total direct compensation provided a useful point of reference, along with the other factors described above, in administering the Company's executive compensation program.

Elements of Compensation

        The named executive officers receive a base salary to compensate them for services provided to the Company. Base salary is intended to provide a fixed component of compensation reflecting various factors, such as the nature of the role and the experience and performance of the individual. As of December 31, 2017, Mr. Goei's, Mr. Stewart's and Mr. Boubazine's annualized base salary was $500,000 each, and Mr. Connolly's and Ms. Rosenblum's annualized base salary was $400,000 each. These were set prior to our initial offering but reviewed in November 2017 by the Compensation Committee.

        For 2017, each of our named executive officers was eligible to earn an annual performance-based cash bonus under our 2017 annual incentive program (the "2017 Bonus Program"). The 2017 Bonus Program was established by the Altice Group Management Board. Following our initial offering, the Compensation Committee of our board assumed responsibility for administration of the 2017 Bonus

176


Table of Contents

Program, and made all determinations with respect to the 2017 Bonus awards, subject to Altice N.V. board of director's right to consent under the stockholders' agreement.

        The 2017 annual incentive opportunity for our named executive officers was comprised of two components: a formula-based award and a discretionary award. The 2017 formula-based award target for Mr. Goei was equal to 300% of annualized base salary (target equal to $1,500,000) with a maximum payout opportunity equal to 450% of annualized base salary (maximum payout of $2,250,000). The formula-based bonus target for Mr. Stewart and Mr. Boubazine was equal to 100% of annualized base salary (target equal to $500,000 each) with a maximum payout opportunity equal to 150% of annualized base salary (maximum payout of $750,000 each). The formula-based bonus target for Mr. Connolly and Ms. Rosenblum was equal to 60% of annualized base salary (target equal to $240,000 each) with a maximum payout opportunity equal to 90% of annualized base salary (maximum payout of $360,000 each).

        When established by the Altice Group Management Board, the performance metrics used to determine the 2017 formula-based annual incentive award were expected to be based upon 2017 financial and operational results of Altice USA and Altice N.V., with two-thirds of the target based upon Altice USA performance and one-third based upon Altice N.V. performance. Separately, for 2017, performance metrics for bonuses to be paid to other members of our management team were also expected, prior to our initial offering, to be based upon both Altice USA and Altice N.V. performance.

        Due to the development of our business following our initial offering, we determined that it would better align the interests of our stockholders and management, as well as more directly reward and motivate our management to receive bonuses based entirely on Altice USA performance. When the Compensation Committee determined the 2017 formula-based bonuses for our named executive officers, it considered this change in the bonus metrics for our broader management team, as well as what would be in the best interests of our stockholders. The Compensation Committee determined that, as was done for other members of our management team, the 2017 formula-based annual incentive award for our named executive officers would be based 100% upon Altice USA performance metrics, which are described below. In making this decision, the Compensation Committee did not change the Altice USA performance metrics that were originally set by the Altice Group Management Board for 2017, nor did the Compensation Committee change the bonus targets and maximums for the named executive officers.


Altice USA Performance Metrics

Performance Area
  Weight   Performance Metrics*

Financial

    10 % Revenue

    20 % Adjusted EBITDA

    20 % Adjusted EBITDA – Capex + Working Capital

Operational

    30 % Corporate Expense

    20 % Weighted Average of Non-corporate Business Results

Total

    100 %  

*
Corporate Expense refers to the portion of other Operating Expenses related to certain predefined departments that provide enterprise-wide administrative support to business operations ( e.g. , executive, legal, human resources, accounting, etc.). A description of the other financial metrics that are non-GAAP metrics is set forth in "—Description of Non-GAAP Financial Measures."

        Based upon actual Altice USA performance, the 2017 formula-based annual incentive awards for our named executive officers were eligible to be paid out at up to 87.8% of target, subject to negative discretion of the Compensation Committee.

177


Table of Contents

        For 2018, it is expected that our named executive officers' formula-based bonus targets will be based solely upon Altice USA performance.

        Based on individual performance evaluations, the Compensation Committee decided to award discretionary bonuses to certain named executive officers for 2017, in addition to annual bonus awards, in the following amounts: Mr. Goei ($183,000); Mr. Stewart and Mr. Boubazine ($61,000 each); and Mr. Connolly ($29,280). During 2017, Ms. Rosenblum's role was modified to one that involved advising the CEO as requested on selected legislative, regulatory and public policy matters. Due to Ms. Rosenblum's changed responsibilities at the Company in 2017, and the non-supervisory nature of her role, she did not receive a discretionary bonus for 2017. In addition, Mr. Connolly received a payment of $250,000 in December 2017, which represents the second and final payment associated with a $500,000 sign on payment.

        The payout of 2017 Bonus to our CEO remains subject to the clawback policy of Altice N.V. until the 2018 shareholders' meeting of Altice N.V.

    Stock Options

        On December 30, 2017, certain members of management, including Mr. Goei, Mr. Stewart and Mr. Boubazine, were granted stock options under the 2017 LTIP. Mr. Goei received 1,201,208 stock options and Mr. Stewart and Mr. Boubazine each received 256,668 stock options. The stock options were granted with an exercise price of $19.48, equal to the 30 day volume weighted average of the closing price of Class A common stock as of the grant date, December 30, 2017. The stock options cliff vest on December 21, 2020, generally subject to continued employment with the Company or any of its affiliates, and expire ten years from the date of grant. The options are generally subject to the provisions of the Company's form for nonqualified stock options, which was filed with the Commission on January 3, 2018 as Exhibit 99.1 to a Current Report on Form 8-K.

        The stock options were granted to named executive officers who had previously received Units under the Carry Unit Plan, discussed below, and whose initial 50% vesting of such Units occurred on December 21, 2017. These were the first grants made to our named executive officers under the 2017 LTIP, and are a component of their annual compensation for 2017.

    Carry Unit Plan

        On July 13, 2016, the Neptune Management Limited Partnership Carry Unit Plan (the "Carry Unit Plan") was created to provide participants, including our named executive officers, with an opportunity to participate in the long-term growth and financial success of our operations. Under the Carry Unit Plan, profits interests denominated in units of ownership (the "Units") of Neptune Management Limited Partnership (the "Partnership") were granted to participants. As of December 31, 2017, approximately 184 million Units were not yet vested.

        A profits interest gives the participant the right to share in specified future profits and appreciation in value that the participants of the Partnership may receive, including profits paid upon a sale of the investors' interests.

        Economically, a profits interest is similar to a stock option granted on the stock of a corporation insofar as a participant realizes value only if the Partnership from which the profits interest is granted appreciates in value and/or has profits after the grant date.

        Holders of vested Units receive Class A common stock of Altice USA at the discretion of the Partnership. The amount of Class A common stock received is calculated using the fair market value of Units and based on the then trading price of Class A common stock of Altice USA.

178


Table of Contents

        On February 13, 2017, Mr. Goei was granted 10,600,000 time-vesting Units, which are scheduled to cliff vest on January 31, 2020, generally subject to his continued employment with the Company or any of its affiliates. No other grants were made under the Carry Unit Plan in 2017 to our named executive officers.

    Benefits

        The named executive officers are eligible to participate in the health and welfare benefit plans made available to the other benefits-eligible employees of the Company, including medical, dental, vision, life insurance and disability coverage.

        The named executive officers are eligible to participate in the Altice USA 401(k) Savings Plan and may contribute into their plan accounts a percentage of their eligible pay on a before-tax basis and after-tax basis. The Company matches 100% of the first 4% of eligible pay contributed by participating employees. In addition, the Company may make an additional discretionary year-end contribution. Any discretionary year-end contribution, if approved by the Company, will be provided to all eligible participants who are active on the last day of the plan year and who complete 1,000 hours of service in such plan year. Company contributions to the Altice USA 401(k) Savings Plan are subject to vesting limitations for the first three years of employment.

        The Company also sponsors the Cablevision Excess Savings Plan, a non-qualified deferred compensation plan. Effective December 31, 2016, the Excess Savings Plan was frozen to new participants and Company contributions. The Company maintains the Cablevision Cash Balance Pension Plan, a tax-qualified defined benefit plan, and the Cablevision Excess Cash Balance Plan, a non-qualified deferred compensation plan for participants whose benefits in the qualified plan are limited by applicable IRS limitations. Effective December 31, 2013, the Cablevision Cash Balance Pension Plan and the Cablevision Excess Cash Balance Plan were frozen to new participants and future benefit accruals, except for certain employees covered by a collective bargaining agreement for whom accruals were frozen as of April 15, 2015. Monthly interest credits continue to be made to participant accounts until distribution of the accounts following termination of employment. Ms. Rosenblum is the only named executive officer with an account balance in the Cablevision Excess Savings Plan or with an accrued benefit in the Cablevision Cash Balance Pension Plan or the Cablevision Excess Cash Balance Pension Plan. See the "Nonqualified Deferred Compensation Table" below for further information on the Cablevision Excess Savings Plan and the "Pension Benefits Table" below for further information on the Cablevision Cash Balance Pension Plan and the Cablevision Excess Cash Balance Pension Plan.

    Perquisites

        The Company provides certain perquisites to named executive officers, which it has determined are appropriate for recruitment and retention, including personal use of Company-provided ground transportation and aircraft, primarily for commuting to and from the Company's Bethpage, NY headquarters. To the extent our employees use Company-provided transportation for commuting and other personal travel, they are imputed compensation for tax purposes. Subject to the Compensation Committee's approval, named executive officers may be eligible to receive a tax gross up on imputed income related to commuting usage. The Company owned and operated two passenger helicopters to facilitate business travel of senior executives and had a lease for a fixed wing aircraft to facilitate international travel for Mr. Goei.

        Mr. Stewart received a monthly housing allowance during the period in 2017. This monthly allowance payment ceased as of December 31, 2017. The Company purchases tickets for sporting and entertainment events for business use; on the occasion the tickets are unused, they are available for personal use by our employees, including the named executive officers. The named executive officers are also eligible to participate in the Altice USA Employee Product Benefit program, which provides

179


Table of Contents

all benefits-eligible employees who reside in the Suddenlink or Optimum footprint with discounted cable television, high-speed data and voice services. See "Summary Compensation Table" below for further information on the perquisites provided to our named executive officers during 2017.

    Post-Termination Compensation

        Our named executive officers have helped build the Company into the successful enterprise that it is today and we believe that post-termination benefits are integral to the Company's ability to attract and retain qualified executives. Our named executive officers were eligible for severance benefits in 2017 under the Altice USA Severance Benefits Policy. All severance benefits payable under the severance policy would be conditioned on the employee executing a separation agreement with the Company, including, a release of claims and any other terms and conditions that the Company may require. For a description and quantification of the severance and other benefits payable to each of the named executive officers under the different circumstances of termination, please see "Severance Benefits" and "Payments on Termination or Change of Control" below.

Employment Agreements

        None of the named executive officers have an employment agreement related to their service with Altice USA.

Tax Deductibility of Compensation

        Section 162(m) of the Internal Revenue Code, as amended ("Section 162(m)"), establishes a $1 million limit on the amount that a publicly held corporation may deduct for compensation paid to "covered employees"). Pursuant to the Tax Cuts and Jobs Act, the definition of "covered employees" under Section 162(m) was amended to include a company's chief financial officer. As such effective January 1, 2018 "covered employees" include the chief executive officer, chief financial officer and the next three most highly paid named executive officers in a taxable year. Once an officer is a "covered employee" their compensation will remain subject to Section 162(m) indefinitely. Further, the Tax Cuts and Jobs Act repealed the exclusion for "qualified performance-based compensation" under Section 162(m) effective January 1, 2018 except for compensation payable pursuant to an employment agreement in place before November 2, 2017. Accordingly, starting in 2018, the Company's tax deduction with regard to the compensation of "covered employees" is limited to $1 million per taxable year with respect to each officer.

Description of Non-GAAP Financial Measures

        The Non-GAAP financial measures disclosed here are measures with respect to Altice USA performance used as performance targets in 2017 compensation programs in which the named executive officers of the Company participate.

        Adjusted EBITDA —net income (loss) excluding income taxes, income (loss) from discontinued operations, other non-operating income or expenses, loss on extinguishment of debt and write-off of deferred financing costs, gain (loss) on interest rate swap contracts, 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.

        Adjusted EBITDA Capex —Adjusted EBITDA as defined above less capital expenditures.

        Adjusted EBITDA Capex change in working capital —Adjusted EBITDA as defined above less capital expenditures and change in working capital.

180


Table of Contents

Executive Compensation Tables

Summary Compensation Table

        The table below summarizes the total compensation paid to or earned by each of our named executive officers for services to Altice USA for the year ending December 31, 2017.

Name and principal position
  Year   Salary
($)(1)
  Bonus
($)(2)
  Stock
awards
($)(3)
  Option
awards
($)(4)
  Non-equity
incentive
plan
compensation
($)(5)
  Change in
pension
value and
nonqualified
deferred
compensation
earnings
($)
  All other
compensation
($)(6)
  Total
($)
 

Dexter Goei

    2017     490,385     183,000     40,280,000     10,582,642     1,317,000         707,583     53,560,610  

Chairman & CEO

    2016     235,950     707,177     7,881,000         792,823         417,920     10,034,870  

Charles Stewart

    2017     490,385     61,000         2,261,245     439,000         765,879     4,017,509  

Co-President & CFO

    2016     490,385     428,400     3,700,000         428,400         830,028     5,877,213  

Abdelhakim Boubazine

    2017     490,385     61,000         2,261,245     439,000         326,637     3,578,267  

Co-President & COO

    2016     417,262     428,400     3,700,000         428,400         464,382     5,438,444  

David Connolly

    2017     392,308     279,280             210,720         12,031     894,339  

EVP—General Counsel and Secretary

    2016     138,462     250,000     1,572,500         315,360         4,308     2,280,630  

Lisa Rosenblum

    2017     392,308                 128,567     10,167     77,776     608,818  

Vice Chairman

    2016     238,462         2,220,000         166,777     10,780     98,410     2,734,429  

(1)
Differences between 2016 and 2017 salary for the named executive officers are largely attributed to when the named executive officer began providing services to the Company in 2016. Salary rates did not change between 2016 and 2017. For 2017, salary amounts reflect 51 weeks of pay due to harmonization of payroll schedules.

(2)
In 2017, Mr. Connolly received the final installment of his sign-on payment ($250,000). These 2017 amounts also reflect the discretionary portion of annual bonus, as described in the section titled "Annual Bonus" in the Compensation Discussion & Analysis.

(3)
Represents the grant date fair value of Units, as described in the section titled "Carry Unit Plan" in the Compensation Discussion & Analysis, computed in accordance with FASB ASC Topic 718, excluding forfeiture assumptions. For Mr. Goei's carry unit award granted on February 13, 2017, the Company's estimate of the grant date fair value is $3.80 per unit, based on the value established in the Company's initial public offering. At the time of grant, the fair market value in use was based on an independent valuation of $0.55 per unit.

(4)
Represents the grant date fair value of options, as described in the section titled "Stock Options" in the Compensation Discussion & Analysis, computed in accordance with FASB ASC Topic 718, excluding forfeiture assumptions. For the stock option awards for Messrs. Goei, Stewart and Boubazine the fair value on the date of grant was calculated using the Black-Scholes option pricing model. The computation of expected life of 6.5 years was determined based on the simplified method (the average of the vesting period and the option term) due to the Company's lack of recent historical data for similar awards. The interest rate of 2.30% for the period within the contractual life of the stock options is based on the interest yield for U.S. Treasury instruments in effect at the time of grant. The computation of expected volatility of 33.97% is based on historical volatility of the Altice USA common stock and the volatility of publicly traded comparable companies, since the Altice USA common stock only began trading on June 22, 2017.

(5)
These 2017 amounts reflect the formula-based portion of annual bonus, as described in the section titled "Annual Bonus" in the Compensation Discussion & Analysis. Due to Ms. Rosenblum's changed responsibilities at the Company during 2017, Management recommended, and the Compensation Committee approved, discretion with respect to her bonus amount.

(6)
This table below shows the components of this column as of December 31, 2017.
Name
  Year   401(k)
Company
Contribution(a)
  Transportation
Tax gross up
payment(b)
  Perquisites(c)   Total  

Dexter Goei

    2017     11,569     16,869     679,145     707,583  

Charles Stewart

    2017     12,723     15,503     737,653     765,879  

Abdelhakim Boubazine

    2017     14,877     25,729     286,031     326,637  

David Connolly

    2017     12,031             12,031  

Lisa Rosenblum

    2017     16,100     9,385     52,291     77,776  

(a)
This column represents, for each individual, a matching contribution and/or Company discretionary contribution made by the Company on behalf of such individual under the Company's 401(k) Plan.

(b)
This column reflects amounts paid to the named executive officers at the discretion of, and approved by, the Compensation Committee to offset imputed income on commuter travel.

181


Table of Contents

(c)
This column represents for each individual the following aggregate perquisites as described in the table below. In addition, the named executive officers are eligible to participate in the Altice USA Employee Product Benefit program, which provides all benefits-eligible employees who reside in the Suddenlink or Optimum footprint with discounted cable television, high-speed data and voice services. The Company purchases tickets for sporting and entertainment events for business use; on the occasion the tickets are unused, they are available for personal use by our employees, including the named executive officers. There is no incremental cost to the Company for these benefits.
Name
  Year   Aircraft
($)(i)
  Housing
Allowance
($)(ii)
  Ground
Transportation
($)(iii)
  Total  

Dexter Goei

    2017     287,502         391,634     679,145  

Charles Stewart

    2017     131,485     499,995     106,173     737,653  

Abdelhakim Boubazine

    2017     73,467         212,564     286,031  

David Connolly

    2017                  

Lisa Rosenblum

    2017     31,050         *     52,921  

*
Does not exceed the greater of $25,000 or 10% of the total amount of perquisites of named executive officers.

(i)
This column represents the incremental cost to the company for personal use of the Company's aircraft, primarily associated with commuting to and from the Company's Bethpage, NY headquarters, and for a leased fixed wing aircraft for Mr. Goei's international business travel. For the purposes of this disclosure, incremental cost is valued based on the variable costs incurred by the Company, such as fuel, landing fees and ground services, and does not include costs that would have been incurred by the Company whether or not a particular trip was taken, such as lease and insurance payments, pilot salaries, ordinary course maintenance and other overhead costs. The incremental cost of the personal use of the fixed wing aircraft, applicable solely to Mr. Goei, is based on the variable hourly cost of the lease applied to the number of personal hours of usage.

(ii)
This column represents Mr. Stewart's housing allowance, which was paid on a monthly basis. This monthly allowance payment ceased as of December 31, 2017.

(iii)
This column reflects the incremental cost of providing our executive officers ground transportation for personal use, primarily for commuting to and from the Company's Bethpage, NY headquarters. For the purposes of this disclosure, incremental cost is valued, for the company vehicles, as a portion of the cost of the driver plus car lease, maintenance, fuel and other related costs, based on an estimated percentage of use, and for third party car services by the amount paid to the third party.

182


Table of Contents

Grants of Plan-Based Awards

        The table below presents information regarding awards granted in 2017 to each named executive officer under the 2017 LTIP, 2017 annual incentive programs and the Carry Unit Plan in which the named executive officers participated.

 
   
   
  Estimated future
payouts under
non-equity
incentive
plan awards(1)
   
   
   
   
 
 
   
   
  All other
stock awards:
Number of
shares of
stock or
units
(#)
  All other
equity awards:
Number of
shares of
stock or
units
(#)
   
  Grant date
fair value
of equity and
option
awards
($)
 
 
   
   
  Exercise
or base
price of
option awards
($/share)
 
Name
  Approval
Date
  Grant
Date
  Target
($)
  Maximum
($)
 

Dexter Goei

            1,500,000     2,250,000                  

        02/13/17 (2)           10,600,000             40,280,000 (3)

    12/23/17     12/30/17                 1,201,208     19.48     10,582,542 (4)

Charles Stewart

            500,000     750,000                  

    12/23/17     12/30/17                 256,668     19.48     2,261,245 (4)

Abdelhakim Boubazine

            500,000     750,000                  

    12/23/17     12/30/17                 256,668     19.48     2,261,245 (4)

David Connolly

            240,000     360,000                  

Lisa Rosenblum

            240,000     360,000                  

(1)
These columns show the target and maximum payouts under the 2017 bonus plan based on 2017 metrics and performance criteria described in the section titled "Annual Bonus" in the Compensation Discussion & Analysis. This plan does not have a threshold payout. Payments were made in 2018 for 2017 performance and actual payments are reflected in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table.

(2)
This award was subject to clawback until approved by Altice N.V. shareholders on June 28, 2017.

(3)
Represents the grant date fair value of Units, as described in the section titled "Carry Unit Plan" in the Compensation Discussion & Analysis, computed in accordance with FASB ASC Topic 718, excluding forfeiture assumptions. For Mr. Goei's carry unit award granted on February 13, 2017, the Company's estimate of the grant date fair value is $3.80 per unit, based on the value established in the Company's initial public offering. At the time of grant, the fair market value in use was based on an independent valuation of $0.55 per unit.

(4)
Represents the grant date fair value of options, as described in the section titled "Stock Options" in the Compensation Discussion & Analysis, computed in accordance with FASB ASC Topic 718, excluding forfeiture assumptions. For the stock option awards for Messrs. Goei, Stewart and Boubazine the fair value on the date of grant was calculated using the Black-Scholes option pricing model. The computation of expected life of 6.5 years was determined based on the simplified method (the average of the vesting period and the option term) due to the Company's lack of recent historical data for similar awards. The interest rate of 2.30% for the period within the contractual life of the stock options is based on the interest yield for U.S. Treasury instruments in effect at the time of grant. The computation of expected volatility of 33.97% is based on historical volatility of the Altice USA common stock and the volatility of publicly traded comparable companies, since the Altice USA common stock only began trading on June 22, 2017.

2017 Long-Term Incentive Plan

        In connection with the Company's IPO, the Company adopted the 2017 LTIP. Under the 2017 LTIP, the Company may grant awards of options, restricted shares, restricted share units, stock appreciation rights, performance stock, performance stock units and other awards. Under the 2017 LTIP, awards may be granted to officers, employees and consultants of the Company or any of its affiliates. The 2017 LTIP will be administered by the Company's Board, subject to the provision of the stockholders' agreement. The Board has delegated this authority to the Company's Compensation Committee. The Compensation Committee has the full power and authority to, among other things, select eligible participants, to grant awards in accordance with the 2017 LTIP, to determine the number of shares subject to each award or the cash amount payable in connection with an award and determine the terms and conditions of each award. The maximum aggregate number of shares that may be issued under the 2017 LTIP is 9,879,291. The Board has the authority to amend, suspend, or terminate the

183


Table of Contents

2017 LTIP. No amendment, suspension or termination will be effective without the approval of the Company's stockholders if such approval is required under applicable laws, rules and regulations.

Outstanding Equity Awards at Fiscal Year-End

        The table below presents (i) the number of stock options awarded under the 2017 LTIP, (ii) the number of Units granted under the Carry Unit Plan that have not yet vested and (iii) the market value of these Units for each named executive officer, in each case as of December 31, 2017.

 
  Option Awards   Stock Awards  
Name
  Number of
securities
underlying
unexercised
options (#)
unexercisable(1)
  Option
exercise
price
($)
  Option
expiration
date
  Number of
shares or
units of
stock that
have not
vested
(#)(2)
  Market
value of
shares or
units of
stock that
have not
vested
($)(7)
  Equity
inventive
plan awards:
number of
unearned
shares,
units or
other rights
that have
not vested
(#)(8)
  Equity
incentive
plan awards:
market or
payout value
of unearned
shares, units
or other
rights that
have not
vested($)(7)
 

Dexter Goei

    1,201,208     19.48     12/30/2027     5,650,000 (3)   15,763,500     10,000,000     27,900,000  

                10,600,000 (4)   15,264,000          

Charles Stewart

    256,668     19.48     12/30/2027     5,000,000 (3)   13,950,000          

Abdelhakim Boubazine

    256,668     19.48     12/30/2027     5,000,000 (3)   13,950,000          

David Connolly

                4,250,000 (5)   11,857,500          

Lisa Rosenblum

                6,000,000 (6)   16,740,000          

(1)
On December 30, 2017, Messrs. Goei, Stewart and Boubazine each received a stock option award under the 2017 LTIP that will vest in full on December 21, 2020.

(2)
The numbers in this column represent the number of Units outstanding, not the number of shares underlying such Units. These awards were granted under the Carry Unit Plan and vesting is generally subject to the named executive officer's continued employment with the Company or any of its affiliates.

(3)
These Units will vest 50% on each of December 21, 2018 and December 21, 2019.

(4)
These Units will vest in full on January 31, 2020.

(5)
These Units will vest 50% on August 22, 2018 and 25% on each of August 22, 2019 and August 22, 2020.

(6)
These Units will vest 50% on June 21, 2018 and 25% on each of June 21, 2019 and June 21, 2020.

(7)
The value of each unvested Unit as of December 31, 2017 is based on the potential number of shares into which the Unit may convert upon vesting and the December 29, 2017 Altice USA, Inc. closing price of $21.23, which was the last trading day of the year.

(8)
In 2016, Mr. Goei received 10,000,000 Performance Vesting Units that will vest based on achievement of certain defined 2019 Altice USA financial targets of (x) consolidated net revenue and (y) adjusted EBITDA or Capex adjusted EBITDA. Mr. Goei's performance based units will be forfeited if performance is not met. All or a portion of the Performance Vesting Units may vest as determined by the board of directors of Altice N.V. in its discretion.

184


Table of Contents

Option Exercises and Stock Vested

        The table below presents information regarding the value of stock awards vested in 2017, for each of the named executive officers. None of the named executive officers exercised stock options with respect to Altice USA in 2017.

 
  Option Awards   Stock Awards  
Name
  Number of
shares acquired
on exercise
(#)
  Value realized
on exercise
($)
  Number of
shares acquired
on exercise
(#)(1)
  Value realized
on exercise
($)(2)
 

Dexter Goei

            719,636     15,090,767  

Charles Stewart

            636,846     13,354,661  

Abdelhakim Boubazine

            636,846     13,354,661  

David Connolly

                 

Lisa Rosenblum

                 

(1)
The number of shares shown in this column represents the number of shares of Class A common stock that were received upon the conversion of Class C Units that vested on December 21, 2017.

(2)
The "value realized" upon the vesting of these Units is equal to the number of shares received times the NYSE closing share price of our common stock on December 21, 2017.

Pension Benefits

        The table below shows the actuarial present value of accumulated benefits payable under our qualified and nonqualified defined benefit pension plans as of December 31, 2017 for Ms. Rosenblum, who is the sole named executive officer who is eligible to participate in such plans.

Name
  Plan   Number of
Years
Credited
Service
(#)(1)
  Present
Value of
Accumulated
Benefit
($)(2)
  Payments
During Last
Fiscal Year
($)
 

Lisa Rosenblum

  Cablevision Cash Balance Pension Plan     20     312,057      

  Cablevision Excess Cash Balance Plan     20     369,963      

(1)
Years of service are calculated based on elapsed time while a member of the plan. Actual elapsed time as an employee of Cablevision and Altice USA for Ms. Rosenblum is 22 years.

(2)
Assumes Ms. Rosenblum will take a lump sum payment of benefits at retirement. The lump sum payment was determined by crediting the December 31, 2017 account balances with an assumed interest crediting rate of 2.82% until an assumed retirement age of 65. The present value of accumulated benefits was calculated using a discount rate of 3.50%.

    Cablevision Cash Balance Pension Plan

        The Cablevision Cash Balance Pension Plan is a tax-qualified defined benefit plan that was amended effective December 31, 2013 to freeze participation and benefit accruals for all legacy Cablevision employees except certain employees covered by a collective bargaining agreement. Effective April 15, 2015, the plan was further amended to freeze participation and benefit accruals for the remaining employees covered by the collective bargaining agreement. Ms. Rosenblum is the only named executive officer with an accrued benefit under the Cablevision Cash Balance Pension Plan.

185


Table of Contents

        A notional account is maintained for each participant under the plan, which is credited with monthly interest credits based on the average of the annual rate of interest on the 30-year U.S. Treasury Bonds for the months of September, October and November of the prior year. Monthly interest credits continue to be made to participant accounts until distribution of the accounts following termination of employment. All active participants are fully vested in their accounts. Upon retirement or other termination of employment with the Company, the participant may elect a distribution of the vested portion of the account. The normal form of benefit payment for an unmarried participant is a single life annuity and the normal form of benefit payment for a married participant is a 50% joint and survivor annuity. The participant, with spousal consent if applicable, can waive the normal form and elect to receive a single life annuity or a lump sum in an amount equal to the cash balance account.

    Cablevision Excess Cash Balance Plan

        The Cablevision Excess Cash Balance Plan is a nonqualified deferred compensation plan that is intended to provide eligible participants, including Ms. Rosenblum, with the portion of their benefit that cannot be paid to them under the Cablevision Cash Balance Pension Plan due to Internal Revenue Code limits applicable to tax-qualified plans. Effective December 31, 2013, the Excess Cash Balance Plan was amended to freeze participation and future benefit accruals for all employees. Ms. Rosenblum is the only named executive officer with an accrued benefit under the Cablevision Excess Cash Balance Pension Plan.

        The Company maintains a notional excess cash balance account for each eligible participant and credits each excess cash balance account monthly with interest at the same rate used under the Cablevision Cash Balance Pension Plan. Monthly interest credits continue to be made to participant accounts until distribution of the accounts following termination of employment. All active participants are fully vested in their excess cash balance account. The excess cash balance account, to the extent vested, is paid in a lump sum to the participant as soon as practicable following his or her retirement or other termination of employment with the Company.

Nonqualified Deferred Compensation Table

        The table below shows the aggregate earnings and account balance information under nonqualified deferred compensation plans for Ms. Rosenblum, who is the sole named executive officer who is eligible to participate in such plan.

Name
  Plan   Executive
Contributions
in Last FY
($)
  Registrant
Contributions
in Last FY
($)
  Aggregate
Earnings
in Last FY
($)
  Aggregate
Withdrawals/
Distributions
($)
  Aggregate
Balance at
Last FYE
($)
 

Lisa Rosenblum

  Cablevision Excess Savings Plan             11,474         580,608  

    Cablevision Excess Savings Plan

        The Cablevision Excess Savings Plan is a nonqualified deferred compensation plan that operates in conjunction with the Cablevision 401(k) Savings Plan. Effective December 31, 2016, the Excess Savings Plan was frozen (i.e., no future employee or Company contributions are permitted under the Plan for 2017 and thereafter). Participant notional account balances continue to be credited monthly with the rate of return earned by the stable value investment option available under the Altice USA 401(k) Savings Plan.

        Ms. Rosenblum is the only named executive officer with an account balance in the Cablevision Excess Savings Plan.

186


Table of Contents

        A participant is always fully vested in the participant's own contributions and vests in the Company contributions over three years from date of hire (subject to full vesting upon death, disability or retirement after attaining age 65). Distributions are made in a lump sum as soon as practicable after the participant's termination of employment with the Company.

Severance Benefits

        In the event of certain termination events during 2017, eligible employees, including our named executive officers, would have been eligible to receive certain severance benefits under the Altice USA Severance Benefits Policy, which provides for severance benefits when a position is eliminated due to restructuring or reorganization. Severance amounts are based on two weeks of base salary for every completed year of service with a minimum 52 weeks of base salary for senior vice presidents and above, 26 weeks for vice presidents and directors, and 4 weeks for all other eligible employees. Employees who were enrolled in the Company's health plans are eligible to receive subsidized COBRA continuation for up to three months. Bonus-eligible exempt employees, including the named executive officers, would have been eligible to receive a prorated 2017 annual bonus based on actual 2017 plan performance if a qualifying termination of employment occurred after June 30, 2017. Severance is subject to noncompete and nonsolicit restrictive covenants.

Payments on Termination or Change of Control

        The following tables summarize the estimated amounts payable to each named executive officer in the event of a termination from employment without cause or upon a change of control as of December 31, 2017.

        In the event of termination for cause, voluntary termination, retirement, death or disability, none of the named executive officers would have been entitled to any severance payments as of December 31, 2017.

Benefits Payable as a Result of Termination of Employment by the Company without Cause

Name
  Severance
($)(1)
  Benefit
Subsidy
($)(2)
  2017
Bonus
($)(3)
  Total
($)
 

Dexter Goei

    500,000     3,201     1,317,000     1,820,201  

Charles Stewart

    500,000     3,201     439,000     942,201  

Abdelhakim Boubazine

    500,000     3,201     439,000     942,201  

David Connolly

    400,000     2,571     210,720     613,291  

Lisa Rosenblum

    400,000     1,710     128,567     530,277  

(1)
Pursuant Altice USA's Severance Benefits Policy, each named executive officer is entitled to two weeks base salary for each completed year of service, with a minimum severance amount equal to 52 weeks of base salary.

(2)
The amounts in this column reflect the employer subsidized COBRA for three months continuation based on each named executive officer's current election.

(3)
The amounts in this column reflect the formula-based portion of the 2017 annual bonus.

187


Table of Contents

Benefits Payable upon a Change of Control Transaction

Name
  Unvested
Options
($)(1)
  Unvested
Units
($)(2)
 

Dexter Goei

    2,102,114     58,927,500  

Charles Stewart

    449,169     13,950,000  

Abdelhakim Boubazine

    449,169     13,950,000  

David Connolly

        11,857,500  

Lisa Rosenblum

        16,740,000  

(1)
The amounts in this column represent the value of the unvested options held by Messrs. Goei, Stewart and Boubazine as of December 31, 2017, with the value calculated as the difference between the total exercise price of each option ($19.48) and the market value of the option at close of business December 29, 2017 ($21.23), which was the last trading day of the year. Pursuant to the terms of the options, as of December 31, 2017, all unvested options automatically vest and are exercisable upon a Change of Control (as defined in the option award agreement). These options are subject to noncompete and nonsolicit restrictive covenants.

(2)
The amounts in this column represent the value of the unvested Units held by each named executive officer as of December 31, 2017, with the value calculated as described in footnote 7 of the "Outstanding Equity Awards at Fiscal Year-End" table. Pursuant to the terms of the Units as of December 31, 2017, all unvested Units automatically vest upon a Company Sale (as defined in the Unit award agreement).

Director Compensation

        Compensation for our non-employee directors is determined by our Board with the assistance of the Compensation Committee. See "Director Compensation Table" below for further details on director compensation.

Director Compensation Table

        The table below shows the compensation paid to or earned by our non-employee directors in the year ending December 31, 2017. Directors who are also employees of the Company, Altice N.V. or A4 S.A. do not receive any compensation for their service as directors. Mr. Okhuijsen and Mr. Bonnin did not receive any compensation for their services as directors of our Board in 2017. Michel Combes, who was a director of our Board until November 9, 2017, did not receive any compensation for his service as a director in 2017.

        Compensation for our non-employee directors is determined by our Board with the assistance of the Compensation Committee. Each non-employee director receives a base fee of $72,500 per year. In addition, the Audit Committee chair receives an annual fee of $32,500 and Audit Committee members each receive an annual fee of $22,500. The Compensation Committee chair receives an annual fee of

188


Table of Contents

$22,500 and Compensation Committee members each receive an annual fee of $5,000. The compensation of Mr. Svider is paid to BC Partners LLP.

Name
  Year   Fees
Earned
or Paid
in Cash
($)
  Stock
awards
($)
  Option
awards
($)
  Non-equity
incentive
plan
compensation
($)
  Change in
pension
value and
nonqualified
deferred
compensation
earnings
($)
  All other
compensation
($)
  Total
($)
 

Raymond Svider

    2017     62,014                         62,014  

Mark Mullen

    2017     58,056                         58,056  

Manon Brouillette

    2017     17,500                         17,500  

189


Table of Contents


PRINCIPAL STOCKHOLDERS

        The following table presents certain information as of May 21, 2018 with respect to the beneficial ownership of Altice USA common stock by:

        Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder. Unless otherwise indicated in the table or footnotes below, the address for each beneficial owner is c/o Altice USA, Inc., 1 Court Square West, Long Island City, New York 11101.

        As of May 21, 2018, we have 246,982,292 shares of our Class A common stock and 490,086,674 shares of our Class B common stock outstanding.

 
  Shares Beneficially Owned(1)    
 
 
  Class A   Class B    
 
 
  % Total
Voting Power
 
Name of Beneficial Owner
  Number   %   Number   %  

5% Stockholders(7)

                               

Patrick Drahi(1)(2)

    58,983,391     23.9 %   490,086,674     100.0 %   98.5 %

CPPIB(4)

    42,265,874     17.1 %       0.0 %   0.3 %

BC Partners(3)

    65,219,767     26.4 %       0.0 %   0.5 %

Named Executive Officers, Directors and Nominees(5)

                               

Patrick Drahi(1)(2)(13)

    58,983,391     23.9 %   490,086,674     100.0 %   98.5 %

Dexter Goei(6)(8)(9)

    2,594,724     1.1 %       0.0 %   0.0 %

Charles Stewart(8)(15)

    655,597     0.3 %       0.0 %   0.0 %

Abdelhakim Boubazine(8)(10)

    1,639,390     0.7 %       0.0 %   0.0 %

Lisa Rosenblum

    18,751     0.0 %       0.0 %   0.0 %

David Connolly

        0.0 %       0.0 %   0.0 %

Manon Brouillette

        0.0 %       0.0 %   0.0 %

Dennis Okhuijsen(8)(11)

        0.0 %       0.0 %   0.0 %

Jérémie Bonnin(8)(12)

        0.0 %       0.0 %   0.0 %

Raymond Svider

        0.0 %       0.0 %   0.0 %

Mark Mullen

    7,000     0.0 %       0.0 %   0.0 %

All executive officers, directors and director nominees as a group (11 persons) (14)

    63,898,853     25.9 %   490,086,674     100.0 %   99.0 %

*
Less than 0.1%

(1)
Mr. Drahi is the sole indirect controlling shareholder of Next Alt. As of May 22, 2018, Next Alt held          % of the outstanding share capital and voting rights of Altice N.V., representing          % of the economic rights and          % of the voting rights in general meetings. Altice N.V. maintains

190


Table of Contents

    a one-tier board of three executive board members and three non-executive board members. The executive board members are appointed by shareholders at the general meeting at the binding nomination of Next Alt. A4 S.A., which is controlled by the family of Mr. Drahi, is an executive board member of Altice N.V. Altice N.V. owns a direct controlling interest in CVC 3. Mr. Drahi may be deemed to beneficially own the 5,281,258 shares of Class A common stock and 490,085,674 shares of Class B common stock owned by CVC 3. CVC 3 is also the sole member of Neptune Holding US GP LLC, which is the sole general partner of Holding LP and as such, Mr. Drahi may be deemed to beneficially own 46,174,784 shares of Class A common stock held by Holding LP. Personal holding companies controlled by Mr. Drahi or his family own 7,527,349 shares of Class A common stock and 1,000 shares of Class B common stock.

    Prior to the Separation, CVC 3 will transfer its control of the general partner of Holding LP to us. CVC 3 will maintain substantially the same rights as a limited partner in Holding LP after the Separation as it had prior to the Separation. In addition, we and Next Alt intend to enter into the Holding LP voting agreement pursuant to which Next Alt will be granted a proxy to vote the shares of Altice USA common stock held by Holding LP. See "Ancillary Agreements—Voting Agreement relating to Holding LP" for more information.

    Mr. Drahi has informed us that Next Alt will elect to receive 100% of the shares of Altice USA to which it is entitled in the Distribution in the form of Class B common stock and will be subject to proration, in the same manner as other Altice N.V. shareholders, in the event the Class B Cap is exceeded. In connection with the Distribution, Next Alt will enter into the Concert Group voting agreements with respect to all shares of Altice USA common stock members of the Concert Group own (including any shares of Altice USA common stock such members are entitled to received in the Distribution). In addition, the Concert Group members who are Altice USA directors or officers have informed us that they intend to elect to receive 100% of the shares of Altice USA to which such members are entitled in the Distribution in the form of Class B common stock. It is also expected that the other members of the Concert Group intend to elect to receive 100% of the shares of Altice USA to which such members are entitled in the Distribution in the form of Class B common stock.

    If the number of shares of Class B common stock distributed to Altice N.V. shareholders including Next Alt and the Concert Group is maximized up to the Class B Cap, Mr. Drahi will own or control (through entities controlled directly or indirectly by Mr. Drahi or his family (including Next Alt, Uppernext and A4 S.A.) and the Concert Group voting agreements and the Holding LP voting agreement) a combined          % of our issued and outstanding Class A and Class B common stock which will represent approximately          % of the voting power of our outstanding capital stock. If no shares of Class B common stock are distributed to Altice N.V. shareholders other than Next Alt and the Concert Group, Mr. Drahi will own or control (through entities controlled directly or indirectly by Mr. Drahi or his family (including Next Alt, Uppernext and A4 S.A.) and the Concert Group voting agreements and the Holding LP voting agreement) a combined          % of our issued and outstanding Class A and Class B common stock which will represent approximately          % of the voting power of our outstanding capital stock. For more information regarding the Concert Group voting agreements, see "Certain Relationships and Related-Party Transactions—Right of First Refusal and Concert Group Voting Agreements" and the Holding LP voting agreement, see "Ancillary Agreements—Voting Agreement relating to Holding LP."

(2)
The principal address for the personal holding companies controlled by Mr. Drahi or his family is 5 rue Eugène Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg; the principal address for Altice N.V. and CVC 3 is Prins Bernhardplein 200, 1097 JB Amsterdam, The Netherlands; the principal address for Neptune Holding US GP LLC and Holding LP is c/o Altice USA, Inc., 1 Court Square West, Long Island City, NY 11101.

191


Table of Contents

(3)
CIE Management IX Limited, which is an entity under common control with BC Partners LLP, is the ultimate general partner of, and has investment control over the Class A common stock held by the funds commonly known as BC European Capital IX—1 LP through 11 LP and BC European Capital—Suddenlink Co-Investment 1 through 6 LP, and has investment control over the Class A common stock held by BC European Capital IX Limited. CIE Management IX Limited is also the ultimate control party of SuddenVision S.a.r.l. CIE Management IX Limited may, therefore, be deemed to have shared voting and investment power over Class A common stock beneficially owned by each of these entities. Because CIE Management IX Limited is managed by a board of directors, no individuals have ultimate voting or investment control (as determined by Rule 13d-3) over the shares that may be deemed beneficially owned by CIE Management IX Limited. The principal address of CIE Management IX Limited is Heritage Hall, Le Marchant Street, St. Peter Port, Guernsey, GY1 4HY, Channel Islands.

(4)
CPPIB is overseen by a board of directors. None of the directors of the board of directors has sole voting or dispositive power with respect to the shares of Altice USA common stock beneficially owned by CPPIB. The address of CPPIB is One Queen Street East, Suite 2500, Toronto, ON, M5C 2W5.

(5)
The address for these persons, other than Mr. Drahi, is c/o Altice USA, Inc., 1 Court Square West, Long Island City, NY 11101.

(6)
Mr. Goei holds his shares of Class A common stock through Inluam LLC.

(7)
5% Stockholders have the same applicable voting rights as other holders of Class A common stock and Class B common stock. For information on voting rights, see "Description of Capital Stock—Class A Common Stock, Class B Common Stock, Class C Common Stock—Voting Rights."

(8)
In connection with the Distribution, will enter into a voting agreement with Next Alt. See "Certain Relationships and Related-Party Transactions—Right of First Refusal and Concert Group Voting Agreements" for more information on the Concert Group voting agreements.

(9)
Mr. Goei is a shareholder in Altice N.V. and will be entitled to receive                    shares of Altice USA common stock in the Distribution.

(10)
Mr. Boubazine is a shareholder in Altice N.V. and will be entitled to receive                    shares of Altice USA common stock in the Distribution.

(11)
Mr. Okhuijsen is a shareholder in Altice N.V. and will be entitled to receive                    shares of Altice USA common stock in the Distribution.

(12)
Mr. Bonnin is a shareholder in Altice N.V. and will be entitled to receive                    shares of Altice USA common stock in the Distribution.

(13)
Mr. Drahi is a director nominee.

(14)
All executive officers and directors as a group (10 persons), other than Mr. Drahi, as of May 22, 2018, owned 4,915,462 shares of Class A common stock, representing 0.7% of Class A common stock issued and outstanding and less than 0.1% of the voting power of Altice USA common stock.

(15)
Mr. Stewart has pledged 450,000 of his shares of Class A common stock to secure a loan with a financial institution.

192


Table of Contents


THE MASTER SEPARATION AGREEMENT

        Following the Distribution, we and Altice N.V. will operate independently, and Altice N.V. will no longer own a controlling equity interest in us. In order to govern the ongoing relationships between us (or our subsidiaries), on the one hand, and Altice N.V. and its subsidiaries (other than Altice USA and our subsidiaries), on the other hand, in connection with the Distribution, we (or our subsidiaries), on the one hand, and Altice N.V. and its subsidiaries (other than Altice USA and our subsidiaries), on the other hand, have entered into the Master Separation Agreement and will enter into certain other agreements providing for various services and rights following the Distribution, and under which we and Altice N.V. will agree to indemnify each other against certain liabilities arising from our respective businesses. Entering into, terminating or modifying any agreements between Altice N.V. and Altice USA requires prior approval of our Audit Committee pursuant to our Related-Party Transaction Approval Policy. See "Ancillary Agreements" and "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions." The Master Separation Agreement was approved by our Audit Committee pursuant to the Company's Related-Party Transaction Approval Policy.

        The following discussion summarizes the material provisions of the Master Separation Agreement. The rights and obligations of the parties are governed by the express terms and conditions of the Master Separation Agreement and not by this summary or any other information contained in this prospectus. The following summary of the Master Separation Agreement is qualified in its entirety by reference to the full text of the Master Separation Agreement, a copy of which is filed as Exhibit 10.25 to the registration statement of which this prospectus forms a part. We urge you to read the Master Separation Agreement and this prospectus carefully and in their entirety when they are made available.

        In addition to the Master Separation Agreement described below and the other agreements described in "Ancillary Agreements," we (or our subsidiaries) may enter into, from time to time, agreements and arrangements with Altice N.V. and its subsidiaries (other than Altice USA and our subsidiaries), in connection with, and in the ordinary course of, our business.

General

        On May 18, 2018, we entered into the Master Separation Agreement with Altice N.V. The Master Separation Agreement sets forth our agreements with Altice N.V. regarding the principal actions to be taken in connection with the Distribution. It also set forths other agreements that govern aspects of our relationship with Altice N.V. following the Distribution.

    Transfer of Assets and Retention of Liabilities

        The Master Separation Agreement identifies certain transfers of assets that are necessary in advance of the Distribution so that we and Altice N.V. retain the assets of, and the liabilities associated with, our respective businesses. The Master Separation Agreement generally provides that the assets comprising our business will consist of those owned or held by us or those exclusively related to our current business and operations. The liabilities we will retain in connection with the Separation will generally consist of those related to the past and future operations of our business. Altice N.V. will retain assets and liabilities related to the businesses now or formerly conducted by Altice N.V., other than those assets and liabilities identified as being retained by Altice USA. The Master Separation Agreement requires the parties to cooperate with each other to complete these transfers of assets. If any transfer of assets is not consummated as of the Distribution, then, until the transfer can be completed, each party will take such actions as are reasonably requested by the other party in order to place such party in the same position as if such asset had been transferred.

193


Table of Contents

    Representations and Warranties

        In general, neither we nor Altice N.V. make any representations or warranties to the other regarding the separation of Altice USA from Altice N.V., including regarding any consents or approvals that may be required in connection with the Distribution. Except as expressly set forth in the Master Separation Agreement, all assets will be transferred on an "as is", "where is" basis.

    Further Assurances

        We and Altice N.V. will use commercially reasonable efforts to effect any transfers contemplated by the Master Separation Agreement that have not been consummated prior to the Distribution as promptly as practicable following the Distribution Date.

    Conditions

        The Master Separation Agreement provides that several conditions must be satisfied or waived (to the extent permitted by applicable law) by Altice N.V. in its sole and absolute discretion before the Distribution can occur. For further information about these conditions, see "The Distribution—Conditions to the Distribution". Altice N.V. shall, in the sole and absolute discretion of the Altice N.V. board of directors, determine the Record Date, the Distribution Date and, subject to our Related-Party Transaction Approval Policy, all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition and notwithstanding anything to the contrary set forth in this prospectus, Altice N.V. may at any time and from time to time until the Distribution decide to abandon or modify the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution or, subject to our Related-Party Transaction Approval Policy, modifying or changing the terms of the Distribution if, at any time, the Altice N.V. board of directors determines, in its sole and absolute discretion, that the Distribution is not in the best interests of Altice N.V. or its shareholders or is otherwise not advisable. Entering into, terminating or modifying any agreements between Altice N.V. and Altice USA requires prior approval of our Audit Committee pursuant to our Related-Party Transaction Approval Policy. See "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions."

        As of the date of this prospectus, all of the conditions described in "The Distribution—Conditions to the Distribution" have been satisfied except: (i) the entry into the post-Distribution stockholders' agreement and the entry into, amendments to or termination of various arrangements between Altice N.V. and Altice USA, (ii) the filing of the third amended and restated certificate of incorporation with the Secretary of State of the State of Delaware following the completion of the 20-day waiting period under Regulation 14C under the Exchange Act, (iii) the absence of any law or governmental order issued by a governmental authority of competent jurisdiction being in effect that enjoins or makes the Separation illegal, and (iv) the payment of the Pre-Distribution Dividend. Holders of Altice N.V. shares that are entitled to receive shares of Altice USA common stock in the Distribution are not entitled to receive any portion of the Pre-Distribution Dividend.

    Exchange of Information

        We and Altice N.V. have agreed to provide each other with information reasonably necessary to comply with reporting, disclosure, filing or other requirements of any national securities exchange or governmental authority, for use in judicial, regulatory, administrative and other proceedings and to satisfy audit, accounting, litigation and other similar requests. We and Altice N.V. have also agreed to retain such information until the later of the seventh anniversary of the Distribution and the expiration of the relevant statute of limitations. Each party has also agreed to provide to the other party and its auditors reasonable assistance in connection with the preparation of any disclosure regarding related

194


Table of Contents

party transactions so long as each party is controlled by any of Next Alt, A4 S.A., Mr. Drahi (or his heirs or entities or trusts directly or indirectly under his or their control or formed for his or their benefit) or any of their affiliates (collectively, the "PDR Group").

    Termination

        Altice N.V., in the sole and absolute discretion of the Altice N.V. board of directors, may terminate the Master Separation Agreement at any time prior to the Distribution.

    Release of Claims

        We and Altice N.V. have each agreed to release the other and its affiliates, and all the other's affiliates', directors, officers, agents and employees, and their respective heirs, executors and administrators from any claims against any of them that arise out of or relate to events, circumstances or actions occurring or failing to occur or any conditions existing at or prior to the time of the Distribution. These releases will be subject to exceptions set forth in the Master Separation Agreement.

    Indemnification

        We and Altice N.V. have each agreed to indemnify the other and its subsidiaries and each of the other's and its subsidiaries' directors, officers, employees and agents, against certain liabilities incurred in connection with the Distribution. The amount of either Altice N.V.'s or our indemnification obligations will be reduced by any insurance proceeds the party being indemnified receives. The Master Separation Agreement also specifies procedures regarding claims subject to indemnification.

    Insurance

        The Master Separation Agreement provides for the allocation between us and Altice N.V. of rights and obligations under existing insurance policies with respect to occurrences prior to the Distribution and sets forth procedures for the administration of insured claims and certain other insurance matters.

    Dispute Resolution

        The Master Separation Agreement contains provisions that govern the resolution of disputes, controversies or claims that may arise between Altice USA and Altice N.V. related to the Master Separation Agreement and the other ancillary agreements entered in connection with the Separation. These provisions provide that efforts will be made to resolve disputes, controversies and claims by elevation of the matter to senior executives of Altice USA and Altice N.V. If such efforts are not successful, either Altice USA or Altice N.V. may submit the dispute, controversy or claim to binding arbitration, subject to the provisions of the Master Separation Agreement.

    Tax Matters

        We and Altice N.V. have each agreed to indemnify the other for any liability for taxes of any member of the party's respective group or certain taxes imposed on any member of the party's group that are attributable to a pre-Distribution tax period. We and Altice N.V. have also agreed to cooperate with each other in connection with any tax matters relating to the Altice USA and Altice N.V. groups, respectively, including preparation and filing of certain tax returns.

195


Table of Contents


ANCILLARY AGREEMENTS

        In connection with the Distribution, in addition to the Master Separation Agreement, we have entered into or expect to enter into or amend agreements which will govern various ongoing relationships between Altice N.V., Next Alt and us after the Distribution, including the following:

    a Trademark License Agreement pursuant to which Altice USA will license from Next Alt the right to use the "Altice" brand;

    Acquisition Agreements for ATS pursuant to which Altice USA acquired 100% of the equity interests in ATS;

    Acquisition Agreements for i24 News business pursuant to which Altice USA acquired 100% of the equity interests of the entities comprising the i24 News business;

    a Voting Agreement relating to Holding LP;

    Stockholders' Agreement;

    Stockholders and Registration Rights Agreement; and

    Indemnification Agreement.

        The material terms of these agreements are summarized below.

        In addition to the Master Separation Agreement described in "The Master Separation Agreement" and the other agreements described below, we (or our subsidiaries) may enter into, from time to time, agreements and arrangements with Altice N.V., Next Alt and certain of their respective related entities, in connection with, and in the ordinary course of, our business. Entering into, terminating or modifying any agreements between Altice N.V. and Altice USA require prior approval of our Audit Committee pursuant to our Related-Party Transaction Approval Policy. Each of the agreements or transactions described below (other than the trademark license agreement) have been approved by our Audit Committee pursuant to the Company's Related-Party Transaction Approval Policy. See "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions."

Trademark License Agreement

        We intend to enter into a trademark license agreement pursuant to which Next Alt will grant us an exclusive, non-transferable license to use the "ALTICE" trademark and variations thereof and logos, designs and other marks containing the term "ALTICE" and variations thereof in North America and any territories under the jurisdiction of any state or country within North America in connection with Altice USA's business. The terms and conditions of the trademark license agreement remain subject to ongoing negotiations.

Acquisition Agreement for ATS

        ATS provides services pursuant to an Independent Contractor Agreement and Transition Services Agreement with the Company. In light of Altice N.V.'s determination to focus on businesses other than the Company, we and Altice N.V. concluded it is in Altice N.V.'s and the Company's interests for Altice USA to own and operate ATS. We acquired 100% of the equity interests in ATS for a de minimis amount in the first quarter of 2018.

Acquisition Agreements for i24 News business

        i24 News is a multi-language international news channel that distributes programming in Europe, Africa, the Middle East and the U.S. The i24 News business is composed of i24 news S.à r.l., i24 News France S.A.S. and i24 US Corp. (collectively, the "i24 Entities"), each of which is indirectly owned by

196


Table of Contents

Altice N.V. We acquired 100% of the equity interests in each i24 Entity from Altice N.V. for approximately $10,125,001.

Voting Agreement relating to Holding LP

        The general partner of Holding LP is currently controlled by CVC 3. Prior to the Separation, CVC 3 will transfer its control of the general partner of Holding LP to us. CVC 3 will maintain substantially the same rights as a limited partner in Holding LP after the Separation as it had prior to the Separation. In addition, we and Next Alt intend to enter into the Holding LP voting agreement pursuant to which Next Alt will be granted a proxy to vote the shares of Altice USA common stock held by Holding LP. Upon vesting, holders of Units under the Carry Unit Plan will receive shares of our Class A common stock from Holding LP, thereby reducing the number of shares of Class A common stock held by Holding LP. Any such shares of Class A common stock received by Concert Group members will be subject to the Concert Group voting agreements. Shares that are received by non-Concert Group members will not be subject to any voting agreement thereby reducing the voting power of Holding LP and consequently, Mr. Drahi. As of May 21, 2018, Holding LP owns 6.3% of Altice USA common stock, of which          % is attributable to Neptune Management LP in connection with the Carry Unit Plan and           % is attributable to Altice N.V. (indirectly through CVC 3).

Post-Distribution Stockholders' Agreement

        In connection with the Distribution, we will enter into the post-Distribution stockholders' agreement with Next Alt and A4 S.A. The post-Distribution stockholders' agreement will be substantially similar to the existing stockholders' agreement among Altice N.V., A4 S.A. and us. Pursuant to the post-Distribution stockholders' agreement, so long as the PDR Group beneficially owns in the aggregate, at least 50% of the voting power of our outstanding capital stock, Next Alt will have the right to designate six directors to the Board, and the Company will cause the Board to consist of a majority of directors nominated by Next Alt. In the event that the PDR Group beneficially owns, in the aggregate, less than 50% of the voting power of our outstanding capital stock, Next Alt will have the right to designate a number of directors to the Board equal to the total number of directors comprising the entire Board multiplied by the percentage of the voting power of our outstanding common stock beneficially owned, in the aggregate, by the PDR Group, rounding up in the case of any resulting fractional number, and in the event that the PDR Group beneficially owns, in the aggregate, less than 50% of the voting power of our outstanding capital stock, Next Alt will not have the right to designate a number of directors to the Board equal to or exceeding 50% of directors comprising the entire Board. One of Next Alt's designated nominations will be an individual designated by A4 S.A., and Next Alt will agree to vote its shares in favor of electing the individual designated by A4 S.A. If a director designated by Next Alt or by A4 S.A. resigns or is removed from the Board, as the case may be, only another director designated by Next Alt or by A4 S.A., as the case may be, may fill the vacancy. After the PDR Group ceases to beneficially own at least 20% of the voting power of our outstanding common stock, Next Alt will cease to have the right to designate any director nominees for election to the Board. In the event Mr. Drahi is not a member of our Board, one representative of the PDR Group will have board observer rights so long as the PDR Group beneficially owns at least 20% of the voting power of our outstanding common stock. In addition, the post-Distribution stockholders' agreement will be revised to replace Altice N.V. with Next Alt, which will be our largest stockholder following the Distribution, and to terminate the board observer rights of the Group Advisory Council of Altice N.V. The post-Distribution stockholders' agreement will require us to obtain the consent of Next Alt before we may take certain actions specified therein. See "Description of Capital Stock—Stockholders' Agreement."

197


Table of Contents

Stockholders and Registration Rights Agreement

        In connection with the Distribution, we will amend and restate our stockholders and registration rights agreement with Altice N.V., BCP and CPPIB to include Next Alt as a party and to give Next Alt demand registration rights consistent with Altice N.V. We do not expect there will be any other material changes made to this agreement in connection with the Distribution. See "Certain Relationships and Related-Party Transactions."

Indemnification Agreement

        In connection with the Distribution, we entered into an indemnification agreement with Altice N.V. Under the indemnification agreement, we and Altice N.V. each agree to indemnify the other, the other's affiliates and the other's and its affiliates' officers, directors, employees, agents, attorneys, accountants, actuaries and consultants, against certain losses arising out of or based upon (i) any filings made by Altice USA with the Commission under the Securities Act or the Exchange Act in connection with the separation of Altice USA and Altice N.V. or the Distribution, (ii) any filings made by Altice USA with the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten) and other relevant regulators in other countries within the European Union under the Financial Markets Supervision Act or any other relevant law in connection with the separation of Altice USA and Altice N.V. or the Distribution, (iii) the publication of the prospectus prepared by Altice USA and approved by the Dutch Authority for the Financial Markets ( Stichting Autoriteit Financiële Markten ) for the purposes of Article 3 of Directive 2003/71/EC of the European Parliament and the Council and the amendments thereto, (iv) any notifications, filings or submissions made by Altice N.V. with governmental authorities having jurisdiction over Altice N.V. in connection with the separation of Altice USA and Altice N.V. or the Distribution, or (v) the AGM and the shareholder circular for the AGM.

Ongoing Commercial Agreements

        In addition to the above agreements, we intend to enter into, or amend the terms of, various other agreements with Altice N.V. and its affiliates (other than Altice USA and our subsidiaries) that are intended to continue post-Distribution subject to their existing terms or terms and conditions to be negotiated and agreed to. These amendments will generally be intended to permit us to maintain pricing and other benefits as if we were still controlled by Altice N.V. We do not consider these agreements to be material.

198


Table of Contents


CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

Our Relationship with Altice N.V.

        As of the date of the prospectus, Altice N.V. indirectly owned 490,085,674 shares of Class B common stock and 51,456,042 shares of Class A common stock representing 73.5% of the total outstanding capital stock and 98.4% of the total voting power of the outstanding capital stock of Altice USA. In connection with the Distribution, Altice N.V. will distribute shares in the aggregate of our Class A common stock and Class B common stock.

        We have entered into transactions and agreements with Altice N.V. and our affiliates in the ordinary course of business, subject to compliance with our Related-Party Transaction Approval Policy, including relating to:

        In connection with the Distribution, on May 18, 2018, we entered into the Master Separation Agreement, and will enter into certain agreements regarding, among other things, the license of the Altice brand and amendments to certain commercial agreements between the Company, on the one hand, and Altice N.V. and its affiliates, on the other hand. See "The Master Separation Agreement" and "Ancillary Agreements."

Altice Technical Services

        ATS provides technical operating services to the Company, including field services, such as dispatch, customer installations, disconnects, service changes and other customer service visits, outside plant maintenance services and design and construction services for HFC and FTTH infrastructure. We acquired 100% of the equity interests in ATS for a de minimis amount in the first quarter of 2018. ATS was previously owned by Altice N.V. and a member of ATS's management through a holding company. In light of Altice N.V.'s determination to focus on businesses other than the Company, we and Altice N.V. concluded it is in the Company's and Altice N.V.'s interests for Altice USA to own and operate ATS. The ATS Acquisition was approved by our Audit Committee pursuant to the Company's Related-Party Transaction Approval Policy. See "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions."

i24 News business

        i24 News is a multi-language international news channel that distributes programming in Europe, Africa, the Middle East and the U.S. The i24 News business is composed of the i24 Entities, each of which were indirectly owned by Altice N.V. We acquired 100% of the equity interests in each i24 Entity from Altice N.V. for approximately $10,125,001. The terms of the purchase of i24 Entities were approved by our Audit Committee pursuant to the Company's Related-Party Transaction Approval

199


Table of Contents

Policy. See "Certain Relationships and Related-Party Transactions—Our Policy Regarding Related-Party Transactions."

Management Advisory and Consulting Services

        Altice N.V. provides consulting, advisory and other services to us in connection with our acquisitions, divestitures, investments, capital raising, financial and business affairs for a quarterly fee. See Note 14 to our audited consolidated financial statements included elsewhere herein for more information. The Management Advisory and Consulting Services Agreement will be terminated in connection with the Distribution.

Stockholders' Agreement

        In connection with our IPO, we entered into a stockholders' agreement with Altice N.V. and A4 S.A. Pursuant to this agreement, Altice N.V. has the right to nominate a majority of the members of our Board, and has agreed to vote its shares in favor of electing the individual designated by A4 S.A. If a director designated by Altice N.V. or by A4 S.A. resigns or is removed from the Board, as the case may be, only another director designated by Altice N.V. or by A4 S.A., as the case may be, may fill the vacancy. The stockholders' agreement requires us to obtain the consent of Altice N.V. before we may take certain actions specified therein. This stockholders' agreement will be terminated upon completion of the Distribution.

        In connection with the Distribution, we will enter into the post-Distribution stockholders' agreement with Next Alt and A4 S.A. The post-Distribution stockholders' agreement will be substantially similar to the existing stockholders' agreement among Altice N.V., A4 S.A. and us. Pursuant to this agreement, so long as the PDR Group beneficially owns in the aggregate, at least 50% of the voting power of our outstanding capital stock, Next Alt will have the right to designate six directors to the Board, and the Company will cause the Board to consist of a majority of directors nominated by Next Alt. In the event that the PDR Group beneficially owns, in the aggregate, less than 50% of the voting power of our outstanding capital stock, Next Alt will have the right to designate a number of directors to the Board equal to the total number of directors comprising the entire Board multiplied by the percentage of the voting power of our outstanding common stock beneficially owned, in the aggregate, by the PDR Group, rounding up in the case of any resulting fractional number, and in the event that the PDR Group beneficially owns, in the aggregate, less than 50% of the voting power of our outstanding capital stock, Next Alt will not have the right to designate a number of directors to the Board equal to or exceeding 50% of directors comprising the entire Board. One of Next Alt's designated nominations will be an individual designated by A4 S.A., and Next Alt will agree to vote its shares in favor of electing the individual designated by A4 S.A. If a director designated by Next Alt or by A4 S.A. resigns or is removed from the Board, as the case may be, only another director designated by Next Alt or by A4 S.A., as the case may be, may fill the vacancy. After the PDR Group ceases to beneficially own at least 20% of the voting power of our outstanding common stock, Next Alt will cease to have the right to designate any director nominees for election to the Board. In the event Mr. Drahi is not a member of our Board, one representative of the PDR Group will have board observer rights so long as the PDR Group beneficially owns at least 20% of the voting power of our outstanding common stock. In addition, the post-Distribution stockholders' agreement will be revised to replace Altice N.V. with Next Alt, which will be our largest stockholder following the Distribution, and to terminate the board observer rights of the Group Advisory Council of Altice N.V. The post-Distribution stockholders' agreement will require us to obtain the consent of Next Alt before we may take certain actions specified therein. See "Description of Capital Stock—Stockholders' Agreement."

200


Table of Contents

Stockholders and Registration Rights Agreement

        In connection with our IPO, we entered into a stockholders and registration rights agreement with Altice N.V., BCP and CPPIB. This agreement provides Altice N.V. with an unlimited number of "demand" registrations for the registration of the sale of Altice USA common stock in a minimum aggregate amount (the "Minimum Amount"), which is the lowest of (i) $100,000,000, (ii) one percent (1%) of the value of Shares (as defined in the stockholders and registration rights agreement) that are publicly traded as of the close of business on the most recent business day or (iii) such lesser amount as agreed by the Sponsors and Altice N.V. Additionally, the agreement provides BCP and CPPIB each with one "demand" registration every twelve months, subject to an exception, and customary "piggyback" registration rights to Altice N.V., BCP and CPPIB. The stockholders and registration rights agreement also provides that we will pay certain expenses relating to such registrations and indemnify Altice N.V., BCP and CPPIB against certain liabilities which may arise under the Securities Act. Each Sponsor also has the right to, among other things, designate one non-voting observer to our Board for so long as such Sponsor and certain of its affiliates own at least 4% of the issued and outstanding shares of Class A and Class B common stock and there is no director who is a designee of such Sponsor on our Board. Subject to certain exceptions, each non-voting observer will be permitted to attend all meetings of our Board and the committees thereof. In connection with the Distribution, we will amend and restate our stockholders and registration rights agreement to include Next Alt as a party with demand registration rights consistent with Altice N.V. We do not expect there will be any other material changes made to this agreement in connection with the Distribution.

Right of First Refusal and Concert Group Voting Agreements

        Any proposed sale of shares of common stock held by certain members of our management is subject to a right of first refusal in favor of Altice N.V. This right of first refusal will be terminated upon the Distribution and will be replaced by a right of first refusal granted to Next Alt by certain parties to the Concert Group voting agreements. The Concert Group consists of the following current and former officers and directors of Altice N.V., Altice USA and other Altice Group companies who will enter into voting agreements with Next Alt with respect to all shares of Altice USA common stock they own (including any shares of Altice USA common stock received in the Distribution): Dexter Goei (through More ATC LLC and Inluam LLC), Dennis Okhuijsen, Jérémie Bonnin (through Hamaja S.à r.l.), Patrice Giami, Jean-Luc Berrebi (through Lynor's S.à r.l.), Nicolas Rotkoff (through Belem Capital S.à r.l.), Charles Stewart and Abdelhakim Boubazine. Pursuant to the voting agreements, the Concert Group members will undertake to vote in favor of any and all items proposed by Next Alt at any annual or special meeting of Altice USA. Each Concert Group member will also give a proxy to Next Alt to represent it and to vote on its behalf at any meeting of Altice USA stockholders. In addition, Next Alt expects that it will enter into a voting agreement with Jean-Michel Hegesippe (through OTR S.à r.l. and JMH Gestion & Participations Limited) but there is no assurance that such agreement will be entered into prior to the Distribution or at all.

        If the number of shares of Class B common stock distributed to Altice N.V. shareholders including Next Alt and the Concert Group is the greatest number such shareholders are entitled receive up to the Class B Cap, Mr. Drahi will own or control (through entities controlled directly or indirectly by Mr. Drahi or his family (including Next Alt, Uppernext and A4 S.A.) and the Concert Group voting agreements and the Holding LP voting agreement) a combined          % of our issued and outstanding Class A and Class B common stock which will represent approximately          % of the voting power of our outstanding capital stock. If no shares of Class B common stock are distributed to Altice N.V. shareholders other than Next Alt and the Concert Group, Mr. Drahi will own or control (through entities controlled directly or indirectly by Mr. Drahi or his family (including Next Alt, Uppernext and A4 S.A.) and the Concert Group voting agreements and the Holding LP voting agreement) a combined

201


Table of Contents


          % of our issued and outstanding Class A and Class B common stock which will represent approximately          % of the voting power of our outstanding capital stock.

Voting Agreement relating to Holding LP

        We and Next Alt will enter into the Holding LP voting agreement pursuant to which Next Alt will be granted a proxy to vote the shares of Altice USA common stock held by Holding LP. The terms of such agreement were approved by our Audit Committee pursuant to the Company's Related-Party Transaction Approval Policy. See "—Our Policy Regarding Related-Party Transactions." Upon vesting, holders of Units under the Carry Unit Plan will receive shares of our Class A common stock from Holding LP, thereby reducing the number of shares of Class A common stock held by Holding LP. Any such shares of Class A common stock received by Concert Group members will be subject to the Concert Group voting agreements. Shares that are received by non-Concert Group members will not be subject to any voting agreement thereby reducing the voting power of Holding LP and consequently, Mr. Drahi. As of May 21, 2018, Holding LP owns 6.3% of Altice USA common stock, of which          % is attributable to Neptune Management LP in connection with the Carry Unit Plan and          % is attributable to Altice N.V. (indirectly through CVC 3).

Compensation for Services

        In light of Mr. Drahi's significant and ongoing direct contributions to the development and implementation of the Altice USA, Inc. strategic vision, on December 30, 2017, nonqualified options to purchase 600,604 shares of our Class A common stock were granted under the 2017 LTIP to a personal holding company that is wholly owned and controlled by Mr. Drahi. The options have a grant date fair value of $5,291,321. The options have a strike price of $19.48 per share, cliff vest on December 21, 2020 and are generally subject to the provisions of the Company's form for nonqualified stock options, which was filed with the Commission on January 3, 2018 as Exhibit 99.1 to a Current Report on Form 8-K. In 2017, Mr. Drahi received transportation services valued at $1,827 which reflected the incremental cost to the Company.

        The stock options were granted to Mr. Drahi, who previously received Units under the Carry Unit Plan and whose initial 50% vesting of such Units occurred on December 21, 2017. These were the first grants made to Mr. Drahi under the 2017 LTIP. Except for the stock options and transportation, Mr. Drahi does not receive any other annual compensation for his service to the Company.

Notes Payable to Affiliates and Related Parties

        In June 2016, in connection with Cablevision Acquisition, affiliates of the Sponsors and Altice N.V. purchased $875 million aggregate principal amount of Altice USA's 10.75% notes due 2023 and $875 million aggregate principal amount of Altice USA's 11.00% notes due 2024. Prior to the consummation of our IPO, the notes held by the affiliates of the Sponsors (together with accrued and unpaid interest and applicable premium) were converted into shares of the Company's Class A common stock and the notes held by an affiliate of Altice N.V. (together with accrued and unpaid interest and applicable premium) were converted into shares of the Company's Class B common stock.

Our Policy Regarding Related-Party Transactions

        All agreements and transactions between us, on the one hand, and (i) prior to the Distribution, affiliates of Altice N.V. and (ii) after the Distribution, affiliates of Next Alt (which includes Altice N.V.) on the other hand, are subject to our Related-Party Transaction Approval Policy. Under this policy, the Audit Committee of the board consisting entirely of directors who have been determined by the board to be independent directors for purposes of the NYSE corporate governance standards reviews and approves or takes such other action as it may deem appropriate with respect to transactions involving

202


Table of Contents

the Company and its subsidiaries, on the one hand, and in which any director, officer, greater than 5% stockholder of the Company or any other "related person" as defined in Item 404 of Regulation S-K under the Securities Act ("Item 404") has or will have a direct or indirect material interest. This approval requirement covers any transaction that meets the related-party disclosure requirements of the SEC as set forth in Item 404. Under the Related-Party Transaction Approval Policy, the Audit Committee similarly oversees approval of transactions and arrangements between the Company and its subsidiaries, on the one hand, and Altice N.V. and its other subsidiaries or Next Alt or its affiliates, as applicable, on the other hand, to the extent involving amounts in excess of the dollar threshold set forth in Item 404 (the "Item 404 Threshold").

        The Related-Party Transaction Approval Policy provides that to simplify the administration of the approval process under the Related-Party Transaction Approval Policy, the Audit Committee may, where it deems it to be appropriate, establish guidelines for certain types of these transactions. The approval requirement does not apply to the implementation and administration of intercompany arrangements under the Related-Party Transaction Approval Policy, but covers any amendments, modifications, terminations or extensions involving amounts in excess of the Item 404 Threshold, as well as the handling and resolution of any disputes involving amounts in excess of the Item 404 Threshold. The Company's executive officers and directors who are also senior executives or directors of Altice N.V. or Next Alt, as the case may be, may participate in the negotiation, execution, amendment, modification, or termination of intercompany arrangements subject to the Related-Party Transaction Approval Policy, as well as in any resolution of disputes under intercompany arrangements, on behalf of either or both of the Company and Altice N.V. or Next Alt, as the case may be, under the direction of the Audit Committee when acting on behalf of the Company.

        The Related-Party Transaction Approval Policy cannot be amended or terminated without the prior approval of a majority of the Audit Committee.

203


Table of Contents


DESCRIPTION OF CAPITAL STOCK

General

        The following description of our capital stock and certain provisions of our third amended and restated certificate of incorporation and second amended and restated bylaws to be entered into are summaries and are qualified by reference to our third amended and restated certificate of incorporation and the second amended and restated bylaws that will be in effect upon consummation of the Distribution. Copies of these documents are filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part.

        Our third amended and restated certificate of incorporation provides for three classes of common stock: Class A common stock, Class B common stock and Class C common stock. In addition, our third amended and restated certificate of incorporation authorizes shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by our Board.

        Our authorized capital stock consists of 9,100,000,000 shares, all with a par value of $0.01 per share, of which:

        As of the date of this prospectus, we have 246,982,292 shares of our Class A common stock issued and outstanding and 490,086,674 shares of our Class B common stock issued and outstanding.

Class A Common Stock, Class B Common Stock and Class C Common Stock

Voting Rights

        Holders of our Class A common stock are entitled to one vote per share and holders of our Class B common stock are entitled to twenty-five votes per share, in each case, on any matter submitted to a vote of our stockholders. Except as set forth below or as required by Delaware law, holders of shares of Class A common stock and Class B common stock vote together as a single class on all matters (including the election of directors) submitted to a vote of our stockholders.

        If we issue any shares of Class C common stock, they will not be entitled to any votes on any matter that is submitted to a vote of our stockholders, except as provided in our certificate of incorporation or as required by Delaware law. Delaware law would require the holders of Class A common stock, Class B common stock or Class C common stock to vote separately as a single class on a matter if we were to seek to:

        As permitted by Delaware law, our third amended and restated certificate of incorporation provides that the number of authorized shares of common stock or any class of common stock may be increased or decreased (but not below the number of shares of common stock then outstanding) by the affirmative vote of the holders of a majority of the voting power of the Class A common stock and Class B common stock, voting together as a single class.

204


Table of Contents

        Each of our directors and director nominees stand for election at each of our annual meetings of stockholders. Our third amended and restated certificate of incorporation does not provide for cumulative voting for the election of directors. Rather, a majority of the votes cast is required for a director or director nominee to be duly elected in any uncontested election. Because our stockholders do not have cumulative voting rights, stockholders holding a majority of the voting power of our capital stock are able to elect all of our directors. Stockholders holding a majority of the voting power of our capital stock are also able to remove each of our directors with or without cause. Pursuant to the post-Distribution stockholders' agreement, so long as the PDR Group beneficially owns in the aggregate, at least 50% of the voting power of our outstanding capital stock, Next Alt will have the right to designate six directors to the Board, and the Company will cause the Board to consist of a majority of directors nominated by Next Alt. In the event that the PDR Group beneficially owns, in the aggregate, less than 50% of the voting power of our outstanding capital stock, Next Alt will have the right to designate a number of directors to the Board equal to the total number of directors comprising the entire Board multiplied by the percentage of the voting power of our outstanding common stock beneficially owned, in the aggregate, by the PDR Group, rounding up in the case of any resulting fractional number, and in the event that the PDR Group beneficially owns, in the aggregate, less than 50% of the voting power of our outstanding capital stock, Next Alt will not have the right to designate a number of directors to the Board equal to or exceeding 50% of directors comprising the entire Board. One of Next Alt's designated nominations will be an individual designated by A4 S.A., and Next Alt will agree to vote its shares in favor of electing the individual designated by A4 S.A. If a director designated by Next Alt or by A4 S.A. resigns or is removed from the Board, as the case may be, only another director designated by Next Alt or by A4 S.A., as the case may be, may fill the vacancy. After the PDR Group ceases to beneficially own at least 20% of the voting power of our outstanding common stock, Next Alt will cease to have the right to designate any director nominees for election to the Board. In the event Mr. Drahi is not a member of our Board, one representative of the PDR Group will have board observer rights so long as the PDR Group beneficially owns at least 20% of the voting power of our outstanding common stock. See "—Stockholders' Agreement."

        Our third amended and restated certificate of incorporation also gives the holders of at least a majority of the voting power of our capital stock the right to act by written consent in lieu of a meeting and without notice.

Economic Rights

        Except as otherwise expressly provided in our third amended and restated certificate of incorporation or required by Delaware law, all shares of Class A common stock, Class B common stock and Class C common stock have the same rights and privileges and rank equally, share ratably and be identical in all respects for all matters, including those described below.

        Dividends and Distributions.     Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of outstanding shares of Class A common stock, Class B common stock and Class C common stock are entitled to share equally, on a per share basis, in any dividend or distribution of funds legally available if our Board, in its discretion, determines to declare and pay dividends and only then at the times and in the amounts that our Board may determine. In the event that a dividend is paid in the form of shares of our capital stock or rights to acquire or securities convertible into or exchangeable for shares of our capital stock, then, in the discretion of our Board, either (A) the holders of shares of Class A common stock, Class B common stock and Class C common stock shall receive the identical class of securities on an equal per share basis, or (B) (i) the holders of shares of Class A common stock shall receive Class A common stock, or securities convertible into or exchangeable for shares of Class A common stock or rights to acquire such securities, as the case may be; (ii) the holders of shares of Class B common stock shall receive Class B common stock, or securities convertible into or exchangeable for shares of Class B common stock or

205


Table of Contents

rights to acquire such securities, as the case may be; and (iii) the holders of shares of Class C common stock shall receive Class C common stock, or securities convertible into or exchangeable for shares of Class C common stock or rights to acquire such securities, as the case may be; in each such case in clause (B), in an equal amount per share.

        Distributions of Another Corporation's Securities.     Unless otherwise approved by the Board, where the securities of another corporation are distributed, they must only be distributed to holders of Class A common stock, Class B common stock and Class C common stock on the basis that:

        To the extent that a dividend is declared and paid pursuant to paragraph (b) or (c), then the holders of Class B common stock shall receive the securities having the highest number of votes per share (or, in the case of convertible securities, the securities convertible into, exchangeable for or evidencing the right to purchase, the securities with the highest number of votes per share) and the holders of each other class of common stock shall receive the securities having the lesser number of votes per share (or, in the case of convertible securities, the securities convertible into, exchangeable for or evidencing the right to purchase, the securities with the lesser number of votes per share): (A) in each case, without regard to whether such voting rights differ to a greater or lesser extent than the corresponding differences in voting rights (and related differences in designation, conversion and rights to distributions) between the Class A common stock, the Class B common stock and the Class C common stock; and (B) provided that the different classes of securities (and, in the case of securities convertible into, exchangeable for or evidencing the right to purchase securities, the securities resulting from such conversion, exchange or purchase) do not differ in any respect other than with respect to their relative voting rights (and related differences in designation, conversion, redemption and rights to distributions).

        To the extent that a dividend is declared and paid pursuant to paragraph (b) or (c), and in the event that the holders of Class A common stock receive a class of securities having different rights than those received by the holders of Class C common stock, then: (A) the rights of the different classes of securities (and, in the case of securities convertible into, exchangeable for or evidencing the right to purchase securities, the securities resulting from such conversion, exchange or purchase) may not differ in any respect other than with respect to their relative voting rights (and related differences in designation, conversion, redemption and rights to distributions); and (B) the relevant classes of securities shall be distributed to the holders of Class A common stock and Class C common stock such that the relative voting rights (and related differences in designation, conversion, redemption, rights to dividends in specie comprising securities and rights to distributions) of the class of securities (or, in the case of convertible securities, the securities convertible into, exchangeable for or evidencing the right to purchase, the securities resulting from such conversion, exchange or purchase) to be received by the holders of Class A common stock on the one hand and Class C common stock on the other hand corresponds to the extent practicable to the relative voting rights (and related differences in designation, conversion, redemption and rights to distributions) of the Class A common stock as compared to the Class C common stock.

206


Table of Contents

        Liquidation Rights.     Upon our dissolution, liquidation or winding up, the assets legally available for distribution to our stockholders will be distributable ratably among the holders of our Class A common stock, Class B common stock and Class C common stock subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights and payment of liquidation preferences, if any, on any outstanding shares of preferred stock unless different treatment of such class with respect to distributions upon any such liquidation, dissolution or winding up is approved in advance by the affirmative vote of the holders of a majority of the voting power of the Class A common stock and Class B common stock, each voting separately as a class.

        Equal Status.     Except as expressly provided in our third amended and restated certificate of incorporation or required by applicable law, shares of Class A common stock, Class B common stock and Class C common stock have the same rights and privileges and rank equally, share ratably and are identical in all respects as to all matters. In the event of (i) a consolidation or merger of us with or into any other entity; (ii) any tender offer or exchange offer by any person or entity pursuant to an agreement to which we are a party or that our Board recommends; or (iii) a sale by Altice N.V. or any of its subsidiaries that holds shares of our Class B common stock or, solely in the event shares of our Class B common stock have been distributed to Mr. Drahi, his heirs or entities or trusts directly or indirectly under his or their control or formed for his or their benefit or any affiliate of Mr. Drahi, his heirs or entities or trusts directly or indirectly under his or their control or formed for his or their benefit (together with Altice N.V. and any of its subsidiaries that hold such shares, the "Altice Holders"), a sale by Mr. Drahi, such heirs or such trusts or entities or such affiliates, in one or a series of related transactions, whether to a single purchaser or purchasers constituting a "group" as defined in Section 13(d) of the Exchange Act, of shares of Class B common stock representing (a) at least 40% of the votes entitled to be cast by all stockholders entitled to vote in an election of directors and (b) a greater number of votes than the Altice Holders collectively are entitled to cast immediately following such sale, the holders of Class A common stock, Class B common stock and Class C common stock shall be entitled to participate proportionately and to receive, or to elect to receive, the same form of consideration and the same amount of consideration on a per share basis. Notwithstanding the foregoing, if any securities consideration is paid, distributed or offered to holders of shares of Class A common stock, Class B common stock or Class C common stock in any such transaction, such consideration may differ only in terms of voting rights such that the holder of a share of Class B common stock shall receive or have the right to elect to receive the securities having the highest number of votes per share (or, in the case of convertible securities, the securities convertible into, exchangeable for or evidencing the right to purchase, the securities with the highest number of votes per share) and the holders of each other class of Altice USA common stock shall receive or have the right to elect to receive the securities having the lesser number of votes per share (or, in the case of convertible securities, the securities convertible into, exchangeable for or evidencing the right to purchase, the securities with the lesser number of votes per share), and any securities that the holder of a share of Class C common stock shall receive or have the right to elect to receive shall either have no voting rights or the same voting rights as the securities that a holder of Class A common stock shall receive or have the right to elect to receive.

        Subdivisions and Combinations.     If we subdivide or combine in any manner outstanding shares of Class A common stock, Class B common stock, or Class C common stock, the outstanding shares of the other classes will be subdivided or combined in the same manner concurrently.

No Preemptive or Similar Rights

        Our Class A common stock, Class B common stock and Class C common stock are not entitled to preemptive rights and are not subject to conversion or redemption provisions, except for the conversion provisions with respect to the Class B common stock and Class C common stock described below. Any

207


Table of Contents

one or more series of preferred stock will have only such preemptive or similar rights granted to the holders thereof by our Board.

Conversion and Transfers

        Each share of Class B common stock is convertible at any time upon written notice to Altice USA at the option of the holder into one share of Class A common stock. Our third amended and restated certificate of incorporation provides that we will, no later than ten (10) calendar days after receipt by us of written notice from a holder of our Class B common stock, issue and take action to deliver a certificate or certificates representing the number of shares of our Class A common stock to which a converting holder is entitled (if such shares are certificated) or, if such shares are uncertificated, register such shares in book-entry form. The date of conversion will be the date of such issuance, in the case of certificated shares, or registration, in the case of uncertificated shares. Our third amended and restated certificate of incorporation further provides that we will not be liable for any losses incurred by any person resulting from any delay in effecting any such conversion.

        Our third amended and restated certificate of incorporation does not provide for the automatic conversion of shares of our Class B common stock upon transfer under any circumstances. As a result, the holders of Class B common stock are free to transfer them without converting them into shares of our Class A common stock. Any shares of Class B common stock that are converted into Class A common stock may not be reissued. The disparate voting rights of the shares of our Class B common stock will not change upon transfer unless first converted into shares of Class A common stock.

        Immediately prior to any conversion of all outstanding shares of Class B common stock into Class A common stock, the holders of majority of the voting power of the Class B common stock at the time of such conversion, may, in connection with such conversion, require that each share of Class C common stock shall automatically be converted into one share of Class A common stock on a date fixed by our Board, which date shall be no less than 61 days and no more than 180 days following the conversion of all outstanding shares of Class B common stock.

Preferred Stock

        Under our third amended and restated certificate of incorporation, our Board may, without further action by our stockholders, fix the rights, preferences, privileges and restrictions of up to an aggregate of 100,000,000 shares of preferred stock in one or more series and authorize their issuance. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of our Class A common stock, Class B common stock or Class C common stock. Any issuance of our preferred stock could adversely affect the voting power of holders of our Class A common stock or Class B common stock, and the likelihood that such holders would receive dividend payments and payments on liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring, or preventing a change of control or other corporate action. On the completion of the Distribution, no shares of preferred stock will be outstanding. We have no present plan to issue any shares of preferred stock.

Stockholders' Agreement

        In connection with the Distribution, we will to enter into the post-Distribution stockholders' agreement with Next Alt and A4 S.A. The post-Distribution stockholders' agreement will be substantially similar to the existing stockholders' agreement among Altice N.V., A4 S.A. and us. Pursuant to this agreement, so long as the PDR Group beneficially owns in the aggregate, at least 50% of the voting power of our outstanding capital stock, Next Alt will have the right to designate six directors to the Board, and the Company will cause the Board to consist of a majority of directors

208


Table of Contents

nominated by Next Alt. In the event that the PDR Group beneficially owns, in the aggregate, less than 50% of the voting power of our outstanding capital stock, Next Alt will have the right to designate a number of directors to the Board equal to the total number of directors comprising the entire Board multiplied by the percentage of the voting power of our outstanding common stock beneficially owned, in the aggregate, by the PDR Group, rounding up in the case of any resulting fractional number, and in the event that the PDR Group beneficially owns, in the aggregate, less than 50% of the voting power of our outstanding capital stock, Next Alt will not have the right to designate a number of directors to the Board equal to or exceeding 50% of directors comprising the entire Board. One of Next Alt's designated nominations will be an individual designated by A4 S.A., and Next Alt will agree to vote its shares in favor of electing the individual designated by A4 S.A. If a director designated by Next Alt or by A4 S.A. resigns or is removed from the Board, as the case may be, only another director designated by Next Alt or by A4 S.A., as the case may be, may fill the vacancy. After the PDR Group ceases to beneficially own at least 20% of the voting power of our outstanding common stock, Next Alt will cease to have the right to designate any director nominees for election to the Board. In the event Mr. Drahi is not a member of our Board, one representative of the PDR Group will have board observer rights so long as the PDR Group beneficially owns at least 20% of the voting power of our outstanding common stock. Until the first date on which the PDR Group ceases to beneficially own at least 20% of the voting power of our outstanding common stock, notwithstanding anything to the contrary in our third amended and restated certificate of incorporation or bylaws, or in the governing documents of any of our subsidiaries, without the prior written approval of Next Alt, we shall not (either directly or indirectly through an affiliate or otherwise or through one or a series of related transactions) take, or permit one of our subsidiaries to take, any of the following actions:

209


Table of Contents

        Our third amended and restated certificate of incorporation requires the written approval of Altice N.V. before we may take the actions specified in paragraphs (a), (h) and (p). Following the Distribution, our third amended and restated certificate of incorporation will require that we obtain this approval from Next Alt instead.

210


Table of Contents

Anti-Takeover Provisions

Certificate of Incorporation and Bylaws

        A special meeting of stockholders may be called by a majority of our Board, the chair of our Board, stockholders holding a majority of the voting power of our capital stock or the director designated by A4 S.A. As described above in "Class A Common Stock, Class B Common Stock and Class C Common Stock—Voting Rights," our third amended and restated certificate of incorporation further provides for a tri-class common stock structure, as a result of which Next Alt generally will be able to control the outcome of all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets.

        The foregoing provisions make it more difficult for our existing stockholders, other than Next Alt, to replace our Board as well as for another party to obtain control of us by replacing our Board. Because our Board has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock makes it possible for our Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change our control.

Authorized but Unissued Shares

        The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the listing standards of the NYSE. These additional shares may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could make more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Section 203 of the DGCL

        Section 203 of the DGCL generally prohibits a publicly-held Delaware corporation from engaging in a merger, asset sale or other transaction resulting in a financial benefit with any person who, together with affiliation and association, owns, or within the prior three years, did own, 15% or more of a corporation's voting stock. The prohibition continues for a period of three years after the date of the transaction in which the person became an owner of 15% or more of the corporation's voting stock unless the transaction or the business combination is approved in a prescribed manner. The statute could prohibit or delay, defer or prevent a change in control with respect to Altice USA. However, by action of our Board we have waived the provisions of Section 203.

Choice of Forum

        Our second amended and restated bylaws provides that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state or federal court located in the State of Delaware) shall be the exclusive forum for: (i) any derivative action or proceeding brought in our name or on our behalf; (ii) any action asserting a breach of fiduciary duty; (iii) any action asserting a claim against us arising under the DGCL; (iv) any action regarding our third amended and restated certificate of incorporation or our second amended and restated bylaws; or (v) any action asserting a claim against us that is governed by the internal affairs doctrine. Our second amended and restated bylaws permits our Board to approve the selection of an alternative forum.

211


Table of Contents

Limitations of Liability and Indemnification

        Our third amended and restated certificate of incorporation contains provisions indemnifying our directors and officers to the fullest extent permitted by law. In addition, as permitted by Delaware law, our third amended and restated certificate of incorporation provides that no director will be liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. The effect of this provision is to restrict our rights and the rights of our stockholders in derivative suits to recover monetary damages against a director for breach of fiduciary duty as a director, except for:

        This provision does not affect a director's liability under the federal securities laws.

        To the extent our directors, officers and controlling persons will be indemnified under the provisions contained in our third amended and restated certificate of incorporation, Delaware law or contractual arrangements against liabilities arising under the Securities Act, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Corporate Opportunities

        Our third amended and restated certificate of incorporation recognizes that Mr. Drahi and the Next Alt Group Representatives may serve as our directors, officers or agents and that Mr. Drahi, Next Alt, Altice N.V., A4 S.A., the Next Alt Group Representatives and their respective affiliates, and the Designated Directors, may now engage, may continue to engage and may in the future engage in the same or similar activities or related lines of business as those in which we, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which we, directly or indirectly, may engage. In the third amended and restated certificate of incorporation we have renounced our rights to certain business opportunities and the third amended and restated certificate of incorporation provides that none of Mr. Drahi, Next Alt, Altice N.V., A4 S.A., any Next Alt Group Representative, any Designated Director, or their respective affiliates, have any duty to refrain from, directly or indirectly, engaging in the same or similar business activities or lines of businesses in which we or any of our affiliates engage or are reasonably likely to engage, or otherwise competing with us or any of our affiliates, or have any duty to communicate such opportunities to us, unless such opportunities arise in or are predominantly related to North America. The third amended and restated certificate of incorporation further provides that, to the fullest extent permitted by law, none of Mr. Drahi, Next Alt, Altice N.V., A4 S.A., any Next Alt Group Representative, any Designated Director (including any Designated Director who serves as one of our officers) or any of the foregoing persons' affiliates shall be liable to us or our stockholders for breach of any fiduciary duty solely because they engage in such activities.

Exchange Listing

        Our Class A common stock is listed on the NYSE under the symbol "ATUS." Our Class B common stock will not be listed on the NYSE or any other stock exchange at the time of the Distribution and we do not currently intend to list our Class B common stock on the NYSE or any other stock exchange.

212


Table of Contents

Transfer Agent, Registrar and Conversion Agent

        The transfer agent, registrar and conversion agent for our Class A common stock and Class B common stock is AST.

Other Information

        In connection with the Distribution, we will publish a prospectus in Europe that will be approved by the AFM. We are required under EU law to include the following information in this prospectus:

        Altice USA was incorporated in Delaware on September 14, 2015 with an authorized capitalization of 1,000 shares of common stock, of which 100 shares of common stock were issued. As of January 1, 2017, Altice USA had 100 shares of common stock issued and outstanding. Upon the closing of the IPO in June 2017, our authorized capitalization was increased to 9,100,000,000 shares, all with a par value of $0.01 per share, of which 4,000,000,000 shares are designated Class A common stock, 1,000,000,000 shares are designated Class B common stock, 4,000,000,000 shares are designated Class C common stock, and 100,000,000 shares are designated preferred stock. As of December 31, 2017, Altice USA had 246,982,292 shares of our Class A common stock issued and outstanding and 490,086,674 shares of our Class B common stock issued and outstanding.

213


Table of Contents


DESCRIPTION OF CERTAIN INDEBTEDNESS

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

 
   
   
   
  Carrying Amount(a)  
(Dollars in thousands)
  Maturity Date   Interest
Rate
  Principal   March 31,
2018
  December 31,
2017
 

CSC Holdings Restricted Group:

                             

Revolving Credit Facility(b)

  $20,000 on October 9, 2020, remaining balance on November 30, 2021     % $   $   $ 425,488  

Term Loan Facility

  July 17, 2025     4.04 %   2,977,500     2,960,859     2,967,818  

Incremental Term Loan Facility

  January 25, 2026     4.28 %   1,500,000     1,481,825        

Cequel:

                             

Revolving Credit Facility(c)

  $65,000 on November 30, 2021, and remaining balance on April 5, 2023                    

Term Loan Facility

  July 28, 2025     4.13 %   1,255,513     1,247,318     1,250,217  

              5,733,013     5,690,002     4,643,523  

Less: Current portion

                    53,900     42,650  

Long-term debt

                  $ 5,636,102   $ 4,600,873  

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

(b)
At March 31, 2018, $115,973 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $2,184,027 of the facility was undrawn and available, subject to covenant limitations.

(c)
At March 31, 2018, $13,500 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $336,500 of the facility was undrawn and available, subject to covenant limitations.

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

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

        On March 22, 2018, Altice US Finance I Corporation, an indirect wholly-owned subsidiary of the Company, entered into a Fourth Amendment to Cequel Credit Agreement (Extension Amendment), by and among the borrower, the Revolving Consent Lenders (as defined in the Fourth Amendment) and JPMorgan Chase Bank, N.A., as administrative agent for the lenders (the "Fourth Amendment"). The Fourth Amendment amends and supplements the Borrower's credit agreement, dated as of June 12, 2015, as amended by the first amendment (refinancing amendment), dated as of October 25, 2016, the second amendment (extension amendment), dated as of December 9, 2016, and the third amendment (incremental loan assumption agreement and refinancing amendment), dated as of March 15, 2017, (as so amended and as may be further amended, restated, modified or supplemented from time to time

214


Table of Contents

and as further amended by the Fourth Amendment among, inter alios, the borrower, the lenders party thereto and the administrative agent.

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

        As of March 31, 2018, the Company was in compliance with all of its financial covenants under the CSC Holdings Credit Facilities Agreement and the Cequel Credit Facilities Agreement. For more information on the Company's ratios, see "Liquidity and Capital Resources—Debt Outstanding."

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

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

 
   
   
  March 31, 2018   December 31, 2017  
Date Issued
  Maturity Date   Interest
Rate
  Principal
Amount
  Carrying
Amount(a)
  Principal
Amount
  Carrying
Amount(a)
 

CSC Holdings Senior Notes:

                               

February 6, 1998

  February 15, 2018     7.875% (b)(f)(o) $   $   $ 300,000   $ 301,184  

July 21, 1998

  July 15, 2018     7.625% (b)(f)   500,000     504,213     500,000     507,744  

February 12, 2009

  February 15, 2019     8.625% (c)(f)   526,000     537,930     526,000     541,165  

November 15, 2011

  November 15, 2021     6.750% (c)(f)   1,000,000     962,332     1,000,000     960,146  

May 23, 2014

  June 1, 2024     5.250% (c)(f)   750,000     663,291     750,000     660,601  

October 9, 2015

  January 15, 2023     10.125% (e)   1,800,000     1,778,745     1,800,000     1,777,914  

October 9, 2015

  October 15, 2025     10.875% (e)(l)   1,684,221     1,661,516     1,684,221     1,661,135  

CSC Holdings Senior Guaranteed Notes:

                         

October 9, 2015

  October 15, 2025     6.625% (e)   1,000,000     987,037     1,000,000     986,717  

September 23, 2016

  April 15, 2027     5.500% (g)   1,310,000     1,304,581     1,310,000     1,304,468  

January 29, 2018

  February 1, 2028     5.375% (n)   1,000,000     991,665          

Cablevision Senior Notes(k):

                         

April 15, 2010

  April 15, 2018     7.750% (c)(f)(o)           750,000     754,035  

April 15, 2010

  April 15, 2020     8.000% (c)(f)   500,000     492,795     500,000     492,009  

September 27, 2012

  September 15, 2022     5.875% (c)(f)   649,024     575,348     649,024     572,071  

Cequel and Cequel Capital Senior Notes(l):

                         

Oct. 25, 2012
Dec. 28, 2012

  September 15, 2020     6.375% (d)(m)   1,050,000     1,029,364     1,050,000     1,027,493  

May 16, 2013
Sept. 9, 2014

  December 15, 2021     5.125% (d)   1,250,000     1,144,929     1,250,000     1,138,870  

June 12, 2015

  July 15, 2025     7.750% (i)   620,000     604,755     620,000     604,374  

Altice US Finance I Corporation Senior Secured Notes(l):

                   

June 12, 2015

  July 15, 2023     5.375% (h)   1,100,000     1,083,159     1,100,000     1,082,482  

April 26, 2016

  May 15, 2026     5.500% (j)   1,500,000     1,488,306     1,500,000     1,488,024  

            $ 16,239,245     15,809,966   $ 16,289,245     15,860,432  

Less: current portion

                    1,042,143           507,744  

Long-term debt

                  $ 14,767,823         $ 15,352,688  

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

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

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

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

215


Table of Contents

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

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

(m)
These notes were repaid in April 2018 with the proceeds from the issuance of new senior notes (see Note 17).

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

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

        In January 2018, CSC Holdings issued $1,000,000 aggregate principal amount of 5.375% senior guaranteed notes due February 1, 2028. The 2028 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 CVC Credit Facilities and rank senior in right of payment to all of existing and future subordinated indebtedness.

        The proceeds from the 2028 Guaranteed Notes, together with proceeds from the Incremental Term Loan (discussed above), borrowings under the CVC revolving credit facility and cash on hand, were used in February 2018 to repay $300,000 principal amount of CSC Holdings' senior notes due in February 2018 and $750,000 principal amount of Cablevision senior notes due in April 2018 and will be used to fund a dividend of $1,500,000 to the Company's stockholders immediately prior to and in connection with the Distribution discussed in Note 1.

216


Table of Contents

        The indentures under which the senior notes and debentures were issued contain various covenants. The Company was in compliance with all of its financial covenants under these indentures as of March 31, 2018.

Notes Payable to Affiliates and Related Parties

        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 bore interest at 10.75% and matured on December 20, 2023 and $875,000 bore interest at 11% and matured on December 20, 2024.

        In connection with the Company's IPO in June 2017, the Company converted the notes payable to affiliates and related parties (together with accrued and unpaid interest of $529 and applicable premium of $513,723) into shares of the Company's common stock at the IPO price. The premium was recorded as a loss on extinguishment of debt on the Company's statement of operations in the second quarter of 2017. In connection with the conversion of the notes, the Company recorded a credit to paid in capital of $2,264,252 in the second quarter of 2017.

        For the three months ended March 31, 2017, the Company recognized $47,588 of interest expense related to these notes prior to their conversion.

Summary of Debt Maturities

        The future maturities of debt payable by the Company under its various debt obligations outstanding as of March 31, 2018, including notes payable, collateralized indebtedness (see Note 10), and capital leases, are as follows:

Years Ending December 31,
  Cablevision   Cequel   Total  

2018

  $ 581,298   $ 14,193   $ 595,491  

2019

    579,587     32,563     612,150  

2020

    547,517     1,062,715     1,610,232  

2021

    2,506,407     1,262,725     3,769,132  

2022

    695,806     12,730     708,536  

Thereafter

    11,812,663     4,416,240     16,228,903  

        The indentures under which the senior notes and debentures were issued contain various covenants. The Company was in compliance with all of its financial covenants under these indentures as of December 31, 2017.

        The following is a summary of provisions relating to our material indebtedness. The following summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the corresponding agreements, including the definitions of certain terms therein that are not otherwise defined in this prospectus. Our Cablevision and Cequel businesses are each currently financed on a standalone basis and the relevant Cablevision and Cequel subsidiaries constitute separate restricted groups for these debt financing purposes. We were in compliance with our debt covenants as of December 31, 2017.

Cablevision Credit Facilities

Overview

        On October 9, 2015, Finco, which merged with and into CSC Holdings on June 21, 2016, entered into a senior secured credit facility, which currently provides U.S. dollar term loans in an aggregate principal amount of $3,000 million and U.S. dollar revolving loan commitments in an aggregate principal amount of $2,300 million, which are governed by the CVC Credit Facilities Agreement.

217


Table of Contents

Interest Rate and Fees

        Loans comprising each eurodollar borrowing or alternate base rate 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 is:

Mandatory Prepayments

        The CVC Credit Facilities Agreement requires CSC Holdings to prepay outstanding CVC 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 fiscal year ending December 31, 2017, a pari ratable share (based on the outstanding principal amount of the CVC Term Loans divided by the sum of the outstanding principal amount of all pari passu indebtedness and the CVC Term Loans) of 50% of annual excess cash flow, 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.

Voluntary Prepayments

        Voluntary prepayments of the CVC Term Loans on or prior to October 17, 2017 which are either (x) in connection with a repricing transaction or (y) effecting any amendment of the CVC Term Loans resulting in a repricing transaction, are subject to a call premium payable to the administrative agent on behalf of the lenders of, in the case of (x) 1.00% of the principal amount of the CVC Term Loans so repaid and in the case of (y) a payment equal to 1.00% of the aggregate amount of the CVC Term Loans subject to such repricing transaction.

Amortization and Final Maturity

        The maturity date of the CVC Term Loans is July 17, 2025. CSC Holdings is required to make scheduled quarterly payments each equal to 0.25% of the original principal amount of the CVC Term Loans, with the balance due on the maturity date. The maturity date for $2,280 million of the CVC Revolving Credit Facility commitments is November 30, 2021. The maturity date for the remaining $20 million of CVC Revolving Credit Facility commitments is October 9, 2020.

Guarantees; Security

        The obligations of CSC Holdings under the CVC Credit Facilities 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 our New Jersey cable systems) and will also be guaranteed by each future wholly-owned restricted subsidiary of CSC Holdings (other than immaterial subsidiaries), subject to certain limitations set forth in the CVC Credit Facilities documentation. The obligations under the CVC Credit Facilities (including any guarantees thereof) are secured on a first priority basis, subject to any liens permitted by the CVC Credit Facilities, by capital stock held by CSC Holdings or any guarantor in restricted subsidiaries of CSC Holdings, subject to certain exclusions and limitations as agreed with the agent.

218


Table of Contents

Certain Covenants and Events of Default

        The CVC Credit Facilities Agreement includes certain negative covenants which, among other things and subject to certain significant exceptions and qualifications, limit CSC Holdings' ability and the ability of its restricted subsidiaries to: (i) incur or guarantee additional indebtedness, (ii) make investments, (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 addition, the CVC Revolving Credit Facility includes a financial maintenance covenant solely for the benefit of the lenders under the CVC Revolving Credit Facility consisting of a maximum consolidated net senior secured leverage ratio of CSC Holdings and its restricted subsidiaries of 5.0 to 1.0. At March 31, 2018, the consolidated net senior secured leverage ratio was 1.3 to 1. The financial covenant will be tested on the last day of any fiscal quarter (commencing on December 31, 2016) but only if on such day there are outstanding borrowings under the CVC Revolving Credit Facility (excluding any cash collateralized letters of credit and undrawn letters of credit not to exceed $15 million).

        The CVC Credit Facilities Agreement also contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, an event of default upon a change of control). If an event of default occurs, the lenders under the CVC Credit Facilities will be entitled to take various actions, including the acceleration of amounts due under the CVC Credit Facilities and all actions permitted to be taken by a secured creditor.

Cequel Credit Facilities

Overview

        On June 12, 2015, Altice US Finance I Corporation entered into a senior secured credit facility which currently provides U.S. dollar term loans in an aggregate principal amount of $1,265 million and U.S. dollar revolving loan commitments in an aggregate principal amount of $350 million which are governed by the Cequel Credit Facilities Agreement.

Interest Rate and Fees

        Loans comprising each eurodollar borrowing or alternate base rate 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 is:

Mandatory Prepayments

        The Cequel Credit Facilities Agreement requires Altice US Finance I Corporation to prepay outstanding Cequel 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) a pari ratable share (based on the outstanding principal amount of the Cequel Term Loans divided by the sum of the outstanding principal amount of all pari passu indebtedness and the Cequel Term Loans) of 50% of annual excess cash flow, which will be reduced to 0% if the consolidated net senior secured leverage ratio is less than or equal to 4.5:1.

219


Table of Contents

Voluntary Prepayments

        Voluntary prepayments of the Cequel Term Loans on or prior to October 28, 2017 which are either (x) in connection with a repricing transaction or (y) effecting any amendment of the Cequel Term Loans resulting in a repricing transaction, are subject to a call premium payable to the administrative agent on behalf of the lenders of, in the case of (x) 1.00% of the principal amount of the Cequel Term Loans so repaid and in the case of (y) a payment equal to 1.00% of the aggregate amount of the Cequel Term Loans subject to such repricing transaction.

Amortization and Final Maturity

        The maturity date of the Cequel Term Loans is July 28, 2025. Altice US Finance I Corporation is required to make scheduled quarterly payments each equal to 0.25% of the original principal amount of the Cequel Term Loans, with the balance due on the maturity date. The maturity date of the Cequel Revolving Credit Facility is November 30, 2021.

Guarantees; Security

        The obligations of Altice US Finance I Corporation under the Cequel Credit Facilities are guaranteed on a senior basis by Cequel Communications Holdings II, LLC, Cequel and certain of the subsidiaries of Cequel and will also be guaranteed by each future wholly-owned subsidiary of Cequel (other than immaterial subsidiaries), subject to applicable guarantee limitations specified therein. The obligations under the Cequel Credit Facilities (including any guarantees thereof) and are secured by certain assets of Cequel Communications Holdings II, LLC and Cequel, including a share pledge over the share capital of Cequel and Altice US Finance I Corporation and substantially all of the assets of Cequel and the subsidiary guarantors (excluding real property and subject to certain other exceptions).

Certain Covenants and Events of Default

        The Cequel Credit Facilities Agreement includes certain negative covenants that, among other things and subject to certain significant exceptions and qualifications, limit Cequel's ability and the ability of its restricted subsidiaries to: (i) incur or guarantee additional indebtedness, (ii) make investments, (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 addition, the Cequel Credit Facilities Agreement includes a financial maintenance covenant solely for the benefit of the revolving lenders under the Cequel Credit Facilities Agreement consisting of a maximum consolidated net senior secured leverage ratio of Cequel and its restricted subsidiaries of 5.0 to 1.0. At March 31, 2018, the consolidated net senior secured leverage ratio was 2.9 to 1. The financial covenant will be tested on the last day of any fiscal quarter but only if on such day there are outstanding borrowings under the Cequel Revolving Credit Facility (excluding any cash collateralized letters of credit).

        The Cequel Credit Facilities Agreement also contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, an event of default upon a change of control trigger event). If an event of default occurs, the lenders under the Cequel Credit Facilities will be entitled to take various actions, including the acceleration of amounts due under the Cequel Credit Facilities and all actions permitted to be taken by a secured creditor, subject to the Cequel First Lien Intercreditor Agreement (as defined below).

220


Table of Contents

Cablevision Bonds

Cablevision Notes

        On April 15, 2010, Cablevision issued $750 million aggregate principal amount of its 7 3 / 4 % Senior Notes due 2018. The Cablevision 2018 Senior Notes mature on April 15, 2018. Interest on the Cablevision 2018 Senior Notes is payable semi-annually in cash on each April 15 and October 15.

        On April 15, 2010, Cablevision issued $500 million aggregate principal amount of its 8% Senior Notes due 2020. The Cablevision 2020 Senior Notes mature on April 15, 2020. Interest on the Cablevision 2020 Senior Notes is payable semi-annually in cash on each April 15 and October 15.

        On September 27, 2012, Cablevision issued $750 million aggregate principal amount of its 5 7 / 8 % Senior Notes due 2022. The Cablevision 2022 Senior Notes mature on September 15, 2022. Interest on the Cablevision 2022 Senior Notes is payable semi-annually in cash on each March 15 and September 15.

        At any time prior to their respective maturity dates, Cablevision may redeem some or all of the Cablevision Legacy Notes at a price equal to 100% of the principal amount of the Cablevision Legacy Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to the date of redemption.

        The Cablevision Legacy Notes are unsecured obligations of Cablevision and are not guaranteed by any of its subsidiaries or any other entity.

        The indenture governing the Cablevision Legacy Notes contains certain negative covenants, agreements and events of default, including, among other things and subject to certain significant exceptions and qualifications, limitations on the ability of Cablevision and its restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) make investments or other restricted payments, (iii) create liens, (iv) pay dividends or make other distributions or repurchase or redeem our capital stock or subordinated debt, (v) engage in certain transactions with affiliates, (vi) enter into agreements that restrict the payment of dividends by subsidiaries or the repayment of intercompany loans and advances; and (vii) engage in mergers or consolidations.

CSC Holdings Notes

        On October 9, 2015, Finco issued $1,000 million aggregate principal amount of its 6 5 / 8 % Senior Guaranteed Notes due 2025. CSC Holdings assumed the obligations as issuer of the CSC 2025 Senior Guaranteed Notes upon the merger of Finco and CSC Holdings on June 21, 2016. The CSC 2025 Senior Guaranteed Notes mature on October 15, 2025. Interest on the CSC 2025 Senior Guaranteed Notes is payable semi-annually in cash on each January 15 and July 15. The CSC 2025 Senior Guaranteed Notes are redeemable, in whole or in part, at any time on or after October 15, 2020, at the applicable redemption prices specified in the indenture governing the CSC 2025 Senior Guaranteed Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to October 15, 2018, CSC Holdings may redeem up to 40% of the original aggregate principal amount of the CSC 2025 Senior Guaranteed Notes with the proceeds of certain equity offerings at a redemption price of 106.625% of the principal amount of the CSC 2025 Senior Guaranteed Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to October 15, 2020, CSC Holdings may also redeem some or all of the CSC 2025 Senior Guaranteed Notes at a price equal to 100% of the principal amount of the CSC 2025 Senior Guaranteed Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.

221


Table of Contents

        On September 23, 2016, CSC Holdings issued $1,310 million aggregate principal amount of its 5 1 / 2 % Senior Guaranteed Notes due 2027. The CSC 2027 Senior Guaranteed Notes mature on April 15, 2027. Interest on the CSC 2027 Senior Guaranteed Notes is payable semi-annually in cash on each April 15 and October 15. The CSC 2027 Senior Guaranteed Notes are redeemable, in whole or in part, at any time on or after April 15, 2022, at the applicable redemption prices specified in the indenture governing the CSC 2027 Senior Guaranteed Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to October 15, 2019, CSC Holdings may redeem up to 40% of the original aggregate principal amount of the CSC 2027 Senior Guaranteed Notes with the proceeds of certain equity offerings at a redemption price of 105.500% of the principal amount of the CSC 2027 Senior Guaranteed Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to April 15, 2022, CSC Holdings may also redeem some or all of the CSC 2027 Senior Guaranteed Notes at a price equal to 100% of the principal amount of the Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.

        The CSC Senior Guaranteed Notes are unsecured obligations of CSC Holdings and are guaranteed on a senior unsecured basis by each restricted subsidiary of CSC Holdings (other than CSC TKR, LLC and its subsidiaries, which own and operate our New Jersey cable systems) and will also be guaranteed by each future wholly-owned restricted subsidiary of CSC Holdings (other than immaterial subsidiaries), subject to certain limitations set forth in the indentures governing the CSC Senior Guaranteed Notes.

        The indentures governing the CSC Senior Guaranteed Notes contain certain negative covenants, agreements and events of default, including, subject to certain significant exceptions and qualifications, limitations on the ability of CSC Holdings and its restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) make investments, (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.

        Upon the occurrence of an event constituting a change of control under the indentures governing the CSC Senior Guaranteed Notes, CSC Holdings must offer to repurchase all of the CSC Senior Guaranteed Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.

        In certain instances in accordance with the terms of the respective indentures, CSC Holdings may be required to make an offer to repurchase the CSC Senior Guaranteed Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, with the excess proceeds from asset sales.

        On February 6, 1998, CSC Holdings, as a successor issuer, issued $300 million aggregate principal amount of its 7 7 / 8 % Senior Debentures due 2018. The CSC 7 7 / 8 % 2018 Senior Debentures mature on February 15, 2018. Interest on the CSC 7 7 / 8 % 2018 Senior Debentures is payable semi-annually in cash on each February 15 and August 15.

        On July 21, 1998, CSC Holdings, as successor issuer, issued $500 million aggregate principal amount of its 7 5 / 8 % Senior Debentures due 2018. The CSC 7 5 / 8 % 2018 Senior Debentures mature on July 15, 2018. Interest on the CSC 7 5 / 8 % 2018 Senior Debentures is payable semi-annually in cash on each January 15 and July 15.

        On February 12, 2009, CSC Holdings, as a successor issuer, issued $526 million aggregate principal amount of its 8 5 / 8 % Senior Notes due 2019 and 8 5 / 8 % Series B Senior Notes due 2019. The CSC 2019

222


Table of Contents

Senior Notes mature on February 15, 2019. Interest on the CSC 2019 Senior Notes is payable semi-annually in cash on each February 15 and August 15.

        On November 15, 2011, CSC Holdings issued $1,000 million aggregate principal amount of its 6 3 / 4 % Senior Notes due 2021 and 6 3 / 4 % Series B Senior Notes due 2021. The CSC 2021 Senior Notes mature on November 15, 2021. Interest on the CSC 2021 Senior Notes is payable semi-annually in cash on each May 15 and November 15.

        On May 23, 2014, CSC Holdings issued $750 million aggregate principal amount of its 5 1 / 4 % Senior Notes due 2024 and 5 1 / 4 % Series B Senior Notes due 2024. The CSC 2024 Senior Notes mature on June 1, 2024. Interest on the CSC 2024 Senior Notes is payable semi-annually in cash on each June 1 and December 1.

        At any time prior to their respective maturity dates, CSC Holdings may redeem some or all of the CSC Legacy Notes at a price equal to 100% of the principal amount of the CSC Legacy Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to the date of redemption.

        On October 9, 2015, Finco, issued $1,800 million aggregate principal amount of its 10 1 / 8 % Senior Notes due 2023 and $2,000 million 10 7 / 8 % Senior Notes due 2025. CSC Holdings assumed the obligations as issuer of the CSC 2023 Senior Notes upon the merger of Finco and CSC Holdings on June 21, 2016. The CSC 2023 Senior Notes mature on January 15, 2023 and the CSC 2025 Senior Notes mature on October 15, 2025. Interest on the CSC New Senior Notes is payable semi-annually in cash on each January 15 and July 15. CSC Holdings used approximately $350,120 of the proceeds from the Company's initial public offering to fund the redemption of $315,779 aggregate principal amount of the CSC 2025 Senior Notes, and the related call premium of approximately $34,341.

        The CSC 2023 Senior Notes are redeemable, in whole or in part, at any time on or after January 15, 2019, at the applicable redemption prices specified in the indenture governing the CSC 2023 Senior Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to October 15, 2018, CSC Holdings may redeem up to 40% of the original aggregate principal amount of the CSC 2023 Senior Notes with the proceeds of certain equity offerings at a redemption price of 110.125% of the principal amount of the CSC 2023 Senior Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to January 15, 2019, CSC Holdings may also redeem some or all of the CSC 2023 Senior Notes at a price equal to 100% of the principal amount of the CSC 2023 Senior Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.

        The CSC 2025 Senior Notes are redeemable, in whole or in part, at any time on or after October 15, 2020, at the applicable redemption prices specified in the indenture governing the CSC 2025 Senior Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to October 15, 2018, CSC Holdings may redeem up to 40% of the original aggregate principal amount of the CSC 2025 Senior Notes with the proceeds of certain equity offerings at a redemption price of 110.875% of the principal amount of the CSC 2025 Senior Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to October 15, 2020, CSC Holdings may also redeem some or all of the CSC 2025 Senior Notes at a price equal to 100% of the principal amount of the CSC 2025 Senior Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.

        The CSC Senior Notes are unsecured obligations of CSC Holdings and are not guaranteed by any of its subsidiaries or any other entity.

        The indentures governing the CSC Senior Notes contain certain negative covenants, agreements and events of default, including, subject to certain significant exceptions and qualifications, limitations

223


Table of Contents

on the ability of CSC Holdings and its restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) make investments, (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.

        Upon the occurrence of an event constituting a change of control under the indenture governing the CSC New Senior Notes, CSC Holdings must offer to repurchase all of the CSC New Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.

        In certain instances in accordance with the terms of the indenture, CSC Holdings may be required to make an offer to repurchase the CSC New Senior Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, with the excess proceeds from asset sales.

Cequel Bonds

Cequel Senior Secured Notes

        On June 12, 2015, Altice US Finance I Corporation issued $1,100 million aggregate principal amount of its 5 3 / 8 % Senior Secured Notes due 2023 (the "Cequel 2023 Senior Secured Notes"). The Cequel 2023 Senior Secured Notes mature on July 15, 2023. Interest on the Cequel 2023 Senior Secured Notes is payable semi-annually in cash on each January 15 and July 15. The Cequel 2023 Senior Secured Notes are redeemable, in whole or in part, at any time on or after July 15, 2018, at the applicable redemption prices specified in the indenture governing the 2023 Senior Secured Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to July 15, 2018, Altice US Finance I Corporation may redeem up to 40% of the original aggregate principal amount of the Cequel 2023 Senior Secured Notes with the proceeds of certain equity offerings at a redemption price of 105.375% of the principal amount of the Cequel 2023 Senior Secured Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to July 15, 2018, Altice US Finance I Corporation may also redeem some or all of the Cequel 2023 Senior Secured Notes at a price equal to 100% of the principal amount of the Cequel 2023 Senior Secured Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.

        On April 26, 2016, Altice US Finance I Corporation issued $1,500 million aggregate principal amount of its 5 1 / 2 % Senior Secured Notes due 2026 (the "Cequel 2026 Senior Secured Notes" and, together with the Cequel 2023 Senior Secured Notes, the "Cequel Senior Secured Notes"). The Cequel 2026 Senior Secured Notes mature on May 15, 2026. Interest on the Cequel 2026 Senior Secured Notes is payable semi-annually in cash on each May 15 and November 15. The Cequel 2026 Senior Secured Notes are redeemable, in whole or in part, at any time on or after May 15, 2021, at the applicable redemption prices specified in the indenture governing the 2026 Senior Secured Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to May 15, 2019, Altice US Finance I Corporation may redeem up to 40% of the original aggregate principal amount of the Cequel 2026 Senior Secured Notes with the proceeds of certain equity offerings at a redemption price of 105.5% of the principal amount of the Cequel 2026 Senior Secured Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to May 15, 2021, Altice US Finance I Corporation may also redeem some or all of the Cequel 2026 Senior Secured Notes at a price equal to 100% of the principal amount of the Cequel 2026 Senior Secured Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.

224


Table of Contents

        The obligations of Altice US Finance I Corporation under the Cequel Senior Secured Notes are guaranteed on a senior basis by Cequel Communications Holdings II, LLC, Cequel and certain subsidiaries of Cequel and are secured by certain assets of Cequel Communications Holdings II, LLC and Cequel, including a share pledge over the share capital of Cequel and Altice US Finance I Corporation, and substantially all of the assets of Cequel and the subsidiary guarantors (excluding real property and subject to certain other exceptions).

        The indentures governing the Cequel Senior Secured Notes contain certain negative covenants, agreements and events of default, including, subject to certain significant exceptions and qualifications, limitations on the ability of Cequel and its restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) make investments, (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.

        Upon the occurrence of an event constituting a change of control under the indentures governing the Cequel Senior Secured Notes, Altice US Finance I Corporation must offer to repurchase all of the Cequel Senior Secured Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.

        In certain instances in accordance with the terms of the respective indentures, Altice US Finance I Corporation may be required to make an offer to repurchase the Cequel Senior Secured Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, with the excess proceeds from asset sales.

Cequel Senior Notes

        On October 25, 2012, Cequel Capital Corporation and Cequel Communications Holdings I, LLC issued $500 million aggregate principal amount of their 6 3 / 8 % Senior Notes due 2020. On December 28, 2012, the Cequel Senior Notes Co-Issuers issued an additional $1,000 million aggregate principal amount of their Cequel 2020 Senior Notes. On April 14, 2017, the Cequel Senior Notes Co-Issuers redeemed $450 million aggregate principal amount of their Cequel 2020 Senior Notes with certain of the proceeds of the term loans incurred under the Cequel Credit Facilities Agreement, reducing the aggregate principal amount of outstanding Cequel 2020 Senior Notes to $1,050 million. The Cequel 2020 Senior Notes mature on September 15, 2020. Interest on the Cequel 2020 Senior Notes is payable semi-annually in cash on each March 15 and September 15. The Cequel 2020 Senior Notes are redeemable, in whole or in part, at any time on or after September 15, 2015, at the applicable redemption prices specified in the indenture governing the Cequel 2020 Senior Notes, together with accrued and unpaid interest, if any, to the date of redemption. At any time prior to September 15, 2015, the Cequel Senior Notes Co-Issuers may redeem up to 40% of the original aggregate principal amount of the Cequel 2020 Senior Notes with the proceeds of certain equity offerings at a redemption price of 106.375% of the principal amount of the Cequel 2020 Senior Notes, together with accrued and unpaid interest, if any, to the date of redemption. At any time prior to September 15, 2015, the Cequel Senior Notes Co-Issuers may also redeem some or all of the Cequel 2020 Senior Notes at a price equal to 100% of the principal amount of the Cequel 2020 Senior Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to the date of redemption.

        On May 16, 2013, the Cequel Senior Notes Co-Issuers issued $750 million aggregate principal amount of their 5 1 / 8 % Senior Notes due 2021. The Cequel 2021 Senior Notes mature on December 15, 2021. Interest on the Cequel 2021 Senior Notes is payable semi-annually in cash on each June 15 and December 15. The Cequel 2021 Senior Notes are redeemable, in whole or in part, at any time on or after June 15, 2016, at the applicable redemption prices specified in the indenture governing the

225


Table of Contents

Cequel 2021 Senior Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to June 15, 2016, the Cequel Senior Notes Co-Issuers may redeem up to 40% of the original aggregate principal amount of the Cequel 2021 Senior Notes with the proceeds of certain equity offerings at a redemption price of 105.125% of the principal amount of the Cequel 2021 Senior Notes, together with accrued and unpaid interest, if any, to the date of redemption. At any time prior to June 15, 2016, the Cequel Senior Notes Co-Issuers may also redeem some or all of the Cequel 2021 Senior Notes at a price equal to 100% of the principal amount of the Cequel 2021 Senior Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to the date of redemption.

        On September 9, 2014, the Cequel Senior Notes Co-Issuers issued $500 million aggregate principal amount of their 5 1 / 8 % Senior Notes due 2021 (the "Cequel 2021 Mirror Notes"). The Cequel 2021 Mirror Notes mature on December 15, 2021. Interest on the Cequel 2021 Mirror Notes is payable semi-annually in cash on each June 15 and December 15. The Cequel 2021 Mirror Notes are redeemable, in whole or in part, at any time on or after June 15, 2016, at the applicable redemption prices specified in the indenture governing the Cequel 2021 Mirror Notes, together with accrued and unpaid interest, if any, to the date of redemption. At any time prior to June 15, 2016, the Cequel Senior Notes Co-Issuers may redeem up to 40% of the original aggregate principal amount of the Cequel 2021 Mirror Notes with the proceeds of certain equity offerings at a redemption price of 105.125% of the principal amount of the Cequel 2021 Mirror Notes, together with accrued and unpaid interest, if any, to the date of redemption. At any time prior to June 15, 2016, the Cequel Senior Notes Co-Issuers may also redeem some or all of the Cequel 2021 Mirror Notes at a price equal to 100% of the principal amount of the Cequel 2021 Mirror Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to the date of redemption.

        On June 12, 2015, Altice US Finance II Corporation issued $300 million aggregate principal amount of its 7 3 / 4 % Senior Notes due 2025. The Cequel Senior Notes Co-Issuers assumed the obligations as issuer of the Cequel 2025 Senior Notes on December 21, 2015. On May 23, 2016, the Cequel Senior Notes Co-Issuers issued an additional $320 million aggregate principal amount of the Cequel 2025 Senior Notes in exchange for debt securities originally issued by Altice US Finance S.A. The Cequel 2025 Senior Notes mature on July 15, 2025. Interest on the Cequel 2025 Senior Notes is payable semi-annually in cash on each January 15 and July 15. The Cequel 2025 Senior Notes are redeemable, in whole or in part, at any time on or after July 15, 2020, at the applicable redemption prices specified in the indenture governing the Cequel 2025 Senior Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to July 15, 2018, the Cequel Senior Notes Co-Issuers may redeem up to 40% of the original aggregate principal amount of the Cequel 2025 Senior Notes with the proceeds of certain equity offerings at a redemption price of 107.750% of the principal amount of the Cequel 2025 Senior Notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to July 15, 2020, the Cequel Senior Notes Co-Issuers may also redeem some or all of the Cequel 2025 Senior Notes at a price equal to 100% of the principal amount of the Cequel 2025 Senior Notes plus a "make-whole" premium, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.

        The Cequel Senior Notes are unsecured obligations of the Cequel Senior Notes Co-Issuers and are not guaranteed by any of their subsidiaries or any other entity.

        The indentures governing the Cequel Senior Notes contain certain negative covenants, agreements and events of default, including, subject to certain significant exceptions and qualifications, limitations on the ability of the Cequel Senior Notes Co-Issuers and their restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) make investments, (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

226


Table of Contents

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.

        Upon the occurrence of an event constituting a change of control under the respective indentures governing the Cequel Senior Notes, the Cequel Senior Notes Co-Issuers must offer to repurchase all of the Cequel Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.

        In certain instances in accordance with the terms of the respective indentures, the Cequel Senior Notes Co-Issuers may be required to make an offer to repurchase the Cequel Senior Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, with the excess proceeds from asset sales.

Cequel Intercreditor Agreement

        On December 21, 2015, JPMorgan Chase Bank, N.A., as security agent and authorized representative of the secured parties under the Cequel Credit Facilities, and Deutsche Bank Trust Company Americas, as authorized representative of the holders of the Cequel 2023 Senior Secured Notes, entered into a first lien intercreditor agreement (the "Cequel First Lien Intercreditor Agreement") as to the relative priorities of their respective security interests in the shared collateral securing the indebtedness of Altice US Finance I Corporation. On May 20, 2016, Deutsche Bank Trust Company Americas acceded to the Cequel First Lien Intercreditor Agreement in its capacity as authorized representative of the holders of the Cequel 2026 Senior Secured Notes. The Cequel First Lien Intercreditor Agreement provides that notwithstanding the date, time, method, manner or order of grant, attachment or perfection of any liens on the shared collateral securing the Cequel Credit Facilities, Cequel 2023 Senior Secured Notes or Cequel 2026 Senior Secured Notes (or future first lien obligations that become subject to the Cequel First Lien Intercreditor Agreement), the liens securing all such first lien obligations shall be of equal priority. The Cequel First Lien Intercreditor Agreement also provides for certain matters relating to the administration of security interests including, amongst other things, specifying the applicable authorized representative who has the right to direct the controlling security agent to take, or refrain from taking, certain actions with respect to the shared collateral, the automatic release of liens in favor of each series of first lien obligations in the event the controlling security agent exercises remedies against any shared collateral and certain agreements relating to debtor-in-possession financings (and liens on the shared collateral in connection with such financings) or the use of cash collateral constituting shared collateral in the event the issuer or a pledgor becomes subject to a bankruptcy case.

Other

Cablevision Collateralized Indebtedness Relating to Stock Monetizations

        CSC Holdings and its consolidated subsidiaries have entered into derivative contracts to hedge their equity price risk and monetize the value of their shares of common stock of Comcast. These contracts, at maturity, are expected to offset declines in the fair value of these securities below the hedge price per share while allowing CSC Holdings and its consolidated subsidiaries to retain upside appreciation from the hedge price per share to the relevant cap price. If any one of these contracts is terminated prior to its scheduled maturity date due to the occurrence of an event specified in the contract, CSC Holdings and its consolidated subsidiaries 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, 2017, CSC Holdings and its consolidated subsidiaries did not have an early termination shortfall relating to any of these contracts. The underlying stock and the equity collars are carried at fair value on CSC Holdings consolidated balance sheets and the collateralized indebtedness is carried at its principal value. See "Management's

227


Table of Contents

Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk" for information on how CSC Holdings and its consolidated subsidiaries participate in changes in the market price of the stocks underlying these derivative contracts.

        All of CSC Holdings monetization transactions are obligations of CSC Holdings wholly-owned subsidiaries. CSC Holdings provides guarantees of the subsidiaries' ongoing contract payment expense obligations and potential payments that could be due as a result of an early termination event. The guarantee exposure approximates the net sum of the fair value of the collateralized indebtedness less the sum of the fair values of the underlying stock and the equity collar. These derivative contracts were not designated as hedges for accounting purposes. All of CSC Holdings equity derivative contracts are carried at their current fair value on our consolidated balance sheets with changes in value reflected in our consolidated statements of income, and all of the counterparties to such transactions currently carry investment grade credit ratings.

Cequel Derivative Instruments

        In June 2016, a subsidiary of Cequel entered into two fixed to floating interest rate swaps. One fixed to floating interest rate swap is converting $750 million from a fixed rate of 1.6655% to six-month LIBOR and a second tranche of $750 million from a fixed rate of 1.68% to six-month LIBOR. The objective of these swaps is to cover the exposure of the Cequel 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.

Letters of Credit

        Certain lenders have issued standby and backstop letters of credit that are used by certain of our subsidiaries to guarantee their obligations in the ordinary course of business. As of December 31, 2017, we had approximately $130 million of outstanding letters of credit.

228


Table of Contents


SHARES ELIGIBLE FOR FUTURE SALE

        Future sales of substantial amounts of Altice USA common stock or the anticipation of these sales, could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through sales of equity securities.

Sale of Restricted Securities

        The shares of our common stock distributed to Altice N.V. shareholders in the Distribution will be freely transferable, except for shares received by individuals who are our affiliates. Individuals who may be considered our affiliates include individuals who control, are controlled by or are under common control with us, as those terms generally are interpreted for U.S. federal securities law purposes. Individuals who are our affiliates will be permitted to sell their shares of our common stock only pursuant to an effective registration statement under the Securities Act, or an exemption from the registration requirements of the Securities Act, such as those afforded by Section 4(1) of the Securities Act or Rule 144 thereunder.

Rule 144

        In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including an affiliate, who beneficially owns "restricted securities" of a "reporting company" may not sell these securities until the person has beneficially owned them for at least six months. Thereafter, affiliates may not sell within any three-month period a number of shares in excess of the greater of: (i) 1% of the shares of the class outstanding as shown by the most recent report or statement published by the issuer; and (ii) the average weekly reported trading volume in such securities during the four preceding calendar weeks.

        Sales under Rule 144 by our affiliates or persons selling on behalf of our affiliates will also be subject to restrictions relating to manner of sale, notice and the availability of current public information about us.

        Persons not deemed to be affiliates who have beneficially owned "restricted securities" for at least six months but for less than one year may sell these securities, provided that current public information about the Company is "available," which means that, on the date of sale, we have been subject to the reporting requirements of the Exchange Act for at least 90 days and are current in our Exchange Act filings. After beneficially owning "restricted securities" for one year, our non-affiliates may engage in unlimited re-sales of such securities.

        Shares received by our affiliates in the Distribution may be "controlled securities" rather than "restricted securities." "Controlled securities" are subject to the same volume limitations as "restricted securities" but are not subject to holding period requirements.

Rule 701

        Rule 701 generally allows a stockholder who purchased shares of our capital stock pursuant to a written compensatory plan or contract prior to our initial public offering and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation, or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701.

229


Table of Contents

Stockholders and Registration Rights Agreement

        In connection with the Distribution, we will amend and restate our stockholders and registration rights agreement with Altice N.V., BCP and CPPIB to add Next Alt as a party. See "Certain Relationships and Related-Party Transactions."

Right of First Refusal

        Any proposed sale of shares of common stock held by certain members of our management is subject to a right of first refusal in favor of Altice N.V. This right of first refusal will be terminated upon consummation of the Distribution and will be replaced by a right of first refusal granted to Next Alt by certain parties to the Concert Group voting agreements.

Equity Incentive Plans

        We filed a registration statement on Form S-8 under the Securities Act to register Class A common stock issuable under our 2017 LTIP. Shares registered under any such registration statement would be available for sale in the public market following the effective date, unless such shares are subject to vesting restrictions with us or Rule 144 restrictions applicable to our affiliates.

        In connection with our initial public offering, we adopted the 2017 LTIP. Under the 2017 LTIP, we may grant awards of options, restricted shares, restricted share units, stock appreciation rights, performance stock, performance stock units and other awards. Under the 2017 LTIP, awards may be granted to officers, employees and consultants of the Company or any of its affiliates. The 2017 LTIP will be administered by our Board, subject to the provision of the stockholders' agreement. The Board has delegated its authority to our Compensation Committee. The Compensation Committee has the full power and authority to, among other things, select eligible participants, to grant awards in accordance with the 2017 LTIP, to determine the number of shares subject to each award or the cash amount payable in connection with an award and determine the terms and conditions of each award, including, without limitation, those related to term, permissible methods of exercise, vesting, cancellation, forfeiture, payment, settlement, exercisability, performance periods, performance targets, and the effect or occurrence, if any, of a participant's termination of employment, separation from service or leave of absence with the Company or any of its affiliates or of a change of control. The maximum aggregate number of shares that may be issued under the 2017 LTIP is 9,879,291, or 4% of the outstanding shares of Class A common stock immediately following our initial public offering. No participant may be granted under the 2017 LTIP in any fiscal year awards covering more than the number of shares equal to 50% of the Plan limit. Our Board has the authority to amend, suspend, or terminate the 2017 LTIP. No amendment, suspension or termination will be effective without the approval of the Company's stockholders if such approval is required under applicable laws, rules and regulations.

        Additionally, our named executive officers hold Units of ownership of Neptune Management Limited Partnership under the Carry Unit Plan. See "Executive Compensation" for additional discussion of the Carry Unit Plan.

230


Table of Contents


LEGAL MATTERS

        The validity of the Altice USA common stock distributed hereby will be passed upon for us by Shearman & Sterling LLP, New York, New York.


EXPERTS

        The consolidated financial statements of Altice USA, Inc. as of December 31, 2017 and 2016, and for the years ended December 31, 2017 and 2016, have been included in this prospectus and the registration statement, of which this prospectus forms a part, in reliance upon the report (which contains emphasis of matter paragraphs relating to the acquisition of Altice Technical Services, the formation of Altice USA, the inclusion of Cequel Corporation operating results for the full year of 2016 the adoption of ASC 606—Revenue from Contracts with Customers, and ASU 2017-07 Compensation—Retirement Benefits (Topic 715)) of KPMG LLP, an independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

        The consolidated financial statements of Cablevision Systems Corporation as of and for the year ended December 31, 2015 and the period from January 1, 2016 through June 20, 2016 have been included in this prospectus and the registration statement, of which this prospectus forms a part, in reliance upon the report of KPMG LLP, an independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

        The consolidated financial statements of Cequel Corporation as of December 31, 2015 ("Successor") and the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity and of cash flows for the period from December 21, 2015 to December 31, 2015 ("Successor") and for the period from January 1, 2015 to December 20, 2015 ("Predecessor") included in this prospectus have been so included in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on the authority of such firm as experts in accounting and auditing.

Independence

        In connection with Altice USA's filing for an initial public offering of its common stock, we requested our independent auditor to affirm its independence relative to the rules and regulations of the Public Company Accounting Oversight Board (PCAOB) and the U.S. Securities and Exchange Commission (SEC).

        KPMG LLP's (KPMG), our registered independent public accountants, independence evaluation procedures identified an engagement by a KPMG member firm that consisted of a service provided to an affiliate of Altice USA by a member firm of KPMG International Cooperative wherein the member firm performed a bookkeeping service, which included elements that are considered management functions under the SEC independence rules. This engagement was terminated in October, 2016. The KPMG member firm referenced above does not participate in the audit engagement and the services did not have any impact on the Company.

        KPMG considered whether the matters noted above impacted its objectivity and ability to exercise impartial judgment with regard to its engagement as our auditors and have concluded that there has been no impairment of KPMG's objectivity and ability to exercise impartial judgment on all matters encompassed within its audits. After taking into consideration the facts and circumstances of the above matter and KPMG's determination, our audit committee also concluded that KPMG's objectivity and ability to exercise impartial judgment has not been impaired.

231


Table of Contents


WHERE YOU CAN FIND MORE INFORMATION

        We have filed a Registration Statement on Form S-1 with the SEC regarding this offering. This prospectus, which is part of the registration statement, does not contain all of the information included in the registration statement and you should refer to the registration statement and its exhibits to read that information. References in this prospectus to any of our contracts or other documents are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document. Following the completion of this offering, we will be subject to the information reporting requirements of the Exchange Act and we will file reports, proxy statements and other information with the SEC.

        You may read and copy the registration statement and the related exhibits, and the reports, proxy statements and other information we will file with the SEC, at the SEC's public reference room maintained at 100 F Street N.E., Room 1580, Washington, D.C. 20549. You can also request copies of those documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room. The SEC also maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file with the SEC. The site's Internet address is www.sec.gov.

232


Table of Contents


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
  Page  

ALTICE USA, INC. AND SUBSIDIARIES

       

Consolidated Financial Statements

       

Condensed Consolidated Balance Sheets—March 31, 2018 (Unaudited) and December 31, 2017

    F-2  

Condensed Consolidated Statement of Operations—Three months ended March 31, 2018 and 2017 (Unaudited)

    F-4  

Condensed Consolidated Statement of Comprehensive Loss—Three months ended March 31, 2018 and 2017 (Unaudited)

    F-5  

Condensed Consolidated Statement of Stockholders' Equity—Three months ended March 31, 2018 (Unaudited)

    F-6  

Condensed Consolidated Statement of Cash Flows—Three months ended March 31, 2018 and 2017 (Unaudited)

    F-7  

Notes to Consolidated Financial Statements (Unaudited)

    F-8  

Report of Independent Registered Public Accounting Firm

    F-37  

Consolidated Financial Statements

       

Consolidated Balance Sheets—December 31, 2017 and 2016

    F-38  

Consolidated Statement of Operations—Years ended December 31, 2017 and 2016

    F-40  

Consolidated Statement of Comprehensive Loss—Years ended December 31, 2017 and 2016

    F-41  

Consolidated Statement of Stockholders' Equity—Years ended December 31, 2017 and 2016

    F-42  

Consolidated Statement of Cash Flows—Years ended December 31, 2017 and 2016

    F-44  

Notes to Consolidated Financial Statements

    F-45  

CABLEVISION SYSTEMS CORPORATION

       

Report of Independent Registered Public Accounting Firm

    F-112  

Consolidated Financial Statements

       

Consolidated Balance Sheet—December 31, 2015

    F-113  

Consolidated Statements of Operations—period ended January 1, 2016 to June 20, 2016 and year ended December 31, 2015

    F-115  

Consolidated Statements of Comprehensive Income (Loss)—period ended January 1, 2016 to June 20, 2016 and year ended December 31, 2015

    F-116  

Consolidated Statements of Stockholders' Equity (Deficiency)—period ended January 1, 2016 to June 20, 2016 and year ended December 31, 2015

    F-117  

Consolidated Statements of Cash Flows—period ended January 1, 2016 to June 20, 2016 and year ended December 31, 2015

    F-119  

Notes to Consolidated Financial Statements

    F-120  

CEQUEL CORPORATION

       

Report of Independent Auditors (Predecessor)

    F-163  

Report of Independent Auditors (Successor)

    F-164  

Consolidated Financial Statements

       

Consolidated Balance Sheet—December 31, 2015

    F-165  

Consolidated Statements of Operations and Comprehensive (Loss)/Income—periods ended December 21, 2015 to December 31, 2015 and January 1, 2015 to December 20, 2015

    F-166  

Consolidated Statements of Cash Flows—periods ended December 21, 2015 to December 31, 2015 and January 1, 2015 to December 20, 2015

    F-167  

Consolidated Statements of Changes in Stockholders' Equity—periods ended December 21, 2015 to December 31, 2015 and January 1, 2015 to December 20, 2015

    F-168  

Notes to Consolidated Financial Statements

    F-169  

F-1


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 
  March 31,
2018
  December 31,
2017
 

ASSETS

             

Current Assets:

             

Cash and cash equivalents

  $ 1,427,651   $ 329,848  

Restricted cash

    253     252  

Accounts receivable, trade (less allowance for doubtful accounts of $10,481 and $13,420)

    330,761     370,765  

Prepaid expenses and other current assets

    142,366     130,425  

Amounts due from affiliates

    21,146     19,764  

Derivative contracts

    9,211     52,545  

Total current assets

    1,931,388     903,599  

Property, plant and equipment, net of accumulated depreciation of $2,983,696 and $2,599,579

    5,819,544     6,023,826  

Investment securities pledged as collateral

    1,467,781     1,720,357  

Derivative contracts

    63,343      

Other assets

    122,786     57,904  

Amortizable customer relationships, net of accumulated amortization of $1,603,142 and $1,409,021

    4,367,742     4,561,863  

Amortizable trade names, net of accumulated amortization of $624,276 and $588,574

    442,807     478,509  

Other amortizable intangibles, net of accumulated amortization of $12,972 and $10,978

    24,088     26,082  

Indefinite-lived cable television franchises

    13,020,081     13,020,081  

Goodwill

    8,019,849     8,019,861  

Total assets

  $ 35,279,409   $ 34,812,082  

   

See accompanying notes to condensed consolidated financial statements.

F-2


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(In thousands, except share and per share amounts)

(Unaudited)

 
  March 31,
2018
  December 31,
2017
 

LIABILITIES AND STOCKHOLDERS' EQUITY

             

Current Liabilities:

             

Accounts payable

  $ 725,625   $ 795,128  

Accrued liabilities:

             

Interest

    296,400     397,422  

Employee related costs

    104,824     147,727  

Other accrued expenses

    318,098     411,988  

Amounts due to affiliates

    11,078     10,998  

Deferred revenue

    122,395     111,197  

Liabilities under derivative contracts

    9,211     52,545  

Credit facility debt

    53,900     42,650  

Senior notes and debentures

    1,042,143     507,744  

Capital lease obligations

    7,699     9,539  

Notes payable

    69,084     33,424  

Total current liabilities

    2,760,457     2,520,362  

Defined benefit plan obligations

    97,908     103,163  

Other liabilities

    131,565     144,289  

Deferred tax liability

    4,729,578     4,769,286  

Liabilities under derivative contracts

    114,319     187,406  

Collateralized indebtedness

    1,351,271     1,349,474  

Credit facility debt

    5,636,102     4,600,873  

Senior notes and debentures

    14,767,823     15,352,688  

Capital lease obligations

    11,869     12,441  

Notes payable

    34,003     32,478  

Deficit investment in affiliates

    12,891     3,579  

Total liabilities

    29,647,786     29,076,039  

Commitments and contingencies

             

Redeemable equity

    234,637     231,290  

Stockholders' Equity:

             

Preferred Stock, $.01 par value, 100,000,000 shares authorized, no shares issued and outstanding

         

Class A common stock: $0.01 par value, 4,000,000,000 shares authorized, 246,982,292 issued and outstanding

    2,470     2,470  

Class B common stock: $0.01 par value, 1,000,000,000 shares authorized, 490,086,674 issued and outstanding

    4,901     4,901  

Class C common stock: $0.01 par value, 4,000,000,000 shares authorized, no shares issued and outstanding

         

Paid-in capital

    4,682,646     4,665,229  

Retained earnings

    713,848     840,636  

    5,403,865     5,513,236  

Accumulated other comprehensive loss

    (8,420 )   (10,022 )

Total stockholders' equity

    5,395,445     5,503,214  

Noncontrolling interest

    1,541     1,539  

Total stockholders' equity

    5,396,986     5,504,753  

  $ 35,279,409   $ 34,812,082  

   

See accompanying notes to condensed consolidated financial statements.

F-3


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 
  Three Months Ended
March 31,
 
 
  2018   2017  

Revenue (including revenue from affiliates of $125 and $141, respectively) (See Note 14)

  $ 2,329,714   $ 2,302,259  

Operating expenses:

             

Programming and other direct costs (including charges from affiliates of $1,154 and $735, respectively) (See Note 14)

    787,361     758,352  

Other operating expenses (including charges from affiliates of $7,994 and $7,298, respectively) (See Note 14)

    583,023     608,144  

Restructuring and other expense

    3,587     76,929  

Depreciation and amortization (including impairments)

    642,705     608,724  

    2,016,676     2,052,149  

Operating income

    313,038     250,110  

Other income (expense):

             

Interest expense (including interest expense to affiliates and related parties of$47,588 in 2017) (See Note 14)

    (377,258 )   (433,294 )

Interest income

    3,103     232  

Gain (loss) on investments and sale of affiliate interests, net

    (248,602 )   131,658  

Gain (loss) on derivative contracts, net

    168,352     (71,044 )

Gain (loss) on interest rate swap contracts

    (31,922 )   2,342  

Loss on extinguishment of debt and write-off of deferred financing costs

    (4,705 )    

Other expense, net

    (11,658 )   (2,100 )

    (502,690 )   (372,206 )

Loss before income taxes

    (189,652 )   (122,096 )

Income tax benefit

    60,703     45,908  

Net loss

    (128,949 )   (76,188 )

Net income attributable to noncontrolling interests

    (2 )   (237 )

Net loss attributable to Altice USA, Inc. stockholders

  $ (128,951 ) $ (76,425 )

Basic and diluted net loss per share

  $ (0.17 ) $ (0.12 )

Basic and diluted weighted average common shares (in thousands)

    737,069     649,525  

   

See accompanying notes to condensed consolidated financial statements.

F-4


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 
  Three Months Ended
March 31,
 
 
  2018   2017  

Net loss

  $ (128,949 ) $ (76,188 )

Other comprehensive income (loss):

             

Defined benefit pension plans:

             

Unrecognized actuarial gain

    4,551      

Applicable income taxes

    (1,228 )    

Unrecognized gain arising during period, net of income taxes

    3,323      

Settlement losses included in other expense, net

    606      

Applicable income taxes

    (164 )    

Settlement losses included in other expense, net, net of income taxes

    442      

Other comprehensive gain

    3,765      

Comprehensive loss

    (125,184 )   (76,188 )

Comprehensive income attributable to noncontrolling interests

    (2 )   (237 )

Comprehensive loss attributable to Altice USA, Inc. stockholders

  $ (125,186 ) $ (76,425 )

   

See accompanying notes to condensed consolidated financial statements.

F-5


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

 
  Class A
Common
Stock
  Class B
Common
Stock
  Paid-in
Capital
  Retained
Earnings
  Accumulated
Other
Comprehensive
Income (loss)
  Total
Stockholders'
Equity
  Non-
controlling
Interest
  Total
Equity
 

Balance at January 1, 2018, as reported

  $ 2,470   $ 4,901   $ 4,642,128   $ 854,824   $ (10,022 ) $ 5,494,301   $ 1,539   $ 5,495,840  

Impact of change in accounting policies (See Note 3)

                12,666         12,666         12,666  

Impact of ATS Acquisition (See Note 3)

            23,101     (26,854 )       (3,753 )       (3,753 )

Balance at January 1, 2018, as adjusted

    2,470     4,901     4,665,229     840,636     (10,022 )   5,503,214     1,539     5,504,753  

Net loss attributable to stockholders

                (128,951 )       (128,951 )       (128,951 )

Net income attributable to noncontrolling interests

                            2     2  

Pension liability adjustments, net of income taxes

                    3,765     3,765         3,765  

Share-based compensation expense

            21,623             21,623         21,623  

Change in fair value of redeemable equity

            (3,347 )           (3,347 )       (3,347 )

Other changes to equity

            (859 )           (859 )       (859 )

Adoption of ASU No. 2018-02

                  2,163     (2,163 )            

Balance at March 31, 2018

  $ 2,470   $ 4,901   $ 4,682,646   $ 713,848   $ (8,420 ) $ 5,395,445   $ 1,541   $ 5,396,986  

   

See accompanying notes to condensed consolidated financial statements.

F-6


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
  Three Months Ended March 31,  
 
  2018   2017  

Cash flows from operating activities:

             

Net loss

  $ (128,949 ) $ (76,188 )

Adjustments to reconcile net loss to net cash provided by operating activities:

             

Depreciation and amortization (including impairments)

    642,705     608,724  

Equity in net loss of affiliates

    10,442     2,757  

Loss (gain) on investments and sale of affiliate interests, net

    248,602     (131,658 )

Loss (gain) on derivative contracts, net

    (168,352 )   71,044  

Loss on extinguishment of debt and write-off of deferred financing costs

    4,705      

Amortization of deferred financing costs and discounts (premiums) on indebtedness

    16,950     1,812  

Settlement loss related to pension plan

    606      

Share-based compensation expense

    21,623     7,848  

Deferred income taxes

    (65,833 )   (52,184 )

Provision for doubtful accounts

    13,500     15,694  

Change in assets and liabilities, net of effects of acquisitions and dispositions:

             

Accounts receivable, trade

    25,207     34,707  

Other receivables

    (28,759 )    

Prepaid expenses and other assets

    9,609     (10,113 )

Amounts due from and due to affiliates

    (1,465 )   (131,564 )

Accounts payable

    11,297     147,999  

Accrued liabilities

    (224,787 )   (253,707 )

Deferred revenue

    11,929     11,257  

Liabilities related to interest rate swap contracts

    31,922     (2,342 )

Net cash provided by operating activities

    430,952     244,086  

Cash flows from investing activities:

             

Payment for acquisition, net of cash acquired

    (28,940 )   (43,608 )

Sale of affiliate interests

    (3,537 )    

Capital expenditures

    (257,615 )   (257,427 )

Proceeds related to sale of equipment, including costs of disposal

    965     596  

Increase in other investments

    (2,500 )   (550 )

Additions to other intangible assets

        (183 )

Net cash used in investing activities

    (291,627 )   (301,172 )

Cash flows from financing activities:

             

Proceeds from credit facility debt, net of discounts

  $ 1,642,500   $ 225,000  

Repayment of credit facility debt

    (610,663 )   (183,288 )

Issuance of senior notes and debentures

    1,000,000      

Proceeds from collateralized indebtedness

        156,136  

Repayment of collateralized indebtedness and related derivative contracts

        (150,084 )

Redemption of senior notes, including premiums and fees

    (1,057,019 )    

Proceeds from notes payable

    6,812      

Principal payments on capital lease obligations

    (3,067 )   (4,207 )

Additions to deferred financing costs

    (19,225 )   (1,290 )

Other

    (859 )    

Net cash provided by financing activities

    958,479     42,267  

Net increase (decrease) in cash and cash equivalents

    1,097,804     (14,819 )

Cash, cash equivalents and restricted cash at beginning of year

    330,100     503,093  

Cash, cash equivalents and restricted cash at end of period

  $ 1,427,904   $ 488,274  

   

See accompanying notes to condensed consolidated financial statements.

F-7


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1. DESCRIPTION OF BUSINESS AND RELATED MATTERS

The Company and Related Matters

        Altice USA, Inc. ("Altice USA" or the "Company") was incorporated in Delaware on September 14, 2015. As of March 31, 2018, Altice USA is majority-owned by Altice N.V., a public company with limited liability (naamloze vennootshcap) under Dutch law. Upon the completion of the Altice N.V. distribution discussed below, the Company will no longer be majority-owned by Altice N.V.

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

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

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

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

        The accompanying condensed consolidated operating results for the three months ended March 31, 2017 reflect the retrospective adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers and ASU No. 2017-07 Compensation-Retirement Benefits (Topic 715). See Note 3 for further details of the impact on the Company's historical financial statements.

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

Acquisition of Altice Technical Services US Corp

        ATS was formed in 2017 to provide network construction and maintenance services and commercial and residential installations, disconnections, and maintenance. The Company believes the services it receives from ATS are of higher quality and at a lower cost than the Company could achieve without ATS, including for the construction of its new fiber-to-the home ("FTTH") network.

        During the second quarter of 2017, a substantial portion of the Company's technical workforce at the Cablevision segment either accepted employment with ATS or became employees of ATS and ATS commenced operations and began to perform services for the Company. A substantial portion of the Cequel segment technical workforce became employees of ATS in December 2017.

        In January 2018, the Company acquired 70% of the equity interests in Altice Technical Services US Corp. ("ATS") for $1.00 (the "ATS Acquisition") and the Company became the owner of 100% of the equity interests in ATS in March 2018. ATS was previously owned by Altice N.V. and a member of

F-8


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 1. DESCRIPTION OF BUSINESS AND RELATED MATTERS (Continued)

ATS's management through a holding company. As the acquisition is a combination of businesses under common control, the Company combined the results of operations and related assets and liabilities of ATS for all periods since its formation. See Note 3 for the impact of the ATS Acquisition on the Company's condensed consolidated balance sheet as of December 31, 2017.

Altice N.V. Distribution

        On January 8, 2018, Altice N.V. announced plans for the separation of the Company from Altice N.V. Altice N.V. will distribute substantially all of its equity interest in the Company through a distribution in kind to holders of Altice N.V.'s common shares A and common shares B (the "Distribution"). Following the Distribution, Altice N.V. will no longer own a controlling equity interest in the Company, and the Company will operate independently from Altice N.V.

        The implementation of the Distribution is expected to be subject to certain conditions precedent being satisfied or waived. Although Altice N.V. and the Company have not yet negotiated the final terms of the Distribution and related transactions, the Company expects that the following will be conditions to the Distribution:

        Prior to Altice N.V.'s announcement of the Distribution, the Board of Directors of Altice USA, acting through its independent directors, approved in principle the payment of the Pre-Distribution Dividend to all shareholders immediately prior to completion of the separation. Formal approval of the Pre-Distribution Dividend and setting of a record date are expected to occur in the second quarter of 2018. The payment of the Pre-Distribution Dividend will be funded with available Cablevision revolving facility capacity and available cash from new financings, completed in January 2018, at CSC Holdings LLC, a wholly-owned subsidiary of Cablevision. In addition, the Board of Directors of Altice USA has authorized a share repurchase program of $2.0 billion, effective following completion of the separation.

        In connection with the Distribution, it is expected that the Management Advisory and Consulting Services Agreement with Altice N.V. which provides certain consulting, advisory and other services will

F-9


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 1. DESCRIPTION OF BUSINESS AND RELATED MATTERS (Continued)

be terminated. Compensation under the terms of the agreement is an annual fee of $30,000 paid by the Company.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

Recently Adopted Accounting Pronouncements

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

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

F-10


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        In March 2017, the FASB issued ASU No. 2017-07 Compensation-Retirement Benefits (Topic 715). ASU No. 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. It also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and what component of net benefit cost is eligible for capitalization. ASU No. 2017-07 was adopted by the Company on January 1, 2018 and was applied retrospectively. As a result of the adoption, the Company reclassified the non-service cost components of the Company's pension expense for the three months ended March 31, 2017 from other operating expenses to other income (expense), net. The Company elected to apply the practical expedient which allowed it to reclassify amounts disclosed previously in the benefits plan note as the basis for applying retrospective presentation for comparative periods, as the Company determined it was impracticable to disaggregate the cost components for amounts capitalized and amortized in those periods. See Note 3 for information on the impact of the adoption of ASU No. 2017-07.

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

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

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

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

F-11


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Recently Issued But Not Yet Adopted Accounting Pronouncements

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

        In February 2016, the FASB issued ASU No. 2016-02, Leases, which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019. The Company has not yet completed the evaluation of the effect that ASU No. 2016-02 will have on its consolidated financial statements.

NOTE 3. CHANGE IN ACCOUNTING POLICIES AND ATS ACQUISITION

Adoption of ASC 606—Revenue from Contracts with Customers

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

Installation Services Revenue

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

F-12


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 3. CHANGE IN ACCOUNTING POLICIES AND ATS ACQUISITION (Continued)

Commission Expenses

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

Third Party Product Giveaways and Incentives

        When the Company acts as the agent in providing certain product giveaways or incentives, revenue is recorded net of the costs of the giveaways and incentives. For the three months ended March 31, 2017, costs of $3,417 for the giveaways and incentives recorded in other operating expense have been reclassified to revenue.

Bundled Services

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

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

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

Acquisition of ATS

        As discussed in Note 1, the Company completed the ATS Acquisition in the first quarter of 2018. ATS was previously owned by Altice N.V. and a member of ATS's management through a holding company. As the acquisition is a combination of businesses under common control, the Company combined the results of operations and related assets and liabilities of ATS for all periods since the formation of ATS, including goodwill of $23,101, representing the amount previously transferred to ATS.

F-13


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 3. CHANGE IN ACCOUNTING POLICIES AND ATS ACQUISITION (Continued)

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

 
  December 31, 2017  
 
  As Reported   Impact of
ASC 606
  Impact of
ATS
Acquisition
  As Adjusted  

Cash and cash equivalents

  $ 273,329   $   $ 56,519   $ 329,848  

Other current assets

    580,231     14,068     (20,548 )   573,751  

Property, plant and equipment, net

    6,063,829         (40,003 )   6,023,826  

Goodwill

    7,996,760         23,101     8,019,861  

Other assets, long-term

    19,861,076     10,261     (6,541 )   19,864,796  

Total assets

  $ 34,775,225   $ 24,329   $ 12,528   $ 34,812,082  

Current liabilities

  $ 2,492,983   $ 6,978   $ 20,401   $ 2,520,362  

Deferred tax liability, long-term

    4,775,115     4,685     (10,514 )   4,769,286  

Liabilities, long-term

    21,779,997         6,394     21,786,391  

Total liabilities

    29,048,095     11,663     16,281     29,076,039  

Redeemable equity

    231,290             231,290  

Paid-in capital

    4,642,128         23,101     4,665,229  

Retained earnings

    854,824     12,666     (26,854 )   840,636  

Total stockholders' equity

    5,495,840     12,666     (3,753 )   5,504,753  

Total liabilities and stockholders' equity

  $ 34,775,225   $ 24,329   $ 12,528   $ 34,812,082  

        The ATS Acquisition did not have an impact on the Company's condensed consolidated statement of operations for the three months ended March 31, 2017. The following table summarizes the impact

F-14


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 3. CHANGE IN ACCOUNTING POLICIES AND ATS ACQUISITION (Continued)

of adopting ASC 606 and ASU No. 2017-07 on the Company's condensed consolidated statement of operations:

 
  Three Months Ended March 31, 2017  
 
  As
Reported
  Impact of
ASC 606
  Impact of
ASU No. 2017-07
  As
Adjusted
 

Residential:

                         

Pay TV

  $ 1,071,361   $ 12,517   $   $ 1,083,878  

Broadband

    611,769     14,149         625,918  

Telephony

    210,873     (29,912 )       180,961  

Business services and wholesale

    319,591     (171 )       319,420  

Advertising

    83,361             83,361  

Other

    8,721             8,721  

Total revenue

    2,305,676     (3,417 )       2,302,259  

Programming and other direct costs

    758,352             758,352  

Other operating expenses

    613,437     (3,417 )   (1,876 )   608,144  

Restructuring and other expense

    76,929             76,929  

Depreciation and amortization

    608,724             608,724  

Operating income

    248,234         1,876     250,110  

Other expense, net

    (370,330 )       (1,876 )   (372,206 )

Loss before income taxes

    (122,096 )           (122,096 )

Income tax benefit

    45,908             45,908  

Net loss

  $ (76,188 ) $   $   $ (76,188 )

NOTE 4. NET LOSS PER SHARE ATTRIBUTABLE TO STOCKHOLDERS

        Basic net income (loss) per common share attributable to Altice USA stockholders is computed by dividing net income (loss) attributable to Altice USA stockholders by the weighted average number of common shares outstanding during the period. Diluted income per common share attributable to Altice USA stockholders reflects the dilutive effects of stock options. Diluted net loss per common share attributable to Altice USA stockholders excludes the effects of common stock equivalents as they are anti-dilutive.

        The weighted average number of shares used to compute basic and diluted net loss per share for the three months ended March 31, 2017 reflect the retroactive impact of certain organizational transactions that occurred prior to the Company's IPO.

F-15


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 5. REVENUE AND CONTRACT ASSETS

Revenue Recognition

Residential Services

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

        The Company is assessed non-income related taxes by governmental authorities, including franchising authorities (generally under multi-year agreements), and collects such taxes from its customers. In instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customers are recorded as revenue. For the three months ended March 31, 2018 and 2017 the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $63,830 and $64,986, respectively.

Business and Wholesale Services

        The Company derives revenue from the sale of products and services to both large enterprise and SMB customers, including broadband, telephony, networking, and pay television services reflected in "Business services and wholesale" revenues. The Company's business services also include Ethernet, data transport, and IP-based virtual private networks. The Company also provides managed services to businesses, including hosted telephony services (cloud based SIP-based private branch exchange), managed Wi-Fi, managed desktop and server backup and managed collaboration services including audio and web conferencing. The Company also offers fiber-to-the-tower services to wireless carriers for cell tower backhaul and enable wireline communications service providers to connect to customers that their own networks do not reach. The Company recognizes revenues for these services as the services are provided to a customer on a monthly basis.

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

F-16


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 5. REVENUE AND CONTRACT ASSETS (Continued)

Advertising

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

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

Other

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

Contract Assets

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

F-17


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 5. REVENUE AND CONTRACT ASSETS (Continued)

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

 
  March 31,
2018
  December 31,
2017,
as adjusted
 

Contract assets(a)

  $ 23,682   $ 24,329  

Deferred revenue(b)

    129,560     117,679  

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

(b)
Deferred revenue represents payments received from customers for services that have yet to be provided and installation revenue which is deferred and recognized over the benefit period. The majority of the Company's deferred revenue represents payments for services for up to one month in advance from residential and SMB customers which is realized within the following month as services are performed.

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

NOTE 6. SUPPLEMENTAL CASH FLOW INFORMATION

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

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

 
  Three Months Ended
March 31,
 
 
  2018   2017  

Non-Cash Investing and Financing Activities:

             

Continuing Operations:

   
 
   
 
 

Property and equipment accrued but unpaid

  $ 91,036   $ 61,170  

Notes payable to vendor

    30,237      

Capital lease obligations

    656        

Supplemental Data:

   
 
   
 
 

Cash interest paid

    464,763     524,864  

Income taxes paid (refunded), net

    (1,027 )   1,553  

F-18


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 7. RESTRUCTURING COSTS AND OTHER EXPENSE

Restructuring

        Beginning in the first quarter of 2016, the Company commenced its restructuring initiatives (the "2016 Restructuring Plan") that are intended to simplify the Company's organizational structure.

        The following table summarizes the activity for the 2016 Restructuring Plan during 2018:

 
  Severance and
Other Employee
Related Costs
  Facility
Realignment and
Other Costs
  Total  

Accrual balance at December 31, 2017

  $ 113,474   $ 9,626   $ 123,100  

Restructuring charges

    1,818     (497 )   1,321  

Payments and other

    (38,469 )   (4,475 )   (42,944 )

Accrual balance at March 31, 2018

  $ 76,823   $ 4,654   $ 81,477  

        The Company recorded restructuring charges of $76,751 for the three months ended March 31, 2017 relating to the 2016 Restructuring Plan.

        Cumulative costs to date relating to the 2016 Restructuring Plan amounted to $310,294 and $67,526 for our Cablevision segment and Cequel segments, respectively.

Transaction Costs

        The Company incurred transaction costs of $2,266 for the three months ended March 31, 2018 relating to the Distribution discussed in Note 1 and $178 for the three months ended March 31, 2017 related to the acquisition of a business.

NOTE 8. INTANGIBLE ASSETS

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

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

Customer relationships

  $ 5,970,884   $ (1,603,142 ) $ 4,367,742   $ 5,970,884   $ (1,409,021 ) $ 4,561,863   8 to 18 years

Trade names

    1,067,083     (624,276 )   442,807     1,067,083     (588,574 )   478,509   2 to 5 years

Other amortizable intangibles

    37,060     (12,972 )   24,088     37,060     (10,978 )   26,082   1 to 15 years

  $ 7,075,027   $ (2,240,390 ) $ 4,834,637   $ 7,075,027   $ (2,008,573 ) $ 5,066,454    

        Amortization expense for the three months ended March 31, 2018 and 2017 aggregated $231,817, and $238,019, respectively.

F-19


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 8. INTANGIBLE ASSETS (Continued)

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

 
  March 31, 2018   December 31, 2017  
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total  

Cable television franchises

  $ 8,113,575   $ 4,906,506   $ 13,020,081   $ 8,113,575   $ 4,906,506   $ 13,020,081  

Goodwill

    5,866,108     2,153,741     8,019,849     5,866,120     2,153,741     8,019,861  

Total

  $ 13,979,683   $ 7,060,247   $ 21,039,930   $ 13,979,695   $ 7,060,247   $ 21,039,942  

        The carrying amount of goodwill is presented below:

Gross goodwill as of December 31, 2017, as reported

  $ 7,996,760  

ATS goodwill included in Cablevision segment (See Note 3 for further details)

    23,101  

Gross goodwill as of December 31, 2017, as adjusted

    8,019,861  

Adjustment to purchase accounting relating to business acquired in fourth quarter of 2017

    (12 )

Net goodwill as of March 31, 2018

  $ 8,019,849  

NOTE 9. DEBT

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

 
   
   
  March 31, 2018   December 31, 2017  
 
  Maturity Date   Interest
Rate
  Principal
Amount
  Carrying
Amount(a)
  Principal
Amount
  Carrying
Amount(a)
 

CSC Holdings Restricted Group:

                                   

Revolving Credit Facility (b)

  $20,000 on October 9, 2020, remaining balance on November 30, 2021     % $   $   $ 450,000   $ 425,488  

Term Loan Facility

  July 17, 2025     4.04 %   2,977,500     2,960,859     2,985,000     2,967,818  

Incremental Term Loan Facility

  January 25, 2026     4.28 %   1,500,000     1,481,825          

Cequel:

                                   

Revolving Credit Facility (c)

  $65,000 on November 30, 2021, and remaining balance on April 5, 2023                      

Term Loan Facility

  July 28, 2025     4.13 %   1,255,513     1,247,318     1,258,675     1,250,217  

            $ 5,733,013     5,690,002   $ 4,693,675     4,643,523  

Less: Current portion

                    53,900           42,650  

Long-term debt

                  $ 5,636,102         $ 4,600,873  

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

F-20


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 9. DEBT (Continued)

(b)
At March 31, 2018, $115,973 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $2,184,027 of the facility was undrawn and available, subject to covenant limitations.

(c)
At March 31, 2018, $13,500 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $336,500 of the facility was undrawn and available, subject to covenant limitations.

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

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

        On March 22, 2018, Altice US Finance I Corporation, an indirect wholly-owned subsidiary of the Company, entered into a Fourth Amendment to Cequel Credit Agreement (Extension Amendment), by and among the borrower, the Revolving Consent Lenders (as defined in the Fourth Amendment) and JPMorgan Chase Bank, N.A., as administrative agent for the lenders (the "Fourth Amendment"). The Fourth Amendment amends and supplements the Borrower's credit agreement, dated as of June 12, 2015, as amended by the first amendment (refinancing amendment), dated as of October 25, 2016, the second amendment (extension amendment), dated as of December 9, 2016, and the third amendment (incremental loan assumption agreement and refinancing amendment), dated as of March 15, 2017, (as so amended and as may be further amended, restated, modified or supplemented from time to time and as further amended by the Fourth Amendment among, inter alios, the borrower, the lenders party thereto and the administrative agent.

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

        As of March 31, 2018, the Company was in compliance with all of its financial covenants under the CSC Holdings Credit Facilities Agreement and the Cequel Credit Facilities Agreement.

F-21


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 9. DEBT (Continued)

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

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

 
   
   
  March 31, 2018   December 31, 2017  
Date Issued
  Maturity Date   Interest
Rate
  Principal
Amount
  Carrying
Amount
(a)
  Principal
Amount
  Carrying
Amount
(a)
 

CSC Holdings Senior Notes:

                                   

February 6, 1998

  February 15, 2018     7.875 %(b)(f)(o) $   $   $ 300,000   $ 301,184  

July 21, 1998

  July 15, 2018     7.625 %(b)(f)   500,000     504,213     500,000     507,744  

February 12, 2009

  February 15, 2019     8.625 %(c)(f)   526,000     537,930     526,000     541,165  

November 15, 2011

  November 15, 2021     6.750 %(c)(f)   1,000,000     962,332     1,000,000     960,146  

May 23, 2014

  June 1, 2024     5.250 %(c)(f)   750,000     663,291     750,000     660,601  

October 9, 2015

  January 15, 2023     10.125 %(e)   1,800,000     1,778,745     1,800,000     1,777,914  

October 9, 2015

  October 15, 2025     10.875 %(e)(l)   1,684,221     1,661,516     1,684,221     1,661,135  

CSC Holdings Senior Guaranteed Notes:

                               

October 9, 2015

  October 15, 2025     6.625 %(e)   1,000,000     987,037     1,000,000     986,717  

September 23, 2016

  April 15, 2027     5.500 %(g)   1,310,000     1,304,581     1,310,000     1,304,468  

January 29, 2018

  February 1, 2028     5.375 %(n)   1,000,000     991,665          

Cablevision Senior Notes(k):

                                   

April 15, 2010

  April 15, 2018     7.750 %(c)(f)(o)           750,000     754,035  

April 15, 2010

  April 15, 2020     8.000 %(c)(f)   500,000     492,795     500,000     492,009  

September 27, 2012

  September 15, 2022     5.875 %(c)(f)   649,024     575,348     649,024     572,071  

Cequel and Cequel Capital Senior Notes(l):

                               

Oct. 25, 2012 Dec. 28, 2012

  September 15, 2020     6.375 %(d)(m)   1,050,000     1,029,364     1,050,000     1,027,493  

May 16, 2013 Sept. 9, 2014

  December 15, 2021     5.125 %(d)   1,250,000     1,144,929     1,250,000     1,138,870  

June 12, 2015

  July 15, 2025     7.750 %(i)   620,000     604,755     620,000     604,374  

Altice US Finance I Corporation Senior Secured Notes(l):

                         

June 12, 2015

  July 15, 2023     5.375 %(h)   1,100,000     1,083,159     1,100,000     1,082,482  

April 26, 2016

  May 15, 2026     5.500 %(j)   1,500,000     1,488,306     1,500,000     1,488,024  

            $ 16,239,245     15,809,966   $ 16,289,245     15,860,432  

Less: current portion

                    1,042,143           507,744  

Long-term debt

                  $ 14,767,823         $ 15,352,688  

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

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

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

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

(e)
The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any. The Company may also redeem up to 40% of each series of 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-22


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 9. DEBT (Continued)

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

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

(m)
These notes were repaid in April 2018 with the proceeds from the issuance of new senior notes (see Note 17).

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

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

In January 2018, CSC Holdings issued $1,000,000 aggregate principal amount of 5.375% senior guaranteed notes due February 1, 2028 (the "2028 Guaranteed Notes"). The 2028 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 CVC Credit Facilities and rank senior in right of payment to all of existing and future subordinated indebtedness.

        The proceeds from the 2028 Guaranteed Notes, together with proceeds from the Incremental Term Loan (discussed above), borrowings under the CVC revolving credit facility and cash on hand, were used in February 2018 to repay $300,000 principal amount of CSC Holdings' senior notes due in February 2018 and $750,000 principal amount of Cablevision senior notes due in April 2018 and will be used to fund a dividend of $1,500,000 to the Company's stockholders immediately prior to and in connection with the Distribution discussed in Note 1.

        The indentures under which the senior notes and debentures were issued contain various covenants. The Company was in compliance with all of its financial covenants under these indentures as of March 31, 2018.

F-23


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 9. DEBT (Continued)

Notes Payable to Affiliates and Related Parties

        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 bore interest at 10.75% and matured on December 20, 2023 and $875,000 bore interest at 11% and matured on December 20, 2024.

        In connection with the Company's IPO in June 2017, the Company converted the notes payable to affiliates and related parties (together with accrued and unpaid interest of $529 and applicable premium of $513,723) into shares of the Company's common stock at the IPO price. The premium was recorded as a loss on extinguishment of debt on the Company's statement of operations in the second quarter of 2017. In connection with the conversion of the notes, the Company recorded a credit to paid in capital of $2,264,252 in the second quarter of 2017.

        For the three months ended March 31, 2017, the Company recognized $47,588 of interest expense related to these notes prior to their conversion.

Summary of Debt Maturities

        The future maturities of debt payable by the Company under its various debt obligations outstanding as of March 31, 2018, including notes payable, collateralized indebtedness (see Note 10), and capital leases, are as follows:

Years Ending December 31,
  Cablevision   Cequel   Total  

2018

  $ 581,298   $ 14,193   $ 595,491  

2019

    579,587     32,563     612,150  

2020

    547,517     1,062,715     1,610,232  

2021

    2,506,407     1,262,725     3,769,132  

2022

    695,806     12,730     708,536  

Thereafter

    11,812,663     4,416,240     16,228,903  

NOTE 10. 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.

F-24


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 10. DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS (Continued)

        The Company received cash proceeds upon execution of the prepaid forward contracts discussed above which has been reflected as collateralized indebtedness in the accompanying condensed 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 condensed 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 condensed consolidated statements of operations.

        All of the Company's monetization transactions are obligations of its wholly-owned subsidiaries that are not part of the Restricted Group; however, CSC Holdings has provided guarantees of the subsidiaries' ongoing contract payment expense obligations and potential payments that could be due as a result of an early termination event (as defined in the agreements). If any one of these contracts were terminated prior to its scheduled maturity date, the Company would be obligated to repay the fair value of the collateralized indebtedness less the sum of the fair values of the underlying stock and equity collar, calculated at the termination date. As of March 31, 2018, the Company did not have an early termination shortfall relating to any of these contracts.

        The Company monitors the financial institutions that are counterparties to its equity derivative contracts. All of the counterparties to such transactions carry investment grade credit ratings as of March 31, 2018.

Interest Rate Swap Contracts

        In June 2016, the Company entered into two 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 issued by Cequel 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 statements of operations.

        The Company does not hold or issue derivative instruments for trading or speculative purposes.

F-25


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 10. DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS (Continued)

        The following represents the location of the assets and liabilities associated with the Company's derivative instruments within the condensed consolidated balance sheets:

 
   
  Asset Derivatives   Liability Derivatives  
Derivatives Not Designated as Hedging Instruments
  Balance Sheet
Location
  Fair Value
at
March 31,
2018
  Fair Value at
December 31,
2017
  Fair Value
at
March 31,
2018
  Fair Value at
December 31,
2017
 

Prepaid forward contracts

  Derivative contracts, current   $ 9,211   $ 52,545   $ (9,211 ) $ (52,545 )

Prepaid forward contracts

  Derivative contracts, long-term     63,343         (4,495 )   (109,504 )

Interest rate swap contracts

  Liabilities under derivative contracts, long-term             (109,824 )   (77,902 )

      $ 72,554   $ 52,545   $ (123,530 ) $ (239,951 )

        Gain (loss) related to the Company's derivative contracts related to the Comcast common stock for the three months ended March 31, 2018 and 2017 of $168,352 and $(71,044), respectively, are reflected in gain (loss) on derivative contracts, net in the Company's condensed consolidated statement of operations.

        For the three months ended March 31, 2018 and 2017, the Company recorded a gain (loss) on investments of $(252,576) and $131,658, respectively, primarily representing the net increase (decrease) in the fair values of the investment securities pledged as collateral.

        For the three months ended March 31, 2018 and 2017, the Company recorded a gain (loss) on interest rate swap contracts of $(31,922) and $2,342, respectively.

NOTE 11. 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.

F-26


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 11. FAIR VALUE MEASUREMENT (Continued)

        The following table presents for each of these hierarchy levels, the Company's financial assets and financial liabilities that are measured at fair value on a recurring basis:

 
  Fair Value
Hierarchy
  March 31,
2018
  December 31,
2017
 

Assets:

                 

Money market funds

  Level I   $ 1,121,432   $ 5,949  

Investment securities pledged as collateral

  Level I     1,467,781     1,720,357  

Prepaid forward contracts

  Level II     72,554     52,545  

Liabilities:

 

 

   
 
   
 
 

Prepaid forward contracts

  Level II     13,706     162,049  

Interest rate swap contracts

  Level II     109,824     77,902  

Contingent consideration related to 2017 acquisitions

  Level III     3,233     32,233  

        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.

        The fair value of the contingent consideration as of March 31, 2018 related to acquisitions in the first quarter and fourth quarters of 2017 of approximately $1,000 and $2,233, respectively. The estimated amount recorded as of March 31, 2018 is the remaining unpaid contractual amount for the first quarter 2017 acquisition and approximately 51% of the contractual amount for the fourth quarter 2017 acquisition. The fair value of the consideration was estimated based on a probability assessment of attaining the targets as of March 31, 2018.

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, 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.

F-27


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 11. FAIR VALUE MEASUREMENT (Continued)

        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 condensed consolidated balance sheets, are summarized as follows:

 
   
  March 31, 2018   December 31, 2017  
 
  Fair Value
Hierarchy
  Carrying
Amount(a)
  Estimated
Fair Value
  Carrying
Amount(a)
  Estimated
Fair Value
 

CSC Holdings debt instruments:

                             

Credit facility debt

  Level II   $ 4,442,684   $ 4,477,500   $ 3,393,306   $ 3,435,000  

Collateralized indebtedness

  Level II     1,351,271     1,298,060     1,349,474     1,305,932  

Senior guaranteed notes

  Level II     3,283,283     3,231,825     2,291,185     2,420,000  

Senior notes and debentures

  Level II     6,108,028     6,797,434     6,409,889     7,221,846  

Notes payable

  Level II     78,938     76,340     56,956     55,289  

Cablevision senior notes:

                             

Senior notes and debentures

  Level II     1,068,142     1,172,906     1,818,115     1,931,239  

Cequel debt instruments:

                             

Cequel credit facility

  Level II     1,247,318     1,255,513     1,250,217     1,258,675  

Senior secured notes

  Level II     2,571,465     2,580,000     2,570,506     2,658,930  

Senior notes

  Level II     2,779,048     2,987,700     2,770,737     2,983,615  

Notes payable

  Level II     24,149     24,149     8,946     8,946  

      $ 22,954,326   $ 23,901,427   $ 21,919,331   $ 23,279,472  

(a)
Amounts are net of unamortized deferred financing costs and discounts.

        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.

NOTE 12. INCOME TAXES

        In general, the Company is required to use an estimated annual effective tax rate to measure the income tax expense or benefit recognized in an interim period. The estimated annual effective tax rate is revised on a quarterly basis and therefore may be different from the rate used in a prior interim period. In addition, certain items included in income tax expense as well as the tax impact of certain items included in pretax income from continuing operations must be treated as discrete items. The income tax expense or benefit associated with these discrete items is fully recognized in the interim period in which the items occur.

        The Company recorded income tax benefit of $60,703 for the three months ended March 31, 2018, reflecting an effective tax rate of 32%, which has declined compared to previous years primarily as a result of the enactment of the Tax Cuts and Jobs Act in December 2017 which lowered the corporate federal income tax rate from 35% to 21%.

F-28


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 12. INCOME TAXES (Continued)

        The Company recorded income tax benefit of $45,908 for the three months ended March 31, 2017, reflecting an effective tax rate of 38%. Nondeductible share-based compensation expense resulted in tax expense of $3,140. Absent this item, the effective tax rate for the three months ended March 31, 2017 would have been 40%.

        As of March 31, 2018, the Company's federal net operating losses ("NOLs") were approximately $2,486,000. The utilization of certain pre-merger NOLs of Cablevision and Cequel are limited pursuant to Internal Revenue Code Section 382. The Company does not expect such limitations to impact the ability to utilize the NOLs prior to their expiration.

NOTE 13. SHARE BASED COMPENSATION

        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 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 performance-based awards under the plan, 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 share-based compensation with respect to these awards at the end of each reporting period.

        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 LLC). Accordingly, the carry units are presented as temporary equity on the consolidated balance sheets 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 60 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 the Company's Class A common stock upon vesting.

F-29


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 13. SHARE BASED COMPENSATION (Continued)

        The following table summarizes activity relating to carry units:

 
  Number of
Time
Vesting
Awards
  Number of
Performance
Based
Vesting
Awards
  Weighted
Average
Grant Date
Fair Value
 

Balance, December 31, 2017

    168,550,001     10,000,000   $ 0.71  

Forfeited

    (3,500,001 )       0.86  

Balance, March 31, 2018

    165,050,000     10,000,000     0.71  

        The weighted average fair value per unit was $2.50 and $2.10 as of December 31, 2017 and March 31, 2018, respectively. For the three months ended March 31, 2018 and 2017, the Company recognized an expense of $17,501 and $7,848 related to the push down of share-based compensation related to the carry unit plan of which approximately $16,872 and $5,786 related to units granted to employees of the Company and $629 and $2,062 related to employees of Altice N.V. and affiliated companies allocated to the Company.

Stock Option Plan

        The following table summarizes activity related to employee stock options for the three months ended March 31, 2018:

 
   
   
  Weighted
Average
Exercise
Price
Per
Share
  Weighted
Average
Remaining
Contractual
Term
(in years)
   
 
 
  Shares Under Option    
 
 
  Time
Vesting
  Performance
Based Vesting
  Aggregate
Intrinsic
Value (a)
 

Balance at December 31, 2017

    5,110,747       $ 19.48     9.97   $ 8,944  

Granted

    298,394     39,050     21.22              

Forfeited

    (103,766 )   (22,314 )   21.81              

Balance at March 31, 2018

    5,305,375     16,736   $ 19.54     9.92     (5,615 )

Options exercisable at March 31, 2018

                     

(a)
The aggregate intrinsic value is calculated as the difference between the exercise price and the closing price of the Company's Class A common stock at the respective date.

        The Company recognized share based compensation expense related to employee stock options for the three months ended March 31, 2018 of $4,122.

F-30


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 13. SHARE BASED COMPENSATION (Continued)

        The following aggregate assumptions were used to calculate the fair values of stock option awards granted during the three months ended March 31, 2018:

Risk-free interest rate

    2.64 %

Expected life (in years)

    6.49  

Dividend yield

    %

Volatility

    33.86 %

Grant date fair value

  $ 7.49  

NOTE 14. AFFILIATE AND RELATED PARTY TRANSACTIONS

Equity Method Investments

        In July 2016, the Company completed the sale of a 75% interest in Newsday LLC ("Newsday") 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 using the equity method.

        At March 31, 2018, the Company's 25% investment in Newsday and its 25% interest in i24NEWS, Altice N.V.'s 24 / 7 international news and current affairs channel aggregated $12,891 and $800, respectively and is included in investments in affiliates on our condensed consolidated balance sheet. The operating results of i24NEWS is also recorded using the equity method. For the three months ended March 31, 2018 and 2017, the Company recorded equity in net loss of Newsday of $9,312 and $1,510, respectively, and equity in net loss of i24NEWS of $1,130 and $1,247, respectively. In April 2018, Altice NV transferred its ownership of i24 US and i24 Europe to the Company for minimal consideration.

Affiliate and Related Party Transactions

        As the transactions discussed below were conducted between subsidiaries of Altice N.V. under common control and equity method investees, 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.

F-31


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 14. AFFILIATE AND RELATED PARTY TRANSACTIONS (Continued)

        The following table summarizes the revenue and charges related to services provided to or received from subsidiaries of Altice N.V. and Newsday:

 
  Three Months Ended
March 31,
 
 
  2018   2017  

Revenue

  $ 125   $ 141  

Operating expenses:

             

Programming and other direct costs

    (1,154 )   (735 )

Other operating expenses, net

    (7,994 )   (7,298 )

Operating expenses, net

    (9,148 )   (8,033 )

Interest expense(a)

        (47,588 )

Net charges

  $ (9,023 ) $ (55,480 )

Capital Expenditures

  $ 1,626   $ 892  

(a)
In connection with the Company's IPO in June 2017, the Company converted the notes payable to affiliates and related parties into shares of the Company's common stock at the IPO price.

Revenue

        The Company recognized revenue primarily in connection with the sale of advertising to Newsday.

Programming and other direct costs

        Programming and other direct costs include 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, as well as consulting, advisory and other services, including, prior to the IPO, 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 $7,500, for the three months ended March 31, 2018 and 2017. As of June 20, 2017, the CEO, CFO and COO became employees of the Company and the agreement was assigned to Altice N.V. by a subsidiary of Altice N.V. This agreement will be terminated upon the completion of the Distribution discussed in Note 1.

        Other operating expenses also include charges for services provided by other subsidiaries of Altice N.V. aggregating $494 and $(202), respectively, net of a credit of $482 for transition services provided to Newsday for the three months ended March 31, 2017.

F-32


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 14. AFFILIATE AND RELATED PARTY TRANSACTIONS (Continued)

Capital Expenditures

        Capital expenditures include $1,626 and $892, respectively, for equipment purchases and software development services provided by subsidiaries of Altice NV.

        Aggregate amounts that were due from and due to related parties are summarized below:

 
  March 31,
2018
  December 31,
2017
 

Due from:

             

Altice US Finance S.A.(a)

  $ 12,951   $ 12,951  

Newsday(b)

    2,558     2,713  

Altice Management Americas(b)

    1,271     33  

i24 News(b)

    4,335     4,036  

Other Altice N.V. subsidiaries(b)

    31     31  

  $ 21,146   $ 19,764  

Due to:

             

Altice Management International(c)

    7,500      

Newsday(b)

    33     33  

Altice Labs S.A.(c)

    1,051     7,354  

Other Altice N.V. subsidiaries(c)

    2,494     3,611  

  $ 11,078   $ 10,998  

(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, the net amounts due from the related party also include charges for certain transition services provided.

(c)
Represents amounts due to affiliates for services provided to the Company.

NOTE 15. COMMITMENTS AND CONTINGENCIES

Legal Matters

        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 Cablevision, and as a result, those stations and networks were unavailable on Cablevision's cable television systems. On October 30, 2010, Cablevision and Fox reached an agreement on new affiliation agreements for these stations and networks, and carriage was restored. Several purported class action lawsuits alleging breach of contract, unjust enrichment, and consumer fraud and seeking unspecified compensatory damages, punitive damages and attorneys' fees were subsequently filed on behalf of Cablevision'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. On March 28, 2012, in ruling on

F-33


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 15. COMMITMENTS AND CONTINGENCIES (Continued)


Cablevision's motion to dismiss, the Court dismissed all of plaintiffs' claims, except for breach of contract. On March 30, 2014, the Court granted plaintiffs' motion for class certification. The parties have entered into a settlement agreement, which is subject to Court approval. As of December 31, 2017, the Company had an estimated liability associated with a potential settlement totaling $6,000. The amount ultimately paid in connection with the proposed settlement could exceed the amount recorded.

        In October 2015, the New York Attorney General began an investigation into whether the major Internet Service Providers in New York State deliver advertised Internet speeds. The Company is cooperating with this investigation and is currently in discussions with the New York Attorney General about resolving the investigation as to the Company, which resolution may involve operational and or financial components. While the Company is unable to predict the outcome of the investigation or these discussions, at this time it does not expect that the outcome will have a material adverse effect on its operations, financial conditions or cash flows.

        The Company receives notices from third parties and, in some cases, 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 matters 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.

NOTE 16. 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 interest rate swap contracts, gain (loss) on 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

F-34


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 16. SEGMENT INFORMATION (Continued)

and transaction expenses. The Company has presented the components that reconcile Adjusted EBITDA to operating income, an accepted GAAP measure:

 
  Three Months Ended March 31, 2018   Three Months Ended March 31, 2017  
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total  

Operating income

  $ 170,693   $ 142,345   $ 313,038   $ 122,044   $ 128,066   $ 250,110  

Share-based compensation

    16,172     5,451     21,623     5,082     2,766     7,848  

Restructuring and other expense

    3,083     504     3,587     58,647     18,282     76,929  

Depreciation and amortization (including impairments)

    485,364     157,341     642,705     443,176     165,548     608,724  

Adjusted EBITDA

  $ 675,312   $ 305,641   $ 980,953   $ 628,949   $ 314,662   $ 943,611  

        A reconciliation of reportable segment amounts to the Company's condensed consolidated balances are as follows:

 
  Three Months Ended
March 31,
 
 
  2018   2017  

Operating income for reportable segments

  $ 313,038   $ 250,110  

Items excluded from operating income:

             

Interest expense

    (377,258 )   (433,294 )

Interest income

    3,103     232  

Gain (loss) on investments and sale of affiliate interests, net

    (248,602 )   131,658  

Gain (loss) on derivative contracts, net

    168,352     (71,044 )

Gain (loss) on interest rate swap contracts

    (31,922 )   2,342  

Loss on extinguishment of debt and write-off of deferred financing costs

    (4,705 )    

Other expense, net

    (11,658 )   (2,100 )

Loss before income taxes

  $ (189,652 ) $ (122,096 )

F-35


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 16. SEGMENT INFORMATION (Continued)

        The following tables present the composition of revenue by segment:

 
  Three Months Ended March 31, 2018   Three Months Ended March 31, 2017  
 
  Cablevision   Cequel   Eliminations(a)   Total   Cablevision   Cequel   Total  

Residential:

                                           

Pay TV

  $ 763,720   $ 269,988   $   $ 1,033,708   $ 802,194   $ 281,684   $ 1,083,878  

Broadband

    440,351     261,270         701,621     396,333     229,585     625,918  

Telephony

    135,585     30,453         166,038     146,557     34,404     180,961  

Business services and wholesale

    234,172     98,918         333,090     228,544     90,876     319,420  

Advertising

    74,643     17,068     (4,129 )   87,582     65,132     18,229     83,361  

Other

    2,823     4,852         7,675     3,227     5,494     8,721  

Total Revenue

  $ 1,651,294   $ 682,549   $ (4,129 ) $ 2,329,714   $ 1,641,987   $ 660,272   $ 2,302,259  

(a)
Reflects revenue recognized by Cablevision from the sale of services to Cequel.

        Capital expenditures (cash basis) by reportable segment are presented below:

 
  Three Months Ended
March 31,
 
 
  2018   2017  

Cablevision

  $ 166,801   $ 184,399  

Cequel

    90,814     73,028  

  $ 257,615   $ 257,427  

        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.

NOTE 17. SUBSEQUENT EVENT

        In April 2018, Cequel Communications Holdings I, LLC and Cequel Capital Corporation each an indirect, wholly owned subsidiary of the Company, issued $1,050,000, aggregate principal amount of 7.5% senior notes due April 1, 2028. The proceeds of these notes were used in April 2018 to redeem the $1,050,000 aggregate principal amount 6.375% senior notes due September 15, 2020.

F-36


Table of Contents

Report of Independent Registered Public Accounting Firm

The Stockholders and Board of Directors
Altice USA, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Altice USA, Inc. and subsidiaries (the Company) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2017, and the related notes (collectively, the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

Company Formation, Altice Technical Services (ATS) Acquisition, and Change in Accounting Policies

The Company was incorporated on September 14, 2015 and had no operations of its own other than the issuance of debt prior to the contribution of Cequel Corporation on June 9, 2016 by Altice N.V. The results of operations of Cequel Corporation for the year ended December 31, 2016 have been included in the results of operations of the Company for the same period as Cequel Corporation was under common control with the Company throughout 2016.

As discussed in Notes 1 and 20 to the consolidated financial statements, a substantial portion of the Company's technical workforce at the Cablevision and Cequel segments became employees of ATS in the second and fourth quarters of 2017, respectively. Subsequent to December 31, 2017 the Company acquired 100% of ATS. As a result of the acquisition of ATS, an entity under common control, the Company has retroactively consolidated the results of operations and related assets and liabilities of ATS for all periods ATS was under common control.

As discussed in Note 20, the Company adopted ASC 606—Revenue from Contracts with Customers and ASU No. 2017-07 Compensation—Retirement Benefits (Topic 715).

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company's auditor since 2016.

/s/ KPMG LLP



New York, New York
March 6, 2018, except for Note 20, which is as of May 21, 2018

F-37


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2017 and 2016

(In thousands)

(See Note 20)

 
  December 31,
2017
  December 31,
2016
 

ASSETS

             

Current Assets:

             

Cash and cash equivalents

  $ 329,848   $ 486,792  

Restricted cash

    252     16,301  

Accounts receivable, trade (less allowance for doubtful accounts of $13,420 and $11,677)

    370,765     349,626  

Prepaid expenses and other current assets

    130,425     102,219  

Amounts due from affiliates

    19,764     22,182  

Investment securities pledged as collateral

        741,515  

Derivative contracts

    52,545     352  

Total current assets

    903,599     1,718,987  

Property, plant and equipment, net of accumulated depreciation of $2,599,579 and $1,039,297

    6,023,826     6,597,635  

Investment in affiliates

    930     5,606  

Investment securities pledged as collateral

    1,720,357     741,515  

Derivative contracts

        10,604  

Other assets

    56,974     58,806  

Amortizable customer relationships, net of accumulated amortization of $1,409,021 and $580,276

    4,561,863     5,345,608  

Amortizable trade names, net of accumulated amortization of $588,574 and $83,397

    478,509     983,386  

Other amortizable intangibles, net of accumulated amortization of $10,978 and $3,093

    26,082     23,650  

Indefinite-lived cable television franchises

    13,020,081     13,020,081  

Goodwill

    8,019,861     7,992,700  

Total assets

  $ 34,812,082   $ 36,498,578  

   

See accompanying notes to consolidated financial statements.

F-38


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

December 31, 2017 and 2016

(In thousands, except share and per share amounts)

(See Note 20)

 
  December 31,
2017
  December 31,
2016
 

LIABILITIES AND STOCKHOLDERS' EQUITY

             

Current Liabilities:

             

Accounts payable

  $ 795,128   $ 705,672  

Accrued liabilities:

             

Interest

    397,422     576,778  

Employee related costs

    147,727     232,864  

Other accrued expenses

    411,988     352,315  

Amounts due to affiliates

    10,998     127,363  

Deferred revenue

    111,197     101,794  

Liabilities under derivative contracts

    52,545     13,158  

Collateralized indebtedness

        622,332  

Credit facility debt

    42,650     33,150  

Senior notes and debentures

    507,744     926,045  

Capital lease obligations

    9,539     15,013  

Notes payable

    33,424     5,427  

Total current liabilities

    2,520,362     3,711,911  

Defined benefit plan obligations

    103,163     84,106  

Notes payable to affiliates and related parties

        1,750,000  

Other liabilities

    144,289     113,485  

Deferred tax liability

    4,769,286     7,971,500  

Liabilities under derivative contracts

    187,406     78,823  

Collateralized indebtedness

    1,349,474     663,737  

Credit facility debt

    4,600,873     3,411,640  

Senior guaranteed notes

    2,291,185     2,289,494  

Senior notes and debentures

    13,061,503     14,291,786  

Capital lease obligations

    12,441     13,142  

Notes payable

    32,478     8,299  

Deficit investments in affiliates

    3,579      

Total liabilities

    29,076,039     34,387,923  

Commitments and contingencies

             

Redeemable equity

    231,290     68,147  

Stockholders' Equity:

             

Preferred stock, $.01 par value, 100,000,000 shares authorized, no shares issued and outstanding at December 31, 2017

         

Class A common stock: $0.01 par value, 4,000,000,000 shares authorized, 246,982,292 issued and outstanding at December 31, 2017

    2,470      

Class B common stock: $0.01 par value, 1,000,000,000 shares authorized, 490,086,674 issued and outstanding at December 31, 2017

    4,901      

Class C common stock: $0.01 par value, 4,000,000,000 shares authorized, no shares issued and outstanding at December 31, 2017

         

Common stock, $.01 par value, 1,000 shares authorized, 100 shares issued and outstanding at December 31, 2016

         

Paid-in capital

    4,665,229     3,003,554  

Retained earnings (accumulated deficit)

    840,636     (963,312 )

    5,513,236     2,040,242  

Accumulated other comprehensive income (loss)

    (10,022 )   1,979  

Total stockholders' equity

    5,503,214     2,042,221  

Noncontrolling interest

    1,539     287  

Total stockholders' equity

    5,504,753     2,042,508  

  $ 34,812,082   $ 36,498,578  

   

See accompanying notes to consolidated financial statements.

F-39


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 2017 and 2016

(In thousands, except per share amounts)

(See Note 20)

 
  2017   2016  

Revenue (including revenue from affiliates of $1,100 and $1,086, respectively) (See Note 14)

  $ 9,306,950   $ 6,017,212  

Operating expenses:

             

Programming and other direct costs (including charges from affiliates of $4,176 and $1,947, respectively) (See Note 14)

    3,035,655     1,911,230  

Other operating expenses (including charges from affiliates of $33,140 and $18,854, respectively) (See Note 14)

    2,347,315     1,702,472  

Restructuring and other expense

    152,401     240,395  

Depreciation and amortization (including impairments)

    2,930,571     1,700,306  

    8,465,942     5,554,403  

Operating income

    841,008     462,809  

Other income (expense):

             

Interest expense (including interest expense to affiliates and related parties of $90,405 and $112,712, respectively) (See Note 14)

    (1,603,132 )   (1,456,541 )

Interest income

    1,921     13,811  

Gain on investments, net

    237,354     141,896  

Loss on derivative contracts, net

    (236,330 )   (53,696 )

Gain (loss) on interest rate swap contracts

    5,482     (72,961 )

Loss on extinguishment of debt and write-off of deferred financing costs (including $513,723 related to affiliates and related parties in 2017) (See Note 14)

    (600,240 )   (127,649 )

Other income (expense), net

    (13,651 )   1,186  

    (2,208,596 )   (1,553,954 )

Loss before income taxes

    (1,367,588 )   (1,091,145 )

Income tax benefit

    2,862,352     259,666  

Net income (loss)

    1,494,764     (831,479 )

Net loss (income) attributable to noncontrolling interests

    (1,587 )   (551 )

Net income (loss) attributable to Altice USA, Inc. stockholders

  $ 1,493,177   $ (832,030 )

Income (loss) per share:

             

Basic income (loss) per share

  $ 2.15   $ (1.28 )

Basic weighted average common shares (in thousands)

    696,055     649,525  

Diluted income (loss) per share:

  $ 2.15   $ (1.28 )

Diluted weighted average common shares (in thousands)

    696,055     649,525  

Cash dividends declared per common share

  $ 1.29   $ 0.69  

   

See accompanying notes to consolidated financial statements.

F-40


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Years ended December 31, 2017 and 2016

(In thousands)

(See Note 20)

 
  2017   2016  

Net income (loss)

  $ 1,494,764   $ (831,479 )

Other comprehensive income (loss):

             

Defined benefit pension plans:

             

Unrecognized actuarial gain (loss)

    (18,632 )   3,452  

Applicable income taxes

    7,441     (1,381 )

Unrecognized gain (loss) arising during period, net of income taxes

    (11,191 )   2,071  

Curtailment loss, net of settlement losses of $1,845 for 2017 included in net periodic benefit cost

    (1,350 )   (154 )

Applicable income taxes

    540     62  

Curtailment loss, net of settlement losses included in net periodic benefit cost, net of income taxes

    (810 )   (92 )

Other comprehensive gain (loss)

    (12,001 )   1,979  

Comprehensive income (loss)

    1,482,763     (829,500 )

Comprehensive income attributable to noncontrolling interests

    (1,587 )   (551 )

Comprehensive Income (loss) attributable to Altice USA, Inc. stockholders

  $ 1,481,176   $ (830,051 )

   

See accompanying notes to consolidated financial statements.

F-41


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended December 31, 2017 and 2016

(In thousands)

(See Note 20)

 
  Class A
Common
Stock
  Paid-in
Capital
  Accumulated
Deficit
  Accumulated
Other
Comprehensive
Income
  Total
Stockholders'
Equity
  Non-
controlling
Interest
  Total
Equity
 

Balance at January 1, 2016

  $   $ 2,252,028   $ (143,948 ) $   $ 2,108,080   $   $ 2,108,080  

Impact of change in accounting policy in connection with the adoption of ASU No. 2014-09

            12,666         12,666         12,666  

Balance at January 1, 2016, as adjusted

        2,252,028     (131,282 )       2,120,746         2,120,746  

Net loss attributable to stockholders

            (832,030 )       (832,030 )       (832,030 )

Noncontrolling interests acquired

                        (264 )   (264 )

Net income attributable to noncontrolling interests

                        551     551  

Pension liability adjustments, net of income taxes

                1,979     1,979         1,979  

Share-based compensation expense

        14,368             14,368         14,368  

Change in fair value of redeemable equity

        (68,148 )           (68,148 )       (68,148 )

Contributions from stockholders

        1,246,499             1,246,499         1,246,499  

Distributions to stockholders

        (445,176 )           (445,176 )       (445,176 )

Excess tax benefit on share-based awards

        31             31         31  

Tax impact related to the Newsday Holdings, LLC transactions

        3,952             3,952         3,952  

Balance at December 31, 2016

  $   $ 3,003,554   $ (963,312 ) $ 1,979   $ 2,042,221   $ 287   $ 2,042,508  

   

See accompanying notes to consolidated financial statements.

F-42


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)

Years ended December 31, 2017 and 2016

(In thousands)

(See Note 20)

 
  Class A
Common
Stock
  Class B
Common
Stock
  Paid-in
Capital
  Retained
Earnings
(Accumulated
Deficit)
  Accumulated
Other
Comprehensive
Income
  Total
Stockholders'
Equity
  Non-
controlling
Interest
  Total
Equity
 

Balance at January 1, 2017

  $   $   $ 3,003,554   $ (963,312 ) $ 1,979   $ 2,042,221   $ 287   $ 2,042,508  

Net income attributable to stockholders

                1,493,177         1,493,177         1,493,177  

Net income attributable to noncontrolling interests

                            1,587     1,587  

Pension liability adjustments, net of income taxes

                    (12,001 )   (12,001 )       (12,001 )

Share-based compensation expense

            57,430             57,430         57,430  

Change in redeemable equity

            (163,142 )           (163,142 )       (163,142 )

Contributions from stockholders

            51,135             51,135         51,135  

Note receivable from parent

            (50,000 )               (50,000 )         (50,000 )

Distributions to stockholders/non-controlling interest

            (839,700 )           (839,700 )   (335 )   (840,035 )

Recognition of previously unrealized excess tax benefits related to share-based awards in connection with the adoption of ASU 2016-09

                310,771         310,771         310,771  

Issuance of common stock pursuant to organizational transactions prior to IPO

    2,349     4,901     2,257,002             2,264,252         2,264,252  

Issuance of common stock pursuant to IPO

    121         348,950             349,071         349,071  

Balance at December 31, 2017

  $ 2,470   $ 4,901   $ 4,665,229   $ 840,636   $ (10,022 ) $ 5,503,214   $ 1,539   $ 5,504,753  

   

See accompanying notes to consolidated financial statements.

F-43


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2017 and 2016

(In thousands)

(See Note 20)

 
  2017   2016  

Cash flows from operating activities:

             

Net income (loss)

  $ 1,495,352   $ (831,479 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

             

Depreciation and amortization (including impairments)

    2,930,571     1,700,306  

Impairment of assets included in restructuring charges

        2,445  

Gain on sale of affiliate interests

        (206 )

Equity in net loss of affiliates

    10,040     1,132  

Gain on investments, net

    (237,354 )   (141,896 )

Loss on derivative contracts, net

    236,330     53,696  

Loss on extinguishment of debt and write-off of deferred financing costs

    600,240     127,649  

Amortization of deferred financing costs and discounts (premiums) on indebtedness

    31,046     27,799  

Settlement loss related to pension plan

    1,845     3,298  

Share-based compensation expense

    57,430     14,368  

Deferred income taxes

    (2,880,154 )   (263,989 )

Excess tax benefit on share-based awards

        (31 )

Provision for doubtful accounts

    74,183     53,249  

Change in assets and liabilities, net of effects of acquisitions and dispositions:

             

Accounts receivable, trade

    (89,683 )   (58,760 )

Other receivables

    (12,835 )   9,413  

Prepaid expenses and other assets

    (7,426 )   56,395  

Amounts due from and due to affiliates

    (34,326 )   41,351  

Accounts payable

    73,888     (11,814 )

Accrued liabilities

    (241,701 )   312,871  

Deferred revenue

    12,310     9,835  

Liabilities related to interest rate swap contracts

    (921 )   78,823  

Net cash provided by operating activities

    2,018,247     1,184,455  

Cash flows from investing activities:

             

Payment for acquisition, net of cash acquired

    (46,703 )   (8,988,774 )

Net proceeds from sale of affiliate interests

        13,825  

Capital expenditures

    (951,349 )   (625,541 )

Proceeds related to sale of equipment, including costs of disposal

    9,743     5,885  

Increase in other investments

    (4,773 )   (4,608 )

Settlement of put-call options

    (97,410 )    

Additions to other intangible assets

    (1,707 )   (106 )

Net cash used in investing activities

    (1,092,199 )   (9,599,319 )

Cash flows from financing activities:

             

Proceeds from credit facility debt

  $ 5,593,675   $ 5,510,256  

Repayment of credit facility debt

    (4,411,581 )   (9,133,543 )

Proceeds from notes payable to affiliates and related parties

        1,750,000  

Issuance of senior notes

        1,310,000  

Proceeds from collateralized indebtedness

    838,794     179,388  

Repayment of collateralized indebtedness and related derivative contracts

    (831,059 )   (143,102 )

Distributions to stockholders

    (919,317 )   (365,559 )

Repayment of senior notes, including premiums and fees

    (1,729,400 )    

Proceeds from notes payable

    33,733      

Excess tax benefit on share-based awards

        31  

Principal payments on capital lease obligations

    (15,157 )   (18,837 )

Additions to deferred financing costs

    (8,600 )   (203,712 )

Proceeds from IPO, net of fees

    349,071      

Contributions from stockholders

    1,135     1,246,499  

Distributions to noncontrolling interests, net

    (335 )    

Net cash provided by (used in) financing activities

    (1,099,041 )   131,421  

Net decrease in cash and cash equivalents

    (172,993 )   (8,283,443 )

Cash, cash equivalents and restricted cash at beginning of year

    503,093     8,786,536  

Cash, cash equivalents and restricted cash at end of year

  $ 330,100   $ 503,093  

   

See accompanying notes to consolidated financial statements.

F-44


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

(See Note 20)

NOTE 1. DESCRIPTION OF BUSINESS AND RELATED MATTERS

The Company and Related Matters

        Altice USA, Inc. ("Altice USA" or the "Company") was incorporated in Delaware on September 14, 2015. As of December 31, 2017, Altice USA is majority-owned by Altice N.V., a public company with limited liability (naamloze vennootshcap) under Dutch law. Upon the completion of the Altice N.V. distribution discussed below, the Company will no longer be majority-owned by Altice N.V.

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

        Altice N.V., through a subsidiary, acquired Cequel Corporation ("Cequel" or "Suddenlink") on December 21, 2015 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 periods, as Cequel was under common control with Altice USA.

        Altice USA acquired Cablevision Systems Corporation ("Cablevision" or "Optimum") on June 21, 2016 (see discussion below) and the results of operations of Cablevision are included with the results of operations of Cequel for the year ended December 31, 2017. The year ended December 31, 2016 operating results include the operating results of Cablevision from the date of acquisition, June 21, 2016.

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

        The accompanying consolidated financial statements also reflect the retrospective adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers and ASU No. 2017-07 Compensation-Retirement Benefits (Topic 715). See Note 20 for further details of the impact on the Company's historical financial statements.

        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 Altice Technical Services US Corp

        ATS was formed to provide network construction and maintenance services and commercial and residential installations, disconnections, and maintenance. In the second quarter of 2017, the Company entered into an Independent Contractor Agreement with ATS that governs the terms of the services described above. The Company believes the services it receives from ATS will be of higher quality and at a lower cost than the Company could achieve without ATS, including for the construction of our new

F-45


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 1. DESCRIPTION OF BUSINESS AND RELATED MATTERS (Continued)

fiber-to-the home ("FTTH") network. The Company also entered into a Transition Services Agreement for the use of the Company's resources to provide various overhead functions to ATS, including accounting, legal and human resources and for the use of certain facilities, vehicles and technician tools during a transitional period that generally ended on December 31, 2017, although the term can be extended on a service-by-service basis. The Transition Services Agreement requires ATS to reimburse the Company for its cost to provide such services.

        In January 2018, the Company acquired 70% of the equity interests in Altice Technical Services US Corp. ("ATS") for $1.00 (the "ATS Acquisition") and the Company became the owner of 100% of the equity interests in ATS in March 2018. ATS was previously owned by Altice N.V. and a member of ATS's management through a holding company. As the acquisition is a combination of businesses under common control, the Company combined the results of operations and related assets and liabilities of ATS for all periods since its commencement of operations in April 2017. See Note 20 for the impact of the ATS Acquisition on the Company's consolidated balance sheet and statement of operations as of and for the year ended December 31, 2017. In connection with the ATS Acquisition, the Company recorded goodwill of $23,101, representing the amount previously transferred to ATS.

Initial Public Offering

        In June 2017, the Company completed its initial public offering ("IPO") of 71,724,139 shares of its Class A common stock (12,068,966 shares sold by the Company and 59,655,173 shares sold by existing stockholders) at a price to the public of $30.00 per share, including the underwriters full exercise of their option to purchase 7,781,110 shares to cover overallotments. At the date of the IPO, Altice N.V. owned approximately 70.2% of the Company's issued and outstanding common stock, which represented approximately 98.2% of the voting power of the Company's outstanding common stock. The Company's Class A common stock began trading on June 22, 2017, on the New York Stock Exchange under the symbol "ATUS".

        In connection with the sale of its Class A common stock, the Company received proceeds of approximately $362,069, before deducting the underwriting discount and expenses directly related to the issuance of the securities of $12,998. The Company did not receive any proceeds from the sale of shares by the selling stockholders. In July 2017, the Company used approximately $350,120 of the proceeds to fund the redemption of $315,779 principal amount of 10.875% senior notes that mature in 2025 issued by CSC Holdings, an indirect wholly-owned subsidiary of the Company, and the related call premium of approximately $34,341.

        The following organizational transactions were consummated prior to the IPO:

F-46


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 1. DESCRIPTION OF BUSINESS AND RELATED MATTERS (Continued)

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 ("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"), and together with the Cablevision NY Group Class A common stock, the "Shares" other than 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

F-47


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 1. DESCRIPTION OF BUSINESS AND RELATED MATTERS (Continued)


"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 Consideration 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 bore interest at 10.75% and $875,000 bore interest at 11%. See Note 9 for a discussion regarding the conversion of these notes payable to shares of the Company's common stock prior to the consummation of the IPO.

        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., though a subsidiary, acquired approximately 70% of the total outstanding equity interests in Cequel (the "Cequel Acquisition") from the direct and indirect stockholders of Cequel Corporation (the "Sellers"). The consideration for the acquired equity interests, which was based on a total equity valuation for 100% of the capital and voting rights of Cequel, was $3,973,528, including $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

F-48


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 1. DESCRIPTION OF BUSINESS AND RELATED MATTERS (Continued)

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.

Altice N.V. Distribution

        On January 8, 2018, Altice N.V. announced plans for the separation of the Company from Altice N.V. Altice N.V. will distribute substantially all of its equity interest in the Company through a distribution in kind to holders of Altice N.V.'s common shares A and common shares B (the "Distribution"). Following the Distribution, Altice N.V. will no longer own a controlling equity interest in the Company, and the Company will operate independently from Altice N.V.

        The implementation of the Distribution is expected to be subject to certain conditions precedent being satisfied or waived. Although Altice N.V. and the Company have not yet negotiated the final terms of the Distribution and related transactions, the Company expects that the following will be conditions to the Distribution:

        Prior to Altice N.V.'s announcement of the Distribution, the Board of Directors of Altice USA, acting through its independent directors, approved in principle the payment of the Pre-Distribution Dividend to all shareholders immediately prior to completion of the separation. Formal approval of the Pre-Distribution Dividend and setting of a record date are expected to occur in the second quarter of 2018. The payment of the Pre-Distribution Dividend will be funded with available Cablevision revolving facility capacity and available cash from new financings, completed in January 2018, at CSC Holdings LLC, a wholly-owned subsidiary of Cablevision. In addition, the Board of Directors of Altice USA has authorized a share repurchase program of $2.0 billion, effective following completion of the separation.

F-49


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 1. DESCRIPTION OF BUSINESS AND RELATED MATTERS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Summary of Significant Accounting Policies

Revenue Recognition

Residential Services

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

        The Company is assessed non-income related taxes by governmental authorities, including franchising authorities (generally under multi-year agreements), and collects such taxes from its customers. In instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities are recorded as programming and other direct costs and amounts received from the customers are recorded as revenue. For the years ended December 31, 2017 and 2016, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $259,075 and $154,732, respectively.

Business and Wholesale Services

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

F-50


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

Advertising

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

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

Other

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

Contract Assets

        Incremental costs incurred in obtaining a contract with a customer are deferred and recorded as a contract asset if the period of benefit is expected to be greater than one year. Sales commissions for enterprise and certain SMB customers are deferred and amortized over the average contract term. For sales commission expenses related to residential and SMB customers with a term of one year or less, the Company is utilizing the practical expedient and is recognizing the costs when incurred. Cost of

F-51


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

fulfilling a contract with a customer are deferred and recorded as a contract asset if they generate or enhance resources of the Company that will be used in satisfying future performance obligations and are expected to be recovered. Installation costs related to residential and SMB customers that are not capitalized as part of the initial deployment of new customer premise equipment are expensed as incurred pursuant to industry-specific guidance.

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

 
  December 31,  
 
  2017   2016  

Contract assets(a)

  $ 24,329   $ 24,329  

Deferred revenue(b)

    117,679     103,996  

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

(b)
Deferred revenue represents payments received from customers for services that have yet to be provided and installation revenue which is deferred and recognized over the benefit period. The majority of the Company's deferred revenue represents payments for services for up to one month in advance from residential and SMB customers which is realized within the following month as services are performed.

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

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 contemporaneously 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.

F-52


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 pay television service represent fees paid to programming distributors to license the programming distributed to customers. This programming is acquired generally under multi-year distribution agreements, with rates usually based on the number of customers 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 statements of operations. Advertising costs amounted to $224,120 and $135,513 for the years ended December 31, 2017 and 2016, 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. Share-based compensation cost relates to awards of units in a carried unit plan and options.

        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 estimated the fair value of carried interest units using an option pricing model. Key inputs that were used in applying the option pricing method were total equity value, equity volatility,

F-53


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

risk free rate and time to liquidity event. The estimate of total equity value was determined using a combination of the income approach, which incorporated cash flow projections that were discounted at an appropriate rate, and the market approach, which involved applying a market multiple to the Company's projected operating results. The Company estimated volatility based on the historical equity volatility of comparable publicly-traded companies. Subsequent to the IPO, such subjective valuations and estimates were no longer necessary as the Company relied on the market price of the Company's common stock to determine the fair value of share-based compensation awards. See Note 13 to the consolidated financial statements for additional information about our share-based compensation.

        For stock option awards, the Company recognizes 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, the Company recognizes the compensation expense using a straight-line amortization method.

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.

F-54


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

        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 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

F-55


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

F-56


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

recognition guidance in GAAP and allowed the use of either the retrospective or cumulative effect transition method.

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

        In March 2017, the FASB issued ASU No. 2017-07 Compensation-Retirement Benefits (Topic 715). ASU No. 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. It also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and what component of net benefit cost is eligible for capitalization. ASU No. 2017-07 was adopted by the Company on January 1, 2018 and was applied retrospectively. As a result of the adoption, the Company reclassified the non-service cost components of the Company's pension expense for the years ended December 31, 2017 and 2016 from other operating expenses to other income (expense), net. The Company elected to apply the practical expedient which allowed it to reclassify amounts disclosed previously in the benefits plan note (Note 17 of the consolidated financial statements) as the basis for applying retrospective presentation for comparative periods, as the Company determined it was impracticable to disaggregate the cost components for amounts capitalized and amortized in those periods. See Note 20 for information on the impact of the adoption of ASU No. 2017-07.

        In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 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 became effective for the Company on January 1, 2017. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value were 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 were applied prospectively. The Company elected to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using the prospective transition method. In connection with the adoption on January 1, 2017, a deferred tax asset of approximately $310,771 for previously unrealized excess tax benefits was recognized with the offset recorded to accumulated deficit.

Recently Issued But Not Yet Adopted Accounting Pronouncements

        In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other

F-57


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive Income. The primary provision of ASU No. 2018-02 allows for the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. ASU 2018-02 also requires certain disclosures about stranded tax effects. ASU No. 2018-02 is effective for the Company on January 1, 2019, with early adoption permitted and will be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.

        In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718). ASU No. 2017-09 provides clarity and guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU No. 2017-09 is effective for the Company on January 1, 2018 and will be applied prospectively.

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

        In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business, which amends Topic 805 to interpret the definition of a business by adding guidance to assist in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new guidance is effective for the Company on January 1, 2018 and will be applied prospectively.

        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 is effective for the Company on January 1, 2018 and will be applied retrospectively. The Company does not believe that the adoption of ASU No. 2016-15 will have a material effect on its consolidated statements of cash flows.

        In February 2016, the FASB issued ASU No. 2016-02, Leases, which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance becomes effective for the Company on January 1, 2019 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 January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities.

F-58


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ASU No. 2016-01 modifies how entities measure certain equity investments and also modifies the recognition of changes in the fair value of financial liabilities measured under the fair value option. Entities will be required to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. For financial liabilities measured using the fair value option, entities will be required to record changes in fair value caused by a change in instrument-specific credit risk (own credit risk) separately in other comprehensive income. ASU No. 2016-01 is effective for the Company on January 1, 2018. The Company does expect the adoption of ASU No. 2016-01 to have any effect on its consolidated financial statements.

Common Stock of Altice USA

        At December 31, 2017, the Company had 246,982,292 shares of Class A common stock and 490,086,674 shares of Class B common stock, with a par value of $0.01, issued and outstanding. Each holder of Class A common stock has one vote per share while holders of Class B common stock have twenty-five votes per share. Class B shares can be converted to Class A common stock at anytime with a conversion ratio of one Class A common share for one Class B common share.

        At December 31, 2016, the Company had 100 shares of common stock, with a par value of $0.01, issued and outstanding.

Dividends and Distributions

        The Company may pay dividends on its capital stock only from net profits and surplus as determined under Delaware law. If dividends are paid on the Altice USA common stock, holders of the Altice USA Class A common stock and Altice USA Class B common stock are entitled to receive dividends, and other distributions in cash, stock or property, equally on a per share basis, except that stock dividends with respect to Altice USA Class A common stock may be paid only with shares of Altice USA Class A common stock and stock dividends with respect to Altice USA Class B common stock may be paid only with shares of Altice USA Class B common stock.

        The Company's indentures restrict the amount of dividends and distributions in respect of any equity interest that can be made.

        Prior to the Company's IPO, the Company declared and paid cash distributions to stockholders aggregating $839,700 in the second quarter of 2017. In 2016, the Company declared cash distributions of $445,176 of which $365,559 were paid in 2016 and $79,617 were paid in the first quarter of 2017.

Net Income (Loss) Per Share

        Basic net income (loss) per common share attributable to Altice USA stockholders is computed by dividing net income (loss) attributable to Altice USA stockholders by the weighted average number of common shares outstanding during the period. Diluted income per common share attributable to Altice USA stockholders reflects the dilutive effects of stock options. Diluted net loss per common share

F-59


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

attributable to Altice USA stockholders excludes the effects of common stock equivalents as they are anti-dilutive. The weighted average number of shares used to compute basic and diluted net income (loss) per share reflect the retroactive impact of the organizational transactions, discussed in Note 1, that occurred prior to the Company's IPO.

        The following table presents a reconciliation of weighted average shares used in the calculation of the basic and diluted net income per share attributable to Altice USA stockholders for the year ended December 31, 2017:

Basic weighted average shares outstanding

    696,055,000  

Effect of dilution:

       

Stock options

     

Diluted weighted average shares outstanding

    696,055,000  

        Anti-dilutive shares totaling approximately 14,000 shares, have been excluded from diluted weighted average shares outstanding for the year ended December 31, 2017.

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 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 years ended December 31, 2017 and 2016, or 10% or more of its consolidated net trade receivables at December 31, 2017 and 2016, respectively.

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.

Reclassifications

        Certain reclassifications have been made to the 2016 financial statements to conform to the 2017 presentation.

F-60


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 3. BUSINESS COMBINATIONS

ATS Acquisition

        As the ATS acquisition discussed in Note 1 is a combination of businesses under common control, the Company combined the results of operations and related assets and liabilities of ATS for all periods since its commencement of operations in April 2017. See Note 20 for the impact of the ATS Acquisition on the Company's consolidated balance sheet and statement of operations as of and for the year ended December 31, 2017.

Cablevision Acquisition

        As discussed in Note 1, the Company completed the Cablevision Acquisition on June 21, 2016. The acquisition was accounted for as a business combination in accordance with ASC Topic 805. Accordingly, the Company recorded the fair value of the assets and liabilities assumed at the date of acquisition.

        The following table provides the allocation of the total purchase price of $9,958,323 to the identifiable tangible and intangible assets and liabilities of Cablevision based on their respective fair values. The remaining useful lives represent the period over which acquired tangible and intangible assets with a finite life are being depreciated or amortized.

 
  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.

F-61


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 3. BUSINESS COMBINATIONS (Continued)

        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 pay television, broadband, and telephony; 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 property, plant and equipment along with assumptions regarding the age and estimated useful lives of 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 date.

        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.

F-62


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 3. BUSINESS COMBINATIONS (Continued)

        The following table presents the unaudited pro forma revenue and net loss for the period presented as if the Cablevision Acquisition had occurred on January 1, 2016:

 
  Year Ended
December 31, 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 Cablevision Acquisition, 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 and the accretion/amortization of fair value adjustments associated with the long-term debt acquired.

Other Acquisitions

        In connection with certain acquisitions completed in the first and fourth quarters of 2017, the Company recorded amortizable intangibles of $45,000 relating to customer relationships and $9,400 relating to other amortizable intangibles. The Company recorded goodwill of $23,948, which represents the excess of the estimated purchase price of approximately $80,000 (based on current probability of contingent consideration) over the net book value of assets acquired. These values are 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 acquired entities are included in the Cablevision segment.

F-63


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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

(Unaudited)

(See Note 20)

NOTE 4. SUPPLEMENTAL CASH FLOW INFORMATION

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

 
  Years Ended December 31,  
 
  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

    171,604     155,653  

Distributions declared but not paid

        79,617  

Leasehold improvements paid by landlord

    3,998      

Notes payable to vendor

    40,131     12,449  

Capital lease obligations

    9,385      

Deferred financing costs accrued but unpaid

        2,570  

Supplemental Data:

   
 
   
 
 

Cash interest paid

   
1,765,126
   
1,192,370
 

Income taxes paid, net

    29,006     1,538  

NOTE 5. RESTRUCTURING AND OTHER EXPENSE

Restructuring

        Beginning in the first quarter of 2016, the Company commenced its restructuring initiatives (the "2016 Restructuring Plan") that are intended to simplify the Company's organizational structure.

        The following table summarizes the activity for the 2016 Restructuring Plan:

 
  Severance and
Other Employee
Related Costs
  Facility
Realignment and
Other Costs
  Total  

Restructuring charges incurred in 2016

  $ 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  

Restructuring charges

    142,679     7,243     149,922  

Payments and other

    (131,324 )   (6,014 )   (137,338 )

Accrual balance at December 31, 2017

  $ 113,474   $ 9,626   $ 123,100  

        Cumulative costs to date relating to the 2016 Restructuring Plan amounted to $309,297 and $67,202 for our Cablevision segment and Cequel segment, respectively.

F-64


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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

(Unaudited)

(See Note 20)

NOTE 5. RESTRUCTURING AND OTHER EXPENSE (Continued)

Transaction Costs

        For the year ended December 31, 2017, the Company incurred transaction costs of $2,479 related to the acquisition of a business during the first quarter of 2017 and other transactions. For the year ended December 31, 2016, the Company incurred transaction costs of $13,845, related to the acquisitions of Cablevision and Cequel.

NOTE 6. 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 pay television, broadband or telephony 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 pay television, broadband or telephony 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 3-5 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.

F-65


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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

(Unaudited)

(See Note 20)

NOTE 6. PROPERTY, PLANT AND EQUIPMENT (Continued)

        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,
2017
  December 31,
2016
  Estimated
Useful Lives

Customer premise equipment

  $ 1,093,726   $ 871,049   3 to 5 years

Headends and related equipment

    1,626,293     1,482,631   4 to 25 years

Infrastructure

    4,003,845     3,740,494   3 to 25 years

Equipment and software

    918,298     735,012   3 to 10 years

Construction in progress (including materials and supplies)

    240,496     84,321    

Furniture and fixtures

    52,545     45,576   5 to 12 years

Transportation equipment

    138,147     135,488   5 to 10 years

Buildings and building improvements

    394,421     390,337   10 to 40 years

Leasehold improvements

    108,071     104,309   Term of lease

Land

    47,563     47,715    

    8,623,405     7,636,932    

Less accumulated depreciation and amortization

    (2,599,579 )   (1,039,297 )  

  $ 6,023,826   $ 6,597,635    

        For the years ended December 31, 2017 and December 31, 2016, the Company capitalized certain costs aggregating $151,646 and $75,804, 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 years ended December 31, 2017 and 2016 amounted to $1,588,764 and $1,046,896, respectively.

        The gross amount of buildings and equipment and related accumulated depreciation recorded under capital leases is presented below:

 
  December 31,  
 
  2017   2016  

Buildings and equipment

  $ 48,936   $ 53,833  

Less accumulated depreciation

    (12,972 )   (6,306 )

  $ 35,964   $ 47,527  

NOTE 7. OPERATING LEASES

        The Company leases certain office, production, and transmission facilities, as well as office equipment, under terms of leases expiring at various dates through 2100. The leases generally provide for escalating rentals over the term of the lease plus certain real estate taxes and other costs or credits.

F-66


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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

(Unaudited)

(See Note 20)

NOTE 7. OPERATING LEASES (Continued)

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 years ended December 31, 2017 and 2016 amounted to $95,017 and $65,881, 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, 2018 through December 31, 2022, at rates now in force are as follows:

2018

  $ 74,992  

2019

    72,142  

2020

    69,203  

2021

    63,735  

2022

    55,234  

Thereafter

    140,406  

NOTE 8. INTANGIBLE ASSETS

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

 
  As of December 31, 2017   As of December 31, 2016    
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Net
Carrying
Amount
  Gross
Carrying
Amount
  Accumulated
Amortization
  Net
Carrying
Amount
  Estimated
Useful Lives

Customer relationships

  $ 5,970,884   $ (1,409,021 ) $ 4,561,863   $ 5,925,884   $ (580,276 ) $ 5,345,608   8 to 18 years

Trade names(a)

    1,067,083     (588,574 )   478,509     1,066,783     (83,397 )   983,386   2 to 5 years

Other amortizable intangibles

    37,060     (10,978 )   26,082     26,743     (3,093 )   23,650   1 to 15 years

  $ 7,075,027   $ (2,008,573 ) $ 5,066,454   $ 7,019,410   $ (666,766 ) $ 6,352,644    

(a)
On May 23, 2017, Altice N.V. announced the adoption of a global brand to replace the Company's brands in the future, reducing the remaining useful lives of these trade name intangibles to three years from the date of the adoption, which reflected one year as an in-use asset and two years as a defensive asset. In December 2017, the Company made a decision to postpone the adoption of a global brand that would have replaced the Optimum brand, increasing the useful life of the Optimum trade name intangible asset to 5 years.

        Amortization expense for the years ended December 31, 2017 and 2016 and aggregated $1,341,807 and $653,410, respectively.

F-67


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 8. INTANGIBLE ASSETS (Continued)

        The following table sets forth the estimated amortization expense on intangible assets for the periods presented:

Estimated amortization expense

       

Year Ending December 31, 2018

 
$

873,133
 

Year Ending December 31, 2019

    777,846  

Year Ending December 31, 2020

    696,240  

Year Ending December 31, 2021

    616,718  

Year Ending December 31, 2022

    537,100  

        The following table summarizes information relating to the Company's acquired indefinite-lived intangible assets as of December 31, 2017:

 
  As of December 31, 2017   As of December 31, 2016  
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total  

Cable television franchises

  $ 8,113,575   $ 4,906,506   $ 13,020,081   $ 8,113,575   $ 4,906,506   $ 13,020,081  

Goodwill

    5,866,120     2,153,741     8,019,861     5,838,959     2,153,741     7,992,700  

Total

  $ 13,979,695   $ 7,060,247   $ 21,039,942   $ 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  

Gross goodwill as of January 1, 2017

    7,992,700  

Goodwill recorded in connection with acquisitions in the first and fourth quarters of 2017 (Cablevision Segment)

    23,948  

Adjustments to purchase accounting relating to Cablevision Acquisition

    3,213  

Net goodwill as of December 31, 2017

  $ 8,019,861  

NOTE 9. DEBT

CSC Holdings Credit Facilities

        In connection with the Cablevision Acquisition, in October 2015, Finco , a wholly-owned subsidiary of the Company, which merged with and into CSC Holdings on June 21, 2016, entered into a senior secured credit facility, which provides U.S. dollar term loans currently in an aggregate principal amount of $3,000,000 ($2,985,000 outstanding at December 31, 2017) (the "CVC Term Loan Facility", and the term loans extended under the CVC Term Loan Facility, the "CVC Term Loans") and U.S. dollar

F-68


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 9. DEBT (Continued)

revolving loan commitments in an aggregate principal amount of $2,300,000 (the "CVC Revolving Credit Facility" and, together with the Term Loan Facility, the "CVC Credit Facilities"), which are governed by a credit facilities agreement entered into by, inter alios , CSC Holdings, certain lenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent and security agent (as amended, restated, supplemented or otherwise modified on June 20, 2016, June 21, 2016, July 21, 2016, September 9, 2016, December 9, 2016 and March 15, 2017, respectively, and as further amended, restated, supplemented or otherwise modified from time to time, the "CVC Credit Facilities Agreement").

        The amendment to the CVC Credit Facilities Agreement entered into on September 9, 2016, extended the maturity date of the CVC Term Loan Facility to October 11, 2024. 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 this amendment. 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 Term Loan Facility.

        The amendment to the CVC Credit Facilities Agreement entered into on March 15, 2017 ("Extension Amendment") increased the Term Loan by $500,000 to $3,000,000 and the maturity date for this facility was extended to July 17, 2025. The closing of the Extension Amendment occurred in April 2017 and the proceeds were used to refinance the entire $2,493,750 principal amount of existing Term Loans and redeem $500,000 of the 8.625% Senior Notes due September 2017 issued by Cablevision. In connection with the Extension Amendment and the redemption of the senior notes, the Company recorded a loss on extinguishment of debt and write-off of deferred financing costs aggregating $18,976.

        During the year ended December 31, 2017, CSC Holdings borrowed $1,350,000 under its revolving credit facility ($500,000 was used to make cash distributions to its stockholders) and made voluntary repayments aggregating $1,075,256 with cash on hand.

        Under the Extension Amendment, the Company is required to make scheduled quarterly payments equal to 0.25% (or $7,500) of the principal amount of the Term Loan, beginning with the fiscal quarter ended September 30, 2017, with the remaining balance scheduled to be paid on July 17, 2025.

        The CVC 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 November 30, 2021, unless the commitments under the CVC Revolving Credit Facility have been previously terminated.

F-69


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 9. DEBT (Continued)

        Loans comprising each eurodollar borrowing or alternate base rate 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 is:

    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.

        The CVC Credit Facilities Agreement requires the prepayment of outstanding CVC 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 fiscal year ending December 31, 2017, a pari ratable share (based on the outstanding principal amount of the Term Loans divided by the sum of the outstanding principal amount of all pari passu indebtedness and the Term Loans) of 50% of annual excess cash flow, 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.

        The obligations under the CVC Credit Facilities are guaranteed by each restricted subsidiary of CSC Holdings (other than CSC TKR, LLC and its subsidiaries and certain excluded subsidiaries) (the "Initial Guarantors") and, subject to certain limitations, will be guaranteed by each future material wholly-owned restricted subsidiary of CSC Holdings. The obligations under the CVC Credit Facilities (including any guarantees thereof) are secured on a first priority basis, subject to any liens permitted by the Credit Facilities, by capital stock held by CSC Holdings or any guarantor in certain subsidiaries of CSC Holdings, subject to certain exclusions and limitations.

        The CVC Credit Facilities Agreement includes certain negative covenants which, among other things and subject to certain significant exceptions and qualifications, limit CSC Holdings' ability and the ability of its restricted subsidiaries to: (i) incur or guarantee additional indebtedness, (ii) make investments, (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 addition, the CVC Revolving Credit Facility includes a financial maintenance covenant solely for the benefit of the lenders under the CVC Revolving Credit Facility consisting of a maximum consolidated net senior secured leverage ratio of CSC Holdings and its restricted subsidiaries of 5.0 to 1.0. The financial covenant will be tested on the last day of any fiscal quarter, but only if on such day there are outstanding borrowings under the CVC 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 CVC Credit Facilities Agreement also contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, an event of default upon a change of control). If an event of default occurs, the lenders under the CVC Credit Facilities

F-70


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 9. DEBT (Continued)

will be entitled to take various actions, including the acceleration of amounts due under the CVC Credit Facilities and all actions permitted to be taken by a secured creditor.

        CSC Holdings was in compliance with all of its financial covenants under the CVC Credit Facilities as of December 31, 2017.

Cequel Credit Facilities

        On June 12, 2015, Altice US Finance I Corporation, an indirect wholly-owned subsidiary of Cequel, entered into a senior secured credit facility which currently provides term loans in an aggregate principal amount of $1,265,000 ($1,258,675 outstanding at December 31, 2017) (the "Cequel Term Loan Facility" and the term loans extended under the Cequel Term Loan Facility, the "Cequel Term Loans") and revolving loan commitments in an aggregate principal amount of $350,000 (the "Cequel Revolving Credit Facility" and, together with the Cequel Term Loan Facility, the "Cequel Credit Facilities") which are governed by a credit facilities agreement entered into by, inter alios, Altice US Finance I Corporation, certain lenders party thereto and JPMorgan Chase Bank, N.A. (as amended, restated, supplemented or otherwise modified on October 25, 2016, December 9, 2016 and March 15, 2017, and as further amended, restated, supplemented or modified from time to time, the "Cequel Credit Facilities Agreement").

        The amendment to the Cequel Credit Facilities Agreement entered into on March 15, 2017 ("Cequel Extension Amendment") increased the Term Loan by $450,000 to $1,265,000 and the maturity date for this facility was extended to July 28, 2025. The closing of the Extension Amendment occurred in April 2017 and the proceeds were used to refinance the entire $812,963 principal amount of loans under the Term Loan and redeem $450,000 of the 6.375% Senior Notes due September 15, 2020. In connection with the Cequel Extension Amendment and the redemption of the senior notes, the Company recorded a loss on extinguishment of debt and write-off of deferred financings costs aggregating $28,684.

        Under the Cequel Extension Amendment, the Company is required to make scheduled quarterly payments equal to 0.25% (or $3,163) of the principal amount of the Cequel Term Loan, beginning with the fiscal quarter ended September 30, 2017, with the remaining balance scheduled to be paid on July 28, 2025.

        Loans comprising each eurodollar borrowing or alternate base rate 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 is:

    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.

F-71


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 9. DEBT (Continued)

        The Cequel Credit Facilities Agreement requires the prepayment of 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) a pari ratable share (based on the outstanding principal amount of the Cequel Term Loans divided by the sum of the outstanding principal amount of all pari passu indebtedness and the Cequel Term Loans) of 50% of annual excess cash flow, which will be reduced to 0% if the consolidated net senior secured leverage ratio is less than or equal to 4.5:1.

        The debt under the Cequel Credit Facility is secured by a first priority security interest in the capital stock of Cequel Communications, LLC and substantially all of the present and future assets of Cequel Communications, LLC and its restricted subsidiaries, and is guaranteed by Cequel Communications Holdings II, LLC, an indirect subsidiary of Cequel (the "Parent Guarantor"), as well as all of Cequel Communications, LLC's existing and future direct and indirect subsidiaries, subject to certain exceptions set forth in the Cequel Credit Facilities Agreement.

        The Cequel Credit Facilities Agreement contains customary representations, warranties and affirmative covenants. In addition, the Cequel Credit Facilities Agreement contains restrictive covenants that limit, among other things, the ability of Cequel Communications, LLC 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 Facilities Agreement also contains a maximum senior secured leverage maintenance covenant of 5.0 to 1.0. Additionally, the Cequel Credit Facilities 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.

        As of December 31, 2017, Cequel was in compliance with all of its financial covenants under the Cequel Credit Facilities Agreement.

F-72


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 9. DEBT (Continued)

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

 
   
   
   
  Carrying Amount(a)  
 
  Maturity Date   Interest
Rate
  Principal   December 31,
2017
  December 31,
2016
 

CSC Holdings Restricted Group:

                             

Revolving Credit Facility(b)

  $20,000 on October 9, 2020, remaining balance on November 30, 2021     4.75 % $ 450,000   $ 425,488   $ 145,013  

Term Loan Facility

  July 17, 2025     3.74 %   2,985,000     2,967,818     2,486,874  

Cequel:

                             

Revolving Credit Facility(c)

  November 30, 2021                  

Term Loan Facility

  July 28, 2025     3.82 %   1,258,675     1,250,217     812,903  

            $ 4,693,675     4,643,523     3,444,790  

Less: Current portion

                    42,650     33,150  

Long-term debt

                  $ 4,600,873   $ 3,411,640  

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

(b)
At December 31, 2017, $115,973 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $1,734,027 of the facility was undrawn and available, subject to covenant limitations.

(c)
At December 31, 2017, $13,500 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $336,500 of the facility was undrawn and available, subject to covenant limitations.

F-73


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 9. DEBT (Continued)

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

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

 
   
   
   
   
  Carrying Amount(a)  
Issuer
  Date Issued   Maturity Date   Interest
Rate
  Principal
Amount
  December 31,
2017
  December 31,
2016
 

Senior notes:

                                 

CSC Holdings(b)(f)(n)

  February 6, 1998   February 15, 2018     7.875 % $ 300,000   $ 301,184   $ 310,334  

CSC Holdings(b)(f)

  July 21, 1998   July 15, 2018     7.625 %   500,000     507,744     521,654  

CSC Holdings(c)(f)

  February 12, 2009   February 15, 2019     8.625 %   526,000     541,165     553,804  

CSC Holdings(c)(f)

  November 15, 2011   November 15, 2021     6.750 %   1,000,000     960,146     951,702  

CSC Holdings(c)(f)

  May 23, 2014   June 1, 2024     5.250 %   750,000     660,601     650,193  

CSC Holdings (e)

  October 9, 2015   January 15, 2023     10.125 %   1,800,000     1,777,914     1,774,750  

CSC Holdings (e)(l)

  October 9, 2015   October 15, 2025     10.875 %   1,684,221     1,661,135     1,970,379  

Senior guaranteed notes:

                                 

CSC Holdings (e)

  October 9, 2015   October 15, 2025     6.625 %   1,000,000     986,717     985,469  

CSC Holdings (g)

  September 23, 2016   April 15, 2027     5.500 %   1,310,000     1,304,468     1,304,025  

Senior notes:

                                 

Cablevision (k)(o)

  September 23, 2009   September 15, 2017     8.625 %           926,045  

Cablevision(c)(f)(n)(o)

  April 15, 2010   April 15, 2018     7.750 %   750,000     754,035     767,545  

Cablevision(c)(f)(o)

  April 15, 2010   April 15, 2020     8.000 %   500,000     492,009     488,992  

Cablevision(c)(f)(o)

  September 27, 2012   September 15, 2022     5.875 %   649,024     572,071     559,500  

Senior notes:

                                 

Cequel Communications Holdings I and Cequel Capital(d)(m)(p)

  Oct. 25, 2012 Dec. 28, 2012   September 15, 2020     6.375 %   1,050,000     1,027,493     1,457,439  

Cequel Communications Holdings I and Cequel

  May 16, 2013   December 15, 2021     5.125 %   1,250,000     1,138,870     1,115,767  

Capital(d)(p)

  Sept. 9, 2014                              

Cequel Communications Holdings I and Cequel Capital(i)(p)

  June 12, 2015   July 15, 2025     7.750 %   620,000     604,374     602,925  

Senior secured notes:

                                 

Altice US Finance I Corporation(h)(p)

  June 12, 2015   July 15, 2023     5.375 %   1,100,000     1,082,482     1,079,869  

Altice US Finance I Corporation (j)(p)

  April 26, 2016   May 15, 2026     5.500 %   1,500,000     1,488,024     1,486,933  

                $ 16,289,245     15,860,432     17,507,325  

Less: Current portion

                        507,744     926,045  

Long-term debt

                      $ 15,352,688   $ 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.

F-74


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 9. DEBT (Continued)

(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 $34,341 which 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.

(n)
As a result of the repayment of these notes in February 2018, discussed in Note 20, the carrying amount of these Notes has been classified as long-term indebtedness.

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

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

F-75


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 9. DEBT (Continued)

        The indentures under which the senior notes and debentures were issued contain various covenants. The Company was in compliance with all of its financial covenants under these indentures as of December 31, 2017.

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 CVC Term Credit Facility that were not extended pursuant to the extension amendment on September 9, 2016. 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

F-76


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 9. DEBT (Continued)

events of default. If an event of default occurs, the obligations under the Cablevision Acquisition Notes may be accelerated.

        As of December 31, 2017, Cablevision and CSC Holdings were in compliance with all of its financial covenants under the indentures under which the senior notes and debentures and senior 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 "Cequel 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 Cequel 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 Cequel 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 "Cequel 2026 Senior Secured Notes"). The proceeds from the sale were used to repay the $1,477,200 remaining balance under the previous credit facility and to pay related fees and expenses. The Cequel 2026 Senior Secured Notes mature on May 15, 2026 and bear interest at a rate of 5.50% annually. Interest on the Cequel 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 Cequel 2025 Senior Notes, the proceeds from which were placed in escrow, to finance a portion of the purchase price for the Cequel Acquisition. The Cequel 2025 Senior Notes were issued by the Cequel 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 Cequel 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 Cequel 2025 Senior Notes Issuer merged into Cequel, the Cequel 2025 Senior Notes became the obligations of Cequel and Cequel Capital Corporation became the co-issuer of the Cequel 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

F-77


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 9. DEBT (Continued)

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 Cequel 2025 Senior Notes at Cequel during the second quarter of 2016.

        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 and related parties aggregating $1,750,000, of which $875,000 bore interest at 10.75% and matured on December 20, 2023 and $875,000 bore interest at 11% and matured on December 20, 2024.

        As discussed in Note 1, in connection with the Company's IPO, the Company converted the notes payable to affiliates and related parties (together with accrued and unpaid interest of $529 and applicable premium of $513,723) into shares of the Company's common stock at the IPO price. The premium was recorded as a loss on extinguishment of debt on the Company's statement of operations for the year ended December 31, 2017. In connection with the conversion of the notes, the Company recorded a credit to paid in capital of $2,264,252.

        For the year ended December 31, 2017 and 2016, the Company recognized interest expense of $90,405 and $102,557 related to these notes prior to their conversion.

Summary of Debt Maturities

        The future maturities of debt payable by the Company under its various debt obligations outstanding as of December 31, 2017, including notes payable, collateralized indebtedness (see Note 10), and capital leases, are as follows:

Years Ending December 31,
  Cablevision   Cequel   Total  

2018

  $ 1,619,094   $ 16,518   $ 1,635,612  

2019

    565,604     18,310     583,914  

2020

    552,902     1,062,713     1,615,615  

2021

    2,921,269     1,262,723     4,183,992  

2022

    680,700     12,734     693,434  

Thereafter

    9,380,513     4,416,270     13,796,783  

F-78


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 9. DEBT (Continued)

        The amounts in the table above do not include the effects of the debt transactions discussed in Note 20.

NOTE 10. DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS

Prepaid Forward Contracts

        The Company has entered into various transactions to limit the exposure against equity price risk on its shares of Comcast Corporation ("Comcast") common stock. The Company has monetized all of its stock holdings in Comcast through the execution of prepaid forward contracts, collateralized by an equivalent amount of the respective underlying stock. At maturity, the contracts provide for the option to deliver cash or shares of Comcast stock with a value determined by reference to the applicable stock price at maturity. These contracts, at maturity, are expected to offset declines in the fair value of these securities below the hedge price per share while allowing the Company to retain upside appreciation from the hedge price per share to the relevant cap price.

        The Company received cash proceeds upon execution of the prepaid forward contracts discussed above which has been reflected as collateralized indebtedness in the accompanying consolidated balance sheets. In addition, the Company separately accounts for the equity derivative component of the prepaid forward contracts. These equity derivatives have not been designated as hedges for accounting purposes. Therefore, the net fair values of the equity derivatives have been reflected in the accompanying consolidated balance sheets as an asset or liability and the net increases or decreases in the fair value of the equity derivative component of the prepaid forward contracts are included in gain (loss) on derivative contracts in the accompanying consolidated statements of operations.

        All of the Company's monetization transactions are obligations of its wholly-owned subsidiaries that are not part of CSC Holdings' 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, 2017, the Company did not have an early termination shortfall relating to any of these contracts.

        The Company monitors the financial institutions that are counterparties to its equity derivative contracts. All of the counterparties to such transactions carry investment grade credit ratings as of December 31, 2017.

Put/Call Options

        In the third quarter of 2017, the Company entered into a put-call contract that expired in the third quarter of 2018 whereby the Company sold a put option and purchased a call option with the same strike price. These put-call options were settled as of December 31, 2017 and the Company recorded a loss of $97,410 for the year ended December 31, 2017, which represents the difference between the strike price and the closing price of the underlying shares.

F-79


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 10. DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS (Continued)

Interest Rate Swap Contracts

        In June 2016, the Company entered into two 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 Cequel 2026 Senior Secured Notes issued by Cequel 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 statements 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 Derivatives   Liability Derivatives  
Derivatives Not
Designated as Hedging
Instruments
  Balance Sheet Location   Fair Value at
December 31,
2017
  Fair Value at
December 31,
2016
  Fair Value at
December 31,
2017
  Fair Value at
December 31,
2016
 

Prepaid forward contracts

  Derivative contracts, current   $ 52,545   $ 352   $ (52,545 ) $ (13,158 )

Prepaid forward contracts

  Derivative contracts, long-term         10,604     (109,504 )    

Interest rate swap contracts

  Liabilities under derivative contracts, long-term             (77,902 )   (78,823 )

      $ 52,545   $ 10,956   $ (239,951 ) $ (91,981 )

        Loss related to the Company's derivative contracts related to the Comcast common stock for the years ended December 31, 2017 and 2016 of $(138,920) and $(53,696), respectively, are reflected in gain (loss) on derivative contracts, net in the Company's consolidated statements of operations.

        For the years ended December 31, 2017 and 2016, the Company recorded a gain on investments of $237,354 and $141,896, respectively, primarily representing the net increase in the fair values of the investment securities pledged as collateral.

        For the years ended December 31, 2017 and 2016, the Company recorded a gain (loss) on interest rate swap contracts of $5,482 and $(72,961), respectively.

F-80


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 10. DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS (Continued)

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 during the year ended December 31, 2017:

Number of shares(a)

    26,815,368  

Collateralized indebtedness settled

  $ (774,703 )

Derivatives contracts settled

    (56,356 )

    (831,059 )

Proceeds from new monetization contracts

    838,794  

Net cash proceeds

  $ 7,735  

(a)
Share amounts are adjusted for the 2 for 1 stock split in February 2017.

        The cash to settle the collateralized indebtedness 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 April 2017, the Company entered into new monetization contracts related to 32,153,118 shares of Comcast common stock held by Cablevision, which synthetically reversed the existing contracts related to these shares (the "Synthetic Monetization Closeout"). As the existing collateralized debt matures, the Company will settle the contracts with proceeds received from the new monetization contracts. The new monetization contracts mature on April 28, 2021. The new monetization contracts provide the Company with downside protection below the hedge price of $35.47 and upside benefit of stock price appreciation up to $44.72 per share. In connection with the execution of these contracts, the Company recorded (i) the fair value of the equity derivative contracts of $53,316 (in a net asset position), (ii) notes payable of $111,657, representing the fair value of the existing equity derivative contracts, in a liability position, and (iii) a discount on notes payable of $58,341.

NOTE 11. 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.

F-81


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 11. FAIR VALUE MEASUREMENT (Continued)

    Level II—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

    Level III—Instruments whose significant value drivers are unobservable.

        The following table presents for each of these hierarchy levels, the Company's financial assets and financial liabilities that are measured at fair value on a recurring basis:

 
  Fair Value
Hierarchy
  December 31,
2017
  December 31,
2016
 

Assets:

                 

Money market funds (of which $14,700 is classified as restricted cash as of December 31, 2016)

  Level I   $ 5,949   $ 100,139  

Investment securities pledged as collateral

  Level I     1,720,357     1,483,030  

Prepaid forward contracts

  Level II     52,545     10,956  

Liabilities:

                 

Prepaid forward contracts

  Level II     162,049     13,158  

Interest rate swap contracts

  Level II     77,902     78,823  

Contingent consideration related to 2017 acquisitions

  Level III     32,233      

        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.

        The fair value of the contingent consideration related to acquisitions in the first and fourth quarters of 2017 of $30,000 and $2,233, respectively, was estimated based on a probability assessment of attaining the targets. The estimated amount recorded as of December 31, 2017 is the full contractual amount for the first quarter acquisition and approximately 51% of the contractual amount for the acquisition that occurred in the fourth quarter.

F-82


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 11. FAIR VALUE MEASUREMENT (Continued)

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,
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     3,393,306     3,435,000     2,631,887     2,675,256  

Collateralized indebtedness

  Level II     1,349,474     1,305,932     1,286,069     1,280,048  

Senior guaranteed notes

  Level II     2,291,185     2,420,000     2,289,494     2,416,375  

Senior notes and debentures

  Level II     6,409,889     7,221,846     6,732,816     7,731,150  

Notes payable

  Level II     56,956     55,289     13,726     13,260  

Cablevision senior notes

  Level II     1,818,115     1,931,239     2,742,082     2,920,056  

Cequel debt instruments:

                             

Cequel credit facility

  Level II     1,250,217     1,258,675     812,903     815,000  

Senior secured notes

  Level II     2,570,506     2,658,930     2,566,802     2,689,750  

Senior notes

  Level II     2,770,737     2,983,615     3,176,131     3,517,275  

Notes payable

  Level II     8,946     8,946          

      $ 21,919,331   $ 23,279,472   $ 24,001,910   $ 25,896,046  

(a)
Amounts are net of unamortized deferred financing costs and discounts/premiums.

        The fair value estimates related to the Company's debt instruments presented above are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant

F-83


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 11. FAIR VALUE MEASUREMENT (Continued)

judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

NOTE 12. INCOME TAXES

        The Company files a federal consolidated and certain state combined income tax returns with its 80% or more owned subsidiaries.

        Income tax benefit attributable to the Company's operations for the years ended December 31, 2017 and 2016 consist of the following components:

 
  Years Ended December 31,  
 
  2017   2016  

Current expense (benefit):

             

Federal

  $ 5,261   $ (981 )

State

    12,530     5,310  

    17,791     4,329  

Deferred benefit:

             

Federal

    (2,095,930 )   (223,159 )

State

    (784,224 )   (40,830 )

    (2,880,154 )   (263,989 )

Tax benefit relating to uncertain tax positions

    11     (6 )

Income tax benefit

  $ (2,862,352 ) $ (259,666 )

F-84


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 12. INCOME TAXES (Continued)

        The income tax benefit attributable to the Company's operations differs from the amount derived by applying the statutory federal rate to pretax loss principally due to the effect of the following items:

 
  Years Ended December 31,  
 
  2017   2016  

Federal tax benefit at statutory rate

  $ (478,656 ) $ (381,901 )

State income taxes, net of federal impact

    (61,698 )   (39,336 )

Changes in the valuation allowance

    (111 )   297  

Impact of Federal Tax Reform

    (2,332,677 )    

Changes in the state rates used to measure deferred taxes, net of federal impact

    (12,896 )   153,239  

Tax benefit relating to uncertain tax positions

    (253 )   (120 )

Non-deductible share-based compensation related to the carried unit plan

    20,101     5,029  

Non-deductible Cablevision Acquisition transaction costs

        4,457  

Other non-deductible expenses

    3,405     1,551  

Other, net

    433     (2,882 )

Income tax benefit

  $ (2,862,352 ) $ (259,666 )

        Pursuant to the enactment of the Tax Cuts & Jobs Act ("Tax Reform") on December 22, 2017, the Company recorded a noncash deferred tax benefit of $2,332,677 to remeasure the net deferred tax liability to adjust for the reduction in the corporate federal income tax rate 35% to 21% which is effective on January 1, 2018. This adjustment results primarily from a decrease in the deferred tax liabilities with regard to fixed assets and intangibles, partially offset by a decrease in the deferred tax asset for the federal net operating loss carry forward ("NOL"). The noncash deferred tax benefit is provisional. Revised estimates and additional guidance regarding application of Tax Reform may require adjustments during the allowable measurement period.

        Overall, Tax Reform will have a favorable impact on the Company's income tax profile. Additional first-year depreciation deductions represent a significant timing benefit. Since Tax Reform only limits the deduction for NOLs arising in years beginning after December 31, 2017, the timing of the Company's deductions with regard to its existing NOLs is largely unaffected. The Company will be subject to Tax Reform's limitation on interest deductibility which is based on a limit calculated without regard to depreciation or amortization through 2021. The resulting interest deduction that is deferred, and can be carried forward indefinitely, is expected to fully reverse. However, as is the case with any future deductible temporary difference, management will evaluate realizability to determine whether a valuation allowance is required. Management does not expect that a valuation allowance will be required based on its preliminary estimate of the current facts and circumstances. Repeal of the alternative minimum tax will reduce projected tax payments in the short term while also providing for the refund of alternative minimum tax credits.

F-85


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 12. INCOME TAXES (Continued)

        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 noncash deferred income tax charge of $153,660.

        The tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance are as follows.

 
  December 31,  
 
  2017   2016  

Noncurrent

             

NOLs and tax credit carry forwards

  $ 785,809   $ 971,728  

Compensation and benefit plans

    49,698     93,939  

Partnership investments

    68,054     113,473  

Restructuring liability

    33,247     37,393  

Other liabilities

    40,149     45,561  

Liabilities under derivative contracts

    21,034     31,529  

Interest deferred for tax purposes

    128,516     39,633  

Other

    8,849     6,615  

Deferred tax asset

    1,135,356     1,339,871  

Valuation allowance

    (3,000 )   (3,125 )

Net deferred tax asset, noncurrent

    1,132,356     1,336,746  

Fixed assets and intangibles

    (5,729,274 )   (9,065,635 )

Investments

    (113,628 )   (187,795 )

Prepaid expenses

    (8,105 )   (10,172 )

Fair value adjustments related to debt and deferred financing costs

    (40,215 )   (30,535 )

Other

    (10,420 )   (14,109 )

Deferred tax liability, noncurrent

    (5,901,642 )   (9,308,246 )

Total net deferred tax liability

  $ (4,769,286 ) $ (7,971,500 )

        On January 1, 2017, the Company adopted ASU No. 2016-09 using the prospective transition method with respect to the presentation of excess tax benefits in the statement of cash flows. In connection with the adoption, a deferred tax asset of $310,771 for previously unrealized excess tax benefits related to share-based payment awards was recognized with the offset recorded to accumulated deficit.

        As of December 31, 2017, the Company's federal NOLs were approximately $2,676,000. The utilization of certain pre-merger NOLs of Cablevision and Cequel are limited pursuant to Internal

F-86


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 12. INCOME TAXES (Continued)

Revenue Code Section 382. The Company does not expect such limitations to impact the ability to utilize the NOLs prior to their expiration.

        As of December 31, 2017, the Company has $48,995 of alternative minimum tax credits which do not expire and $17,806 of research credits, expiring in varying amounts from 2023 through 2035.

        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 operations. 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

  $ 4,025  

Increases related to prior year tax positions

    11  

Balance at December 31, 2017

  $ 4,036  

        As of December 31, 2017, 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 $5,585.

        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. For the

F-87


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 12. INCOME TAXES (Continued)


year ended December 31, 2017, $659 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, Connecticut, 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. The State of New Jersey is presently auditing income tax returns for years 2013 through 2015.

        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.

NOTE 13. SHARE BASED COMPENSATION

Carry Unit Plan

        Certain employees of the Company and its affiliates received awards of units in a carry unit plan of Neptune Management LP, an entity which has an ownership interest in the Company. The awards generally 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 performance-based awards under the plan, 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 share-based compensation with respect to these awards at the end of each reporting period. The carry unit plan has 259,442,785 units authorized for issuance, of which 211,670,834 have been issued to employees of the Company and 11,300,000 have been issued to employees of Altice N.V. and affiliated companies as of December 31, 2017.

        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 LLC). Accordingly, the carry units are presented as temporary equity on the consolidated balance sheets 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 60 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

F-88


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 13. SHARE BASED COMPENSATION (Continued)

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 the Company's Class A common stock upon vesting.

        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. In addition these units are presented as temporary equity on our consolidated balance sheet at fair value. For carry unit awards granted in 2016, 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 was estimated using the historical weekly volatility of publicly traded comparable companies. The risk-free rate assumed 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 was based on Finnerty's (2012) average-strike put option model.

        For carry unit awards granted in the first and second quarter of 2017, the Company estimated the grant date fair value based on the value established in the Company's IPO.

        The following table summarizes activity relating to carry units:

 
  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

    (7,854,166 )       0.37  

Vested

    (44,420,833 )       0.41  

Balance, December 31, 2017

    168,550,001     10,000,000     0.71  

        The weighted average fair value per unit was $1.76 and $2.50 as of December 31, 2016 and December 31, 2017, respectively. For the years ended December 31, 2017 and 2016, the Company recognized an expense of $57,430 and $14,368, respectively, related to the push down of share-based compensation related to the carry unit plan of which approximately $55,258 and $9,849 related to units granted to employees of the Company and $2,172 and $4,519 related to employees of Altice N.V. and affiliated companies allocated to the Company.

Stock Option Plan

        In connection with the Company's IPO, the Company adopted the Altice USA 2017 Long Term Incentive Plan (the "2017 LTIP"). Under the 2017 LTIP, the Company may grant awards of options, restricted shares, restricted share units, stock appreciation rights, performance stock, performance stock

F-89


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 13. SHARE BASED COMPENSATION (Continued)

units and other awards. Under the 2017 LTIP, awards may be granted to officers, employees and consultants of the Company or any of its affiliates. The 2017 LTIP will be administered by the Company's Board of Directors (the "Board"), subject to the provision of the stockholders' agreement. The Board has delegated its authority to the Company's Compensation Committee. The Compensation Committee has the full power and authority to, among other things, select eligible participants, to grant awards in accordance with the 2017 LTIP, to determine the number of shares subject to each award or the cash amount payable in connection with an award and determine the terms and conditions of each award. The maximum aggregate number of shares that may be issued under the 2017 LTIP is 9,879,291. The Board has the authority to amend, suspend, or terminate the 2017 LTIP. No amendment, suspension or termination will be effective without the approval of the Company's stockholders if such approval is required under applicable laws, rules and regulations.

        On December 30, 2017, the Company granted 5,110,747 nonqualified stock options under the 2017 LTIP. The stock options were granted with an exercise price of $19.48, equal to the 30 day volume weighted average of the closing price of Class A common stock as of the grant date. Certain nonqualified stock options (2,730,949 awards) will vest 100% on December 21, 2020 and 2,379,798 awards will vest 50% on the second anniversary, 25% on the third anniversary and 25% on the fourth anniversary of the date of grant, generally subject to continued employment with the Company or any of its affiliates, and expire ten years from the date of grant.

        The Company calculated the fair value of each option award on the date of grant using the Black-Scholes valuation model. The Company's computation of expected life was determined based on the simplified method (the average of the vesting period and option term) due to the Company's lack of recent historical data for similar awards. 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 and the expected volatility of comparable publicly-traded companies who granted options that had similar expected lives.

        The following aggregate assumptions were used to calculate the fair values of stock option awards granted on December 30, 2017:

Risk-free interest rate

    2.30 %

Expected life (in years)

    6.44  

Dividend yield

    %

Volatility

    33.95 %

Grant date fair value

  $ 8.77  

F-90


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 14. AFFILIATE AND RELATED PARTY TRANSACTIONS

Equity Method Investments

        In July 2016, the Company completed the sale of a 75% interest in Newsday LLC ("Newsday") 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 method.

        At December 31, 2017 and 2016, the Company's 25% investment in Newsday and its 25% interest in i24NEWS, Altice N.V.'s 24/7 international news and current affairs channel aggregated $(2,649) and $5,606, respectively, and is included in investments in affiliates on our consolidated balance sheets. The operating results of Newsday and i24NEWS are recorded on the equity basis. For the years ended December 31, 2017 and 2016, the Company recorded equity in net loss of Newsday of $7,219 and $1,132, respectively, and equity in net loss of i24NEWS of $2,821 and $0, respectively.

Affiliate and Related Party Transactions

        As the transactions discussed below were conducted between subsidiaries of Altice N.V. under common control and equity method investees, 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:

 
  Years Ended December 31,  
 
  2017   2016  

Revenue

  $ 1,100   $ 1,086  

Operating expenses:

             

Programming and other direct costs

  $ (4,176 ) $ (1,947 )

Other operating expenses, net

    (33,140 )   (18,854 )

Operating expenses, net

    (37,316 )   (20,801 )

Interest expense (see Note 9)(a)

    (90,405 )   (112,712 )

Loss on extinguishment of debt and write-off of deferred financing costs (see Note 9)

    (513,723 )    

Net charges

  $ (640,344 ) $ (132,427 )

Capital Expenditures

  $ 22,012   $ 45,886  

(a)
The 2016 amount includes $10,155 related to Holdco Notes prior to the exchange in addition to the interest related to notes payable to affiliates and related parties discussed in Note 9.

F-91


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 14. AFFILIATE AND RELATED PARTY TRANSACTIONS (Continued)

Revenue

        The Company recognized revenue primarily from the sale of advertising to Newsday.

Programming and other direct costs

        Programming and other direct costs include 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

        Altice N.V. provides certain executive services, as well as consulting, advisory and other services, including, prior to the IPO, 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 $30,000 and $20,556, for the years ended December 31, 2017 and 2016, respectively. As of June 20, 2017, the CEO, CFO and COO became employees of the Company and the agreement was assigned to Altice N.V. by a subsidiary of Altice N.V. This agreement will be terminated upon the completion of the Distribution discussed in Note 1.

        Other operating expenses also include charges for services provided by other subsidiaries of Altice N.V. aggregating $4,057 and $887, respectively, net of a credit of $917 and $2,589 related to transition services provided to Newsday for the year ended December 31, 2017 and 2016, respectively.

Capital Expenditures

        Capital expenditures for the year ended December 31, 2017 include $17,434 of equipment purchased from Altice Labs S.A., and $4,578 of software development services, that were capitalized, from Altice Management International and other Altice N.V. subsidiaries.

        Capital expenditures for the year ended December 31, 2016 include $44,121 of equipment purchased 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.

F-92


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 14. AFFILIATE AND RELATED PARTY TRANSACTIONS (Continued)

        Aggregate amounts that were due from and due to related parties are summarized below:

 
  December 31,  
 
  2017   2016  

Due from:

             

Altice US Finance S.A.(a)

  $ 12,951   $ 12,951  

Newsday(b)

    2,713     6,114  

Altice Management Americas(b)

    33     3,117  

i24NEWS(b)

    4,036      

Other Altice N.V. subsidiaries(b)

    31      

  $ 19,764   $ 22,182  

Due to:

             

CVC 3BV(c)

  $   $ 71,655  

Neptune Holdings US LP(c)

        7,962  

Altice Management International(d)

        44,121  

Newsday(b)

    33     275  

Altice Labs S.A.(d)

    7,354     866  

Other Altice N.V. subsidiaries(e)

    3,611     2,484  

  $ 10,998   $ 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, 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/or software development services discussed above.

(e)
Represents amounts due to affiliates for services provided to the Company.

        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 of December 31, 2016, respectively, which is reflected in accrued interest in the Company's balance sheet. See discussion in Note 9.

        In the second quarter of 2017, prior to the Company's IPO, the Company declared and paid cash distributions aggregating $839,700 to stockholders, $500,000 of which were funded with proceeds from borrowings under CSC Holdings' revolving credit facility. In 2016, the Company declared cash distributions of $445,176, of which $365,559 were paid in 2016 and $79,617 were paid in the first quarter of 2017.

F-93


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 15. 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, 2017 are as follows:

 
  Payments Due by Period  
 
  Total   Year 1   Years 2 - 3   Years 4 - 5   More than
5 years
 

Off balance sheet arrangements:

                               

Purchase obligations(a)

  $ 8,427,609   $ 3,072,083   $ 4,181,199   $ 1,094,508   $ 79,819  

Guarantees(b)

    36,224     34,716     1,508          

Letters of credit(c)

    129,473     200     120     129,153      

Total

  $ 8,593,306   $ 3,106,999   $ 4,182,827   $ 1,223,661   $ 79,819  

(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 customers receiving the programming. Amounts reflected above related to programming agreements are based on the number of customers receiving the programming as of December 31, 2017 multiplied by the per customer rates or the stated annual fee, as applicable, contained in the executed agreements in effect as of December 31, 2017.

(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

        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 Cablevision, and as a result, those stations and networks were unavailable on Cablevision's cable

F-94


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 15. COMMITMENTS AND CONTINGENCIES (Continued)

television systems. On October 30, 2010, Cablevision and Fox reached an agreement on new affiliation agreements for these stations and networks, and carriage was restored. Several purported class action lawsuits alleging breach of contract, unjust enrichment, and consumer fraud and seeking unspecified compensatory damages, punitive damages and attorneys' fees were subsequently filed on behalf of Cablevision'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. On March 28, 2012, in ruling on Cablevision's motion to dismiss, the Court dismissed all of plaintiffs' claims, except for breach of contract. On March 30, 2014, the Court granted plaintiffs' motion for class certification. The parties have entered into a settlement agreement. The Court granted preliminary approval of the settlement agreement on January 8, 2018, and set a hearing for final approval on May 17, 2018. As of December 31, 2016, the Company had an estimated liability associated with a potential settlement totaling $5,200. During the year ended December 31, 2017, the Company recorded an additional liability of $800. The amount ultimately paid in connection with the proposed settlement could exceed the amount recorded.

        In October 2015, the New York Attorney General began an investigation into whether the major Internet Service Providers in New York State deliver advertised Internet speeds. The Company is cooperating with this investigation and is currently in discussions with the New York Attorney General about resolving the investigation as to the Company, which resolution may involve operational and/or financial components. While the Company is unable to predict the outcome of the investigation or these discussions, at this time it does not expect that the outcome will have a material adverse effect on its operations, financial conditions or cash flows.

        The Company receives notices from third parties and, in some cases, 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 matters 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.

F-95


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 16. 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 interest rate swap contracts, gain (loss) on 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:

 
  Year Ended December 31, 2017   Year Ended December 31, 2016  
 
  Cablevision   Cequel   Total   Cablevision   Cequel   Total  

Operating income

  $ 320,686   $ 520,322   $ 841,008   $ 78,008   $ 384,801   $ 462,809  

Share-based compensation

    42,060     15,370     57,430     9,164     5,204     14,368  

Restructuring and other expense

    112,384     40,017     152,401     212,150     28,245     240,395  

Depreciation and amortization (including impairments)

    2,251,710     678,861     2,930,571     963,665     736,641     1,700,306  

Adjusted EBITDA

  $ 2,726,840   $ 1,254,570   $ 3,981,410   $ 1,262,987   $ 1,154,891   $ 2,417,878  

(a)
Reflects operating results of Cablevision from the date of acquisition.

F-96


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 16. SEGMENT INFORMATION (Continued)

        A reconciliation of reportable segment amounts to the Company's consolidated balances are as follows:

 
  Year Ended
December 31,
 
 
  2017   2016  

Operating income for reportable segments

  $ 841,008   $ 462,809  

Items excluded from operating income:

             

Interest expense

    (1,603,132 )   (1,456,541 )

Interest income

    1,921     13,811  

Gain on investments, net

    237,354     141,896  

Loss on derivative contracts, net

    (236,330 )   (53,696 )

Gain (loss) on interest rate swap contracts

    5,482     (72,961 )

Loss on extinguishment of debt and write-off of deferred financing costs

    (600,240 )   (127,649 )

Other income (expense), net

    (13,651 )   1,186  

Loss before income taxes

  $ (1,367,588 ) $ (1,091,145 )

        The following table presents the composition of revenue by segment:

 
  Year Ended December 31, 2017   Year Ended December 31, 2016  
 
  Cablevision(a)   Cequel   Eliminations   Total   Cablevision(a)   Cequel   Total  

Residential:

                                           

Pay TV

  $ 3,175,097   $ 1,099,025   $   $ 4,274,122   $ 1,668,348   $ 1,120,525   $ 2,788,873  

Broadband

    1,649,771     958,824         2,608,595     817,160     834,414     1,651,574  

Telephony

    570,871     129,894         700,765     311,832     153,939     465,771  

Business services and wholesale

    922,691     375,522         1,298,213     468,632     350,909     819,541  

Advertising

    321,149     73,509     (2,792 )   391,866     163,678     88,371     252,049  

Other

    10,747     22,642         33,389     14,402     25,002     39,404  

Total Revenue

  $ 6,650,326   $ 2,659,416   $ (2,792 ) $ 9,306,950   $ 3,444,052   $ 2,573,160   $ 6,017,212  

(a)
Reflects revenue from the Cablevision Acquisition Date.

F-97


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 16. SEGMENT INFORMATION (Continued)

        Capital expenditures (cash basis) by reportable segment are presented below:

 
  Years Ended
December 31,
 
 
  2017   2016  
 
  As Adjusted
(See Note 20)

 

Cablevision

  $ 671,417   $ 298,357  

Cequel

    279,932     327,184  

  $ 951,349   $ 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.

NOTE 17. 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. The Company also maintained 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.

F-98


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 17. BENEFIT PLANS (Continued)

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, 2017 and 2016:

 
  December 31,  
 
  2017   2016  

Change in projected benefit obligation:

             

Projected benefit obligation at beginning of year

  $ 382,517   $ 403,963  

Interest cost

    11,786     14,077  

Actuarial loss (gain)

    13,171     (11,429 )

Curtailments

    6,332     3,968  

Settlements

    6,910      

Benefits paid

    (121,650 )   (28,062 )

Projected benefit obligation at end of year

    299,066     382,517  

Change in plan assets:

             

Fair value of plan assets at beginning of year

    284,118     297,846  

Actual return on plan assets, net

    6,356     5,829  

Employer contributions

    26,944     8,505  

Benefits paid

    (121,650 )   (28,062 )

Fair value of plan assets at end of year

    195,768     284,118  

Unfunded status at end of year

  $ (103,298 ) $ (98,399 )

        The accumulated benefit obligation for the Company's Defined Benefit Plans aggregated $299,066 and $382,517 at December 31, 2017 and 2016.

        The Company's net funded status relating to its Defined Benefit Plans at December 31, 2017 and 2016, is as follows:

 
  December 31,  
 
  2017   2016  

Defined Benefit Plans

  $ (103,298 ) $ (98,399 )

Less: Current portion related to nonqualified plans

    135     14,293  

Long-term defined benefit plan obligations

  $ (103,163 ) $ (84,106 )

F-99


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 17. BENEFIT PLANS (Continued)

        Components of the benefit costs, recorded in other income (expense), net, for the Defined Benefit Plans for the years ended December 31, 2017 and 2016, is as follows:

 
  Years Ended
December 31,
 
 
  2017   2016  

Interest cost

  $ 11,786   $ 6,946  

Expected return on plan assets, net

    (4,905 )   (3,880 )

Curtailment loss

    3,137     231  

Settlement loss (income) (reclassified from accumulated other comprehensive loss)(a)

    1,845     (154 )

Non-operating pension costs

  $ 11,863   $ 3,143  

(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 year ended December 31, 2017 and 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 pension costs (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:

 
  Benefit Costs   Benefit
Obligations at
December 31,
 
 
  For the
Year Ended
December 31, 2017
  For the Period
June 21, 2016 to
December 31, 2016
 
 
  2017   2016  

Discount rate(a)

    3.69 %   3.53 %   3.50 %   3.81 %

Rate of increase in future compensation levels

    %   %   %   %

Expected rate of return on plan assets (Pension Plan only)

    3.90 %   3.97 %   N/A     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 benefit costs in connection with the recognition of settlement losses discussed above.

F-100


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 17. BENEFIT PLANS (Continued)

        The discount rate used by the Company in calculating the benefit costs 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, 2017 and 2016 were as follows:

 
  Plan Assets at
December 31,
 
 
  2017   2016  

Asset Class:

             

Mutual funds

    32 %   43 %

Fixed income securities

    66     55  

Cash equivalents and other

    2     2  

    100 %   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 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

F-101


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 17. BENEFIT PLANS (Continued)

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, 2017 by asset class are as follows:

Asset Class
  Level I   Level II   Level III   Total  

Mutual funds

  $ 61,833   $   $   $ 61,833  

Fixed income securities held in a portfolio:

                         

Foreign issued corporate debt

        10,721         10,721  

U.S. corporate debt

        39,992         39,992  

Government debt

        4,645         4,645  

U.S. Treasury securities

        62,601         62,601  

Asset-backed securities

        10,978         10,978  

Other

                 

Cash equivalents(a)

    6,691     2,782         9,473  

Total(b)

  $ 68,524   $ 131,719   $   $ 200,243  

(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, 2017.

F-102


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 17. BENEFIT PLANS (Continued)

        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 during the periods indicated:

2018

  $ 96,482  

2019

    18,960  

2020

    14,052  

2021

    13,282  

2022

    13,792  

2023 - 2027

    69,369  

        The Company currently expects to contribute approximately $18,000 to the Pension Plan in 2018.

F-103


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 17. BENEFIT PLANS (Continued)

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 which was frozen on January 1, 2017 for which the Company provided a matching contribution similar to the Cablevision 401(k) Savings Plan. Applicable employees of the Company were 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.

        Through September 30, 2017, the Company also maintained a 401(k) plan for employees of Cequel. Cequel employees that qualified for participation were able to contribute a percentage of eligible annual compensation and the Company would make a matching cash contribution, as defined in the plan. During the fourth quarter of 2017, the Suddenlink 401(k) plan assets were transferred to the Cablevision 401(k) Savings Plan and the plan was renamed the Altice USA 401(k) Savings Plan.

        The cost associated with these plans (including the enhanced employer matching and discretionary contributions on 2016) was $27,577 and $28,501 for the years ended December 31, 2017 and 2016, respectively.

NOTE 18. ALLOWANCE FOR DOUBTFUL ACCOUNTS

        Activity related to the Company's allowance for doubtful accounts is presented below:

 
  Balance at
Beginning of
Period
  Provision
for Bad
Debt
  Deductions/
Write-Offs
and Other
Charges
  Balance at
End of
Period
 

Year Ended December 31, 2017

                         

Allowance for doubtful accounts

 
$

11,677
 
$

74,183
 
$

(72,440

)

$

13,420
 

Year Ended December 31, 2016

                         

Allowance for doubtful accounts

 
$

1,051
 
$

53,249
 
$

(42,623

)

$

11,677
 

F-104


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 19. INTERIM FINANCIAL INFORMATION (Unaudited)

        The following is a summary of the Company's selected quarterly financial data for the years ended December 31, 2017 and 2016:

 
  March 31,
2017
  June 30,
2017
  September 30,
2017
  December 31,
2017(a)
  Total
2017
 

Residential:

                               

Pay TV

  $ 1,083,878   $ 1,071,163   $ 1,069,946   $ 1,049,135   $ 4,274,122  

Broadband

    625,918     642,620     658,278     681,779     2,608,595  

Telephony

    180,961     178,261     172,479     169,064     700,765  

Business services and wholesale

    319,420     323,641     324,642     330,510     1,298,213  

Advertising

    83,361     97,501     89,292     121,712     391,866  

Other

    8,721     9,176     7,884     7,608     33,389  

Revenue

    2,302,259     2,322,362     2,322,521     2,359,808     9,306,950  

Operating expenses

    (2,052,149 )   (2,069,094 )   (2,201,946 )   (2,142,753 )   (8,465,942 )

Operating income

  $ 250,110   $ 253,268   $ 120,575   $ 217,055   $ 841,008  

Net income (loss)

  $ (76,188 ) $ (479,939 ) $ (192,434 ) $ 2,243,325   $ 1,494,764  

Net income attributable to noncontrolling interests

    (237 )   (365 )   (135 )   (850 )   (1,587 )

Net income (loss) attributable to Altice USA Inc.'s stockholders

  $ (76,425 ) $ (480,304 ) $ (192,569 ) $ 2,242,475   $ 1,493,177  

Basic and diluted net income (loss) per share attributable to Altice USA Inc.'s stockholders

  $ (0.12 ) $ (0.73 ) $ (0.26 ) $ 3.04   $ 2.15  

(a)
Pursuant to the enactment of the Tax Reform on December 22, 2017, the Company recorded a noncash deferred tax benefit of $2,332,677 to remeasure the net deferred tax liability to adjust for the reduction in the corporate federal income tax rate 35% to 21% which is effective on January 1, 2018.

F-105


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 19. INTERIM FINANCIAL INFORMATION (Unaudited) (Continued)

 
  March 31,
2016
  June 30,
2016
  September 30,
2016
  December 31,
2016
  Total
2016
 

Residential:

                               

Pay TV

  $ 279,736   $ 370,122   $ 1,066,019   $ 1,072,996   $ 2,788,873  

Broadband

    196,691     245,568     594,932     614,383     1,651,574  

Telephony

    39,735     55,855     185,834     184,347     465,771  

Business services and wholesale

    84,404     111,193     309,366     314,578     819,541  

Advertising

    20,887     29,843     90,555     110,764     252,049  

Other

    6,136     10,920     13,515     8,833     39,404  

Revenue

    627,589     823,501     2,260,221     2,305,901     6,017,212  

Operating expenses

    (573,329 )   (777,564 )   (2,115,955 )   (2,087,555 )   (5,554,403 )

Operating income

  $ 54,260   $ 45,937   $ 144,266   $ 218,346   $ 462,809  

Net loss

  $ (140,748 ) $ (282,129 ) $ (172,553 ) $ (236,049 ) $ (831,479 )

Net loss (income) attributable to noncontrolling interests

        364     (256 )   (659 )   (551 )

Net loss attributable to Altice USA, Inc. stockholders

  $ (140,748 ) $ (281,765 ) $ (172,809 ) $ (236,708 ) $ (832,030 )

Basic and diluted net loss per share attributable to Altice USA Inc.'s stockholders

  $ (0.22 ) $ (0.43 ) $ (0.27 ) $ (0.36 ) $ (1.28 )

        The Company's previously reported statements of cash flows for the three months ended March 31, 2017, the six months ended June 30, 2017 and the nine months ended September 30, 2017 reflected distributions to stockholders of $79,617 in cash provided by operating activities. These distributions should have been reflected in financing activities.

NOTE 20. CHANGE IN ACCOUNTING POLICIES AND ATS ACQUISITION

Adoption of ASC 606—Revenue from Contracts with Customers

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

F-106


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 20. CHANGE IN ACCOUNTING POLICIES AND ATS ACQUISITION (Continued)

Installation Services Revenue

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

Commission Expenses

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

Third Party Product Giveaways and Incentives

        When the Company acts as the agent in providing certain product giveaways or incentives, revenue is recorded net of the costs of the giveaways and incentives. For the periods prior to January 1, 2018, costs for the giveaways and incentives recorded in other operating expense have been reclassified to revenue.

Bundled Services

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

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

        On January 1, 2018, the Company adopted the guidance pursuant to ASU No. 2017-07. ASU No. 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. In connection with the adoption of ASU No. 2017-07, the Company

F-107


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 20. CHANGE IN ACCOUNTING POLICIES AND ATS ACQUISITION (Continued)

retroactively reclassified certain pension costs from other operating expenses to other income (expense), net.

Acquisition of Altice Technical Services US Corp

        In January 2018, the Company acquired 70% of the equity interests in Altice Technical Services US Corp. ("ATS") for $1.00 (the "ATS Acquisition") and the Company became the owner of 100% of the equity interests in ATS in March 2018. ATS was previously owned by Altice N.V. and a member of ATS's management through a holding company. As the acquisition is a combination of businesses under common control, the Company combined the results of operations and related assets and liabilities of ATS for all periods since its commencement of operations in April 2017, including goodwill of $23,101, representing the amount previously transferred to ATS.

        The adoption of ASU No. 2017-07 had no impact on the Company's consolidated balance sheet. The following table summarizes the impact of adopting ASC 606 and the impact of the ATS Acquisition on the Company's consolidated balance sheets:

 
  December 31, 2017   December 31, 2016  
 
  As
Reported
  Impact of
ASC 606
  Impact of ATS
Acquisition
  As
Adjusted
  As
Reported
  Impact of
ASC 606
  As
Adjusted
 

Cash and cash equivalents

  $ 273,329   $   $ 56,519   $ 329,848   $ 486,792   $   $ 486,792  

Other current assets

    580,231     14,068     (20,548 )   573,751     1,218,127     14,068     1,232,195  

Property, plant and equipment, net

    6,063,829         (40,003 )   6,023,826     6,597,635         6,597,635  

Goodwill

    7,996,760         23,101     8,019,861     7,992,700         7,992,700  

Other assets, long-term

    19,861,076     10,261     (6,541 )   19,864,796     20,178,995     10,261     20,189,256  

Total assets

  $ 34,775,225   $ 24,329   $ 12,528   $ 34,812,082   $ 36,474,249   $ 24,329   $ 36,498,578  

Current liabilities

    2,492,983     6,978     20,401     2,520,362     3,704,933     6,978     3,711,911  

Deferred tax liability

    4,775,115     4,685     (10,514 )   4,769,286     7,966,815     4,685     7,971,500  

Liabilities, long-term

    21,779,997         6,394     21,786,391     22,704,512         22,704,512  

Total liabilities

  $ 29,048,095   $ 11,663   $ 16,281   $ 29,076,039   $ 34,376,260   $ 11,663   $ 34,387,923  

Redeemable equity

    231,290             231,290     68,147         68,147  

Paid-in-capital

    4,642,128         23,101     4,665,229     3,003,554         3,003,554  

Retained earnings (accumulated deficit)

    854,824     12,666     (26,854 )   840,636     (975,978 )   12,666     (963,312 )

Total stockholders' equity

    5,495,840     12,666     (3,753 )   5,504,753     2,029,842     12,666     2,042,508  

Total liabilities and stockholders' equity

  $ 34,775,225   $ 24,329   $ 12,528   $ 34,812,082   $ 36,474,249   $ 24,329   $ 36,498,578  

F-108


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 20. CHANGE IN ACCOUNTING POLICIES AND ATS ACQUISITION (Continued)

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

 
  Year Ended December 31, 2017  
 
  As
Reported
  Impact of
ASC 606
  Impact of
ASU
No. 2017-07
  Impact of
ATS
Acquisition
  As
Adjusted
 

Residential

                               

Pay TV

  $ 4,214,745   $ 59,878   $   $ (501 ) $ 4,274,122  

Broadband

    2,563,772     45,192         (369 )   2,608,595  

Telephony

    823,981     (122,981 )       (235 )   700,765  

Business services and wholesale

    1,298,817     (604 )           1,298,213  

Advertising

    391,866                 391,866  

Other

    33,389                 33,389  

Total revenue

    9,326,570     (18,515 )       (1,105 )   9,306,950  

Programming and other direct costs

    3,035,655                 3,035,655  

Other operating expenses

    2,342,655     (18,515 )   (11,863 )   35,038     2,347,315  

Restructuring and other expense

    152,401                 152,401  

Depreciation and amortization

    2,930,475             96     2,930,571  

Operating income

    865,384         11,863     (36,239 )   841,008  

Other income (expense), net

    (2,196,733 )       (11,863 )       (2,208,596 )

Loss before income taxes

    (1,331,349 )           (36,239 )   (1,367,588 )

Income tax benefit

    2,852,967             9,385     2,862,352  

Net income

  $ 1,521,618   $   $   $ (26,854 ) $ 1,494,764  

F-109


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 20. CHANGE IN ACCOUNTING POLICIES AND ATS ACQUISITION (Continued)


 
  Year Ended December 31, 2016  
 
  As
Reported
  Impact of
ASC 606
  Impact of
ASU
No. 2017-07
  As
Adjusted
 

Residential

                         

Pay TV

  $ 2,759,216   $ 29,657   $   $ 2,788,873  

Broadband

    1,617,029     34,545         1,651,574  

Telephony

    529,973     (64,202 )       465,771  

Business services and wholesale

    819,541             819,541  

Advertising

    252,049             252,049  

Other

    39,404             39,404  

Total revenue

    6,017,212             6,017,212  

Programming and other direct costs

    1,911,230             1,911,230  

Other operating expenses

    1,705,615         (3,143 )   1,702,472  

Restructuring and other expense

    240,395             240,395  

Depreciation and amortization

    1,700,306             1,700,306  

Operating income

    459,666         3,143     462,809  

Other income (expense), net

    (1,550,811 )       (3,143 )   (1,553,954 )

Loss before income taxes

    (1,091,145 )           (1,091,145 )

Income tax benefit

    259,666             259,666  

Net loss

  $ (831,479 ) $   $   $ (831,479 )

NOTE 21. SUBSEQUENT EVENT

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

        In January 2018, CSC Holdings issued $1,000,000 aggregate principal amount of 5.375% senior guaranteed notes due February 1, 2028 (the "2028 Guaranteed Notes"). The 2028 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 CVC Credit Facilities and rank senior in right of payment to all of existing and future subordinated indebtedness.

        The proceeds from the 2028 Guaranteed Notes, together with proceeds from the Incremental Term Loan, borrowings under the CVC revolving credit facility and cash on hand, were used in February 2018 to repay certain senior notes ($300,000 principal amount of CSC Holdings' senior notes due in

F-110


Table of Contents


ALTICE USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Unaudited)

(See Note 20)

NOTE 21. SUBSEQUENT EVENT (Continued)

February 2018 and $750,000 principal amount of Cablevision senior notes due in April 2018) and will be used to fund a dividend of $1,500,000 to the Company's stockholders immediately prior to and in connection with the Distribution discussed in Note 1.

F-111


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Cablevision Systems Corporation:

        We have audited the accompanying consolidated balance sheet of Cablevision Systems Corporation and subsidiaries (the Company) as of December 31, 2015 and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity (deficiency), and cash flows for the period from January 1, 2016 to June 20, 2016, and the year ended December 31, 2015. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cablevision Systems Corporation and subsidiaries as of December 31, 2015, and the results of their operations and their cash flows for the period from January 1, 2016 to June 20, 2016, and the year ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP



New York, New York
April 10, 2017

F-112


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

December 31, 2015

(In thousands)

 
  December 31, 2015  

ASSETS

       

Current Assets:

       

Cash and cash equivalents

  $ 1,003,279  

Restricted cash

    1,600  

Accounts receivable, trade (less allowance for doubtful accounts of $6,039)

    266,383  

Prepaid expenses and other current assets

    123,242  

Amounts due from affiliates

    767  

Deferred tax asset

    14,596  

Investment securities pledged as collateral

    455,386  

Derivative contracts

    10,333  

Total current assets

    1,875,586  

Property, plant and equipment, net of accumulated depreciation of $9,625,348

    3,017,015  

Investment in affiliates

     

Investment securities pledged as collateral

    756,596  

Derivative contracts

    72,075  

Other assets

    32,920  

Amortizable customer relationships, net of accumulated amortization of $27,778

    11,636  

Other amortizable intangibles, net of accumulated amortization of $32,532

    25,315  

Trademarks and other indefinite-lived intangible assets

    7,250  

Indefinite-lived cable television franchises

    731,848  

Goodwill

    262,345  

Deferred financing costs, net of accumulated amortization of $8,150

    7,588  

  $ 6,800,174  

   

See accompanying notes to consolidated financial statements.

F-113


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Continued)

(In thousands, except share and per share amounts)

 
  December 31, 2015  

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

       

Current Liabilities:

       

Accounts payable

  $ 453,653  

Accrued liabilities:

       

Interest

    119,005  

Employee related costs

    344,091  

Other accrued expenses

    169,899  

Amounts due to affiliates

    29,729  

Deferred revenue

    55,545  

Liabilities under derivative contracts

    2,706  

Credit facility debt

    562,898  

Collateralized indebtedness

    416,621  

Senior notes and debentures

     

Capital lease obligations

    20,350  

Notes payable

    13,267  

Total current liabilities

    2,187,764  

Defined benefit plan obligations

    99,228  

Other liabilities

    165,768  

Deferred tax liability

    704,835  

Credit facility debt

    1,951,556  

Collateralized indebtedness

    774,703  

Senior guaranteed notes

     

Senior notes and debentures

    5,801,011  

Capital lease obligations

    25,616  

Notes payable

    1,277  

Total liabilities

    11,711,758  

Commitments and contingencies

       

Stockholders' Deficiency:

       

Preferred Stock, $.01 par value, 50,000,000 shares authorized, none issued

     

CNYG Class A common stock, $.01 par value, 800,000,000 shares authorized, 304,196,703 shares issued and 222,572,210 shares outstanding

    3,042  

CNYG Class B common stock, $.01 par value, 320,000,000 shares authorized, 54,137,673 shares issued and outstanding

    541  

RMG Class A common stock, $.01 par value, 600,000,000 shares authorized, none issued

     

RMG Class B common stock, $.01 par value, 160,000,000 shares authorized, none issued

     

Paid-in capital

    792,351  

Accumulated deficit

    (4,059,411 )

    (3,263,477 )

Treasury stock, at cost (81,624,493 CNYG Class A common shares)

    (1,610,167 )

Accumulated other comprehensive loss

    (37,672 )

Total stockholders' deficiency

    (4,911,316 )

Noncontrolling interest

    (268 )

Total deficiency

    (4,911,584 )

  $ 6,800,174  

   

See accompanying notes to consolidated financial statements.

F-114


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

 
  January 1, 2016
to June 20,
2016
  Year ended
December 31,
2015
 

Revenue (including revenue from affiliates of $2,088 and $5,343, respectively) (See Note 16)

  $ 3,137,604   $ 6,545,545  

Operating expenses:

             

Programming and other direct costs (including charges from affiliates of $84,636 and $176,909, respectively) (See Note 16)

    1,088,555     2,269,290  

Other operating expenses (including charges (credits) from affiliates of $2,182 and $5,372, respectively) (See Note 16)

    1,136,970     2,546,319  

Restructuring and other expense

    22,223     16,213  

Depreciation and amortization (including impairments)

    414,550     865,252  

    2,662,298     5,697,074  

Operating income

    475,306     848,471  

Other income (expense):

             

Interest expense

    (287,098 )   (585,764 )

Interest income

    1,590     925  

Gain (loss) on investments, net

    129,990     (30,208 )

Gain (loss) on equity derivative contracts, net

    (36,283 )   104,927  

Loss on extinguishment of debt and write-off of deferred financing costs

        (1,735 )

Other expense, net

    4,855     6,045  

    (186,946 )   (505,810 )

Income from continuing operations before income taxes

    288,360     342,661  

Income tax expense

    (124,848 )   (154,872 )

Income from continuing operations, net of income taxes

    163,512     187,789  

Loss from discontinued operations, net of income taxes

        (12,541 )

Net income

    163,512     175,248  

Net loss attributable to noncontrolling interests

    236     201  

Net income attributable to Cablevision Systems Corporation stockholders

  $ 163,748   $ 175,449  

INCOME PER SHARE:

             

Basic income (loss) per share attributable to Cablevision Systems Corporation stockholder(s):

             

Income from continuing operations, net of income taxes

 
$

0.60
 
$

0.70
 

Income (loss) from discontinued operations, net of income taxes

  $   $ (0.05 )

Net income

  $ 0.60   $ 0.65  

Basic weighted average common shares (in thousands)

    272,035     269,388  

Diluted income (loss) per share attributable to Cablevision Systems Corporation stockholder(s):

             

Income from continuing operations, net of income taxes

 
$

0.58
 
$

0.68
 

Income (loss) from discontinued operations, net of income taxes

  $   $ (0.05 )

Net income

  $ 0.58   $ 0.63  

Diluted weighted average common shares (in thousands)

    280,199     276,339  

Amounts attributable to Cablevision Systems Corporation stockholder(s):

             

Income from continuing operations, net of income taxes

 
$

163,748
 
$

187,990
 

Loss from discontinued operations, net of income taxes

        (12,541 )

Net income

  $ 163,748   $ 175,449  

Cash dividends declared and paid per share of common stock

  $   $ 0.45  

   

See accompanying notes to consolidated financial statements.

F-115


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

 
  January 1, 2016 to
June 20, 2016
  Year ended
December 31, 2015
 

Net income

  $ 163,512   $ 175,248  

Other comprehensive income (loss):

             

Defined benefit pension and postretirement plans (see Note 14):

             

Unrecognized actuarial gain

    68     2,694  

Applicable income taxes

    (28 )   (1,106 )

Unrecognized income arising during period, net of income taxes          

    40     1,588  

Amortization of actuarial losses, net included in net periodic benefit cost

    929     1,224  

Applicable income taxes

    (388 )   (502 )

Amortization of actuarial losses, net included in net periodic benefit cost, net of income taxes

    541     722  

Settlement loss included in net periodic benefit cost

    1,655     3,822  

Applicable income taxes

    (679 )   (1,569 )

Settlement loss included in net periodic benefit cost, net of income taxes

    976     2,253  

Other comprehensive income

    1,557     4,563  

Comprehensive income

    165,069     179,811  

Comprehensive loss attributable to noncontrolling interests

    236     201  

Comprehensive income attributable to Cablevision Systems Corporation stockholder(s)

  $ 165,305   $ 180,012  

   

See accompanying notes to consolidated financial statements.

F-116


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

(In thousands)

 
  CNYG
Class A
Common
Stock
  CNYG
Class B
Common
Stock
  Paid-in
Capital
  Accumulated
Deficit
  Treasury
Stock
  Accumulated
Other
Comprehensive
Income (Loss)
  Total
Stockholders'
Equity
(Deficiency)
  Non-
controlling
Interest
  Total
Equity
(Deficiency)
 

Balance at January 1, 2015

  $ 3,003   $ 541   $ 823,103   $ (4,234,860 ) $ (1,591,021 ) $ (42,235 ) $ (5,041,469 ) $ 779   $ (5,040,690 )

Net income attributable to Cablevision Systems Corporation stockholders

                175,449             175,449         175,449  

Net loss attributable to noncontrolling interests

                                (146 )   (146 )

Pension and postretirement plan liability adjustments, net of income taxes

                        4,563     4,563         4,563  

Proceeds from exercise of options and issuance of restricted shares

    39         18,648                 18,687         18,687  

Recognition of equity-based stock compensation arrangements

            60,817                 60,817         60,817  

Treasury stock acquired from forfeiture and acquisition of restricted shares

            5         (19,146 )       (19,141 )       (19,141 )

Excess tax benefit on share-based awards

            5,694                 5,694         5,694  

Dividends on CNYG Class A and CNYG Class B common stock

            (124,752 )               (124,752 )       (124,752 )

Adjustments to noncontrolling interests

            8,836                 8,836     (901 )   7,935  

Balance at December 31, 2015

  $ 3,042   $ 541   $ 792,351   $ (4,059,411 ) $ (1,610,167 ) $ (37,672 ) $ (4,911,316 ) $ (268 ) $ (4,911,584 )

   

See accompanying notes to consolidated financial statements.

F-117


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (Continued)

(In thousands)

 
  CNYG
Class A
Common
Stock
  CNYG
Class B
Common
Stock
  Paid-in
Capital
  Accumulated
Deficit
  Treasury
Stock
  Accumulated
Other
Comprehensive
Income (Loss)
  Total
Stockholders'
Equity
(Deficiency)
  Non-
controlling
Interest
  Total
Equity
(Deficiency)
 

Balance at January 1, 2016

  $ 3,042   $ 541   $ 792,351   $ (4,059,411 ) $ (1,610,167 ) $ (37,672 ) $ (4,911,316 ) $ (268 ) $ (4,911,584 )

Net income attributable to Cablevision Systems Corporation stockholders

                163,748             163,748         163,748  

Net loss attributable to noncontrolling interests

                                (236 )   (236 )

Pension and postretirement plan liability adjustments, net of income taxes

                        1,557     1,557         1,557  

Proceeds from exercise of options and issuance of restricted shares

    15         14,544                 14,559         14,559  

Recognition of equity-based stock compensation arrangements

            24,997                 24,997         24,997  

Treasury stock acquired from forfeiture and acquisition of restricted shares

            1         (41,470 )       (41,469 )       (41,469 )

Tax withholding associated with shares issued for equity-based compensation

    (4 )       (6,030 )               (6,034 )       (6,034 )

Excess tax benefit on share-based awards

            82                 82         82  

Contributions from noncontrolling interests

                                240     240  

Balance at June 20, 2016

  $ 3,053   $ 541   $ 825,945   $ (3,895,663 ) $ (1,651,637 ) $ (36,115 ) $ (4,753,876 ) $ (264 ) $ (4,754,140 )

   

See accompanying notes to consolidated financial statements.

F-118


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 
  January 1, 2016
to June 20,
2016
  Year ended
December 31,
2015
 

Cash flows from operating activities:

             

Net income

  $ 163,512   $ 175,248  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

             

Loss (income) from discontinued operations, net of income taxes

        12,541  

Depreciation and amortization (including impairments)

    414,550     865,252  

Loss (gain) on investments, net

    (129,990 )   30,208  

Loss (gain) on equity derivative contracts, net

    36,283     (104,927 )

Loss on extinguishment of debt and write-off of deferred financing costs

        1,735  

Amortization of deferred financing costs and discounts on indebtedness

    11,673     23,764  

Share-based compensation expense

    24,778     60,321  

Settlement loss and amortization of actuarial losses related to pension and postretirement plans

    2,584     5,046  

Deferred income taxes

    116,150     133,396  

Provision for doubtful accounts

    13,240     35,802  

Excess tax benefits related to share-based awards

    (82 )   (5,694 )

Change in assets and liabilities, net of effects of acquisitions and dispositions:

             

Accounts receivable, trade

    (18,162 )   (24,760 )

Prepaid expenses and other assets

    (844 )   38,860  

Amounts due from and due to affiliates, net

    (5,082 )   1,043  

Accounts payable

    36,147     6,896  

Accrued liabilities

    (160,937 )   1,200  

Deferred revenue

    (9,726 )   2,156  

Net cash provided by operating activities

    494,094     1,258,087  

Cash flows from investing activities:

             

Capital expenditures

    (330,131 )   (816,396 )

Proceeds related to sale of equipment, including costs of disposal

    1,106     4,407  

Decrease (increase) in other investments

    610     (7,779 )

Additions to other intangible assets

    (1,709 )   (8,035 )

Net cash used in investing activities

    (330,124 )   (827,803 )

Cash flows from financing activities:

             

Repayment of credit facility debt

  $ (14,953 ) $ (260,321 )

Proceeds from issuance of senior notes

         

Proceeds from collateralized indebtedness

    337,149     774,703  

Repayment of collateralized indebtedness and related derivative contracts

    (281,594 )   (639,237 )

Redemption and repurchase of senior notes, including premiums and fees

         

Repayment of notes payable

    (1,291 )   (2,458 )

Proceeds from stock option exercises

    14,411     18,727  

Tax withholding associated with shares issued for equity-based awards

    (6,034 )    

Dividend distributions to common stockholders

    (4,066 )   (125,170 )

Principal payments on capital lease obligations

    (11,552 )   (20,250 )

Deemed repurchases of restricted stock

    (41,469 )   (19,141 )

Additions to deferred financing costs

        (250 )

Payment for purchase of noncontrolling interest

        (8,300 )

Contributions from (distributions to) noncontrolling interests, net

    240     (901 )

Excess tax benefit related to share-based awards

    82     5,694  

Net cash used in financing activities

    (9,077 )   (276,904 )

Net increase in cash and cash equivalents from continuing operations

    154,893     153,380  

Cash flows of discontinued operations:

             

Net cash used in operating activities

    (21,000 )   (484 )

Net cash used in investing activities

        (30 )

Net decrease in cash and cash equivalents from discontinued operations

    (21,000 )   (514 )

Cash and cash equivalents at beginning of period

    1,003,279     850,413  

Cash and cash equivalents at end of period

  $ 1,137,172   $ 1,003,279  

   

See accompanying notes to consolidated financial statements.

F-119


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1. 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 2B.V., CIE Management IX Limited, for and on behalf of the limited partnerships BC European Capital IX-1through 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").

F-120


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 1. DESCRIPTION OF BUSINESS, RELATED MATTERS AND BASIS OF PRESENTATION (Continued)

        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 year ended December 31, 2015. 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 2015 financial statements to conform to the 2016 presentation.

NOTE 2. 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

F-121


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 year ended December 31, 2015, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $95,432 and $199,701, 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

F-122


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 and $160,671, for the period January 1, 2016 through June 20, 2016 and for the year ended December 31, 2015, 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

F-123


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

F-124


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

F-125


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

F-126


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

F-127


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

F-128


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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
Outstanding
 
 
  Class A
Common Stock
  Class B
Common Stock
 

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.

F-129


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        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
per Share
  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

        Cablevision paid dividends aggregating $125,170 during the year ended December 31, 2015, including accrued dividends on vested restricted shares of $3,935.

        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
December 31,
 
 
  January 1,
2016 to
June 20,
2016
 
 
  2015  

Basic weighted average shares outstanding

    272,035     269,388  

Effect of dilution:

             

Stock options

    4,444     3,532  

Restricted stock

    3,720     3,419  

Diluted weighted average shares outstanding

    280,199     276,339  

        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 shares were excluded from diluted weighted average shares outstanding for the years ended 2015. 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 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.

F-130


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 year ended December 31, 2015, or 10% or more of its consolidated net trade receivables at December 31, 2015.

NOTE 3. ALLOWANCE FOR DOUBTFUL ACCOUNTS

        Activity related to the allowance for doubtful accounts:

 
  Balance at
Beginning of Period
  Provision for
Bad Debt
  Deductions/
Write-Offs and
Other Charges
  Balance at End
of Period
 

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  

F-131


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 4. SUPPLEMENTAL CASH FLOW INFORMATION

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

 
  January 1, 2016
to June 20,
2016
  Years Ended
December 31,
2015
 

Non-Cash Investing and Financing Activities:

             

Continuing Operations:

             

Property and equipment accrued but unpaid

  $ 68,356   $ 63,843  

Notes payable to vendor

        8,318  

Capital lease obligations

        19,987  

Intangible asset obligations

    290     1,121  

Non-Cash Investing and Financing Activities:

   
 
   
 
 

Dividends payable on unvested restricted share awards

        3,517  

Supplemental Data:

   
 
   
 
 

Continuing Operations:

             

Cash interest paid

    258,940     560,361  

Income taxes paid, net

    7,082     3,849  

NOTE 5. RESTRUCTURING AND OTHER EXPENSE

Restructuring

        The Company recorded net restructuring charges (credits) of $2,299 and $(1,649), for the period January 1, 2016 through June 20, 2016 and for the year ended December 31, 2015, respectively. 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.

F-132


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 6. 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).

NOTE 7. 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.

F-133


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 7. PROPERTY, PLANT AND EQUIPMENT (Continued)

        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,
2015
  Estimated
Useful Lives

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 year ended December 31, 2015, the Company capitalized certain costs aggregating $58,409 and $144,349, 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 year ended December 31, 2015 amounted to $404,234 and $857,440, respectively.

        At December 31, 2015, the gross amount of equipment and related accumulated amortization recorded under capital leases was as follows:

 
  December 31,
2015
 

Equipment

  $ 90,099  

Less accumulated amortization

    (28,119 )

  $ 61,980  

F-134


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 8. 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 year ended December 31, 2015 amounted to $41,573 and $82,704, 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  

NOTE 9. INTANGIBLE ASSETS

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

 
  December 31, 2015
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Net
Carrying
Amount
  Estimated
Useful Lives

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 year ended December 31, 2015 amounted to $10,316 and $7,812, respectively.

F-135


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 9. INTANGIBLE ASSETS (Continued)

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

 
  December 31,
2015
 

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.

        No goodwill impairments were recorded for the period January 1, 2016 through June 20, 2016 and for the year ended December 31, 2015, respectively.

NOTE 10. 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.

F-136


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 10. DEBT (Continued)

Repayment of Restricted Group Credit Facility Debt

        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
Rate
  Principal   December 31,
2015(a)
 

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).

F-137


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 10. DEBT (Continued)

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
Rate
  Principal
Amount
  Carrying
Amount(c)
 

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.

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

F-138


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 10. DEBT (Continued)

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

F-139


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 10. DEBT (Continued)

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  

F-140


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 11. 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
Derivatives
  Liability
Derivatives
 
Derivatives Not Designated as Hedging Instruments
  Balance Sheet Location   Fair Value at December 31, 2015  

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 year ended December 31, 2015 of $(36,283) and $104,927, respectively, are reflected in gain (loss) on equity derivative contracts, net in the Company's consolidated statements of operations.

F-141


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 11. DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS (Continued)

        For the period January 1, 2016 through June 20, 2016 and the year ended December 31, 2015 and, the Company recorded a gain (loss) on investments of $129,510 and $(33,935), 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
June 20, 2016
  Year Ended
December 31, 2015
 

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.

NOTE 12. 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.

F-142


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 12. FAIR VALUE MEASUREMENT (Continued)

        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.

F-143


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 12. FAIR VALUE MEASUREMENT (Continued)

        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
Hierarchy
  Carrying
Amount
  Estimated
Fair Value
 

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.

NOTE 13. INCOME TAXES

        Income tax expense attributable to the Company's continuing operations consists of the following components:

 
  January 1 to June 20, 2016   Year Ended
December 31, 2015
 

Current expense:

             

Federal

  $ 6,473   $ 4,844  

State

    1,917     15,869  

    8,390     20,713  

Deferred (benefit) expense:

             

Federal

    93,253     97,927  

State

    22,897     35,469  

    116,150     133,396  

Tax (benefit) expense relating to uncertain tax positions

    308     763  

Income tax expense

  $ 124,848   $ 154,872  

        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.

F-144


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 13. INCOME TAXES (Continued)

        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
June 20,
2016
  Year Ended December 31,
2015
 

Federal tax expense at statutory rate

  $ 100,926   $ 119,931  

State income taxes, net of federal impact

    14,825     18,874  

Changes in the valuation allowance

    86     (902 )

Changes in the state rates used to measure deferred taxes, net of federal impact

        (1,006 )

Tax expense (benefit) relating to uncertain tax positions

    178     574  

New York tax reform

        16,334  

Non-deductible officers' compensation

    462     846  

Non-deductible merger transaction costs

    9,392      

Other non-deductible expenses

    1,337     3,099  

Research credit

    (850 )   (2,630 )

Adjustment to prior year tax expense

        (515 )

Other, net

    (1,508 )   267  

Income tax expense

  $ 124,848   $ 154,872  

        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  

F-145


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 13. INCOME TAXES (Continued)


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 and $5,694 for the period January 1, 2016 through June 20, 2016, and for the year ended December 31, 2015, 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.

F-146


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 13. INCOME TAXES (Continued)

        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, 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.

NOTE 14. 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

F-147


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 14. BENEFIT PLANS (Continued)

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 )

F-148


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 14. BENEFIT PLANS (Continued)

        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 year ended December 31, 2015, are as follows:

 
  January 1, 2016
to June 20,
2016
  Year ended
December 31,
2015
 

Service cost

  $   $ 344  

Interest cost

    7,130     15,523  

Expected return on plan assets, net

    (3,565 )   (8,297 )

Recognized actuarial loss (reclassified from accumulated other comprehensive loss)

    (1,446 )   1,294  

Settlement (income) loss (reclassified from accumulated other comprehensive loss)(a)

    1,655     3,822  

Net periodic benefit cost

  $ 3,774   $ 12,686  

(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 year ended December 31, 2015, 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
Obligations
 
 
  January 1, 2016
to June 20,
2016
  Year ended
December 31,
2015
  December 31,
2015
 

Discount rate(a)

    3.76 %   3.83 %   3.94 %

Rate of increase in future compensation levels

    %   %   %

Expected rate of return on plan assets (Pension Plan only)

    3.97 %   4.03 %   N/A  

(a)
The discount rates of 3.76% and 3.83%, for the period January 1, 2016 through June 20, 2016, and year ended December 31, 2015, 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

F-149


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 14. BENEFIT PLANS (Continued)

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
December 31,
2015
 

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.

F-150


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 14. BENEFIT PLANS (Continued)

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 and $61,343 for the period January 1, 2016 through June 20, 2016, and year ended December 31, 2015, respectively.

F-151


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 15. 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, the Company granted its non-employee directors an aggregate of 73,056 restricted stock units. 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, 2016
to
June 20, 2016
  Year ended
December 31,
2015
 

Stock options

  $ 3,848   $ 9,159  

Restricted shares and restricted stock units

    20,930     51,162  

Share-based compensation related to equity classified awards

    24,778     60,321  

Other share-based compensation

    453     4,965  

Total share-based compensation

  $ 25,231   $ 65,286  

        An income tax benefit of $10,357 and $26,718 was recognized in continuing operations resulting from share-based compensation expense for the period from January 1, 2016 through June 20, 2016 and year ended December 31, 2015, respectively.

F-152


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 15. EQUITY AND LONG-TERM INCENTIVE PLANS (Continued)

        Cash received from stock option exercises for the period January 1, 2016 through June 20, 2016, and year ended December 31, 2015, respectively was $14,411 and $18,727, 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:

 
  2015  

Risk-free interest rate

    1.82 %

Expected life (in years)

    8  

Dividend yield

    3.63 %

Volatility

    39.98 %

Grant date fair value

  $ 5.45  

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:

 
  Shares Under Option   Weighted
Average
Exercise
Price
Per
Share
  Weighted
Average
Remaining
Contractual
Term
(in years)
   
 
 
  Time
Vesting
Options
  Performance
Based
Vesting
Options
  Aggregate
Intrinsic
Value(a)
 

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.

F-153


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 15. EQUITY AND LONG-TERM INCENTIVE PLANS (Continued)

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
Restricted
Shares
  Number of
Performance
Restricted
Shares
  Number of
Performance
Based
Restricted
Stock
Units
("PSU")(a)
  Weighted
Average
Fair Value
Per Share
at Date
of Grant
 

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 and $27,170 for the period January 1, 2016 through June 20, 2016, and year ended December 31, 2015, respectively, related to this plan.

F-154


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 15. EQUITY AND LONG-TERM INCENTIVE PLANS (Continued)

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.

NOTE 16. 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 i 24NEWS, 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").

F-155


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 16. AFFILIATE AND RELATED PARTY TRANSACTIONS (Continued)

        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:

 
  January 1, 2016
to
June 20, 2016
  Year Ended
December 31,
2015
 

Revenue

  $ 2,088   $ 5,343  

Operating expenses:

             

Programming and other direct costs, net of credits

  $ 84,636   $ 176,909  

Other operating expenses, net of credits

    2,182     5,372  

Operating expenses, net

    86,818     182,281  

Net charges

  $ 84,730   $ 176,938  

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, 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.

F-156


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 16. AFFILIATE AND RELATED PARTY TRANSACTIONS (Continued)

        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 year ended December 31, 2015, 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,
2015
 

Amounts due from affiliates

  $ 767  

Amounts due to affiliates

    29,729  

NOTE 17. 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.

F-157


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 17. COMMITMENTS AND CONTINGENCIES (Continued)

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.

F-158


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 17. COMMITMENTS AND CONTINGENCIES (Continued)

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).

NOTE 18. INTERIM FINANCIAL INFORMATION (Unaudited)

        The following is a summary of the Company's selected quarterly financial data:

 
  Predecessor  
2016:
  March 31,
2016
  April 1 to
June 20, 2016
 

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  

F-159


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 18. INTERIM FINANCIAL INFORMATION (Unaudited) (Continued)

 
  Predecessor  
2015:
  March 31,
2015
  June 30,
2015
  September 30,
2015
  December 31,
2015
  Total
2015
 

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  

F-160


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 19. 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
Values (As of
December 31, 2016)
  Estimated
Useful
Lives

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

F-161


Table of Contents


CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

NOTE 19. BUSINESS COMBINATION (Continued)

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.

F-162


Table of Contents

Report of Independent Auditors

To the Board of Directors of Cequel Corporation

        We have audited the accompanying consolidated financial statements of Cequel Corporation and its subsidiaries (Predecessor), which comprise the consolidated statements of operations and comprehensive loss, of changes in stockholders' equity and of cash flows for the period from January 1, 2015 to December 20, 2015.

Management's Responsibility for the Consolidated Financial Statements

        Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

        Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

        An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Cequel Corporation and its subsidiaries (Predecessor) for the period from January 1, 2015 to December 20, 2015, in accordance with accounting principles generally accepted in the United States of America.

/s/PricewaterhouseCoopers LLP



St. Louis, Missouri
March 30, 2016

F-163


Table of Contents

Report of Independent Auditors

To the Board of Directors of Cequel Corporation

        We have audited the accompanying consolidated financial statements of Cequel Corporation and its subsidiaries (Successor), which comprise the consolidated balance sheet as of December 31, 2015, and the related consolidated statements of operations and comprehensive loss, of changes in stockholders' equity and of cash flows for the period from December 21, 2015 to December 31, 2015.

Management's Responsibility for the Consolidated Financial Statements

        Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

        Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

        An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cequel Corporation and its subsidiaries (Successor) as of December 31, 2015, and the results of their operations and their cash flows for the period from December 21, 2015 to December 31, 2015 in accordance with accounting principles generally accepted in the United States of America.

/s/PricewaterhouseCoopers LLP



St. Louis, Missouri
March 30, 2016

F-164


Table of Contents


Cequel Corporation

Consolidated Balance Sheet

(dollars in thousands)

 
  Successor
December 31,
2015
 

ASSETS

       

Cash and cash equivalents

  $ 86,065  

Accounts receivable, net of allowance of $1,051

    192,667  

Deferred tax asset

    20,866  

Prepaid expenses and other assets

    23,549  

Total current assets

    323,147  

Property, plant and equipment

    2,234,274  

Less—accumulated depreciation

    (10,162 )

Property, plant and equipment, net

    2,224,112  

Deferred financing costs, net

    39,876  

Intangible assets:

       

Subscriber relationships, net

    1,054,728  

Franchise rights, net

    4,984,589  

Trade Names

    37,109  

Goodwill

    2,040,402  

Total intangible assets, net

    8,116,828  

Other long-term assets

    10,468  

Total assets

  $ 10,714,431  

LIABILITIES AND STOCKHOLDERS' EQUITY

       

Liabilities:

       

Accounts payable and accrued expenses

  $ 217,781  

Due to affiliates

    296  

Deferred revenue

    157,764  

Accrued interest

    93,594  

Current portion of capital leases and other obligations

    10,126  

Current portion of long-term debt

    105,129  

Total current liabilities

    584,690  

Long-term deferred revenue

    623  

Long-term deferred tax liability

    1,546,301  

Long-term portion of capital leases and other obligations

    2,813  

Due to parent

    291,277  

Long-term debt

    6,054,063  

Other long-term liabilities

    247  

Total liabilities

  $ 8,480,014  

Commitments and contingencies (Note 11)

       

Stockholders' equity:

       

Stockholders' equity

    2,252,028  

Accumulated deficit

    (17,611 )

Total stockholders' equity

    2,234,417  

Total liabilities and stockholders' equity

  $ 10,714,431  

   

The accompanying notes are an integral part of these consolidated financial statements.

F-165


Table of Contents


Cequel Corporation

Consolidated Statements of Operations and Comprehensive Loss

(dollars in thousands)

 
  Successor Period from
December 21, 2015 to
December 31, 2015
   
  Predecessor Period from
January 1, 2015 to
December 20, 2015
 

Revenues

  $ 72,943       $ 2,347,369  

Costs and expenses:

                 

Operating (excluding depreciation and amortization)

    26,586         872,308  

Selling, general and administrative

    39,166         889,960  

Depreciation and amortization

    23,533         531,561  

Loss on disposal of cable assets

    41         1,796  

Total costs and expenses

    89,326         2,295,625  

(Loss)/income from operations

    (16,383 )       51,744  

Interest expense, net

    (11,491 )       (237,319 )

Loss before income taxes

    (27,874 )       (185,575 )

Benefit/(provision) for income taxes

    10,263         (29,301 )

Net loss

  $ (17,611 )     $ (214,876 )

Comprehensive loss

  $ (17,611 )     $ (214,876 )

   

The accompanying notes are an integral part of these consolidated financial statements.

F-166


Table of Contents


Cequel Corporation

Consolidated Statements of Cash Flows

(dollars in thousands)

 
  Successor Period from
December 21, 2015 to
December 31, 2015
   
  Predecessor Period from
January 1, 2015 to
December 20, 2015
 

Cash flows from operating activities:

                 

Net loss

  $ (17,611 )     $ (214,876 )

Adjustments to reconcile net loss to cash flows from operating activities:

                 

Loss on disposal of cable assets

    41         1,766  

Depreciation and amortization

    23,533         531,562  

Non-cash interest expense

    1,444         (1,184 )

Non-cash equity compensation expense

            287,691  

Deferred income tax (benefit)/provision

    (10,418 )       24,866  

Changes in assets and liabilities:

                 

Accounts receivable, net

    (13,291 )       31,508  

Prepaid expenses

    965         3,115  

Accounts payable and accrued expenses

    (23,080 )       20,845  

Deferred revenue

    11,584         (2,829 )

Accrued interest

    9,855         (20,660 )

Net cash provided by (used in) operating activities

    (16,978 )       661,804  

Cash flows from investing activities:

                 

Purchases of property, plant and equipment (Note 6)

    (30,582 )       (447,864 )

Acquisition of cable systems

             

Net proceeds from disposal of assets

    25         2,137  

Purchase of patent rights

            (4,003 )

Other

             

Net cash used in investing activities

    (30,557 )       (449,730 )

Cash flows from financing activities:

                 

Issuance of long-term debt

             

Repayments of long-term debt

    (3,941 )       (18,317 )

Repayments of capital lease obligations

    (30 )       (13,065 )

Equity contributions

            32,187  

Equity distributions

            (218 )

Cash paid for financing costs

             

Net cash provided by (used in) financing activities

    (3,971 )       587  

(Decrease)/Increase in cash and cash equivalents

    (51,506 )       212,661  

Cash and cash equivalents, beginning of period

    137,571         154,931  

Cash and cash equivalents, end of period

  $ 86,065       $ 367,592  

Supplemental cash flow disclosures:

                 

Cash paid for interest

  $ 884       $ 259,417  

Cash paid for taxes

  $       $ 6,137  

Non-cash transactions:

                 

Other obligations (Note 8)

  $       $  

   

The accompanying notes are an integral part of these consolidated financial statements.

F-167


Table of Contents


Cequel Corporation

Consolidated Statements of Changes in Stockholders' Equity

(dollars in thousands)

 
  Stockholders'
Equity
  Accumulated
Deficit
  Total
Stockholders'
Equity
 

PREDECESSOR:

                   

Balance, December 31, 2014

  $ 1,430,848   $ (105,028 ) $ 1,325,820  

Net loss

        (214,876 )   (214,876 )

Non-cash equity compensation

    287,691         287,691  

Equity contribution

    32,187         32,187  

Equity distribution

    (218 )       (218 )

Balance, December 20, 2015

  $ 1,750,508   $ (319,904 ) $ 1,430,604  

SUCCESSOR:

                   

Balance, December 21, 2015

  $ 2,252,028   $   $ 2,252,028  

Net loss

        (17,611 )   (17,611 )

Balance, December 31, 2015

  $ 2,252,028   $ (17,611 ) $ 2,234,417  

   

The accompanying notes are an integral part of these consolidated financial statements.

F-168


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements

December 31, 2015

(dollars in thousands, except where otherwise indicated)

1. Organization

        Cequel Corporation, a Delaware Corporation ("Cequel Corporation"), through its subsidiaries (together, the "Company") is a leading owner, operator and acquirer of broadband communication systems serving a diversified mix of markets. Cequel Communications Holdings I, LLC ("Cequel") is a wholly owned subsidiary of Cequel Communications Holdings, LLC, a Delaware limited liability company ("Cequel Holdings"), which is a wholly owned subsidiary of Cequel Corporation. Cequel Capital Corporation is a wholly owned subsidiary of Cequel (and together with Cequel, the "Issuers"). Cequel Communications, LLC, a Delaware limited liability company, doing business as Suddenlink Communications ("Suddenlink"), is an indirect wholly owned subsidiary of Cequel.

        The Issuers are holding companies and conduct no operations. Accordingly, the Issuers depend on the cash flow of their subsidiaries in order to make payments on, or repay or refinance, the Notes, as defined herein. The terms of the Credit Agreement generally restrict Suddenlink and its restricted subsidiaries from making dividends and other distributions to the Issuers subject to satisfaction of certain conditions, including pro forma compliance with 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. However, the Credit Agreement permits Suddenlink to make dividends and distributions to Cequel for payment of regularly scheduled interest payments through maturity on indebtedness which was incurred by Cequel to refinance the Issuers' 8.625% Senior Notes due 2017 (the "2017 Notes"). The Issuers' 6.375% Senior Notes due 2020 (the "2020 Notes"), the Issuers' 5.125% Senior Notes due 2021, issued on May 16, 2013 (the "Initial 2021 Notes") and the Issuers' 5.125% Senior Notes due 2021, issued on September 9, 2014 (the "2021 Mirror Notes,") and the 2025 Senior Notes, as defined herein (collectively the 2020 Notes, the 2021 Notes and the 2025 Senior Notes, the "Senior Notes"), are unsecured and are not guaranteed by any subsidiaries of the Issuers, including Suddenlink.

        On December 21, 2015, Altice N.V., a public company with limited liability ( naamloze vennootshcap ) under Dutch law ("Altice"), as successor in interest to Altice S.A., certain other direct or indirect wholly-owned subsidiaries of Altice (the "Purchasers"), acquired approximately 70% of the total outstanding equity interests in Cequel Corporation (the "Altice Acquisition") from the direct and indirect stockholders of Cequel Corporation (the "Sellers"). Prior to the date hereof, Cequel Corporation was directly or indirectly owned by investment funds advised by BC Partners Limited ("BCP"), CPPIB-Suddenlink LP, a wholly owned subsidiary of Canada Pension Plan Investment Board ("CPPIB" and together with BCP, the "Sponsors"), and IW4MK Carry Partnership LP (the "Management Holder" and together with the Sponsors, the "Stockholders"). The consideration for the acquired equity interests was based on a total equity valuation for 100% of the capital and voting rights of Cequel Corporation of $4,132.0 million, which includes $2,956.4 million of cash consideration, $675.6 million of retained equity held by the Sponsors and $500 million funded by the issuance by an affiliate of Altice of a senior vendor note that is subscribed by the Sponsors. Following the closing of the Altice Acquisition, the Sponsors retained equity interests in Cequel Corporation representing, in the aggregate, 30% of Cequel Corporation's outstanding capital stock on a post-closing basis. In addition, the carry interest plans of the Stockholders were cashed out based on an agreement between

F-169


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

1. Organization (Continued)

the Sponsors and the Management Holder whereby payments were made to participants in such carry interest plans, including certain officers and directors of Cequel and Cequel Corporation.

2. Liquidity and Capital Resources

        The Company has significant indebtedness and incurred net losses of $17.6 million and $214.9 million for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively. The Company's net cash flows used in operating activities were $17.0 million for the successor period from December 21, 2015 through December 31, 2015, and net cash flows provided by operating activities were $661.8 million and $686.3 million for the predecessor period from January 1, 2015 through December 20, 2015, respectively.

        The Company requires significant cash to fund debt service requirements, capital expenditures and ongoing operations. The Company also has negative working capital, which is primarily due to the payment terms it has with its vendors. The Company has historically funded these requirements through cash flows from operating activities, borrowings under its $2.7 billion credit facility (the "Credit Facility"), sales of assets, issuances of debt, and cash on hand. However, the mix of funding sources changes from period to period. For the combined year ended December 31, 2015, the Company generated $627.5 million of cash flows from operating activities after paying cash interest of $260.3 million. In addition, the Company used $478.4 million for purchases of property, plant and equipment.

        The Company expects that cash on hand, cash flows from operating activities and available credit under its revolving credit facility will be adequate to meet its cash flow needs in 2016.

3. Summary of Significant Accounting Policies

    Basis of Preparation of Consolidated Financial Statements

        The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. All significant intercompany accounts and transactions have been eliminated in consolidation. However, in the opinion of management, such financial statements include all adjustments, which consist of only normal recurring adjustments, necessary for the fair statement of the results of the periods presented. Certain estimates and assumption have been made that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

        The financial information set forth in this report, unless otherwise set forth or as the context otherwise indicates, includes the accounts of Cequel and its subsidiaries for the period from December 21, 2015 to December 31, 2015 ("Successor"), and of Cequel and its subsidiaries for the period from January 1, 2015 through December 20, 2015 ("Predecessor"). Effective December 21, 2015, the Company applied business combination accounting which requires certain assets and liabilities to be

F-170


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

3. Summary of Significant Accounting Policies (Continued)

reflected at fair value. For a summary of the application and valuation of business combination accounting, see Footnote 4.

    Revenue Recognition

        Revenue by service offering consisted of the following:

 
  Successor
Period from
December 21,
2015 to
December 31,
2015
   
  Predecessor
Period from
January 1,
2015 to
December 20,
2015
 

Video

  $ 33,690       $ 1,107,718  

High-speed Internet

    27,789         845,514  

Telephone

    6,209         201,377  

Advertising sales

    2,079         85,587  

Other

    3,176         107,173  

Total revenues

  $ 72,943       $ 2,347,369  

        Video revenue includes subscriber fees received from residential and commercial customers for the Company's various tiers or packages of video programming services, related equipment and rental charges, fees collected on behalf of local franchising authorities and the Federal Communications Commission, as well as revenue from the sale of premium networks, transactional VOD (e.g. events and movies) and digital video recorder service. High-speed Internet revenue includes subscriber fees received from residential and commercial customers for the Company's high-speed Internet services and related equipment rental charges, and wholesale transport revenue, including amounts generated by the sale of point-to-point transport services offered to wireless telephone providers (i.e. cell tower backhaul) and other carriers. Telephone revenue includes subscriber fees received from residential and commercial customers for the Company's telephone services, as well as fees collected on behalf of governmental authorities. Advertising sales includes revenue generated from the sale of advertising time to national, regional and local customers. Other revenue includes revenue from the Company's security services, installation charges, revenue from tower services, including site development and construction, and other residential and commercial subscriber-related fees.

        Revenue from video, high-speed Internet, telephone and security services are recognized in the period during which the related services are provided. 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 is recognized in the period the service is performed to the extent of direct selling costs, with the remaining amount deferred over the life of the customer relationship. The Company generally bills customers in advance for the services they have chosen to use and record such amounts as deferred revenue until the services are provided. Customer services paid for in advance are recorded as income when earned. Advertising sales are recognized in the period that the advertisements are broadcast.

F-171


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

3. Summary of Significant Accounting Policies (Continued)

        Local or state government authorities impose franchise fees on the majority of the Company's systems ranging up to a federally mandated maximum of 5% of gross revenues as defined in the franchise agreements. Such fees are collected on a monthly basis from the Company's customers and are periodically remitted to franchise authorities. Because franchise fees are the Company's obligation, the Company presents them on a gross basis in revenue with a corresponding operating expense. Franchise fees reported on a gross basis in revenue amounted to approximately $1.4 million and $46.3 million for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively.

    Allowance for Doubtful Accounts

        The allowance for doubtful accounts represents the Company's best estimate of uncollectible balances in the accounts receivable balance. The allowance is based on the number of days outstanding, customer balances, historical experience and other currently available information.

    Concentrations of Credit Risk

        Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and accounts receivable. Concentration of credit risk with respect to the Company's cash balance is limited. The Company maintains or invests its cash with highly qualified financial institutions. With respect to the Company's receivables, credit risk is limited due to the large number of customers, individually small balances and short payment terms.

    Programming Costs

        The Company purchases certain analog, digital and premium programming provided by program suppliers whose compensation is typically based on a flat fee per customer at the negotiated rates included in the programming contracts. The cost of the right to provide network programming under such arrangements is recorded in operating expenses in the month the programming is distributed. Programming costs are paid each month based on calculations performed by the Company and are subject to adjustment based on periodic audits performed by the programmers. Net programming costs included in the operating costs line item in the accompanying consolidated statements of operations was $17.9 million and $594.2 million for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively.

    Advertising Costs

        The Company expenses advertising costs as incurred. Advertising expense, included in the selling, general and administrative expense line item in the accompanying consolidated statements of operations, was approximately $1.9 million and $62.7 million for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively.

F-172


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

3. Summary of Significant Accounting Policies (Continued)

    Equity Based Compensation

        Prior to the Altice Acquisition, the general partners of the partnerships that held the shares of Cequel Corporation (collectively, the "Carry Interest Partnerships"), each adopted a separate carried interest plan (see Footnote 18). The Company measured the cost of employee services received in exchange for carried interest units based on the fair value of the award at each reporting period. The Company used the Monte Carlo Simulation Method to estimate the fair value of the awards. Because the Monte Carlo Simulation Method required the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the carried interest units granted. The time to liquidity event assumption is based on management's judgment. The equity volatility assumption was estimated using the historical weekly volatility of publicly traded comparable companies. The risk-free rate 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 Company's total equity value was estimated by a third party using a range of indicated business enterprise values. The plan was terminated on December 21, 2015, concurrent with the Altice Acquisition.

    Income Taxes

        The Company provides for estimated income taxes for amounts payable or refundable on current year income tax returns, as well as the estimated future tax effects attributable to temporary differences and carryforwards using existing guidance from the FASB. This guidance also requires that a valuation allowance be recorded against deferred tax assets when it is more likely than not that all or some portion of the deferred income tax asset will not be realized in the future. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowances recorded (See Footnote 15).

    Cash and Cash Equivalents

        For financial reporting purposes, the Company considers all highly liquid investments with original maturities at purchase of three months or less to be cash equivalents. These investments are carried at cost, which approximates market value.

    Property, Plant and Equipment

        Property, plant and equipment are recorded at cost, including all material, labor and certain indirect costs associated with the construction of cable transmission and distribution facilities (or fair value at date of Acquisition). While the Company's capitalization is based on specific activities, once capitalized, costs are tracked by fixed asset category at the cable system level and not on a specific asset basis. For assets that are sold or retired, the estimated historical cost and related accumulated depreciation is removed. Costs associated with initial customer installations and the additions of network equipment necessary to enable advanced services are capitalized. Costs capitalized as part of initial customer installations include materials, labor and certain indirect costs. Indirect costs are associated with the activities of the Company's personnel who assist in connecting and activating the new service. Indirect costs include employee benefits and payroll taxes, direct variable costs associated

F-173


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

3. Summary of Significant Accounting Policies (Continued)

with capitalizable activities, consisting of installation and construction vehicle costs, the cost of dispatch personnel and indirect costs directly attributable to capitalizable activities. Leasehold improvements are amortized over the shorter of their estimated life or the term of the related leases. Costs for repairs and maintenance are charged to operating expense as incurred, while plant and equipment replacements, including replacement of cable drops, are capitalized.

        Depreciation is computed using the straight-line method over the following estimated useful lives of the assets:

Buildings and improvements

  3 - 20 years

Customer equipment and installations

  4 - 7 years

Capitalized leases

  3 - 15 years

Vehicles

  3 - 5 years

Broadband distribution systems

  4 - 25 years

Office furniture, tools and equipment

  2 - 7 years

    Capitalized Internal Costs

        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. Capitalized internal payroll costs were approximately $1.2 million and $49.2 million for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively. Related capitalized overhead were approximately $0.7 million and $28.7 million for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively.

    Deferred Financing Costs

        Deferred financing costs are being amortized to interest expense using the effective interest method over the terms of the related debt.

    Franchises

        Franchise rights are periodically reviewed to determine if each franchise has a finite life or an indefinite life in accordance with goodwill and other intangible asset financial accounting standards. Accordingly, the Company believes its franchises qualify for indefinite life treatment and are not amortized against earnings but instead are tested for impairment annually or more frequently as warranted by events or changes in circumstances (see Footnote 12). Costs incurred in negotiating and

F-174


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

3. Summary of Significant Accounting Policies (Continued)

renewing broadband franchises are amortized on a straight-line basis over the life of the renewal period.

    Accounting for Long-Lived and Intangible Assets

    Long-lived Assets

        Long-lived assets (e.g., property, plant and equipment) do not require that an annual impairment test be performed; instead, long-lived assets are tested for impairment upon the occurrence of a triggering event. Triggering events include the more likely than not disposal of a portion of such assets or the occurrence of an adverse change in the market involving the business employing the related assets. Once a triggering event has occurred, the impairment test is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. If the intent is to hold the asset for continued use, the impairment test first requires a comparison of estimated undiscounted future cash flows generated by the asset group against the carrying value of the asset group. If the carrying value of the asset group exceeds the estimated undiscounted future cash flows, the asset would be deemed to be impaired. The impairment charge would then be measured as the difference between the estimated fair value of the asset and its carrying value. Fair value is generally determined by discounting the future cash flows associated with that asset. If the intent is to hold the asset for sale and certain other criteria are met (e.g., the asset can be disposed of currently, appropriate levels of authority have approved the sale, and there is an active program to locate a buyer), the impairment test involves comparing the asset's carrying value to its estimated fair value. To the extent the carrying value is greater than the asset's estimated fair value, an impairment charge is recognized for the difference. Significant judgments in this area involve determining whether a triggering event has occurred, determining the future cash flows for the assets involved and selecting the appropriate discount rate to be applied in determining estimated fair value. For the year ended December 31, 2015, no triggering event had occurred and no impairment test was performed.

    Goodwill and Indefinite-lived Intangible Assets

        Goodwill is tested annually for impairment during the fourth quarter or earlier upon occurrence of a triggering event. Accounting guidance related to goodwill impairment testing provides an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company performs a qualitative assessment, various events and circumstances are considered when evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount and whether the first step of the goodwill impairment test is necessary. If, after this qualitative assessment, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then no further quantitative testing would be necessary.

        If determined necessary as a result of the qualitative assessment described above, or if we do not perform the qualitative assessment as allowed under authoritative guidance from the FASB, goodwill impairment is determined using a two-step process. The first step involves a comparison of the estimated fair value of the Company to its carrying amount, including goodwill. In performing the first

F-175


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

3. Summary of Significant Accounting Policies (Continued)

step, the Company determines the fair value using a discounted cash flow ("DCF") analysis corroborated by a market-based approach. Determining fair value requires the exercise of significant judgment, including judgment about appropriate discount rates, perpetual growth rates, the amount and timing of expected future cash flows, as well as relevant comparable company earnings multiples for the market-based approach. The cash flows employed in the DCF analyses are based on the Company's most recent budget and, for years beyond the budget, the Company's estimates, which are based on assumed growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the future cash flows of the Company. If the estimated fair value of the Company exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of the Company exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the goodwill with the goodwill carrying amount to measure the amount of impairment, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the Company is allocated to all of the assets and liabilities of the Company (including any unrecognized intangible assets) as if the Company had been acquired in a business combination and the fair value of the Company was the purchase price paid. If the carrying amount of the Company's goodwill exceeds the implied fair value of that goodwill, an impairment charge is recognized in an amount equal to that excess.

        Other intangible assets not subject to amortization, primarily cable franchise rights, are tested annually for impairment during the fourth quarter or earlier upon the occurrence of a triggering event. The impairment test for other intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the asset group exceeds the estimated undiscounted cash flows, the asset would be deemed to be impaired. The impairment charge would then be measured as the difference between the estimated fair value of the asset and its carrying value. The estimates of fair value of intangible assets not subject to amortization are determined using Greenfield Discounted Cash Flow Method ("Greenfield Method"), which entails identifying the projected discrete cash flows related to such cable franchise rights and discounting them back to the valuation date. Significant judgments inherent in this analysis include the selection of appropriate discount rates, estimating the amount and timing of estimated future cash flows attributable to cable franchise rights and identification of appropriate terminal growth rate assumptions. The discount rates used in the Greenfield Method are intended to reflect the risk inherent in the projected future cash flows generated by the respective intangible assets.

        For the Company's impairment analysis completed in the fourth quarter of 2015 the Company did not perform a qualitative assessment for any of its six reporting units and instead began with the first step of the goodwill impairment analysis. The Company's impairment analysis for 2015 indicated no impairment of its goodwill and other intangible assets not subject to amortization.

F-176


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

3. Summary of Significant Accounting Policies (Continued)

    Asset Retirement Obligations

        Accounting for asset retirement obligations requires that a liability be recognized for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. If a lease or franchise agreement is not renewed, certain of the Company's franchise agreements and leases contain provisions requiring the Company to remove equipment or restore facilities. The Company expects to continually renew its franchise agreements and has concluded that the related franchise right is an indefinite lived intangible asset. The Company could be required to incur substantial restoration or removal costs related to these franchise agreements in the unlikely event a franchise agreement containing such a provision were no longer expected to be renewed. The Company would record an estimated liability at the time that it became probable that a franchise agreement would not be renewed. The obligations related to the removal provisions contained in the Company's lease agreements or any disposal obligations related to the Company's operating assets are not material to the Company's consolidated financial condition or results of operation or are not estimable.

    Fair Value of Financial Instruments

        The carrying amounts of certain of the Company's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities, approximate fair value because of their short maturities (see Footnote 10).

    Derivative Financial Instruments

        Accounting for derivative financial instruments requires that all derivative instruments be recognized on the balance sheet at fair value. The Company's policy is to manage interest costs using a mix of fixed and variable rate debt. The Company does not hold or issue derivative instruments for trading or speculative purposes.

    Recently Issued Accounting Pronouncements

        In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The new guidance stipulates that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Early application is not permitted, and the standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. In August 2015, the FASB issued Accounting Standards update No. 2015-14, Deferral of Effective Date, which deferred the effective date of ASU 2014-09 by one year to December 15, 2017 for interim and annual reporting periods beginning after that date. The FASB permitted early adoption of the standard, but not before the original effective date of December 15, 2016. The Company has not

F-177


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

3. Summary of Significant Accounting Policies (Continued)

yet selected a transition method nor has it determined the effect of these standards on its ongoing operations or financial reporting.

        In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"), 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 2014-15 is effective for the annual period ended December 31, 2016 and for annual periods and interim periods thereafter, with early adoption permitted. The adoption of ASU 2014-15 is not expected to materially impact the Company's consolidated financial statements.

        In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). The new guidance stipulates that an entity should present debt issuance costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset, and amortization of the costs should be reported as interest expense. ASU 2015-03 is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. Early application is permitted, and entities would apply the new guidance retrospectively to all prior periods. In August 2015, the FASB issued Accounting Standards Update No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with line-of-Credit Arrangements ("ASU 2015-15"), which provides additional guidance to ASU 2015-03 to address the presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. ASU 2015-15 noted that the SEC 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 arrangement. The adoption of ASU 2015-03 and ASU 2015-15 is not expected to have a material impact on the Company's consolidated financial statements and related disclosures.

        In September 2015, the FASB issued Accounting Standards Update No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments ("ASU 2015-16"), 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 amount recognized in a business combination. ASU 2015-16 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, and early adoption is permitted. The adoption of ASU 2015-16 is not expected to materially impact the Company's consolidated financial statements.

        In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes ("ASU 2015-17"), which requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after

F-178


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

3. Summary of Significant Accounting Policies (Continued)

December 15, 2016, and early adoption is permitted. The adoption of ASU 2015-17 is not expected to materially impact the Company's consolidated financial statements.

4. Altice Acquisition

        On December 21, 2015, Altice N.V., a public company with limited liability ( naamloze vennootshcap ) under Dutch law ("Altice"), as successor in interest to Altice S.A., certain other direct or indirect wholly-owned subsidiaries of Altice (the "Purchasers"), acquired approximately 70% of the total outstanding equity interests in Cequel Corporation (the "Altice Acquisition") from the direct and indirect stockholders of Cequel Corporation (the "Sellers"). Prior to the date hereof, Cequel Corporation was directly or indirectly owned by investment funds advised by BC Partners Limited ("BCP"), CPPIB-Suddenlink LP, a wholly owned subsidiary of Canada Pension Plan Investment Board ("CPPIB" and together with BCP, the "Sponsors"), and IW4MK Carry Partnership LP (the "Management Holder" and together with the Sponsors, the "Stockholders"). The consideration for the acquired equity interests was based on a total equity valuation for 100% of the capital and voting rights of Cequel Corporation of $4,132.0 million, which includes $2,956.4 million of cash consideration, $675.6 million of retained equity held by the Sponsors and $500 million funded by the issuance by an affiliate of Altice of a senior vendor note that is subscribed by the Sponsors. Following the closing of the Altice Acquisition, the Sponsors retained equity interests in Cequel Corporation representing, in the aggregate, 30% of Cequel Corporation's outstanding capital stock on a post-closing basis. In addition, the carry interest plans of the Stockholders were cashed out based on an agreement between the Sponsors and the Management Holder whereby payments were made to participants in such carry interest plans, including certain officers and directors of Cequel and Cequel Corporation.

        In connection with the Altice Acquisition, on June 12, 2015, affiliates of Altice issued (i) $320 million principal amount of senior holdco notes due 2025 (the "Holdco Notes"), (ii) $300 million principal amount of senior notes due 2025 (the "2025 Senior Notes") and (iii) $1.1 billion principal amount of senior secured notes due 2023 (the "Senior Secured Notes"), the proceeds from which were placed in escrow, to finance a portion of the purchase price for the Altice Acquisition. The Holdco Notes were issued by Altice US Finance S.A. (the "Holdco Notes Issuer"), an indirect subsidiary of Altice, bear interest at a rate of 7.75% per annum and were issued at a price of 98.275%. The 2025 Senior Notes were issued by Altice US Finance II Corporation (the "Senior Notes Issuer"), an indirect subsidiary of Altice, bear interest at a rate of 7.75% per annum and were issued at a price of 100.00%. The Senior Secured Notes were issued by Altice US Finance I Corporation (the "Senior Secured Notes Issuer"), an indirect subsidiary of Altice, bear interest at a rate of 5.375% per annum and were issued at a price of 100.00%. Interest on the Holdco Notes, the 2025 Senior Notes and the Senior Secured Notes is payable semi-annually on January 15 and July 15. The Holdco Notes will automatically exchange into an equal aggregate principal amount of 2025 Senior Notes once the 2025 Senior Notes Issuer builds sufficient restricted payment capacity and the ability to incur additional indebtedness in excess of the aggregate amount of the Holdco Notes. Following the consummation of the Altice Acquisition and related transactions, (i) the indirect parent of the Holdco Notes Issuer owned 70% of Cequel Corporation, (ii) the 2025 Senior Notes Issuer merged into Cequel, the Senior Notes became the obligations of Cequel and Cequel Capital Corporation became the co-issuer of the

F-179


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

4. Altice Acquisition (Continued)

2025 Senior Notes, and (iii) the equity interests in the Senior Secured Notes Issuer 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.

        In connection with the Altice Acquisition, we received consent from holders of the 2020 Notes to, among other things, waive any obligation that the Issuers may have under the 2020 Indenture to repurchase the 2020 Notes as a result of the consummation of the Altice Acquisition and make certain related changes to the 2020 Indenture (the "Indenture Amendments"), and the Issuers entered into a first supplemental indenture to the 2020 Indenture with U.S. Bank National Association, as trustee (the "First Supplemental Indenture"), containing the Indenture Amendments. In exchange for this consent, we paid holders who consented to these amendments an aggregate fee of approximately $26.3 million at the closing of the Altice Acquisition, at which time the Indenture Amendments become effective.

        In connection with the Altice Acquisition, we received consent from lenders under the credit and guaranty agreement, dated February 14, 2012, entered into by Cequel Communications, LLC, Cequel Communications Holdings II, LLC, certain subsidiaries of Cequel Communications, LLC and a syndicate of lenders, as amended, which provides for up to $2.7 billion of loans in the aggregate, consisting of a $2.2 billion term loan facility and a $500.0 million revolving credit facility (collectively, the "Existing Credit Facility"), to amend the definition of change of control and certain other related definitions therein so that the consummation of the Altice Acquisition did not constitute a change of control and corresponding event of default thereunder (the "Existing Credit Facility Amendments"), and we entered into a Second Amendment and Consent to the Existing Credit Facility (the "Second Amendment and Consent") with the lenders thereunder, containing, among other things, the Existing Credit Facility Amendments. In exchange for this consent, we paid lenders who consented to these amendments an aggregate fee of approximately $6.8 million.

        In addition, lenders holding (a) $290.0 million of loans and commitments under the existing revolving credit facility under the Existing Credit Facility and (b) approximately $815.4 million of loans under the existing term loan facility under the Existing Credit Facility consented to roll over, on a cashless basis, such lenders' loans and commitments under the Existing Credit Facility into loans and commitments of the same amount under a new credit facility (the "New Credit Facility") made available to Altice US Finance I Corporation effective upon the consummation of the Altice Acquisition (the "Roll Consents"). The New Credit Facility will mature on December 21, 2022, or sooner if certain amounts of the 2020 Notes, the 2021 Notes or the Senior Secured Notes remain outstanding at certain future dates. Upon the closing of the Altice Acquisition, the $290.0 million of loans and commitments under the existing revolving credit facility under the Existing Credit Facility that lenders elected to rollover into the New Credit Facility, plus $60.0 million of new revolving commitments from other lenders, formed a new $350 million revolving credit facility under the New Credit Facility, and all remaining commitments under the then existing $500 million revolving credit facility under the Existing Credit Facility were terminated.

F-180


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

4. Altice Acquisition (Continued)

        We applied business combination accounting for the Altice Acquisition. This resulted in the Company having a new accounting basis in the identifiable assets and liabilities and no retained earnings or accumulated losses. Accordingly, the consolidated financial statements on or after December 21, 2015 are not comparable to the consolidated financial statements prior to that date. The financial statements for the periods ended prior to December 20, 2015 do not include the effect of any changes in our corporate structure or changes in the fair value of assets and liabilities as a result of business combination accounting.

        Business combination accounting provides, among other things, for a determination of the value to be assigned to the equity of the company as of a date selected for financial reporting purposes. The value of the Company was set forth at approximately $9.1 billion. The value was based upon the purchase price that the Purchasers paid to acquire the Company on December 21, 2015, and including liabilities assumed. Further, DCF analysis was completed for purchase price allocation purposes. A more detailed explanation of the DCF analysis is discussed below.

        The basis for the DCF analysis was the Company's projections. These seven-year projections were based on management's assumptions including among others, penetration rates for basic and digital video, high speed Internet, and telephone; 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 DCF analysis was completed using a discount rate of approximately 9.0% based on the Company's cost of equity and after-tax cost of debt and a perpetuity growth rate of 2.5%. 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 our 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

F-181


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

4. Altice Acquisition (Continued)

rate utilized. The following table summarizes the estimates of the fair values of the assets acquired and liabilities assumed in the Altice Acquisition (dollars in millions):

 
  Amount Recognized
as of December 21,
2015
 

Current Assets

  $ 156.2  

Accounts Receivable

    179.4  

Property, plant and equipment

       

2,208.3

       

Goodwill ($538.9 million tax deductible)

    2,040.4  

Intangible assets

    6,089.8  

Other non-current assets

    62.1  

Current liabilities

    (571.4 )

Long-term debt

    (6,056.7 )

Deferred income taxes

    (1,944.8 )

Other non-current liabilities

    (4.0 )

Total

  $ 2,159.3  

        The significant assumptions related to the valuations of our assets and liabilities in connection with business combination accounting include the following:

        Property, plant and equipment was given a preliminary fair value of $2.2 billion as of December 21, 2015. 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 Company identified the following intangible assets to be valued: franchise and patent rights, trade names and subscriber relationships. Franchise rights were valued using the greenfield method and were given a preliminary value of $4,984.6 million as of December 21, 2015. Trade names were valued using a deviation of the income approach, known as the royalty savings method, and were given a preliminary value of $37.9 million as of December 21, 2015. Subscriber relationships were valued using a deviation of the excess earnings method and were given a preliminary value of $1,067.4 million as of December 21, 2015. (See Footnote 12)

        Long-term debt was valued at fair value as of December 21, 2015 using quoted market prices (Level 2).

        The carrying value of most other assets and liabilities approximated fair value as of December 21, 2015. The contractual value of accounts receivable as of December 21, 2015 is approximately $191.2 million, compared to a preliminary fair value of $179.4 million.

F-182


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

4. Altice Acquisition (Continued)

        As a result of applying business combination accounting, the Company recorded preliminary goodwill of $2.0 billion, 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.

5. Allowance for Doubtful Accounts

        Allowance for doubtful accounts consisted of the following:

 
  Successor
2015
   
  Predecessor
2015
 

Balance, beginning of period

  $       $ 15,567  

Charged to expense

    1,051         29,144  

Uncollected balances written off, net of recoveries

            (33,106 )

Balance, end of period

  $ 1,051       $ 11,605  

6. Property, Plant and Equipment

        Property, plant and equipment consisted of the following as of December 31:

 
  Successor
2015
 

Land

  $ 44,666  

Buildings and improvements

    112,085  

Capitalized leases

    2,547  

Vehicles

    25,324  

Broadband distribution systems

    2,005,783  

Office furniture, tools and equipment

    43,869  

Total Property, plant and equipment

    2,234,274  

Less: accumulated depreciation

    (10,162 )

Property, plant and equipment, net

  $ 2,224,112  

        Depreciation expense was $10.2 million and $465.2 million for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively.

        During the successor period from December 21, 2015 through December 31, 2015, we acquired $26.0 million of property, plant and equipment. As reflected in our consolidated statement of cash flows, $30.6 million represents capital expenditures for which cash was paid during the year ended December 31, 2015. This amount includes $4.6 million of cash outflows related to the decrease in accounts payable and accrued expenses related to capital expenditures from $16.9 million as of December 20, 2015 to $12.3 million as of December 31, 2015.

F-183


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

6. Property, Plant and Equipment (Continued)

        During the predecessor period from January 1, 2015 through December 20, 2015, we acquired $444.0 million of property, plant and equipment. As reflected in our consolidated statement of cash flows, $447.9 million represents capital expenditures for which cash was paid during the year ended December 31, 2015. This amount includes $3.9 million of cash outflows related to the decrease in accounts payable and accrued expenses related to capital expenditures from $20.8 million as of December 31, 2014 to $16.9 million as of December 20, 2015.

        For the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, the Company recorded a loss on the disposal of cable assets of less than $0.1 million and $1.8 million, respectively.

7. Accounts Payable and Accrued Expenses

        Accounts payable and accrued expenses as of December 31, 2015 consist of the following:

 
   
 

Accounts payable—trade

  $ 17,497  

Accounts payable and accrued expenses related to capital expenditures

    12,329  

Accrued liabilities:

       

Programming costs

    54,047  

Compensation and benefits

    43,498  

Taxes and insurance

    23,851  

Telephone and circuit costs

    7,271  

Franchise related fees

    15,399  

Pole rentals

    9,441  

Other

    34,448  

Total

  $ 217,781  

8. Capital Lease and Other Obligations

        Capital lease and other obligations consist of capital leases related to assets, facilities and multi-year vendor service agreements. The Company has financing agreements with original obligations totaling $43.0 million, of which $12.9 million was outstanding at December 31, 2015, that expire between December 2015 and January 2028.

F-184


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

8. Capital Lease and Other Obligations (Continued)

        The future principal payments of the Company's capital lease obligations as of December 31, 2015 are as follows (dollars in thousands):

Year
  Amount  

2016

  $ 10,127  

2017

    865  

2018

    503  

2019

    180  

2020

    266  

Thereafter

    1,001  

Total

  $ 12,942  

        In 2014, the Company entered into a three year capital lease commitment totaling approximately $14.1 million, of which $4.1 million was outstanding at December 31, 2015, and a five year capital lease commitment totaling approximately $0.8 million, of which $0.6 million was outstanding at December 31, 2015.

9. Long-Term Debt

        Outstanding debt consisted of the following at December 31:

 
  Successor
2015(a)
 

Existing credit facility

  $ 1,459,077  

New credit facility

    795,138  

6.375% Senior Notes due 2020

    1,447,659  

5.125% Senior Notes due 2021(b)

    1,094,461  

5.375% Senior Secured Notes due 2023

    1,089,036  

7.750% Senior Notes due 2025

    273,821  

Total Debt

    6,159,192  

Less: Current portion

    (105,129 )

Long-Term Debt

  $ 6,054,063  

(a)
On December 21, 2015, we applied business combination accounting to adjust our debt to reflect fair value. Therefore, as of December 31, 2015, the accreted values presented above generally represent the fair value at December 21, 2015, plus or minus the accretions to the balance sheet date of December 31, 2015.

(b)
Includes the Initial 2021 Notes and the 2021 Mirror Notes.

F-185


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

9. Long-Term Debt (Continued)

    Existing Credit Facility

        On February 14, 2012, Suddenlink, Cequel Communications Holdings II, LLC ("Holdings II"), Cequel's direct subsidiary and the direct parent of Suddenlink, certain subsidiaries of Suddenlink and a syndicate of lenders entered into a Credit and Guaranty Agreement, (the "Existing Credit Agreement"), which provides for up to $2.7 billion of loans in the aggregate, consisting of a $2.2 billion term loan facility funded at closing and a $500.0 million revolving credit facility (collectively, the "Existing Credit Facility"). The revolving credit facility was scheduled to mature on February 14, 2017. The term loan facility is scheduled to mature on February 14, 2019. The interest rate on the term loans outstanding under the Existing Credit Agreement initially equaled the prime rate plus 1.75% or the LIBOR rate plus 2.75%, with a LIBOR floor of 0.75%, while the interest rate on the revolver loans initially equaled the prime rate plus 1.50% or the LIBOR rate plus 2.50%. The term loan facility requires quarterly repayments in annual amounts equal to 1.00% of the original principal amount, with the remainder due at maturity. The debt under the Existing Credit Agreement is secured by a first priority security interest in the capital stock of Suddenlink and substantially all of the present and future assets of Suddenlink and its restricted subsidiaries, and is guaranteed by Holdings II, as well as all of Suddenlink's existing and future direct and indirect subsidiaries, subject to certain exceptions set forth in the Existing Credit Agreement. The Existing Credit Agreement contains customary representations, warranties and affirmative covenants. In addition, the Existing 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 Existing Credit Agreement also contains a maximum senior secured leverage maintenance covenant. Additionally, the Existing 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.

        In connection with the Altice Acquisition, we received consent from lenders under the Existing Credit Facility to amend the definition of change of control and certain other related definitions therein so that the consummation of the Altice Acquisition did not constitute a change of control and corresponding event of default thereunder (the "Existing Credit Facility Amendments"), and we entered into a Second Amendment and Consent to the Existing Credit Facility (the "Second Amendment and Consent") with the lenders thereunder, containing, among other things, the Existing Credit Facility Amendments. In exchange for this consent, we paid lenders who consented to these amendments an aggregate fee of approximately $6.8 million.

        Additionally, as of December 21, 2015, in connection with the formation of the New Credit Facility (as described below) the interest rate on the term loans outstanding under the Existing Credit Agreement was increased to the prime rate plus 1.8125% or the LIBOR rate plus 2.8125%, with a LIBOR floor of 1.00%, and the commitments under the then existing $500 million revolving credit facility under the Existing Credit Facility were terminated.

F-186


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

9. Long-Term Debt (Continued)

        On April 29, 2016, the Company will be required to make an excess cash flow recapture payment of $80.7 million in accordance with the terms of the Existing Credit Agreement.

    New Credit Facility

        In connection with the Altice Acquisition, lenders holding (a) $290.0 million of loans and commitments under the existing revolving credit facility under the Existing Credit Facility and (b) approximately $815.4 million of loans under the existing term loan facility under the Existing Credit Facility consented to roll over, on a cashless basis, such lenders' loans and commitments under the Existing Credit Facility into loans and commitments of the same amount under the New Credit Facility made available to Altice US Finance I Corporation effective upon the consummation of the Altice Acquisition. The New Credit Facility will mature on December 21, 2022, or sooner if certain amounts of the 2020 Notes, the 2021 Notes or the Senior Secured Notes remain outstanding at certain future dates. Upon the closing of the Altice Acquisition, the $290.0 million of loans and commitments under the existing revolving credit facility under the Existing Credit Facility that lenders elected to rollover into the New Credit Facility, plus $60.0 million of new revolving commitments from other lenders, formed a new $350 million revolving credit facility under the New Credit Facility, and all remaining commitments under the then existing $500 million revolving credit facility under the Existing Credit Facility were terminated.

        The revolving credit facility under the New Credit Facility is scheduled to mature on December 21, 2020. The New Credit Facility will mature on December 21, 2022, or sooner if certain amounts of the 2020 Notes, the 2021 Notes or the Senior Secured Notes remain outstanding at certain future dates. The interest rate on the term loans outstanding under the New Credit Agreement equal the prime rate plus 2.25% or the LIBOR rate plus 3.25%, with a LIBOR floor of 1.00%, while the interest rate on the revolver loans equal the prime rate plus 2.25% or the LIBOR rate plus 3.25%. The term loan facility requires quarterly repayments in annual amounts equal to 1.00% of the original principal amount, commencing on March 31, 2016, with the remainder due at maturity. The debt under the New Credit Agreement is secured by a first priority security interest in the capital stock of Suddenlink and substantially all of the present and future assets of Suddenlink and its restricted subsidiaries, and is guaranteed by Holdings II, as well as all of Suddenlink's existing and future direct and indirect subsidiaries, subject to certain exceptions set forth in the New Credit Agreement. The New Credit Agreement contains customary representations, warranties and affirmative covenants. In addition, the New 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 New Credit Agreement also contains a maximum senior secured leverage maintenance covenant. Additionally, the New 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.

F-187


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

9. Long-Term Debt (Continued)

    Senior Secured Notes

        On June 12, 2015, affiliates of Altice issued $1.1 billion principal amount of Senior Secured Notes, the proceeds from which were placed in escrow to finance a portion of the purchase price for the Altice Acquisition. The Senior Secured Notes were issued by the Senior Secured Notes Issuer, an indirect subsidiary of Altice, bear interest at a rate of 5.375% per annum and were issued at a price of 100.00%. Interest on the Senior Secured Notes is payable semi-annually on January 15 and July 15. Following the consummation of the Altice Acquisition and related transactions the equity interests in the Senior Secured Notes Issuer 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.

    Senior Notes

        On September 9, 2014, the Issuers issued $500.0 million aggregate principal amount of the 2021 Mirror Notes. The proceeds from the sale, plus cash on hand, were used to make a distribution in the amount of $600 million to our parent and pay related fees and expenses. The 2021 Mirror Notes mature on December 15, 2021. Interest is payable on the 2021 Mirror Notes semi-annually in cash on June 15 and December 15 of each year. The 2021 Mirror Notes have substantially the same terms as the Initial 2021 Notes.

        On June 12, 2015, affiliates of Altice issued $300 million 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 Altice Acquisition. The 2025 Senior Notes were issued by the 2025 Senior Notes Issuer, an indirect subsidiary of Altice, 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. Following the consummation of the Altice 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, affiliates of Altice issued $320 million principal amount of the Holdco Notes, the proceeds from which were placed in escrow, to finance a portion of the purchase price for the Altice Acquisition. The Holdco Notes were issued by the Holdco Notes Issuer, an indirect subsidiary of Altice, bear interest at a rate of 7.75% per annum and were issued at a price of 100.00%. Interest on the Holdco Notes is payable semi-annually on January 15 and July 15 (See Footnote 16). The Holdco Notes will automatically exchange into an equal aggregate principal amount of 2025 Senior Notes once the 2025 Senior Notes Issuer builds sufficient restricted payment capacity and the ability to incur additional indebtedness in excess of the aggregate amount of the Holdco Notes. This automatic exchange is expected to take place during the second quarter of 2016.

        The Issuers have no ability to service interest or principal on the Senior 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 Credit Agreements. However, the Credit Agreements permit Suddenlink to make dividends and distributions

F-188


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

9. Long-Term Debt (Continued)

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 Senior Notes are unsecured and are not guaranteed by any subsidiaries of the Issuers, including Suddenlink.

        The Indentures contain certain covenants, agreements and events of default which are customary with respect to non-investment grade debt securities, including limitations on our ability to incur additional indebtedness, pay dividends on or make other distributions or repurchase our 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.

        The Company's debt agreements include restrictive covenants such as restrictions on additional indebtedness. The Credit Agreements also require the Company to satisfy a financial maintenance covenant. The Company was in compliance with those covenants as of December 31, 2015.

    Loss on Extinguishment of Debt

        The Company did not incur any losses on extinguishment of debt for the successor period from December 21, 2015 through December 31, 2015, and the predecessor period from January 1, 2015 through December 20, 2015.

    Future Principal Payments

        The future maturities of long-term debt, excluding premiums and discounts, as of December 31, 2015 are as follows (dollars in thousands):

Year
  Amount  

2016

  $ 105,129  

2017

    24,422  

2018

    24,422  

2019

    1,361,804  

2020

    1,508,657  

Thereafter

    3,422,160  

Total debt

  $ 6,446,594  

F-189


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

10. Fair Value of Financial Instruments

        The Company has established a process for determining fair value of its financial assets and liabilities using available market information or other appropriate valuation methodologies. Fair value is based upon quoted market prices, where available. If such valuation methods are not available, fair value is based on internally or externally developed models using market-based or independently-sourced market parameters, where available. Fair value may be subsequently adjusted to ensure that those assets and liabilities are recorded at fair value. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value estimate as of the Company's reporting date.

        Fair value guidance establishes a three-level hierarchy for disclosure of fair value measurements, based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date, as follows:

    Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

    Level 2—inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset and liability, either directly or indirectly, for substantially the full term of the financial instrument.

    Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Financial Assets and Liabilities

        The Company has estimated the fair value of its financial instruments as of December 31, 2015 using available market information or other appropriate valuation methodologies. Considerable judgment, however, is required in interpreting market data to develop the estimates of fair value. Accordingly the estimates presented in the accompanying consolidated financial statements are not necessarily indicative of the amounts the Company would realize in a current market exchange.

        The carrying amounts of cash and cash equivalents, receivables, payables and other current assets and liabilities approximate fair value because of the short maturity of those instruments.

        The estimated fair value of the Company's debt at December 31, 2015 is based on quoted market prices for the debt and is classified within Level 2 of the valuation hierarchy. Unrealized gains or losses on debt do not result in the realization or expenditure of cash and are not recognized for financial reporting purposes.

F-190


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

10. Fair Value of Financial Instruments (Continued)

        A summary of the carrying value and fair value of the Company's debt at December 31, 2015 is as follows:

 
  Successor December 31,
2015
 
 
  Carrying
Value(a)
  Fair Value  

Existing credit facility

  $ 1,459,077   $ 1,455,231  

New credit facility

    795,138     797,096  

6.375% Senior Notes due 2020

    1,447,659     1,451,250  

5.125% Senior Notes due 2021(b)

    1,094,461     1,118,750  

5.375% Senior Notes due 2023

    1,089,036     1,102,750  

7.750% Senior Notes due 2025

    273,821     276,000  

Total

  $ 6,159,192   $ 6,201,077  

(a)
On December 21, 2015, we applied business combination accounting to adjust our debt to reflect fair value. Therefore, as of December 31, 2015, the accreted values presented above generally represent the fair value at December 21, 2015, plus or minus the accretions to the balance sheet date of December 31, 2015.

(b)
Includes the Initial 2021 Notes and the 2021 Mirror Notes.

Non-financial Assets and Liabilities

        The Company's non-financial assets such as franchises, property, plant and equipment, and other intangible assets are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist. No impairments were recorded for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015.

11. Commitments and Contingencies

    Contractual Obligations

        The Company has obligations to make future payments for goods and services under certain contractual arrangements. These contractual obligations secure future rights to various assets and services to be used in the normal course of the Company's operations. For example, the Company is contractually committed to make minimum lease payments for the use of property under operating lease agreements. in accordance with applicable accounting rules, the future rights and obligations pertaining to firm commitments, such as operating lease obligations and certain purchase obligations under contracts, are not reflected as assets or liabilities in the consolidated balance sheet.

F-191


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

11. Commitments and Contingencies (Continued)

        The following table summarizes the estimated timing and effect of the Company's payment obligations as of December 31, 2015 on the Company's liquidity and cash flows in future periods (dollars in millions):

 
  Total   2016   2017   2018   2019   2020   Thereafter  

Contractual Obligations:

                                           

Operating lease obligations(1)

  $ 27.9   $ 7.9   $ 6.0   $ 4.4   $ 3.6   $ 2.9   $ 3.1  

Other commitments(2)

    26.4     26.0     0.4                  

Total contractual obligation

  $ 54.3   $ 33.9   $ 6.4   $ 4.4   $ 3.6   $ 2.9   $ 3.1  

(1)
The Company leases certain site and office space under non-cancelable operating leases. Rent expense for site leases and office space was approximately $0.2 million and $8.1 million for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively.

(2)
Represents contractual obligations under programming and content purchase agreements and various other contractual obligations.

        The following items are not included as contractual obligations due to various factors discussed below. However, the Company incurs these costs as part of its operations:

    The Company rents utility poles used in its operations. Generally, pole rentals are cancelable on short notice, but the Company anticipates that such rentals will recur. Rent expense for pole rental attachments was approximately $0.4 million and $13.9 million for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively.

    The Company pays franchise fees under multi-year franchise agreements based on a percentage of revenues generated from video service per year. Franchise fees and other franchise-related costs included in the accompanying consolidated statements of operations were $1.4 million and $46.2 million for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively.

    The Company has cable franchise agreements containing provisions requiring the construction of cable plant and the provision of services to customers within the franchise areas. In connection with these obligations under existing franchise agreements, the Company obtains letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Such letters of credit as of December 31, 2015 totaled $21.2 million which reduced the availability under the $350.0 million to approximately $328.8 million. Payments under these arrangements are required only in the event of nonperformance. The Company does not expect that these contingent commitments will result in any amounts being paid within at least the next twelve months.

F-192


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

11. Commitments and Contingencies (Continued)

    Litigation

        The Company is a defendant or a co-defendant in several lawsuits involving alleged infringement of various patents relating to various aspects of its businesses. Other industry participants are also defendants in certain of these cases, and, in many cases, the Company expects that any potential liability would be the responsibility of the Company's equipment vendors pursuant to applicable contractual indemnification provisions.

        In the event that a court ultimately determines that the Company infringed on any intellectual property rights, the Company may be subject to substantial damages and/or an injunction that could require the Company or the Company's vendors to modify certain products and services the Company offers to its customers, as well as negotiate royalty or license agreements with respect to the patents at issue. While the Company believes the lawsuits are without merit and intends to defend the actions vigorously, no assurance can be given that any adverse outcome would not be material to the Company's consolidated financial condition, results of operations, or liquidity. The Company cannot predict the outcome of any such claims nor can it reasonably estimate the range of possible loss.

        From time to time, the Company is involved in other litigation and regulatory proceedings arising out of the Company's operations. Management believes that the Company is not currently a party to any other legal or regulatory proceedings, the adverse outcome of which, individually or in the aggregate, would materially adversely affect the Company's business, financial position, results of operations, or liquidity.

12. Intangible Assets

        The Company does not amortize indefinite lived intangible assets. Accordingly, all franchises that qualify for indefinite life treatment are not amortized against earnings but instead are tested for impairment annually, or more frequently as warranted by events or changes in circumstances. Based on testing of impairment of indefinite lived intangible asset guidance, franchises are aggregated into essentially inseparable asset groups to conduct the valuations. The asset groups generally represent geographic clustering of the Company's broadband systems into groups by which such systems are managed and by which the franchise rights are associated and tracked. Management believes such grouping represents the highest and best use of those assets for purposes of evaluating impairment of its franchises. The impairment test for intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. The Company determines the fair value of the intangible asset using a DCF analysis, which utilizes significant unobservable inputs (Level 3) within the fair value hierarchy. Determining fair value requires the exercise of significant judgment, including judgment about appropriate discount rates, perpetual growth rates, the amount and timing of expected future cash flows, as well as relevant comparable company earnings multiples for the market-based approach.

        The Company performs its impairment assessment of its goodwill at the same inseparable asset group level as franchises discussed above. The asset groups generally represent geographic clustering of the Company's broadband systems into groups by which such systems are managed and by which goodwill is tracked. The impairment test for goodwill involves a comparison of the estimated fair value

F-193


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

12. Intangible Assets (Continued)

to its carrying amount, including goodwill. The Company determines its fair value using a DCF analysis corroborated by a market-based approach, which utilize significant unobservable inputs (Level 3) within the fair value hierarchy.

        On December 21, 2015, the Company applied business combination accounting and adjusted its franchise, goodwill and other intangible assets including trademarks and customer relationships to reflect fair value. As a result of applying business combination accounting, the Company recorded goodwill, which is tax deductible, of $2.04 billion, which represents the excess of organization value over amounts assigned to the other assets and liabilities (see Footnote 4).

        The Company determined the estimated fair value utilizing an income approach model based on the present value of the estimated discrete future cash flows attributable to each of the intangible assets identified for each unit assuming a discount rate. This approach makes use of unobservable factors such as projected revenues, expenses, capital expenditures, and a discount rate applied to the estimated cash flows. The determination of the discount rate was based on a weighted average cost of capital approach, which uses a market participant's cost of equity and after-tax cost of debt and reflects the risks inherent in the cash flows.

        The Company estimated discounted future cash flows using reasonable and appropriate assumptions including among others, penetration rates for basic and digital video, high speed Internet, and telephone, 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 estimates and assumptions made in the Company's valuations are inherently subject to significant uncertainties, many of which are beyond its 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 significantly affect the measurement value include the assumptions regarding revenue growth, programming expense growth rates, the amount and timing of capital expenditures and the discount rate utilized.

        Franchises, for valuation purposes, are defined as the future economic benefits of the right to solicit and service potential customers (customer marketing rights), and the right to deploy and market new services, such as interactivity and telephone, to potential customers (service marketing rights). Franchises rights of $4.98 billion were recorded as a result of the application of business combination accounting. Franchises are expected to generate cash flows indefinitely and as such will continue to be tested for impairment annually.

        Subscriber relationships, for valuation purposes, represent the value of the business relationship with existing customers (less the anticipated customer churn), and are calculated by projecting the discrete future after-tax cash flows from these customers, including the right to deploy and market additional services to these customers. The Company recorded $1.07 billion of customer relationships in connection with the application of business combination accounting. Subscriber relationships will be amortized on an accelerated method over a useful life of four years based on the period over which current customers are expected to generate cash flows.

F-194


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

12. Intangible Assets (Continued)

        The Company recorded $37.9 million in trade names in connection with the application of business combination accounting. The fair value of trade names was determined using the relief from royalty method which applies a fair royalty ratio to estimated revenue. Trade names will be amortized on an accelerated method over a useful life of 2 years based on the period over which the Company expects to continue to use each trade name.

        The results of the Company's analysis of indefinite-lived intangible assets as of December 31, 2015 indicated no impairment of the carrying value of those assets and no accumulated impairment of goodwill existed.

        Indefinite-lived and finite-lived intangible assets are presented in the following table as of December 31:

 
  Successor 2015  
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Net
Carrying
Amount
 

Indefinite-lived

                   

Franchise and Patent rights

  $ 4,981,233   $   $ 4,981,233  

Trade Names

             

Goodwill

    2,040,402         2,040,402  

Total

  $ 7,021,635   $   $ 7,021,635  

Finite-lived

                   

Franchise and Patent rights

  $ 3,356   $   $ 3,356  

Trade Names

    37,856     (746 )   37,110  

Subscriber relationships

    1,067,353     (12,625 )   1,054,728  

Total

  $ 1,108,565   $ (13,371 ) $ 1,095,194  

        Amortization expense for franchise and patent rights represents the amortization related to patents rights and amortization related to franchises that did not qualify for indefinite-life treatment, including costs associated with franchise renewals. Franchise amortization expense for the successor period from December 21, 2015 through December 31, 2015 was less than $0.1 million and franchise amortization expense for the predecessor period from January 1, 2015 through December 20, 2015 was $0.7 million. Trade names amortization expense was $0.7 million for the successor period from December 21, 2015 through December 31, 2015 and was zero for the predecessor period from January 1, 2015 through December 20, 2015. Subscriber relationships amortization expense was $12.6 million and $65.7 million, for the successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively.

F-195


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

12. Intangible Assets (Continued)

        Below is a summary of the changes in the carrying value of the Company's goodwill for the year ended December 31, 2015:

 
  Predecessor 2015  
 
  Gross
Amount
  Accumulated
Impairment
Charge
  Carrying
Value
 

Balance, beginning of year

  $ 1,543,103   $   $ 1,543,103  

Goodwill recognized(a)

             

Balance, end of period

  $ 1,543,103   $   $ 1,543,103  

(a)
Includes Goodwill recognized from the acquisitions
 
  Successor 2015  
 
  Gross
Amount
  Accumulated
Impairment
Charge
  Carrying
Value
 

Balance, beginning of period

  $ 2,040,402   $   $ 2,040,402  

Balance, end of period

  $ 2,040,402   $   $ 2,040,402  

        The Company has upgraded the technological state of many of its broadband systems since the commencement of operations and has experience with local franchise authorities where the franchises exist and believes all franchises will be renewed indefinitely.

        The following table sets forth the estimated amortization expense on intangible assets for the fiscal years ending December 31:

Year
  Amount  

2016

  $ 93,577  

2017

    65,564  

2018

    30,420  

2019

    13,472  

2020

    273  

Thereafter

    1,230  

Total

  $ 204,536  

F-196


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

13. Operating Expenses

        Operating expenses by key expense components consisted of the following:

 
  Successor
Period from
December 21,
2015 through
December 31,
2015
   
  Predecessor
Period from
January 1, 2015
through
December 20,
2015
 

Programming

  $ 17,943       $ 594,152  

High-speed Internet

    1,559         54,177  

Telephone

    823         26,934  

Plant and Operating

    6,261         197,045  

Total Operating Expenses

  $ 26,586       $ 872,308  

        Programming costs consist primarily of costs paid for programmers for basic, digital, premium, VOD and pay-per-view programming. High-speed Internet costs primarily consist of costs for bandwidth connectivity. Telephone costs primarily consist of costs for delivering telephone service to customers, such as subscriber line costs and regulatory fees. Plant and operating costs consist primarily of employee costs related to wages and benefits of technical personnel who maintain our cable network and provide customer support, outside labor costs, vehicle, utilities and pole rental expenses.

14. Selling, General and Administrative Expenses

        Selling, general and administrative expenses by key expense components consisted of the following:

 
  Successor
Period from
December 21,
2015 through
December 31,
2015
   
  Predecessor
Period from
January 1, 2015
through
December 20,
2015
 

General and Administrative

  $ 7,982       $ 687,802  

Marketing

    2,873         95,547  

Corporate Overhead and Management Fees

    28,311         106,611  

Total Selling, General and Administrative

  $ 39,166       $ 889,960  

        General and administrative expenses consist primarily of wages and benefits for our call centers, customer service and support and administrative personnel; bad debt; billing; advertising; facilities costs; non-cash stock compensation expenses and other administrative expenses. Marketing costs represent the costs of marketing to our current and potential commercial and residential customers, including wages and benefits for our marketing departments and other labor costs. Corporate overhead and management fees primarily consist of wages and benefits for our corporate personnel, legal fees, accounting and audit fees and other corporate expenses.

F-197


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

15. Income and Other Taxes

        Components of the Company's current and deferred income tax (benefit)/provision for the year ended December 31, 2015 was as follows:

 
  Successor
Period from
December 21,
2015 through
December 31,
2015
   
  Predecessor
Period from
January 1, 2015
through
December 20,
2015
 

Current Tax Expense:

                 

Federal

  $       $  

State

    155         4,435  

Total Current

    155         4,435  

Deferred Tax (Benefit)/Expense:

                 

Federal

    (9,794 )       30,116  

State

    (624 )       (5,250 )

Total Deferred

    (10,418 )       24,866  

Net (Benefit)/Provision for Income Taxes

  $ (10,263 )     $ 29,301  

        The Company's (benefit)/provision for income taxes differs from the expected tax expense amount computed by applying the statutory federal income tax rate to the income/(loss) before income taxes as a result of the following:

 
  Successor
Period from
December 21,
2015 through
December 31,
2015
   
  Predecessor
Period from
January 1, 2015
through
December 20,
2015
 

Tax at U.S. statutory rate

    35.0 %       35.0 %

State taxes, net of benefit

    1.9         (1.2 )

Uncertain tax position

             

Change in valuation allowance

            0.4  

Non-cash stock option expense

            (57.7 )

Return to provision

             

Change in state effective tax rate

            5.4  

State income tax credits

            (0.1 )

Other, net

    (0.1 )       2.4  

Effective tax rate

    36.8 %       (15.8 )%

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax

F-198


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

15. Income and Other Taxes (Continued)

purposes. Significant components of the Company's deferred tax assets and liabilities are as follows as of December 31:

 
  Successor 2015  

Deferred tax assets:

       

Net operating loss carryforwards

  $ 631,216  

State income tax credits

    3,809  

Accrued expenses

    20,634  

Other

    888  

Total gross deferred tax assets

    656,547  

Less: valuation allowance

    (1,283 )

Net deferred tax asset

    655,264  

Deferred tax liabilities:

       

Book over tax basis of depreciable assets

    (385,437 )

Book over tax basis of amortizable assets

    (1,795,262 )

Gross deferred tax liabilities

    (2,180,699 )

Net deferred tax liabilities

  $ (1,525,435 )

        The Company has approximately $1,709.0 million of federal net operating loss carryforwards in 2015, which will expire at various dates through 2035. In addition, the Company has state net operating loss carryforwards, net of US Federal income taxes, of approximately $33.1 million in 2015, which will expire at various dates through 2035. At December 31, 2015, the Company has a $1.3 million valuation allowance on state net operating loss carryforwards as it is more likely than not that a portion of the deferred tax asset will not be realized in the future. The net operating loss carryforwards are subject to certain limitations arising from changes in ownership rules under the Internal Revenue Code and state taxing authorities. The Company does not expect the limitations to impact the ability to utilize the losses prior to their expiration. The utilization of the net operating losses and the acquired net operating losses will be determined based on the ordering rules required by the applicable taxing jurisdiction.

        The Company accounts for uncertain tax positions in accordance with the accounting guidance for such items. This guidance prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. The Company recognizes income tax benefits for those income tax provisions determined more likely than not to be sustained upon examination, based on the technical merits of

F-199


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

15. Income and Other Taxes (Continued)

the positions. Changes in the Company's reserve for uncertain income tax positions, excluding the related accrual for interest and penalties are presented below:

 
  Successor
Period from
December 21,
2015 through
December 31,
2015
   
  Predecessor
Period from
January 1, 2015
through
December 20,
2015
 

Balance, beginning of period

  $       $  

Additions for tax positions related to prior years

             

Reductions for tax positions related to prior years

             

Additions for tax positions related to current year

             

Reductions for tax positions related to current year

             

Reductions due to settlements with taxing authorities

             

Reductions due to expiration of statute of limitations

             

Balance, end of period

  $       $  

        Tax years ending 2011 through 2014 remain subject to examination and assessment. By statute, the Company's use of certain carryforward attributes that were generated prior to 2010 will allow the Internal Revenue Service ("IRS") to subsequently examine those periods. In 2015, the Company reached a settlement with the IRS on the audit of the income tax return for the successor tax period ending December 31, 2012, resulting in no material adjustments to the Company's financial statements.

        We adjust our tax reserve estimates periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and precedent. We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2015, we have no accrued interest or penalties related to uncertain tax positions.

        As of December 31, 2015, the Company does not currently have any uncertain tax positions, nor does it believe that any events or rulings will cause one, within the next twelve months. However, various events could cause the Company's current expectations to change in the future.

16. Related Party Transactions

        Prior to the consummation of the Altice Acquisition, pursuant to the Amended and Restated Cequel Communications Management Agreement, dated as of February 14, 2012, as amended (the "Management Agreement"), Cequel III, LLC ("Cequel III") provided certain executive, administrative and managerial services to the broadband systems owned by Cequel Holdings and its subsidiaries. Compensation under the terms of the agreement was an annual base fee of $5.3 million, set in 2006, paid quarterly in arrears. The base fee increased 5% annually on each anniversary date of the Management Agreement. The Cequel Holdings Board of Directors approved an additional incentive fee of $3.2 million to Cequel III, LLC for the predecessor period from January 1, 2015 through December 20, 2015. The Management Agreement was terminated upon consummation of the Altice

F-200


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

16. Related Party Transactions (Continued)

Acquisition, so no incentive fees were approved during the successor period from December 21, 2015 through December 31, 2015.

        Total compensation paid to Cequel III, LLC under the Management Agreement, which is included in the selling, general and administrative line in the accompanying consolidated statements of operations, was $11.0 million for the predecessor period from January 1, 2015 through December 20, 2015. The Management Agreement was terminated upon consummation of the Altice Acquisition, so no fees were paid to Cequel III during the successor period from December 21, 2015 through December 31, 2015. No payables to Cequel III, LLC were recorded at December 31, 2015.

        Pursuant to the Stockholders Agreement of CVC 2 B.V., a subsidiary of Altice and indirect owner of Cequel Corporation, dated as of December 21, 2015, Altice 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 $10.0 million. At December 31, 2015, the Company had approximately $0.3 million recorded as a payable to Altice, related to services provided for the successor period from December 21, 2015 through December 31, 2015.

        On December 21, the Holdco Notes Issuer loaned the proceeds of the Holdco Notes to the Company to consummate the Altice Acquisition. The intercompany loan was recorded as Due to Parent at the fair value of the related debt at the time of the transaction. Once the Senior Notes Issuer builds sufficient restricted payment capacity and the ability to incur additional indebtedness in excess of the aggregate amount of the Holdco Notes, the Holdco Notes will automatically exchange into an equal aggregate principal amount of 2025 Senior Notes and the intercompany loan will be eliminated.

17. Employee Benefit Plan

        The Company's employees may participate in a 401(k) plan. Employees that qualify for participation can contribute up to 15% of their salary, on a pre-tax basis, subject to a maximum contribution limit as determined by the Internal Revenue Service. The Company matches 50% of the first 6% of participant contributions. The Company contributed approximately $0.2 million and $6.6 million, to the 401(k) plan for successor period from December 21, 2015 through December 31, 2015 and the predecessor period from January 1, 2015 through December 20, 2015, respectively.

18. Equity Based Compensation

Carried Interest Plan

        Prior to the Altice Acquisition, the general partners of the partnerships that held the shares of Cequel Corporation (collectively, the "Carry Interest Partnerships"), each adopted separate carried interest plans (collectively, the "Carried Interest Plan"), pursuant to which participants were awarded profit interest units in those partnerships. The purpose of the Carried Interest Plan was to provide participation in Cequel Corporation's long-term success and growth as an incentive to our executives, key employees, directors and other individuals who were responsible for and contributed to our management, growth and profitability, and to attract, retain and reward such participants.

F-201


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

18. Equity Based Compensation (Continued)

        Pursuant to the Carried Interest Plan, each Carry Interest Partnership was permitted to issue no more than 1,000,000 carry units. The Carry Interest Partnerships issued an aggregate of approximately 996,500 carry units. The awarded carry units that were forfeited or canceled in accordance with the Carried Interest Plan were available, under certain terms and conditions, for reissue in subsequent awards. In certain instances following cessation of their services on behalf of us, the participants had put rights or the Carry Interest Partnerships had call rights, with respect to such participants' carry units.

        The carry units were to vest in quarterly installments over four years. Certain adjustments to the vesting schedules and/or certain distributions could occur in respect of certain specified events in connection with the Carried Interest Plan, which included: (i) a sale or series of sales by one of the Sponsors to the other resulting in the transferring Sponsor owning less than 35% of its original total Sponsor ownership interest following such transaction, (ii) a sale or series of sales by the Sponsors to third parties resulting in the Sponsors together owning less than 35% of their aggregate original Sponsor ownership interests, (iii) a sale or series of sales by either BC Partners or CPPIB to third parties resulting in such Sponsor owning less than 35% of its original total Sponsor ownership interest, or (iv) a sale of substantially all of the assets of Cequel Corporation or a sale of substantially all of its shares.

        The Carried Interest Plan entitled participants to receive certain percentages of net cash proceeds received by the Carry Interest Partnerships in connection with sales by the Carry Interest Partnerships of common stock of Cequel Corporation, distributions from Cequel Corporation or amounts received upon liquidation or dissolution of Cequel Corporation. The amounts were paid to participants once threshold amounts had been received by the Carry Interest Partnerships and paid to the Sponsors and Management Investors in Cequel Corporation, and the percentage of cash proceeds to which the participants are entitled increased as the return to the Sponsors and such Management Investors increased.

        The Company measured the cost of employee services received in exchange for carry units based on the fair value of the award at each reporting period. The Company used the Monte Carlo Simulation Method to estimate the fair value of the awards. Because the Monte Carlo Simulation Method required the use of subjective assumptions, changes in these assumptions could have materially affected the fair value of the carried interest units granted. The time to liquidity event assumption was based on management's judgment. The equity volatility assumption were estimated using the historical weekly volatility of publicly traded comparable companies. The risk-free rate 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 Company's total equity value was estimated by a third party using a range of indicated business enterprise values. For the year ended December 31, 2015, the Company recognized approximately $287.7 million, related to the push down of non-cash compensation expense for employees of Cequel.

        Concurrent with the Altice Acquisition, the Carried Interest Plan was cashed out based on an agreement between the Sponsors and the Management Holder whereby payments were made to

F-202


Table of Contents


Cequel Corporation

Notes to Consolidated Financial Statements (Continued)

December 31, 2015

(dollars in thousands, except where otherwise indicated)

18. Equity Based Compensation (Continued)

participants in such Carried Interest Plan, including certain officers and directors of Cequel and Cequel Corporation, and the Carried Interest Plan was terminated.

19. Equity Distributions

        In December 2015, $32.2 million was contributed to the Company to pay certain transaction fees and expenses related to the Altice Acquisition.

20. Unaudited Quarterly Financial Data

        The following table presents quarterly data for the periods presented on the consolidated statements of operations (unaudited):

 
  Quarter Ended  
 
  March 31,   June 30,   September 30,   December 31,  

Successor 2015(1)

                         

Revenues

  $   $   $   $ 72,943  

Loss from operations

                (16,383 )

Net loss

                (17,611 )

Predecessor 2015(2)

                         

Revenues

  $ 588,250   $ 608,016   $ 605,112   $ 545,991  

Income/(loss) from operations

    79,029     (19,792 )   62,196     (69,689 )

Net income/(loss)

    8,994     (277,397 )   35,326     18,201  

(1)
Successor 2015 consists of the period from December 21, 2015 through December 31, 2015.

(2)
Predecessor 2015 consists of the period from January 1, 2015 through December 20, 2015.

21. Subsequent Events

        The Company has updated its review of subsequent events as of March 30, 2016 (the date available for issuance) noting no events that require disclosure.

F-203


Table of Contents


PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.    Other Expenses of Issuance.

        The following table sets forth the various expenses payable in connection with the issuance contemplated by this registration statement. All of the fees set forth below are estimates except for the SEC registration fee.

 
  Payable by the registrant  

SEC registration fee

  $ 384,659  

Printing expenses

  $ 350,000  

Legal fees and expenses

  $ 2,500,000  

Accounting fees and expenses

  $ 1,000,000  

Transfer Agent and Registrar fees

  $ 50,000  

Miscellaneous fees and expenses

  $ 15,341  

Total

  $ 4,300,000  

Item 14.    Indemnification of Directors and Officers.

        We are incorporated under the laws of the state of Delaware.

        Section 145(a) of the DGCL provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful.

        Section 145(b) of the DGCL provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.

        Section 145(c) of the DGCL provides that to the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145 of the DGCL, or in defense of any

II-1


Table of Contents

claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith.

        Section 145(e) of the DGCL provides that expenses, including attorneys' fees, incurred by an officer or director of the corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in Section 145 of the DGCL. Such expenses, including attorneys' fees, incurred by former directors and officers or other persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.

        Section 145(g) of the DGCL specifically allows a Delaware corporation to purchase liability insurance on behalf of its directors and officers and to insure against potential liability of such directors and officers regardless of whether the corporation would have the power to indemnify such directors and officers under Section 145 of the DGCL.

        Section 102(b)(7) of the DGCL permits a Delaware corporation to include a provision in its certificate of incorporation eliminating or limiting the personal liability of directors to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. This provision, however, may not eliminate or limit a director's liability (1) for breach of the director's duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, (3) under Section 174 of the DGCL, or (4) for any transaction from which the director derived an improper personal benefit.

        Section 145 of the DGCL makes provision for the indemnification of officers and directors in terms sufficiently broad to indemnify our officers and directors under certain circumstances from liabilities (including reimbursement for expenses incurred) arising under the Securities Act. Our amended and restated certificate of incorporation will provide, in effect, that, to the fullest extent and under the circumstances permitted by Section 145 of the DGCL, we will indemnify any and all of our officers and directors. Our certificate of incorporation also will relieve our directors from monetary damages to us or our stockholders for breach of such director's fiduciary duty as a director to the fullest extent permitted by the DGCL.

        We have purchased insurance policies which, within the limits and subject to the terms and conditions thereof, cover certain expenses and liabilities that may be incurred by directors and officers in connection with proceedings that may be brought against them as a result of an act or omission committed or suffered while acting as our director or officer.

Item 15.    Recent Sales of Unregistered Securities.

        In the three years preceding the filing of this registration statement, the registrant has issued the following securities that were not registered under the Securities Act:

        On September 16, 2015, in connection with the Optimum Acquisition, Altice USA, Inc. (formerly known as Neptune Holding US Corp.) issued 100 shares of its common stock, par value $0.01 per share, to CVC 3 B.V., a Dutch private company with limited liability ( besloten vennootschap ), in a private placement under Section 4(a)(2) of the Securities Act, and in consideration for $1.00 paid to Altice USA, Inc. by CVC 3 B.V. for such shares.

        On June 21, 2016, Altice USA issued $875 million aggregate principal amount of 10.75% notes due 2023 and $875 million aggregate principal amount of Altice USA's 11.00% notes due 2024. The transaction did not involve any underwriters or any public offering. The transaction was exempt from

II-2


Table of Contents

registration under the Securities Act, pursuant to Section 4(a)(2) of the Securities Act, as a transaction by an issuer not involving a public offering. No general solicitation was made by either Altice USA or any person acting on its behalf. The purchasers of the notes agreed that the securities would be subject to standard restrictions applicable to a private placement of securities under applicable state and federal securities laws and appropriate legends were affixed to the issued notes.

        On June 21, 2017, Altice USA issued shares of Class A common stock and Class B common stock in exchange for outstanding shares of the Company and in connection with conversion of notes payable to affiliates and related parties into shares of Class A common stock and Class B common stock. The issuance of such shares of Class A common stock and Class B common stock was not registered under the Securities Act and the shares were issued to investors in reliance upon the exemption from the registration requirements of the Securities Act, as set forth in Section 4(a)(2) under the Securities Act.

        Since September 14, 2015, we have granted stock options to employees, directors and consultants, covering an aggregate of 5,681,387 shares of our common stock, having exercise prices ranging from $18.87 to $22.41 per share, in connection with services provided to us by such parties.

Item 16.    Exhibits and Financial Statement Schedules.

    (a)
    Exhibits :

        The exhibit index attached hereto is incorporated herein by reference.

    (b)
    Financial statement schedules :

        No financial statement schedules are provided because the information called for is not required or is shown in the financial statements or the notes thereto.

Item 17.    Undertakings.

        The undersigned hereby undertakes:

    (1)
    To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

    (i)
    To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

    (ii)
    To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;

    (iii)
    To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

    (2)
    That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the

II-3


Table of Contents

      securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

    (3)
    To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;

    (4)
    That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however , that no statements made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use;

    (5)
    That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

    (i)
    Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

    (ii)
    Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

    (iii)
    The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

    (iv)
    Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser;

    (6)
    Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

II-4


Table of Contents


EXHIBIT INDEX

Exhibit No.   Exhibit Description
  3.1   Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on June 12, 2017)
        
  3.2   Amended and Restated Bylaws of the Company (incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on June 12, 2017)
        
  3.3 * Form of Third Amended and Restated Certificate of Incorporation of the Company
        
  3.4 * Form of Second Amended and Restated Bylaws of the Company
        
  4.1 Specimen Class A Common Stock Certificate
        
  4.2 Specimen Class B Common Stock Certificate
        
  4.3   Form of Stockholders and Registration Rights Agreement by and among Altice USA, Inc. and the stockholders party thereto (incorporated by reference to Exhibit 4.2 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on June 12, 2017)
        
  4.4   Indenture, dated as of April 2, 2010, relating to Cablevision's 7 3 / 4 % Senior Notes due 2018 and 8% Senior Notes due 2020 (incorporated by reference to Exhibit 4.4 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.5   First Supplemental Indenture, dated as of April 15, 2010, to the Indenture, dated as of April 2, 2010, relating to Cablevision's 7 3 / 4 % Senior Notes due 2018 and 8% Senior Notes due 2020 (incorporated by reference to Exhibit 4.5 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.6   Second Supplemental Indenture, dated as of September 27, 2012, to the Indenture dated as of April 2, 2010, relating to Cablevision's 5 7 / 8 % Senior Notes due 2022 (incorporated by reference to Exhibit 4.6 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.7   Indenture, dated as of December 1, 1997, relating to CSC Holdings' 7 7 / 8 % Senior Debentures due 2018 (incorporated by reference to Exhibit 4.7 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.8   Indenture, dated as of July 1, 1998, relating to CSC Holdings' 7 5 / 8 % Senior Debentures due 2018 (incorporated by reference to Exhibit 4.8 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.9   Indenture, dated as of February 12, 2009, relating to CSC Holdings' 8 5 / 8 % Senior Notes due 2019 and 8 5 / 8 % Series B Senior Notes due 2019 (incorporated by reference to Exhibit 4.9 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.10   Indenture, dated as of November 15, 2011, relating to CSC Holdings' 6 3 / 4 % Senior Notes due 2021 and 6 3 / 4 % Series B Senior Notes due 2021 (incorporated by reference to Exhibit 4.10 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
 
   

II-5


Table of Contents

Exhibit No.   Exhibit Description
  4.11   Indenture, dated as of May 23, 2014, relating to CSC Holdings' 5 1 / 4 % Senior Notes due 2024 and 5 1 / 4 % Series B Senior Notes due 2024 (incorporated by reference to Exhibit 4.11 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.12   Indenture, dated as of October 9, 2015, relating to CSC Holdings' 10 1 / 8 % Senior Notes due 2023 and 10 7 / 8 % Senior Notes due 2025 (incorporated by reference to Exhibit 4.12 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.13   Supplemental Indenture, dated as of June 21, 2016, to Indenture dated as of October 9, 2015, relating to CSC Holdings' 10 1 / 8 % Senior Notes due 2023 and 10 7 / 8 % Senior Notes due 2025 (incorporated by reference to Exhibit 4.13 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.14   Indenture, dated as of October 9, 2015, relating to CSC Holdings' 6 5 / 8 % Senior Guaranteed Notes due 2025 (incorporated by reference to Exhibit 4.14 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.15   Supplemental Indenture, dated as of June 21, 2016, to the Indenture dated as of October 9, 2015, relating to CSC Holdings' 6 5 / 8 % Senior Guaranteed Notes due 2025 (incorporated by reference to Exhibit 4.15 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.16   Indenture, dated as of September 23, 2016, relating to CSC Holdings' 5 1 / 2 % Senior Guaranteed Notes due 2027 (incorporated by reference to Exhibit 4.16 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.17   Indenture, dated as of June 12, 2015, relating to Altice US Finance I Corporation's 5 3 / 8 % Senior Secured Notes due 2023 (incorporated by reference to Exhibit 4.17 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.18   Supplemental Indenture, dated as of December 21, 2015, to the Indenture, dated as of June 12, 2015, relating to Altice US Finance I Corporation's 5 3 / 8 % Senior Secured Notes due 2023 (incorporated by reference to Exhibit 4.18 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.19   Notes Pledge and Security Agreement, dated as of December 21, 2015, by and between Cequel Communications Holdings II,  LLC and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 4.19 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.20   Notes Pledge and Security Agreement, dated as of December 21, 2015, by and among the grantors party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 4.20 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.21   Trademark Security Agreement, dated as of December 21, 2015, by and among the grantors party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 4.21 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
 
   

II-6


Table of Contents

Exhibit No.   Exhibit Description
  4.22   Copyright Security Agreement, dated as of December 21, 2015, by and among the grantors party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 4.22 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.23   Indenture, dated as of April 26, 2016, relating to Altice US Finance I Corporation's 5 1 / 2 % Senior Secured Notes due 2026 (incorporated by reference to Exhibit 4.23 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.24   Notes Pledge and Security Agreement, dated May 20, 2016, by and between Cequel Communications Holdings II, LLC and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 4.24 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.25   Notes Pledge and Security Agreement, dated May 20, 2016, by and among each of the grantors party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 4.25 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.26   Trademark Security Agreement, dated as of May 20, 2016, by and among the grantors party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 4.26 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.27   Copyright Security Agreement, dated as of May 20, 2016, by and among the grantors party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 4.27 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.28   Indenture, dated as of October 25, 2012 relating to Cequel Communications Holdings I, LLC's and Cequel Capital Corporation's 6 3 / 8 % Senior Notes due 2020 (incorporated by reference to Exhibit 4.28 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.29   Indenture, dated as of May 16, 2013, relating to Cequel Communications Holdings I, LLC's and Cequel Capital Corporation's 5 1 / 8 % Senior Notes due 2021 (incorporated by reference to Exhibit 4.29 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.30   Indenture, dated as of September 9, 2014, relating to Cequel Communications Holdings I, LLC's and Cequel Capital Corporation's 5 1 / 8 % Senior Notes due 2021 (incorporated by reference to Exhibit 4.30 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.31   Indenture, dated as of June 12, 2015, relating to Cequel Communications Holdings I, LLC's and Cequel Capital Corporation's 7 3 / 4 % Senior Notes due 2025 (incorporated by reference to Exhibit 4.31 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  4.32   Supplemental Indenture, dated as of December 21, 2015, to the Indenture, dated as of June 12, 2015, relating to Cequel Communications Holdings I, LLC's and Cequel Capital Corporation's 7 3 / 4 % Senior Notes due 2025 (incorporated by reference to Exhibit 4.32 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)

II-7


Table of Contents

Exhibit No.   Exhibit Description
  4.33   Indenture, dated as of January 29, 2018, relating to CSC Holdings, LLC's 5.375% Senior Notes due 2028 (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K (File No. 001-38126) filed with the Commission on February 2, 2018)
        
  4.34   Indenture, dated as of April 5, 2018, relating to Cequel Communications Holdings I, LLC's and Cequel Capital Corporation's 7.500% Senior Notes due 2028 (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K (File No. 001-38126) filed with the Commission on April 6, 2018)
        
  4.35 * Form of Amended and Restated Stockholders and Registration Rights Agreement
        
  5.1 * Opinion of Shearman & Sterling LLP
        
  10.1   Credit Agreement, dated as of October 9, 2015, by and among CSC Holdings, LLC (as successor by merger to Neptune Finco Corp.), as borrower, certain lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and security agent, Barclays Bank plc and BNP Paribas Securities Corp., as co-syndication agents, Credit Agricole Corporate and Investment Bank, Deutsche Bank Securities Inc., Royal Bank of Canada, Societe Generale, TD Securities (USA) LLC and the Bank of Nova Scotia, as co-documentation agents, and J.P. Morgan Securities LLC, Barclays Bank plc, BNP Paribas Securities Corp., Credit Agricole Corporate and Investment Bank, Deutsche Bank Securities Inc., Royal Bank of Canada, Societe Generale, TD Securities (USA) LLC and The Bank of Nova Scotia, as joint bookrunners and lead arrangers (incorporated by reference to Exhibit 10.1 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.2   First Amendment to Credit Agreement, dated as of June 20, 2016 (incorporated by reference to Exhibit 10.2 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.3   Incremental Loan Assumption Agreement, dated as of June 21, 2016 (incorporated by reference to Exhibit 10.3 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.4   Incremental Loan Assumption Agreement, dated as of July 21, 2016 (incorporated by reference to Exhibit 10.4 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.5   Second Amendment to Credit Agreement (Extension Amendment), dated as of September 9, 2016 (incorporated by reference to Exhibit 10.5 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.6   Third Amendment to Credit Agreement (Extension Amendment, Incremental Loan Assumption Agreement & Assignment and Acceptance), dated as of December 9, 2016 (incorporated by reference to Exhibit 10.6 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.7   Fourth Amendment to Credit Agreement (Incremental Loan Assumption Agreement & Refinancing Amendment), dated as of March 15, 2017 (incorporated by reference to Exhibit 10.7 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.8   Facility Guaranty, dated as of June 21, 2016, by and among the guarantors party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.8 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)

II-8


Table of Contents

Exhibit No.   Exhibit Description
  10.9   Pledge Agreement, dated as of June 21, 2016, by and among CSC Holdings, LLC, certain pledgors party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.10   Credit Agreement, dated as of June 12, 2015, by and among Altice US Finance I Corporation, as borrower, certain lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and security agent, and J.P. Morgan Securities LLC and BNP Paribas, as joint bookrunners and lead arrangers (incorporated by reference to Exhibit 10.10 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.11   First Amendment to Credit Agreement (Refinancing Amendment), dated as of October 25, 2016 (incorporated by reference to Exhibit 10.11 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.12   Second Amendment to Credit Agreement (Extension Amendment), dated as of December 9, 2016 (incorporated by reference to Exhibit 10.12 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.13   Third Amendment to Credit Agreement (Incremental Loan Assumption Agreement & Refinancing Amendment), dated as of March 15, 2017 (incorporated by reference to Exhibit 10.13 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.14   Loans Pledge and Security Agreement, dated as of December 21, 2015, by and between Cequel Communications Holdings II,  LLC and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.14 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.15   Loans Pledge and Security Agreement, dated as of December 21, 2015, by and among the grantors party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.15 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.16   Facility Guaranty, dated as of December 21, 2015, by and among the guarantors party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.16 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.17   Trademark Security Agreement, dated as of December 21, 2015, by and among certain grantors thereunder and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.17 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.18   Copyright Security Agreement, dated as of December 21, 2015, by and between Cequel Communications, LLC and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.18 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on May 16, 2017)
        
  10.19   Form of Stockholders' Agreement by and among Altice USA, Inc., Altice N.V. and A4 S.A. (incorporated by reference to Exhibit 10.19 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on June 12, 2017)
 
   

II-9


Table of Contents

Exhibit No.   Exhibit Description
  10.20 + Altice USA 2017 Long Term Incentive Plan (incorporated by reference to Exhibit 99.1 of the Company's Registration Statement on Form S-8 (File No. 333-222170) filed with the Commission on December 20, 2017)
        
  10.21 + Altice USA Short Term Incentive Compensation Plan (incorporated by reference to Exhibit 10.21 of the Company's Registration Statement on Form S-1 (File No. 333-217240) filed with the Commission on June 12, 2017)
        
  10.22 + Altice USA 2017 Long Term Incentive Plan, Form of Nonqualified Stock Option Award Agreement (incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 8-K filed with the Commission on January 3, 2018)
        
  10.23   Fifth Amendment to Credit Agreement (Incremental Loan Assumption Agreement, dated as of January 12, 2018 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (File No. 001-38126) filed with the Commission on January 16, 2018)
        
  10.24   Fourth Amendment to Credit Agreement (Extension Amendment), dated as of March 22, 2018 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (File No. 001-38126) filed with the Commission on March 28, 2018)
        
  10.25 * Master Separation Agreement, dated as of May 18, 2018, by and between Altice USA, Inc. and Altice N.V.
        
  10.26 * Form of Stockholders' Agreement by and among Altice USA, Inc., Next Alt S.à r.l. and A4 S.A.
        
  21.1 * List of subsidiaries of the Company
        
  23.1 * Consent of KPMG LLP
        
  23.2 * Consent of PricewaterhouseCoopers LLP
        
  23.3 * Consent of Shearman & Sterling LLP (contained in its opinion filed as Exhibit 5.1 hereto)
        
  24.1 ** Power of Attorney
        
  99.1 ** Rule 438 Consent of Patrick Drahi
        
  101.INS * XBRL Instance Document
        
  101.SCH * XBRL Taxonomy Extension Schema Document
        
  101.CAL * XBRL Taxonomy Extension Calculation Linkbase Document
        
  101.DEF * XBRL Taxonomy Extension Definition Linkbase Document
        
  101.LAB * XBRL Taxonomy Extension Labels Linkbase Document
        
  101.PRE * XBRL Taxonomy Extension Presentation Linkbase Document

*
Filed herewith.

**
Previously filed.

Shares of Class A common stock and Class B common stock of the Company will be distributed in an uncertificated form. Therefore, the Company is not filing specimen Class A common stock or Class B common stock certificates. Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4 hereto.

+
Indicates management contract or compensatory plan.

II-10


Table of Contents


SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Long Island City, State of New York, on May 21, 2018.

    ALTICE USA, INC.

 

 

By:

 

/s/ DAVID CONNOLLY

        Name:   David Connolly
        Title:   Executive Vice President, General Counsel and Secretary

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on May 21, 2018 by the following persons in the capacities indicated.

Signature
 
Title

 

 

 

 

 
*

Dexter Goei
  Chairman and Chief Executive Officer (Principal Executive Officer)

*

Charles Stewart

 

Co-President and Chief Financial Officer (Principal Financial Officer)

*

Victoria Mink

 

Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)

*

Jérémie Bonnin

 

Director

*

Manon Brouillette

 

Director

*

Mark Mullen

 

Director

*

Dennis Okhuijsen

 

Director

II-11


Table of Contents

Signature
 
Title

 

 

 

 

 
*

Raymond Svider
  Director

*By:

 

/s/ DAVID CONNOLLY

David Connolly
as Attorney-in-Fact

 

 

II-12




Exhibit 3.3

 

THIRD AMENDED AND RESTATED

 

CERTIFICATE OF INCORPORATION

 

OF

 

ALTICE USA, INC.

 

ALTICE USA, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

 

1. The present name of the corporation is Altice USA, Inc. (the “ Corporation ”).

 

2. The Corporation was incorporated under the name “Neptune Holding US Corp.” by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on September 14, 2015, and was amended by a Certificate of Amendment to the original Certificate of Incorporation filed on March 28, 2017 and a Certificate of Amendment to the original Certificate of Incorporation filed on June 21, 2017 (as amended, the “ Original Certificate of Incorporation ”).  The Original Certificate of Incorporation was amended and restated in its entirety by the filing of the Corporation’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on June 21, 2017 (as amended and restated, the “ Interim Amended and Restated Certificate of Incorporation ”).

 

3. The Interim Amended and Restated Certificate of Incorporation was amended and restated in its entirety by the filing of the Corporation’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on June 21, 2017 (as amended and restated, the “ Amended and Restated Certificate of Incorporation ”).

 

4. The Amended and Restated Certificate of Incorporation is hereby amended and restated pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware (as amended from time to time, the “ DGCL ”), so as to read in its entirety in the form attached hereto as  Exhibit A  and incorporated herein by this reference (Exhibit A and this Certificate collectively constituting the Corporation’s Third Amended and Restated Certificate of Incorporation).

 

5. The amendment and restatement of the Amended and Restated Certificate of Incorporation of the Corporation has been duly adopted in accordance with the provisions of Sections 228, 242 and 245 of the DGCL, the Board of Directors of the Corporation having adopted resolutions setting forth such amendment and restatement, declaring its advisability, and directing that it be submitted to the stockholders of the Corporation for their approval; and the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted having consented in writing to the adoption of such amendment and restatement.

 

6. The Third Amended and Restated Certificate of Incorporation of the Corporation shall be effective as of [ · ] a.m. Eastern Time on [ · ], 2018 . .

 



 

IN WITNESS WHEREOF, the undersigned officer of the Corporation has executed this Certificate on the [ · ] day of [ · ], 2018.

 

 

ALTICE USA, INC.

 

 

 

 

 

By:

 

 

 

Name:

David Connolly

 

 

Title:

Executive Vice President and General Counsel

 

[Signature Page to Third Amended and Restated Certificate of Incorporation]

 



 

Exhibit A

 

THIRD AMENDED AND RESTATED

 

CERTIFICATE OF INCORPORATION

 

OF

 

ALTICE USA, INC.

 

*  *  *  *  *

 

ARTICLE I

 

NAME

 

The name of the Corporation is Altice USA, Inc.

 

ARTICLE II

 

REGISTERED OFFICE AND AGENT

 

The address of the registered office of the Corporation in the State of Delaware is Corporation Service Company, 251 Little Falls Drive, in the City of Wilmington, County of New Castle, Delaware 19808.  The name of the registered agent of the Corporation at such address is Corporation Service Company.

 

ARTICLE III

 

CORPORATE PURPOSE

 

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

 

ARTICLE IV

 

CAPITAL STOCK

 

(1)                                  Authorized Shares .  This Corporation is authorized to issue capital stock to be designated “ Common Stock ” and “ Preferred Stock .”  A total of 9,000,000,000 shares of Common Stock are authorized to be issued, $0.01 par value per share, 4,000,000,000 of which are designated “ Class A Common Stock ,” 1,000,000,000 of which are designated “ Class B Common Stock ” and 4,000,000,000 of which are designated “ Class C Common Stock .”  A total of 100,000,000 shares of Preferred Stock are authorized to be issued, $0.01 par value per share.  The number of authorized shares of Common Stock or any class of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding)

 

1



 

by the affirmative vote of the holders of a majority of the voting power of the Class A Common Stock and Class B Common Stock, voting together as a single class.

 

(2)                                  Preferred Stock .  The Preferred Stock may be issued from time to time in one or more series.  The Board of Directors of the Corporation (the “ Board ”) is hereby expressly authorized to provide for the issue of all or any of the shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designations, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board providing for the issuance of such shares and as may be permitted by the DGCL.  The Board is also expressly authorized to increase or decrease the number of shares of any series of Preferred Stock subsequent to the issuance of shares of that series of Preferred Stock, but not below the number of shares of such series of Preferred Stock then outstanding.  In case the number of shares of any series of Preferred Stock shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series of Preferred Stock.  The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the Corporation’s outstanding capital stock entitled to vote thereon, without a separate vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of Preferred Stock.

 

(3)                                  Voting Rights of Class A Common Stock and Class B Common Stock .  Except as otherwise expressly provided by this Third Amended and Restated Certificate of Incorporation or required by applicable law, the holders of Class A Common Stock are entitled to one vote per share and the holders of Class B Common Stock are entitled to twenty-five votes per share on any matter submitted to a vote of the stockholders.  Except as otherwise expressly provided by this Third Amended and Restated Certificate of Incorporation or required by applicable law, the holders of shares of Class A Common Stock and Class B Common Stock shall (i) at all times vote together as a single class on all matters (including the election of directors) submitted to a vote of the stockholders of the Corporation, (ii) be entitled to notice of any stockholders’ meeting in accordance with the Corporation’s Bylaws and (iii) be entitled to vote upon such matters and in such manner as may be provided by applicable law.

 

(4)                                  No Voting Rights for Class C Common Stock .  Except as otherwise expressly provided by this Third Amended and Restated Certificate of Incorporation or required by applicable law, the holders of shares of Class C Common Stock are not entitled to vote on any matter submitted to a vote of the stockholders.

 

(5)                                  Dividends and Distributions .  Subject to preferences that may apply to any shares of Preferred Stock outstanding at the time, the holders of outstanding shares of Class A Common Stock, Class B Common Stock and Class C Common Stock are entitled to share equally, on a per share basis, in any dividend or distribution of funds legally available if the Board, in its discretion, determines to declare and pay dividends and only then at the times and in the amounts that the Board may determine.  In the event that a dividend is paid in the form of

 

2



 

shares of capital stock of the Corporation or rights to acquire or securities convertible into or exchangeable for shares of capital stock of the Corporation, then, in the Board’s discretion, either (i) the holders of shares of Class A Common Stock, Class B Common Stock and Class C Common Stock shall receive the identical class of securities on an equal per share basis or (ii) (a) the holders of shares of Class A Common Stock shall receive Class A Common Stock, or securities convertible into or exchangeable for shares of Class A Common Stock or rights to acquire such securities, as the case may be; (b) the holders of shares of Class B Common Stock shall receive Class B Common Stock, or securities convertible into or exchangeable for shares of Class B Common Stock or rights to acquire such securities, as the case may be; and (c) the holders of shares of Class C Common Stock shall receive Class C Common Stock, or securities convertible into or exchangeable for shares of Class C Common Stock or rights to acquire such securities, as the case may be; in each such case in this clause (ii), in an equal amount per share.

 

(6)                                  Distributions of Another Corporation’s Securities .  Unless otherwise approved by the Board, where the securities of another corporation are distributed, they must only be distributed to holders of Class A Common Stock, Class B Common Stock and Class C Common Stock on the basis that:

 

(a)                                  the holders of Class A Common Stock, Class B Common Stock and Class C Common Stock receive the identical class of securities; or

 

(b)                                  subject to the remainder of this Section (6), the holders of Class A Common Stock, Class B Common Stock and Class C Common Stock each receive different classes of securities; or

 

(c)                                   subject to the remainder of this Section (6), the holders of one or more class of Common Stock receive a different class of securities than the holders of all other classes of Common Stock,

 

in each case, on an equal per share basis, and, to holders of any shares of Preferred Stock outstanding at the time, on such terms as the Board may determine.

 

To the extent that a dividend is declared and paid pursuant to paragraph (b) or (c) of this Section (6) then:

 

(i)                                      the holders of Class B Common Stock shall receive the securities having the highest number of votes per share (or, in the case of convertible securities, the securities convertible into, exchangeable for or evidencing the right to purchase, the securities with the highest number of votes per share) and the holders of each other class of Common Stock shall receive the securities having the lesser number of votes per share (or, in the case of convertible securities, the securities convertible into, exchangeable for or evidencing the right to purchase, the securities with the lesser number of votes per share):

 

(A)                                in each case, without regard to whether such voting rights differ to a greater or lesser extent than the corresponding differences in voting rights (and related differences in designation, conversion

 

3



 

and rights to distributions pursuant to this Article IV) between the Class A Common Stock, the Class B Common Stock and the Class C Common Stock; and

 

(B)                                provided that the different classes of securities (and, in the case of securities convertible into, exchangeable for or evidencing the right to purchase securities, the securities resulting from such conversion, exchange or purchase) do not differ in any respect other than with respect to their relative voting rights (and related differences in designation, conversion, redemption and rights to distributions pursuant to this Article IV); and

 

(ii)                                   in the event that the holders of Class A Common Stock receive a class of securities having different rights than those received by the holders of Class C Common Stock:

 

(A)                                the rights of the different classes of securities (and, in the case of securities convertible into, exchangeable for or evidencing the right to purchase securities, the securities resulting from such conversion, exchange or purchase) may not differ in any respect other than with respect to their relative voting rights (and related differences in designation, conversion, redemption and rights to distributions pursuant to this Article IV); and

 

(B)                                the relevant classes of securities shall be distributed to the holders of Class A Common Stock and Class C Common Stock such that the relative voting rights (and related differences in designation, conversion, redemption, rights to dividends in specie comprising securities and rights to distributions pursuant to this Article IV) of the class of securities (or, in the case of convertible securities, the securities convertible into, exchangeable for or evidencing the right to purchase, the securities resulting from such conversion, exchange or purchase) to be received by the holders of Class A Common Stock on the one hand and Class C Common Stock on the other hand corresponds to the extent practicable to the relative voting rights (and related differences in designation, conversion, redemption and rights to distributions pursuant to this Article IV) as the Class A Common Stock compares to the Class C Common Stock.

 

(7)                                  Liquidation, Dissolution or Winding Up .  Upon dissolution, liquidation or winding up of the Corporation, the assets legally available for distribution to stockholders will be distributable ratably among the holders of Class A Common Stock, Class B Common Stock and Class C Common Stock, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights and payment of liquidation preferences, if any, on any outstanding shares of preferred stock unless different treatment of such class with respect to distributions upon any such liquidation, dissolution or winding up is approved in advance by the affirmative vote of the

 

4



 

holders of a  majority of the voting power of the Class A Common Stock and Class B Common Stock, each voting separately as a class.

 

(8)                                  Equal Status .  Except as otherwise expressly provided by this Third Amended and Restated Certificate of Incorporation or required by applicable law, shares of Class A Common Stock, Class B Common Stock and Class C Common Stock have the same rights and privileges and rank equally, share ratably and are identical in all respects as to all matters.  In the event of (i) a consolidation or merger of the Corporation with or into any other entity; (ii) any tender offer or exchange offer by any person or entity pursuant to an agreement to which the Corporation is a party or that the Board recommends; or (iii) a sale by Next Alt S.à r.l., a Luxembourg private company with limited liability or any successor thereto (“ Next Alt ”), or any of its subsidiaries that holds shares of Class B Common Stock or, solely in the event shares of Class B Common Stock have been distributed to Patrick Drahi (“ Patrick Drahi ”), his heirs or entities or trusts directly or indirectly under his or their control or formed for his or their benefit or any Affiliate of Patrick Drahi, his heirs or entities or trusts directly or indirectly under his or their control or formed for his or their benefit (together with Next Alt and any of its subsidiaries that hold such shares, the “ Next Alt Holders ”), a sale by Patrick Drahi, such heirs or such trusts or entities or such Affiliates, in one or a series of related transactions, whether to a single purchaser or purchasers constituting a “group” as defined in Section 13(d) of the Securities Exchange Act of 1934, of shares of Class B Common Stock representing (a) at least 40% of the votes entitled to be cast by all stockholders entitled to vote in an election of directors and (b) a greater number of votes than the Next Alt Holders collectively are entitled to cast immediately following such sale, the holders of Class A Common Stock, Class B Common Stock and Class C Common Stock shall be entitled to participate proportionately and to receive, or to elect to receive, the same form of consideration and the same amount of consideration on a per share basis.  Notwithstanding the foregoing, if any securities consideration is paid, distributed or offered to holders of shares of Class A Common Stock, Class B Common Stock or Class C Common Stock in any such transaction, such consideration may differ only in terms of voting rights such that the holder of a share of Class B Common Stock shall receive or have the right to elect to receive the securities having the highest number of votes per share (or, in the case of convertible securities, the securities convertible into, exchangeable for or evidencing the right to purchase, the securities with the highest number of votes per share) and the holders of each other class of Common Stock shall receive or have the right to elect to receive the securities having the lesser number of votes per share (or, in the case of convertible securities, the securities convertible into, exchangeable for or evidencing the right to purchase, the securities with the lesser number of votes per share), and any securities that the holder of a share of Class C Common Stock shall receive or have the right to elect to receive shall either have no voting rights or the same voting rights as the securities that a holder of Class A Common Stock shall receive or have the right to elect to receive.

 

(9)                                  Subdivisions, Combinations or Reclassifications .  Shares of Class A Common Stock, Class B Common Stock or Class C Common Stock may not be subdivided, combined or reclassified unless the shares of the other classes are concurrently therewith proportionately subdivided, combined or reclassified in a manner that maintains the same proportionate equity ownership between the holders of the outstanding Class A Common Stock, Class B Common Stock and Class C Common Stock on the record date for such subdivision, combination or reclassification.

 

5



 

(10)                           No Preemptive or Similar Rights .  Shares of the Class A Common Stock, Class B Common Stock and Class C Common Stock are not entitled to preemptive rights and are not subject to conversion or redemption provisions, except for the conversion provisions with respect to the Class B Common Stock and Class C Common Stock described in this Article IV.  Any one or more series of Preferred Stock will have only such preemptive or similar rights granted to the holders thereof by the Board pursuant to Section (2) of this Article IV.

 

(11)                           Voluntary Conversion of Class B Common Stock .  Except as otherwise expressly provided by this Third Amended and Restated Certificate of Incorporation or required by applicable law, each share of Class B Common Stock shall be convertible into one fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the Corporation.  Before any holder of Class B Common Stock shall be entitled to voluntarily convert any shares of such Class B Common Stock, such holder shall surrender the certificate or certificates therefor (if any), duly endorsed, at the principal corporate office of the Corporation or of any transfer agent for the Class B Common Stock, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names (i) in which the certificate or certificates representing the shares of Class A Common Stock into which the shares of Class B Common Stock are so converted are to be issued if such shares are certificated or (ii) in which such shares are to be registered in book entry if such shares are uncertificated.  The Corporation shall, no later than ten (10) calendar days after receipt of the written notice, issue and take action to deliver at such office to such holder of Class B Common Stock, or to the nominee or nominees of such holder, a certificate or certificates representing the number of shares of Class A Common Stock to which such holder shall be entitled as aforesaid (if such shares are certificated) or, if such shares are uncertificated, register such shares in book-entry form (such date of the issuance, in the case of certificated shares, or registration, in the case of uncertificated shares, the “ Conversion Date ”).  The Corporation shall not be liable for any losses incurred by any person resulting from any delay in effecting any conversion under this Section (11). Such conversion shall be deemed to have been made immediately prior to the close of business on the Conversion Date, and the person or persons entitled to receive the shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock as of such Conversion Date.  Each share of Class B Common Stock that is converted pursuant to this Section (11) shall be retired by the Corporation and shall not be available for reissuance.

 

(12)                           Automatic Conversion and Transfers of Class B Common Stock and Class C Common Stock .  Except as otherwise expressly provided by this Third Amended and Restated Certificate of Incorporation or required by applicable law, there shall be no automatic conversion of shares of Class B Common Stock upon transfer under any circumstances.  The disparate voting rights of the shares of Class B Common Stock will not change upon transfer unless first converted into shares of Class A Common Stock.  Immediately prior to any conversion of all outstanding shares of Class B Common Stock into shares of Class A Common Stock, the holders of a majority of the voting power of the Class B Common Stock at the time of such conversion, may, in connection with such conversion, require that each share of Class C Common Stock shall automatically be converted into one share of Class A Common Stock on a date fixed by the Board, which date shall be no less than 61 days and no more than 180 days following the conversion of all outstanding shares of Class B Common Stock.  In the event of such conversion

 

6



 

of shares of Class C Common Stock into Class A Common Stock, each outstanding stock certificate that, immediately prior to such conversion, represented one or more shares of Class C Common Stock subject to such conversion shall, upon such conversion, be deemed to represent an equal number of shares of Class A Common Stock, without the need for surrender or exchange thereof.  The Corporation shall, upon the request of any holder whose shares of Class C Common Stock have been converted into shares of Class A Common Stock as a result of an automatic conversion and upon surrender by such holder to the Corporation of the outstanding certificate(s) formerly representing such holder’s shares of Class C Common Stock (if any), issue and deliver to such holder certificate(s) representing the shares of Class A Common Stock into which such holder’s shares of Class C Common Stock were converted as a result of automatic conversion (if such shares are certificated) or, if such shares are uncertificated, register such shares in book-entry form.  Each share of Class C Common Stock that is converted pursuant to this Section (12) of this Article IV shall thereupon be retired by the Corporation and shall not be available for reissuance.

 

(13)                           Reservation of Stock .  The corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of Class B Common Stock and Class C Common Stock, such number of shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class B Common Stock and Class C Common Stock into shares of Class A Common Stock.

 

(14)                           Protective Provision .  The Corporation shall not, whether by merger, consolidation or otherwise, amend, alter, repeal or waive Sections (3)-(14) of this Article IV (or adopt any provision inconsistent therewith), without first obtaining the affirmative vote of the holders of a majority of the voting power of the Class B Common Stock, voting as a separate class, in addition to any other vote required by applicable law, this Third Amended and Restated Certificate of Incorporation or the Corporation’s Bylaws.

 

ARTICLE V

 

CORPORATE OPPORTUNITIES

 

(1)                                  In recognition and anticipation that:

 

(i) Patrick Drahi and certain directors, principals, officers, employees and/or other representatives of Next Alt, Altice N.V., a Dutch public company with limited liability ( vaamloze vennootchap) or any successor thereto ( Altice N.V. ”) , A4 S.A., a Luxembourg public limited liability company or any successor thereto (“ A4 ”), and their Affiliates (each such director, principal, officer, employee and/or other representative, an “ Next Alt Group Representative ” and collectively, the “ Next Alt Group Representatives ) may serve as directors, officers or agents of the Corporation;

 

(ii) Patrick Drahi, Next Alt, Altice N.V., A4, the Next Alt Group Representatives and their respective Affiliates may now engage, may continue to engage and may in the future engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities

 

7



 

that overlap with or compete with those in which the Corporation, directly or indirectly, may engage; and

 

(iii) members of the Board who were or are in the future nominated by Next Alt or A4 pursuant to the Stockholders’ Agreement (“ Designated Directors ”) may now engage, may continue to engage and may in the future engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage;

 

the provisions of this Article V are set forth to regulate and define the conduct of certain affairs of the Corporation with respect to certain classes or categories of business opportunities that may involve Patrick Drahi, Next Alt, Altice N.V., A4, the Next Alt Group Representatives and the Designated Directors, or their respective Affiliates, and the powers, rights, duties and liabilities of the Corporation and its directors, officers and stockholders in connection therewith.  As used herein, “ Stockholders’ Agreement ” refers to that certain Stockholders’ Agreement to be entered into by and among the Corporation, Next Alt and A4, as amended from time to time.

 

(2)                                  For purposes of this Third Amended and Restated Certificate of Incorporation, unless otherwise explicitly stated, (i) the term “ Affiliate ” shall mean (a) in respect of Next Alt, any Person that, directly or indirectly, is controlled by Next Alt, controls Next Alt or is under common control with Next Alt and shall include any principal, member, director, partner, stockholder, officer, employee or other representative of any of the foregoing (other than the Corporation and any entity that is controlled by the Corporation); (b) in respect of A4, any Person that, directly or indirectly, is controlled by A4, controls A4 or is under common control with A4 and shall include any principal, member, director, partner, stockholder, officer, employee or other representative of any of the foregoing (other than the Corporation and any entity that is controlled by the Corporation); (c) in respect of Patrick Drahi, any Person that, directly or indirectly, is controlled by Patrick Drahi (other than the Corporation and any entity that is controlled by the Corporation); (d) in respect of any Next Alt Group Representative, any Person that, directly or indirectly, is controlled by such Next Alt Group Representative (other than the Corporation and any entity that is controlled by the Corporation); (e) in respect of any Designated Director, any Person that, directly or indirectly, is controlled by such Designated Director (other than the Corporation and any entity that is controlled by the Corporation); and (f) in respect of the Corporation, any Person that, directly or indirectly, is controlled by the Corporation; and (ii) the term “ Person ” shall mean any individual, corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity.

 

(3)                                  Unless an opportunity to engage in a business opportunity in the same or similar business activities or lines of business in which the Corporation or any of its Affiliates engages or is reasonably likely to engage arises in or is predominantly related to North America (each such opportunity a “ North America Business Opportunity ”), to the fullest extent permitted by law, none of (i) Patrick Drahi; (ii) Next Alt; (iii) Altice N.V.; (iv) A4; (v) any Next Alt Group Representative; (vi) any Designated Director (including any Designated Director who serves as an officer of the Corporation); or (vii) any of the foregoing Persons’ Affiliates (the Persons identified in (i), (ii), (iii), (iv), (v), (vi) and (vii) above being referred to, collectively, as “ Identified Persons ” and, individually, as an “ Identified Person ”) shall have any duty to refrain

 

8


 

from, directly or indirectly, (a) engaging in the same or similar business activities or lines of business in which the Corporation or any of its Affiliates engages or is reasonably likely to engage in or (b) otherwise competing with the Corporation or any of its Affiliates, and, to the fullest extent permitted by law, no Identified Person shall be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty solely by reason of the fact that such Identified Person engages in any such activities.

 

(4)                                  Except with respect to any North America Business Opportunity, to the fullest extent permitted by law, the Corporation hereby renounces any interest or expectancy in, or right to be offered an opportunity to participate in, any business opportunity which may be a corporate opportunity for an Identified Person and the Corporation or any of its Affiliates.

 

(5)                                  In the event that any Identified Person acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for itself, himself or herself and the Corporation or any of its Affiliates, and which is not a North America Business Opportunity, such Identified Person shall, to the fullest extent permitted by law, have no duty to communicate or offer such transaction or other business opportunity to the Corporation or any of its Affiliates and, to the fullest extent permitted by law, shall not be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty as a stockholder, director or officer of the Corporation solely by reason of the fact that such Identified Person pursues or acquires such corporate opportunity for itself, himself or herself, or offers or directs such corporate opportunity to another Person.

 

(6)                                  To the fullest extent permitted by law, any Person purchasing or otherwise acquiring or holding any interest in any shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article V.

 

(7)                                  Neither the amendment nor repeal of this Article V, nor the adoption of any provision of, or any other amendment to, this Third Amended and Restated Certificate of Incorporation, nor, to the fullest extent permitted by the DGCL, any modification of law, shall eliminate, reduce or otherwise adversely affect any right or protection of a current or former Identified Person in respect of any act or omission occurring prior to the time of such amendment, repeal, adoption or modification.

 

ARTICLE VI

 

MATTERS RELATING TO DIRECTORS

 

(1)                                  Director Powers .  The business and affairs of the Corporation shall be managed by or under the directions of the Board.  In addition to the powers and authority expressly conferred upon the Board by statute or by this Third Amended and Restated Certificate of Incorporation or the Corporation’s Bylaws, the Board is hereby empowered to exercise all such powers and do all such things as may be exercised or done by the Corporation.

 

(2)                                  Number of Directors .  The authorized number of directors of the Board comprising the entire Board shall be not less than seven nor more than twelve.  An increase or decrease in the outer limits of this range of directors requires the affirmative vote of the holders of a majority of the voting power of the Corporation’s outstanding capital stock entitled to vote

 

9



 

thereon.  Within the foregoing limits, and subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by resolution adopted by a majority of the Board.  No decrease in the authorized number of directors of the Board shall shorten the term of any incumbent director.

 

(3)                                  Quorum .  A quorum is required for the transaction of business at any meeting of the Board.  A majority of the number of directors then in office shall be required to constitute a quorum; provided that so long as Next Alt is entitled to nominate three or more directors to the Board pursuant to the Stockholders’ Agreement, such quorum must include (i) the Chairman of the board of managers of Next Alt and two other directors nominated to the Board pursuant to the Stockholders’ Agreement by Next Alt or (ii) in the event the Chairman of the board of managers of Next Alt is not a member of the Board, three directors nominated to the Board pursuant to the Stockholders’ Agreement by Next Alt; provided, however, that, in the case of clause (i) of this Section (3) of this Article VI, if consented to in writing (including by email) by Next Alt prior to the applicable meeting of the Board, three directors nominated to the Board pursuant to the Stockholders’ Agreement by Next Alt shall be required to constitute a quorum, none of which need be the Chairman of the board of managers of Next Alt.  In the event Next Alt is entitled to nominate one or two directors to the Board pursuant to the Stockholders’ Agreement and such directors are elected to the Board by the stockholders of the Corporation, a quorum must include each of the directors nominated to the Board pursuant to the Stockholders’ Agreement by Next Alt. For the avoidance of doubt, the A4-Next Alt Designee (as defined in the Stockholders’ Agreement) shall be considered a director nominated to the Board pursuant to the Stockholders’ Agreement by Next Alt.

 

(4)                                  Vacancies and Newly Created Directorships .  Subject to the rights granted to the holders of any one or more series of Preferred Stock then outstanding or the rights granted pursuant to the Stockholders’ Agreement, any newly created directorship on the Board that results from an increase in the number of directors within the range set forth in Section (2) of this Article VI and any vacancy occurring on the Board (whether by death, resignation, retirement, disqualification, removal or other cause) shall be filled by a majority of the directors then in office, although less than a quorum, by a sole remaining director or by the stockholders. Any director elected to fill a vacancy or newly created directorship shall hold office until the next annual meeting of stockholders for the election of directors and until his or her successor shall be elected and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal.

 

(5)                                  Term and Removal .  Each director shall hold office until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal.  Any director may resign at any time upon notice to the Corporation given in writing or by any electronic transmission permitted in the Corporation’s Bylaws or in accordance with applicable law.  Subject to the rights granted to the holders of any one or more series of Preferred Stock then outstanding or the rights granted pursuant to the Stockholders’ Agreement, stockholders holding a majority of the voting power of the Corporation’s outstanding capital stock entitled to vote thereon may remove any or all directors with or without cause.

 

10



 

(6)                                  Vote by Ballot . Elections of directors of the Corporation need not be by written ballot, except and to the extent provided in the Corporation’s Bylaws.

 

ARTICLE VII

 

DIRECTOR LIABILITY AND INDEMNIFICATION
OF DIRECTORS, OFFICERS AND OTHERS

 

(1)                                  To the fullest extent permitted by the DGCL as it now exists and as it may hereafter be amended, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.

 

(2)                                  The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that the person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful; provided, that, except for proceedings to enforce rights to indemnification or advancement of expenses, the Corporation shall not be obligated to indemnify any such director or officer (or his or her heirs, executors or personal or legal representatives) in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board.  The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, has reasonable cause to believe that the person’s conduct was unlawful.

 

(3)                                  The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that the person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably

 

11



 

entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper; provided, that, except for proceedings to enforce rights to indemnification or advancement of expenses, the Corporation shall not be obligated to indemnify any such director or officer (or his or her heirs, executors or personal or legal representatives) in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board.

 

(4)                                  To the extent that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections (2) and (3) of this Article VII, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

 

(5)                                  Any indemnification under Sections (2) and (3) of this Article VII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director or officer is proper in the circumstances because the person has met the applicable standard of conduct set forth in such Sections (2) and (3).  Such determination shall be made, with respect to a person who is a director or officer of the Corporation at the time of such determination, (a) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (b) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (c) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (d) by the stockholders of the Corporation.

 

(6)                                  Expenses (including attorneys’ fees) incurred by a current officer or director of the Corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VII.  Such expenses (including attorneys’ fees) incurred by former directors and officers of the Corporation or by persons serving at the request of the Corporation as directors or officers of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate.

 

(7)                                  The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office.

 

(8)                                  The Corporation may purchase and maintain insurance on behalf of any person who is or was an Affiliate, director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or

 

12



 

not the Corporation would have the power to indemnify him against such liability under Section 145 of the DGCL.

 

(9)                                  For purposes of this Article VII, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors and officers so that any person who is or was a director or officer of such constituent corporation, or is or was serving at the request of such constituent corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article VII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.

 

(10)                           For purposes of this Article VII, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director or officer of the Corporation which imposes duties on, or involves services by, such director or officer with respect to any employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VII.

 

(11)                           The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

(12)                           Any repeal or modification of this Article VII shall only be prospective and shall not affect the rights or protections or increase the liability of any director or officer under this Article VII in effect at the time of the alleged occurrence of any act or omission to act giving rise to liability or indemnification.

 

(13)                           The Corporation may, to the extent authorized from time to time by the Board, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VII to directors and officers of the Corporation.

 

(14)                           The Corporation hereby acknowledges that certain of its directors and officers (the “ Specified Persons ”) may have rights to indemnification and advancement of expenses provided by Next Alt or its Affiliates (directly or through insurance obtained by any such entity) (collectively, the “ Next Alt Indemnitors ”).  The Corporation hereby agrees and acknowledges that (i) it is the indemnitor of first resort with respect to the Specified Persons to the extent the underlying matter arises from or is related to the Specified Person’s service as a director on the Board or as an officer of the Corporation, (ii) it shall be required to advance the full amount of expenses incurred by the Specified Persons, as required by the terms of this Article VII, without regard to any rights the Specified Persons may have against the Next Alt Indemnitors and (iii) it

 

13



 

irrevocably waives, relinquishes and releases the Next Alt Indemnitors from any and all claims against the Next Alt Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.  The Corporation further agrees that no advancement or payment by the Next Alt Indemnitors on behalf of the Corporation with respect to any claim for which the Specified Persons have sought indemnification from the Corporation shall affect the foregoing and the Next Alt Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of the Specified Persons against the Corporation.  These rights shall be a contract right.

 

ARTICLE VIII

 

MATTERS RELATING TO STOCKHOLDERS

 

(1)                                  Annual Meeting of Stockholders .  An annual meeting of stockholders for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, if any, on such date, and at such time as shall be fixed exclusively by resolution of the Board or a duly authorized committee thereof.

 

(2)                                  Special Meeting of Stockholders .  Subject to the rights of the holders of any series of Preferred Stock with respect to actions by the holders of shares of such series, special meetings of the stockholders of the Corporation may be called only by the Board, the Chairman of the Board, stockholders holding a majority of the voting power of the Corporation’s outstanding capital stock or the director nominated pursuant to the Stockholders’ Agreement by A4, and may not be called by any other person or persons.  Business transacted at special meetings of stockholders shall be confined to the purpose or purposes stated in the notice of meeting.

 

(3)                                  Action by Written Consent of Stockholders .  Notwithstanding anything to the contrary in this Third Amended and Restated Certificate of Incorporation or the Corporation’s Bylaws, any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the books in which proceedings of meetings of stockholders are recorded.  Delivery made to the Corporation’s registered office shall be made by hand, overnight courier or certified or registered mail with return receipt requested.

 

(4)                                  Approval and Consent Rights .  Until the Expiration Date, notwithstanding anything to the contrary herein or in the governing documents of any of the Subsidiaries of the Corporation, without the prior written approval of Next Alt, the Corporation shall not (either directly or indirectly through an Affiliate or otherwise or through one or a series of related transactions):

 

14



 

(a)                                  effect or consummate a Change of Control or publicly endorse a Change of Control (including by recommending any tender or exchange offer that would result in a Change of Control) or enter into any agreement or arrangement to effect or consummate a Change of Control;

 

(b)                                  amend (or approve or recommend amendment of) the Corporation’s or any of the Corporation’s Subsidiaries’ certificates of incorporation or bylaws (or other similar organizational documents), including by merger, consolidation or otherwise; and

 

(c)                                   commence any liquidation, dissolution or voluntary bankruptcy, administration, recapitalization or reorganization in any form of transaction, make arrangements with creditors, or consent to the entry of an order for relief in any involuntary case, or take the conversion of an involuntary case to a voluntary case, or consent to the appointment of or take possession by a receiver, trustee or other custodian for all or substantially all of its or its Subsidiaries’ property, or otherwise seek the protection of any applicable bankruptcy or insolvency law.

 

For purposes of this Section (4) only,

 

i.                   A4 Group ” means A4 and each Person that is an Affiliate of A4;

 

ii.                Affiliate ” means, as to any Person, any other Person which, directly or indirectly, controls, or is controlled by, or is under common control with, such Person; provided , however , that none of the Corporation and its Subsidiaries shall be considered an Affiliate of a member of the PDR Group for purposes of this Section (4);

 

iii.             beneficially own ” means, with respect to the Corporation Common Stock, having “beneficial ownership” of such stock for purposes of Rule 13d-3 or 13d-5 promulgated under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, without giving effect to the limiting phrase “within sixty days” set forth in Rule 13d-3(1)(i), including, for the avoidance of doubt, any shares of Corporation Common Stock over which a Person has a right to vote, through voting agreement, proxy or otherwise.

 

iv.            Change of Control ” means (a) the sale, lease, conveyance, disposition, in one or a series of related transactions (other than a merger or consolidation), of all or substantially all of the assets of the Corporation and its Subsidiaries, taken as a whole, to any Person or group of Persons (other than a member or members of the PDR Group) or (b) a merger, reorganization, recapitalization, combination or consolidation of, or any other transaction (including the purchase of the Corporation Securities) involving, the Corporation with any other Person after which a member or members of the PDR Group cease to beneficially own fifty percent (50%) or more of the voting power of the Corporation or the surviving entity in such transaction, as the case may be;

 

v.               Corporation Common Stock ” means, collectively, (i) the Class A Common Stock, (ii) the Class B Common Stock, (iii) the Class C Common Stock, and (iv) any equity interest into which such shares of common stock set forth in clauses (i), (ii) or (iii) shall have been changed, or any equity interest resulting from any reclassification,

 

15



 

recapitalization, reorganization, merger, consolidation, conversion, stock or other equity split or dividend or similar transactions with respect to such shares of common stock;

 

vi.            Corporation Securities ” means (i) the Corporation Common Stock, (ii) any Preferred Stock, (iii) any other common stock issued by the Corporation and (iv) any securities convertible into or exchangeable for, or options, warrants or other rights to acquire, Corporation Common Stock or any other common or Preferred Stock issued by the Corporation;

 

vii.         control ” (including the terms “ controlled by ” and “ under common control with ”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract or otherwise;

 

viii.      Expiration Date ” means the first date on which the PDR Group, in the aggregate, ceases to beneficially own at least twenty percent (20%) of the voting power of the outstanding Corporation Common Stock;

 

ix.            Governmental Entity ” means any United States federal, state or local, or foreign, international or supranational, government, court or tribunal, or administrative, executive, governmental or regulatory or self-regulatory body, agency or authority thereof;

 

x.               Next Alt Group ” means Next Alt and each Person that is an Affiliate of Next Alt;

 

xi.            PDR Group ” means (i) Next Alt, (ii) each member of the Next Alt Group, (iii) A4, (iv) each member of the A4 Group, (v) Patrick Drahi, his heirs or entities or trusts directly or indirectly under his or their control or formed for his or their benefit, and (vi) any Affiliate of Patrick Drahi, his heirs or entities or trusts directly or indirectly under his or their control or formed for his or their benefit;

 

xii.         Person ” means an individual, corporation, partnership, joint venture, association, trust, unincorporated organization, limited liability company, Governmental Entity or other entity; and

 

xiii.      Subsidiary ” means, with respect to any Person, another Person, an amount of the voting securities or other voting ownership interests sufficient, together with any contractual rights, to elect at least a majority of the board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which is owned directly or indirectly by such first Person).

 

ARTICLE IX

 

DGCL SECTION 203 AND BUSINESS COMBINATION

 

The Corporation hereby expressly elects not to be governed by Section 203 of the DGCL.

 

16



 

ARTICLE X

 

MISCELLANEOUS

 

If any provision or provisions of this Third Amended and Restated Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Third Amended and Restated Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Third Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of this Third Amended and Restated Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Third Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service or for the benefit of the Corporation to the fullest extent permitted by law.

 

ARTICLE XI

 

AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS

 

Except as otherwise expressly provided by this Third Amended and Restated Certificate of Incorporation, the Corporation reserves the right to amend, alter, change or repeal any provision of this Third Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed by law, and all the provisions of this Third Amended and Restated Certificate of Incorporation and all rights conferred on stockholders, directors, officers and other persons in this Third Amended and Restated Certificate of Incorporation are subject to this reserved power.  Except as otherwise expressly provided by this Third Amended and Restated Certificate of Incorporation, the Board shall have the power to adopt, amend or repeal the Corporation’s Bylaws.  Any adoption, amendment or repeal of the Corporation’s Bylaws by the Board shall require the approval of a majority of the Board.

 

17




Exhibit 3.4

 


 

SECOND AMENDED AND RESTATED

 

BYLAWS

 

OF

 

ALTICE USA, INC.

 

a Delaware corporation

 


 



 

Table of Contents

 

Section

 

Page

ARTICLE I

OFFICES

 

Section 1.01.

Registered Office

1

Section 1.02.

Other Offices

1

 

 

 

ARTICLE II

MEETINGS OF STOCKHOLDERS

 

Section 2.01.

Annual Meetings

1

Section 2.02.

Special Meetings

1

Section 2.03.

Notice of Stockholder Business and Nominations

2

Section 2.04.

Notice of Meetings

7

Section 2.05.

Waiver of Notice

8

Section 2.06.

Quorum

8

Section 2.07.

Voting; Proxies

8

Section 2.08.

Chairman of Meetings

9

Section 2.09.

Secretary of Meetings

9

Section 2.10.

Adjournment

9

Section 2.11.

Inspectors of Election

9

 

 

 

ARTICLE III

THE BOARD

 

Section 3.01.

Director Powers

10

Section 3.02.

Number of Directors

10

Section 3.03.

Resignation

10

Section 3.04.

Term and Removal

10

Section 3.05.

Vacancies and Newly Created Directorships

11

Section 3.06.

Meetings

11

Section 3.07.

Committees of the Board; Committee Rules

12

Section 3.08.

Directors’ Consent in Lieu of Meeting

13

Section 3.09.

Action by Means of Telephone or Similar Communications Equipment

13

Section 3.10.

Compensation

13

Section 3.11.

Reliance on Books and Records

13

 

 

 

ARTICLE IV

OFFICERS

 

Section 4.01.

Officers

14

Section 4.02.

Authority and Duties

14

Section 4.03.

Term of Office, Resignation and Removal

14

Section 4.04.

Vacancies

14

Section 4.05.

The Chairman

14

 

i



 

Section 4.06.

The Chief Executive Officer

15

Section 4.07.

Presidents

15

Section 4.08.

The Vice Chairman

15

Section 4.09.

The Secretary

15

Section 4.10.

Assistant Secretaries

15

Section 4.11.

The Treasurer

15

Section 4.12.

Assistant Treasurers

16

Section 4.13.

Contracts and Other Documents

16

Section 4.14.

Ownership of Stock of Another Corporation

16

Section 4.15.

Delegation of Duties

16

 

 

 

ARTICLE V

CORPORATE FUNDS, CHECKS, DRAFTS, NOTES AND PROXIES

 

Section 5.01.

Corporate Funds, Checks, Drafts and Notes

16

Section 5.02.

Execution of Proxies

16

 

 

 

ARTICLE VI

SHARES OF STOCK AND TRANSFERS OF SHARES

 

Section 6.01.

Stock Certificates and Uncertificated Shares

17

Section 6.02.

Transfer Agents

17

Section 6.03.

Transfer of Stock

17

Section 6.04.

Lost Certificates

17

Section 6.05.

Regulations

18

Section 6.06.

Fixing Date for Determination of Stockholders of Record

18

 

 

 

ARTICLE VII

CHOICE OF FORUM

 

Section 7.01.

Forum for Adjudication of Disputes

19

 

 

 

ARTICLE VIII

MISCELLANEOUS

 

Section 8.01.

Seal

19

Section 8.02.

Fiscal Year

19

Section 8.03.

Form of Records

20

Section 8.04.

Section Headings

20

Section 8.05.

Inconsistent Provisions

20

 

 

 

ARTICLE IX

AMENDMENTS

 

Section 9.01.

Amendments

20

 

ii


 

SECOND AMENDED AND RESTATED

 

BYLAWS

 

OF

 

ALTICE USA, INC.

 

a Delaware corporation

 

*  *  *  *  *

 

ARTICLE I

 

OFFICES

 

Section 1.01.                           Registered Office .  The registered office of Altice USA, Inc. (the “ Corporation ”) in the State of Delaware shall be at the office of Corporation Service Company, 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle, Delaware 19808.  The name of the registered agent of the Corporation at such address is Corporation Service Company.

 

Section 1.02.                           Other Offices .  The Corporation may also have an office or offices at any other place or places within or without the State of Delaware as the Board of Directors of the Corporation (the “ Board ”) may from time to time determine or the business of the Corporation may from time to time require.

 

ARTICLE II

 

MEETINGS OF STOCKHOLDERS

 

Section 2.01.                           Annual Meetings .  Annual meetings of stockholders may be held at such place, if any, either within or without the State of Delaware, and at such time and date as the Board shall determine and state in the notice of meeting.  The Board may, in its sole discretion, determine that meetings of stockholders shall not be held at any place, but may instead be held solely by means of remote communication in accordance with Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “ DGCL ”).  The Board may postpone, reschedule or cancel any annual meeting of stockholders previously scheduled by the Board.

 

Section 2.02.                           Special Meetings .  Special meetings of the stockholders may only be called in the manner provided in the Corporation’s certificate of incorporation as then in effect (as the same may be amended and/or restated from time to time, the “ Amended and Restated Certificate of Incorporation ”) and may be held at such place, if any, either within or without the State of Delaware, and at such time and date as the Board or the Chairman of the Board (the “ Chairman ”) shall determine and state in the notice of meeting. The Board may postpone, reschedule or cancel any special meeting of stockholders previously scheduled by the Board or the Chairman; provided , however , that with respect to any special meeting of

 

1



 

stockholders previously scheduled by the Board or the Chairman at the request of stockholders holding a majority of the voting power of the outstanding capital stock or the director nominated pursuant to the Stockholders’ Agreement by A4 S.A., a Luxembourg public limited liability company or any successor thereto (“ A4 ”), the Board shall not postpone, reschedule or cancel such special meeting without the prior written consent of such stockholders or such director, as applicable.  As used herein, “ Stockholders’ Agreement ” refers to that certain Stockholders’ Agreement to be entered into by and among the Corporation, Next Alt S.à r.l., a Luxembourg private company with limited liability or any successor thereto (“ Next Alt ”), and A4, as amended from time to time.

 

Section 2.03.                           Notice of Stockholder Business and Nominations .

 

(A)                                Annual Meetings of Stockholders .

 

(1)                                  Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only (a) as provided in the Stockholders’ Agreement (with respect to nominations of persons for election to the Board only), (b) pursuant to the Corporation’s notice of meeting (or any supplement thereto) delivered pursuant to Section 2.04 of Article II of these Bylaws, (c) by or at the direction of the Board or any authorized committee thereof or (d) by any stockholder of the Corporation who is entitled to vote at the meeting, who, subject to paragraph (C)(7) of this Section 2.03, complied with the notice procedures set forth in paragraphs (A)(2) and (A)(3) of this Section 2.03 and who was a stockholder of record at the time such notice is delivered to the Secretary of the Corporation (the “ Secretary ”).

 

(2)                                  For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (d) of paragraph (A)(1) of this Section 2.03, the stockholder must have given timely notice thereof in writing to the Secretary, and, in the case of business other than nominations of persons for election to the Board, such other business must constitute a proper matter for stockholder action.  To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred and twenty (120) days prior to the first anniversary of the preceding year’s annual meeting (which date shall, for purposes of the Corporation’s first annual meeting of stockholders after its shares of Class A Common Stock are first publicly traded, be deemed to have occurred on May 15, 2017); provided, however , that in the event that the date of the annual meeting is advanced by more than thirty (30) days, or delayed by more than seventy (70) days, from the anniversary date of the previous year’s meeting, or if no annual meeting was held in the preceding year, notice by the stockholder to be timely must be so delivered not earlier than one hundred and twenty (120) days prior to such annual meeting and not later than the close of business on the later of the

 

2



 

ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation.  Public announcement of an adjournment or postponement of an annual meeting shall not commence a new time period (or extend any time period) for the giving of a stockholder’s notice.  Notwithstanding anything in this Section 2.03(A)(2) to the contrary, if the number of directors to be elected to the Board at an annual meeting is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board at least one hundred (100) calendar days prior to the first anniversary of the prior year’s annual meeting of stockholders, then a stockholder’s notice required by this Section shall be considered timely, but only with respect to nominees for any new positions created by such increase, if it is received by the Secretary not later than the close of business on the tenth (10th) calendar day following the day on which such public announcement is first made by the Corporation.

 

(3)                                  Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and the rules and regulations promulgated thereunder, including such person’s written consent to being named in the Corporation’s proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend these Bylaws, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books and records, and of such beneficial owner, (ii) the class or series and number of shares of capital stock of the Corporation which are owned, directly or indirectly, beneficially and of record by such stockholder and such beneficial owner, (iii) a representation that the stockholder is a holder of record of the stock of the Corporation at the time of the giving of the notice, will be entitled to vote at such meeting and will appear in person or by proxy at the meeting to propose such business or nomination, (iv) a representation whether the stockholder or the beneficial owner, if any, will be or is part of a group which will (x) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the voting power of

 

3



 

the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (y) otherwise to solicit proxies or votes from stockholders in support of such proposal or nomination, (v) a certification regarding whether such stockholder and beneficial owner, if any, have complied with all applicable federal, state and other legal requirements in connection with the stockholder’s and/or beneficial owner’s acquisition of shares of capital stock or other securities of the Corporation and (vi) any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder; (d) a description of any agreement, arrangement or understanding with respect to the nomination or proposal and/or the voting of shares of any class or series of stock of the Corporation between or among the stockholder giving the notice, the beneficial owner, if any, on whose behalf the nomination or proposal is made, any of their respective affiliates or associates and/or any others acting in concert with any of the foregoing (collectively, “ proponent persons ”); and (e) a description of any agreement, arrangement or understanding (including without limitation any contract to purchase or sell, acquisition or grant of any option, right or warrant to purchase or sell, swap or other instrument) to which any proponent person is a party, the intent or effect of which may be (i) to transfer to or from any proponent person, in whole or in part, any of the economic consequences of ownership of any security of the Corporation, (ii) to increase or decrease the voting power of any proponent person with respect to shares of any class or series of stock of the Corporation and/or (iii) to provide any proponent person, directly or indirectly, with the opportunity to profit or share in any profit derived from, or to otherwise benefit economically from, any increase or decrease in the value of any security of the Corporation.  A stockholder providing notice of a proposed nomination for election to the Board or other business proposed to be brought before a meeting (whether given pursuant to this paragraph (A)(3) or paragraph (B) of this Section 2.03 of these Bylaws) shall update and supplement such notice from time to time to the extent necessary so that the information provided or required to be provided in such notice shall be true and correct as of the record date for determining the stockholders entitled to notice of the meeting.  Any such update and supplement shall be delivered in writing to the Secretary at the principal executive offices of the Corporation not later than five (5) days after the record date for determining the stockholders entitled to notice of the meeting.  The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation and to

 

4



 

determine the independence of such director under the Exchange Act and rules and regulations thereunder and applicable stock exchange rules.

 

(B)                                Special Meetings of Stockholders .  Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting.  Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (1) as provided in the Stockholders’ Agreement, (2) by or at the direction of the Board or any committee thereof (or the stockholders or director pursuant to section (2) of Article VIII of the Amended and Restated Certificate of Incorporation) or (3) provided that the Board (or the stockholders or director pursuant to Section (2) of Article VIII of the Amended and Restated Certificate of Incorporation) has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is entitled to vote at the meeting, who (subject to paragraph (C)(7) of this Section 2.03) complies with the notice procedures set forth in this Section 2.03 and who is a stockholder of record at the time such notice is delivered to the Secretary.  In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting if the stockholder’s notice as required by paragraph (A)(2) of this Section 2.03 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which the Corporation first makes a public announcement of the date of the special meeting at which directors are to be elected. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

 

(C)                                General .

 

(1)                                  Except as provided in paragraph (C)(7) of this Section 2.03, only such persons who are nominated in accordance with the procedures set forth in this Section 2.03 or the Stockholders’ Agreement shall be eligible to serve as directors and only such business shall be conducted at an annual or special meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section. Except as otherwise provided by law, the Amended and Restated Certificate of Incorporation or these Bylaws, the chairman of the meeting shall, in addition to making any other determination that may be appropriate for the conduct of the meeting, have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any

 

5



 

proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall be disregarded.

 

(2)                                  The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairman of the meeting. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the chairman of the meeting shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting, (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants and on shareholder approvals.

 

(3)                                  Notwithstanding the foregoing provisions of this Section 2.03, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or business proposal, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.  For purposes of this Section 2.03, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.

 

(4)                                  Unless and to the extent determined by the Board or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

(5)                                  Whenever used in these Bylaws, “ public announcement ” shall mean disclosure (a) in a press release released by the Corporation,

 

6



 

provided such press release is released by the Corporation following its customary procedures, is reported by the Dow Jones News Service, Associated Press or comparable national news service, or is generally available on Internet news sites, or (b) in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

 

(6)                                  Notwithstanding the foregoing provisions of this Section 2.03, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.03; provided, however , that, to the fullest extent permitted by law, any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to these Bylaws (including paragraphs (A)(1)(d) and (B) hereof), and, subject to Rule 14a-8 under the Exchange Act, compliance with paragraphs (A)(1)(d) and (B) of this Section 2.03 of these Bylaws shall be the exclusive means for a stockholder to make nominations or submit other business.  Nothing in these Bylaws shall be deemed to affect any rights of the holders of any class or series of Preferred Stock to elect directors under specified circumstances.

 

(7)                                  Notwithstanding anything to the contrary contained in this Section 2.03, (i) Next Alt and A4 and each of their permitted assignees for so long as such Person is a party to the Stockholders’ Agreement, and (ii) Patrick Drahi (“ Patrick Drahi ”) shall not be subject to the notice procedures set forth in paragraphs (A)(2), (A)(3), (B), (C)(3) or (C)(6) of this Section 2.03 with respect to any annual or special meeting of stockholders.

 

Section 2.04.                           Notice of Meetings .  Whenever stockholders are required or permitted to take any action at a meeting, a timely notice in writing or by electronic transmission, in the manner provided in Section 232 of the DGCL, of the meeting, which shall state the place, if any, date and time of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purposes for which the meeting is called, shall be mailed to or transmitted electronically by the Secretary to each stockholder of record entitled to vote thereat as of the record date for determining the stockholders entitled to notice of the meeting. Unless otherwise provided by law, the Amended and Restated Certificate of Incorporation or these Bylaws, the notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.

 

7



 

Section 2.05.                           Waiver of Notice .  Notice of any annual or special meeting of stockholders need not be given to any stockholder who files a written waiver of notice with the Secretary, signed by the person entitled to notice, whether before or after such meeting.  Neither the business to be transacted at, nor the purpose of, any meeting of stockholders need be specified in any written waiver of notice thereof.  Attendance of a stockholder at a meeting, in person or by proxy, shall constitute a waiver of notice of such meeting, except when such stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the notice of such meeting was inadequate or improperly given.

 

Section 2.06.                           Quorum .  Unless otherwise required by law, the Amended and Restated Certificate of Incorporation or the rules of any stock exchange upon which the Corporation’s securities are listed, the holders of record of a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders.  Notwithstanding the foregoing, where a separate vote by a class or series or classes or series is required, a majority of the voting power of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to the vote on that matter.  Once a quorum is present to organize a meeting, it shall not be broken by the subsequent withdrawal of any stockholders.

 

Section 2.07.                           Voting; Proxies .  Except as otherwise expressly provided by the Amended and Restated Certificate of Incorporation or required by applicable law, the holders of Class A Common Stock are entitled to one vote per share and the holders of Class B Common Stock are entitled to twenty-five votes per share on any matter submitted to a vote of the stockholders.  Except as otherwise expressly provided by the Amended and Restated Certificate of Incorporation or required by applicable law, the holders of shares of Class C common stock are not entitled to vote on any matter submitted to a vote of the stockholders.  Each stockholder entitled to vote at a meeting of stockholders or to express consent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy in any manner provided by applicable law, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.  A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power.  A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary a revocation of the proxy or a new proxy bearing a later date.  Unless required by the Amended and Restated Certificate of Incorporation or applicable law, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot.  On a vote by ballot, each ballot shall be signed by the stockholder voting, or by such stockholder’s proxy, if there be such proxy.  Other than in respect of the election of directors, when a quorum is present or represented at any meeting, all questions presented to the stockholders shall be decided by the affirmative vote of the holders of a majority of the voting power of the shares of stock present in person or represented by proxy and entitled to vote on the subject matter, unless the question is one upon which, by express provision of applicable law, of the rules or regulations of any stock exchange applicable to the Corporation, of any regulation applicable to the Corporation or its securities, of the Amended and Restated Certificate of Incorporation or of

 

8



 

these Bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. The vote required for the election of directors by stockholders, other than in a contested election of directors, shall be the affirmative vote of a majority of the votes cast with respect to a director nominee.  For purposes of this paragraph, a ‘majority of the votes cast’ shall mean that the number of votes cast ‘for’ a director must exceed the number of votes cast ‘against’ that director.  In any contested election of directors, the nominees receiving the greatest number of the votes cast for their election, up to the number of directors to be elected in such election, shall be deemed elected.  ‘Abstentions’ and ‘broker non-votes’ will not count as votes either ‘for’ or ‘against’ a nominee.  A contested election is one in which the number of persons nominated exceeds the number of directors to be elected as of the date that is ten days prior to the date that the Corporation first mails its notice of meeting for such meeting to the stockholders.

 

Section 2.08.                           Chairman of Meetings .  The Chairman, or in the absence, or at the direction, of the Chairman, the Chief Executive Officer, or in the absence, or at the direction, of the Chief Executive Officer, a person designated by the Board shall be the chairman of the meeting and, as such, preside at all meetings of the stockholders.

 

Section 2.09.                           Secretary of Meetings .  The Secretary shall act as secretary at all meetings of the stockholders.  In the absence or disability of the Secretary, the Chairman or the Chief Executive Officer shall appoint a person to act as secretary at such meetings.

 

Section 2.10.                           Adjournment .  At any meeting of stockholders of the Corporation, if less than a quorum be present, the chairman of the meeting or stockholders holding a majority of the voting power of the shares of stock of the Corporation, present in person or by proxy and entitled to vote thereat, shall have the power to adjourn the meeting from time to time until a quorum shall be present without notice other than announcement at the meeting of the time, place (if any) thereof and the means of remote communications (if any) by which stockholders and proxy holders may be determined to be present in person and vote at such adjourned meeting.  Any business may be transacted at the adjourned meeting that might have been transacted at the meeting originally noticed.  If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.  If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date so fixed for notice of such adjourned meeting.

 

Section 2.11.                           Inspectors of Election .  The Corporation may, and shall if required by law, in advance of any meeting of stockholders, appoint one or more inspectors of election, who may be employees of the Corporation, to act at the meeting or any adjournment thereof and to make a written report thereof.  The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act.  In the event that no inspector so appointed or designated is able to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting.  Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of

 

9



 

inspector with strict impartiality and according to the best of his or her ability.  The inspector or inspectors so appointed or designated shall (i) ascertain the number of shares of capital stock of the Corporation outstanding and the voting power of each such share, (ii) determine the shares of capital stock of the corporation represented at the meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares of capital stock of the Corporation represented at the meeting and such inspectors’ count of all votes and ballots.  Such certification and report shall specify such other information as may be required by law.  In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the Corporation, the inspectors may consider such information as is permitted by applicable law.  No person who is a candidate for an office at an election may serve as an inspector at such election.

 

ARTICLE III

 

THE BOARD

 

Section 3.01.                           Director Powers .  The business and affairs of the Corporation shall be managed by or under the directions of the Board.  In addition to the powers and authority expressly conferred upon the Board by statute, the Amended and Restated Certificate of Incorporation or these Bylaws, the Board is hereby empowered to exercise all such powers and do all such things as may be exercised or done by the Corporation.

 

Section 3.02.                           Number of Directors .  The authorized number of directors of the Board comprising the entire Board shall be not less than seven nor more than twelve.  An increase or decrease in the outer limits of this range of directors requires the affirmative vote of the holders of a majority of the voting power of the then outstanding shares of the Corporation’s capital stock entitled to vote thereon.  Within the foregoing limits, and subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by resolution adopted by a majority of the Board.  No decrease in the authorized number of directors of the Board shall shorten the term of any incumbent director.  Directors need not be stockholders.

 

Section 3.03.                           Resignation .  Any director may resign at any time by delivering his written resignation to the Board, the Chairman or the Secretary.  Such resignation shall take effect at the time specified in such notice or, if the time be not specified, upon receipt thereof by the Board, the Chairman or the Secretary, as the case may be.  Unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective.

 

Section 3.04.                           Term and Removal .  Each director shall hold office until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal.  Subject to the rights granted to the holders of any one or more series of Preferred Stock then outstanding or the rights granted pursuant to the Stockholders’ Agreement, stockholders holding a majority of the voting power of the outstanding capital stock may remove any or all directors with or without cause.

 

10


 

Section 3.05.                           Vacancies and Newly Created Directorships .  Subject to the rights granted to the holders of any one or more series of Preferred Stock then outstanding or the rights granted pursuant to the Stockholders’ Agreement, any newly created directorship on the Board that results from an increase in the number of directors within the range set forth in Section 3.02 of this Article III and any vacancy occurring on the Board (whether by death, resignation, retirement, disqualification, removal or other cause) shall be filled by a majority of the directors then in office, although less than a quorum, by a sole remaining director or by the stockholders. Any director elected to fill a vacancy or newly created directorship shall hold office until the next annual meeting of stockholders for the election of directors and until his or her successor shall be elected and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal.

 

Section 3.06.                           Meetings .

 

(A)                                Annual Meetings .  As soon as practicable after each annual election of directors by the stockholders, the Board shall meet for the purpose of organization and the transaction of other business, unless it shall have transacted all such business by written consent pursuant to Section 3.08 hereof.

 

(B)                                Other Meetings .  Other meetings of the Board shall be held at such times as the Chairman, the director nominated to the Board pursuant to the Stockholders’ Agreement by A4 or two Board members acting jointly shall from time to time determine.

 

(C)                                Notice of Meetings .  The Secretary shall give written notice to each director and, pursuant to the Stockholders’ Agreement, in the event Patrick Drahi is not a member of the Board, to the Chairman of Next Alt of each meeting of the Board, which notice shall state the place, date, time and purpose of such meeting.  Notice of each such meeting shall be given to each director, if by mail, addressed to him at his residence or usual place of business, at least three days before the day on which such meeting is to be held, or shall be sent to him by telecopy or other form of electronic transmission, or be delivered personally or by an internationally recognized courier service or by telephone, not later than 24 hours before the time at which such meeting is to be held.  A written waiver of notice, signed by the director entitled to notice, whether before or after the time of the meeting referred to in such waiver, shall be deemed equivalent to notice.  Neither the business to be transacted at, nor the purpose of any meeting of the Board need be specified in any written waiver of notice thereof.  Attendance of a director at a meeting of the Board shall constitute a waiver of notice of such meeting, except as provided by law.

 

(D)                                Place of Meetings .  The Board may hold its meetings at such place or places within or without the State of Delaware as the Board or the Chairman may from time to time determine, or as shall be designated in the respective notices or waivers of notice of such meetings.

 

11



 

(E)                                 Quorum and Manner of Acting .  A quorum is required for the transaction of business at any meeting of the Board.  A majority of the number of directors then in office shall be required to constitute a quorum; provided that so long as Next Alt is entitled to nominate three or more directors to the Board pursuant to the Stockholders’ Agreement, such quorum must include (i) the Chairman of the board of managers of Next Alt and two other directors nominated to the Board pursuant to the Stockholders’ Agreement by Next Alt or (ii) in the event the Chairman of the board of managers of Next Alt is not a member of the  Board, three directors nominated to the Board pursuant to the Stockholders’ Agreement by Next Alt; provided, however, that, in the case of clause (i) of this paragraph (E) of this Section 3.06, if consented to in writing (including by email) by Next Alt prior to the applicable meeting of the Board, three directors nominated to the Board pursuant to the Stockholders’ Agreement by Next Alt shall be required to constitute a quorum, none of which need be the Chairman of the board of managers of Next Alt.  In the event Next Alt is entitled to nominate one or two directors to the Board pursuant to the Stockholders’ Agreement and such directors are elected to the Board by the stockholders of the Company, a quorum must include each of the directors nominated to the Board pursuant to the Stockholders’ Agreement by Next Alt. For the avoidance of doubt, the A4-Next Alt Designee (as defined in the Stockholders’ Agreement) shall be considered a director nominated to the Board pursuant to the Stockholders’ Agreement by Next Alt.

 

(F)                                  Organization .  At each meeting of the Board, one of the following shall act as chairman of the meeting and preside, in the following order of precedence: (1) the Chairman; and (2) any director chosen by a majority of the directors present.  The Secretary or, in the case of the Secretary’s absence, any person (who shall be an Assistant Secretary, if an Assistant Secretary is present) whom the chairman of the meeting shall appoint shall act as secretary of such meeting and keep the minutes thereof.

 

(G)                                Meeting Agenda .  The agenda for any meeting of the Board will be determined by the Board member(s) convening the meeting.  Board members may submit agenda items to be discussed at the meeting to the Board member(s) convening the meeting.  After convocation of a Board meeting, amendments to the agenda can only be made upon the unanimous vote of all Board members.  Matters not included on the agenda can only be added thereto if all Board members are present at the meeting and agree to vote on the matter.  At the request of a Board member and with the agreement of the majority of the other Board members, urgent matters may be discussed immediately, although voting on such urgent matters shall require an amendment to the agenda which can only be made upon the unanimous vote of all Board members.

 

Section 3.07.                           Committees of the Board; Committee Rules .  The Board may designate one or more committees, including but not limited to an Audit Committee and a Compensation Committee, each such committee to consist of one or more of the directors of the Board.  The Board may designate one or more directors as alternate members of any committee

 

12



 

to replace any absent or disqualified member at any meeting of the committee.  Any such committee, to the extent provided in the resolution of the Board establishing such committee, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any Bylaw of the Corporation.  All committees of the Board shall keep minutes of their meetings and shall report their proceedings to the Board when requested or required by the Board. Each committee of the Board may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the Board designating such committee.  Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present at a meeting of the committee at which a quorum is present.

 

Section 3.08.                           Directors’ Consent in Lieu of Meeting .  Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, without prior notice and without a vote, if a consent in writing or by electronic transmission, setting forth the action so taken, shall be signed by all the members of the Board or such committee and such consent or electronic transmission is filed with the minutes of the proceedings of the Board or such committee.  Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

Section 3.09.                           Action by Means of Telephone or Similar Communications Equipment .  Any one or more members of the Board, or of any committee thereof, may participate in a meeting of the Board or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

 

Section 3.10.                           Compensation .  Unless otherwise restricted by the Amended and Restated Certificate of Incorporation and in all cases subject to the Stockholders’ Agreement, the Board may determine the compensation of directors.  In addition, as determined by the Board, directors may be reimbursed by the Corporation for their expenses, if any, in the performance of their duties as directors.  No such compensation or reimbursement shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

 

Section 3.11.                           Reliance on Books and Records .  A member of the Board, or a member of any committee designated by the Board, shall, in the performance of such person’s duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board, or by any other person as to

 

13



 

matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

 

ARTICLE IV

 

OFFICERS

 

Section 4.01.                           Officers .  The officers of the Corporation will include, if and when designated by the Board: the Chairman; a Chief Executive Officer; two or more Presidents including a Chief Financial Officer and a Chief Operating Officer; a Vice Chairman; a Secretary; and a Treasurer.  The Board may also appoint one or more Assistant Secretaries and Assistant Treasurers and such other officers and agents with such powers and duties as it deems necessary (subject to the rights, if any, of an officer under any contract of employment).  Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by law.  The salaries and other compensation of the officers of the Corporation will be fixed by or in the manner designated by the Board or a committee thereof to which the Board has delegated such responsibility.

 

Section 4.02.                           Authority and Duties .  All officers shall have such authority and perform such duties in the management of the Corporation as may be provided in these Bylaws or, to the extent not so provided, by resolution of the Board.

 

Section 4.03.                           Term of Office, Resignation and Removal .  (a)  Each officer shall be appointed by the Board and shall hold office for such term as may be determined by the Board.  Each officer shall hold office until such officer’s successor has been appointed and qualified or such officer’s earlier death or resignation or removal in the manner hereinafter provided.

 

(b)                                  Any officer may resign at any time by giving written notice to the Board, the Chief Executive Officer, any President or the Secretary.  Such resignation shall take effect at the time specified in such notice or, if the time be not specified, upon receipt thereof by the Board, the Chief Executive Officer, any President or the Secretary, as the case may be.  Unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective.

 

(c)                                   All officers and agents appointed by the Board shall be subject to removal, with or without cause, at any time by the Board.

 

Section 4.04.                           Vacancies .  Any vacancy occurring in any office of the Corporation, for any reason, shall be filled by action of the Board.  Unless earlier removed pursuant to Section 4.03 hereof, any officer appointed by the Board to fill any such vacancy shall serve only until such time as the unexpired term of such officer’s predecessor expires unless reappointed by the Board.

 

Section 4.05.                           The Chairman .  The Chairman shall have the power to call special meetings of stockholders, to call special meetings of the Board and, if present, to preside at all meetings of stockholders and all meetings of the Board.  The Chairman shall perform all duties

 

14



 

incident to the office of Chairman of the Board and all such other duties as may from time to time be assigned to the Chairman by the Board or these Bylaws.

 

Section 4.06.                           The Chief Executive Officer .   The Chief Executive Officer, who may also be the Chairman, subject to the determination of the Board, shall have general and active management and control of the business and affairs of the Corporation, subject to the control of the Board, and shall see that all orders and resolutions of the Board are carried into effect.  The Chief Executive Officer shall perform all duties incident to the office of Chief Executive Officer and all such other duties as may from time to time be assigned to the Chief Executive Officer by the Board or these Bylaws.

 

Section 4.07.                           Presidents .  Any President, in order of his or her seniority or in any other order determined by the Board, shall generally assist the Chief Executive Officer and perform such other duties as the Board or the Chief Executive Officer shall prescribe, and in the absence or disability of the Chief Executive Officer, shall perform the duties and exercise the powers of the Chief Executive Officer.

 

Section 4.08.                           The Vice Chairman .  The Vice Chairman shall perform all duties incident to the office of Vice Chairman and all such other duties as may from time to time be assigned to the Vice Chairman by the Chief Executive Officer or these Bylaws.

 

Section 4.09.                           The Secretary .  The Secretary shall, to the extent practicable, attend all meetings of the Board and all meetings of stockholders and shall record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform the same duties for any committee of the Board when so requested by such committee.  The Secretary shall give or cause to be given notice of all meetings of stockholders and of the Board.  The Secretary shall keep in safe custody the certificate books and stockholder records and such other books and records of the Corporation as the Board, the Chairman or the Chief Executive Officer may direct and shall perform all other duties incident to the office of Secretary and such other duties as from time to time may be assigned to the Secretary by the Board, the Chairman or the Chief Executive Officer.

 

Section 4.10.                           Assistant Secretaries .  Assistant Secretaries of the Corporation (“ Assistant Secretaries ”), if any, in order of their seniority or in any other order determined by the Board, shall generally assist the Secretary and perform such other duties as the Board or the Secretary shall prescribe, and, in the absence or disability of the Secretary, shall perform the duties and exercise the powers of the Secretary.

 

Section 4.11.                           The Treasurer .  The Treasurer of the Corporation (the “ Treasurer ”) shall have the care and custody of all the funds of the Corporation and shall deposit such funds in such banks or other depositories as the Board, or any officer or officers, or any officer and agent jointly, duly authorized by the Board, shall, from time to time, direct or approve.  The Treasurer shall disburse the funds of the Corporation under the direction of the Board and the Chief Executive Officer.  The Treasurer shall keep a full and accurate account of all moneys received and paid on account of the Corporation and shall render a statement of the Treasurer’s accounts whenever the Board, the Chairman or the Chief Executive Officer shall so request.  The Treasurer shall perform all other necessary actions and duties in connection with the

 

15



 

administration of the financial affairs of the Corporation and shall generally perform all the duties usually appertaining to the office of treasurer of a corporation.  When required by the Board, the Treasurer shall give bonds for the faithful discharge of the Treasurer’s duties in such sums and with such sureties as the Board shall approve.

 

Section 4.12.                           Assistant Treasurers .  Assistant Treasurers of the Corporation (“ Assistant Treasurers ”), if any, in order of their seniority or in any other order determined by the Board, shall generally assist the Treasurer and perform such other duties as the Board or the Treasurer shall prescribe, and, in the absence or disability of the Treasurer, shall perform the duties and exercise the powers of the Treasurer.

 

Section 4.13.                           Contracts and Other Documents .  Subject to such policies as may be adopted by the Board from time to time, the Chief Executive Officer, any President, the Secretary or the Treasurer, or such other officer or officers as may from time to time be authorized by the Board or any other committee given specific authority in the premises by the Board during the intervals between the meetings of the Board, shall have power to sign and execute on behalf of the Corporation deeds, conveyances and contracts, and any and all other documents requiring execution by the Corporation.

 

Section 4.14.                           Ownership of Stock of Another Corporation .  Unless otherwise directed by the Board, the Chief Executive Officer, any President, the Secretary or the Treasurer, or such other officer or agent as shall be authorized by the Board, shall have the power and authority, on behalf of the Corporation, to attend and to vote at any meeting of stockholders of any entity in which the Corporation holds securities or equity interests and may exercise, on behalf of the Corporation, any and all of the rights and powers incident to the ownership of such securities or equity interests at any such meeting, including the authority to execute and deliver proxies and consents on behalf of the Corporation.

 

Section 4.15.                           Delegation of Duties .  In the absence, disability or refusal of any officer to exercise and perform his or her duties, the Board may delegate to another officer such powers or duties.

 

ARTICLE V

 

CORPORATE FUNDS, CHECKS, DRAFTS, NOTES AND PROXIES

 

Section 5.01.                           Corporate Funds, Checks, Drafts and Notes .  The funds of the Corporation shall be kept in such depositories as shall from time to time be prescribed by the Board or its designees selected for such purposes.  All checks, drafts and other orders for the payment of money, notes and other evidences of indebtedness issued in the name of the Corporation shall be signed by the Chief Executive Officer, any President, the Secretary or the Treasurer, or such other person or agent as may from time to time be authorized and with such countersignature, if any, as may be required by the Board.

 

Section 5.02.                           Execution of Proxies .  The Chairman, the Chief Executive Officer or any President may authorize, from time to time, the execution and issuance of proxies to vote shares of stock or other securities of other corporations held of record by the Corporation and the

 

16



 

execution of consents to action taken or to be taken by any such corporation.  All such proxies and consents, unless otherwise authorized by the Board, shall be signed in the name of the Corporation by the Chief Executive Officer or any President.

 

ARTICLE VI

 

SHARES OF STOCK AND TRANSFERS OF SHARES

 

Section 6.01.                           Stock Certificates and Uncertificated Shares .

 

(A)                                Unless otherwise required by applicable law or authorized by the Board, from and after June 20, 2017, all shares of the Corporation shall be issued, recorded and transferred exclusively in uncertificated book-entry form in accordance with a direct registration program operated by a clearing agency registered under Section 17A of the Exchange Act.  Shares of the Corporation represented by certificates that were issued prior to June 20, 2017 shall continue to be certificated securities of the Corporation until the certificates therefor have been surrendered to the Corporation.

 

(B)                                Certificates for shares of the capital stock of the Corporation shall be issued only to the extent as may be required by applicable law or as otherwise authorized by the Board, and if so issued shall be in such form as shall be approved by the Board.  Any such certificates shall be signed by or have engraved thereon a facsimile signature of the Chief Executive Officer and the Secretary or an Assistant Secretary, certifying the number and class of the Corporation’s shares held by such stockholder.

 

Section 6.02.                           Transfer Agents .  The Board may, in its discretion, appoint responsible banks or trust companies or other appropriately qualified institutions to act as Transfer Agents and Registrars of the stock of the Corporation and, upon such appointments being made, no stock certificate shall be valid until countersigned by one of such Transfer Agents and registered by one of such Registrars.  Where any such certificate is registered with the manual signature of a Registrar, the countersignature of a Transfer Agent may be a facsimile or engraved, stamped or printed.

 

Section 6.03.                           Transfer of Stock .  Shares of stock may be transferred by delivery of the certificates therefore, accompanied by an assignment in writing on the back of the certificates or by written power of attorney to sell, assign and transfer the same, signed by the record holder thereof, upon receipt of proper transfer instructions from the owner of uncertificated shares, or upon the escheat of said shares under the laws of any state of the United States.  In no event shall a transfer of shares affect the right of the Corporation to pay any dividend upon the stock to the holder of record thereof for all purposes, and no transfer shall be valid, except between the parties thereto, until such transfer shall have been made upon the books of the Corporation.

 

Section 6.04.                           Lost  Certificates .  In case any certificate of stock shall be lost, stolen or destroyed, the Board, in its discretion, may authorize the issue of, or provide for the

 

17



 

manner of issuing, uncertificated shares in place of the certificate so lost, stolen or destroyed; provided, that, in each such case, the applicant for such uncertificated shares shall furnish to the Corporation and to such of its Transfer Agents and Registrars as may require the same evidence to their satisfaction, in their discretion, of the loss, theft or destruction of such certificate and of the ownership thereof, and also such security or indemnity as may be required by them.

 

Section 6.05.                           Regulations .  The Board may make such other rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates evidencing shares and uncertificated shares.

 

Section 6.06.                           Fixing Date for Determination of Stockholders of Record .

 

(a)                                  In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting.  If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination.  If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however , that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the foregoing provisions of this subsection (a) at the adjourned meeting.

 

(b)                                  In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board.  If no record date has been fixed by the Board, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.  Delivery made to a corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.  If no record date has been fixed by the Board and prior action by the Board is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board adopts the resolution taking such prior action.

 

18



 

(c)                                   In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action.  If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

 

ARTICLE VII

 

CHOICE OF FORUM

 

Section 7.01.                           Forum for Adjudication of Disputes .  To the fullest extent permitted by law, and unless the Board approves the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state or federal court located in the State of Delaware), shall be the sole and exclusive forum for: (i) any derivative action or proceeding brought in the name or right of the Corporation or on its behalf, (ii) any action asserting a claim for breach of a fiduciary duty owed by any current or former director, officer or stockholder in such capacity to the Corporation or the Corporation’s stakeholders, (iii) any action arising or asserting a claim arising pursuant to any provision of the DGCL or any provision of the Amended and Restated Certificate of Incorporation or these Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforce or determine the validity of the Amended and Restated Certificate of Incorporation or these Bylaws.  Any person or entity purchasing or otherwise acquiring or holding any interest in securities of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VII.  To the fullest extent permitted by applicable law, if any action the subject matter of which is within the scope of these Bylaws is filed in a court other than as specified above in the name of any stockholder, such stockholder shall be deemed to have consented to (a) the personal jurisdiction of the Court of Chancery of the State of Delaware, another court in the State of Delaware or the federal district court in the District of Delaware, as appropriate, in connection with any action brought in any such court to enforce these Bylaws and (b) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the action as agent for such stockholder.

 

ARTICLE VIII

 

MISCELLANEOUS

 

Section 8.01.                           Seal .  The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.

 

Section 8.02.                           Fiscal Year .  The fiscal year of the Corporation shall end on the thirty-first day of December of each year unless changed by resolution of the Board.

 

19



 

Section 8.03.                           Form of Records .  Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time.  The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL

 

Section 8.04.                           Section Headings .  Section headings in these Bylaws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.

 

Section 8.05.                           Inconsistent Provisions .  In the event that any provision of these Bylaws is or becomes inconsistent with any provision of the Amended and Restated Certificate of Incorporation, the DGCL or any other applicable law, such provision of these Bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.

 

ARTICLE IX

 

AMENDMENTS

 

Section 9.01.                           Amendments .  Except as otherwise expressly provided by the Amended and Restated Certificate of Incorporation, any Bylaw (including these Bylaws) may be altered, amended or repealed by the vote of the record holders of a majority of the voting power of the shares then entitled to vote at an election of directors or act by written consent of stockholders, or by vote of the Board or by a written consent of directors pursuant to Section 3.08 hereof.

 

20




Exhibit 4.35

 

 

 

AMENDED AND RESTATED

 

STOCKHOLDERS AND

 

REGISTRATION RIGHTS AGREEMENT

 

by and among

 

Altice USA, Inc.,

 

the Stockholders signatories hereto

 

and

 

the other parties signatories hereto

 

Dated as of [ · ], 2018

 

 



 

CONTENTS

 

ARTICLE I. DEFINITIONS

3

 

 

 

Section 1.01

Certain Definitions

3

 

Section 1.02

Construction

9

 

 

 

 

ARTICLE II. REPRESENTATIONS; WARRANTIES AND COVENANTS

10

 

 

 

Section 2.01

Representations and Warranties of the Stockholders

10

 

Section 2.02

Representations and Warranties of the Company

10

 

Section 2.03

Entitlement of the Company and the Stockholders to Rely on Representations and Warranties

11

 

 

 

 

ARTICLE III. GOVERNANCE

12

 

 

 

Section 3.01

Observer Rights

12

 

Section 3.02

Compliance with this Agreement

13

 

Section 3.03

Reimbursement of Expenses

13

 

 

 

 

ARTICLE IV. REGISTRATION RIGHTS

13

 

 

 

Section 4.01

Demand Registration

13

 

Section 4.02

Shelf Registration

16

 

Section 4.03

Piggyback Registration

18

 

Section 4.04

Black-out Period

19

 

Section 4.05

Registration Procedures

20

 

Section 4.06

Underwritten Offerings

25

 

Section 4.07

No Inconsistent Agreements; Additional Rights

26

 

Section 4.08

Registration Expenses

26

 

Section 4.09

Indemnification

27

 

Section 4.10

Rules 144 and 144A and Regulation S

30

 

Section 4.11

Company Cooperation

30

 

 

 

 

ARTICLE V. GENERAL PROVISIONS

30

 

 

 

Section 5.01

Termination

30

 

Section 5.02

Entire Agreement; Amendment

30

 

Section 5.03

Waivers

31

 

Section 5.04

Information Rights

31

 

Section 5.05

Tax Matters

31

 

Section 5.06

Assignment; Benefit; Additional Parties

32

 

Section 5.07

Severability

32

 

Section 5.08

Counterparts

33

 

Section 5.09

Notices

33

 

Section 5.10

Governing Law; Jurisdiction

35

 

Section 5.11

Waiver of Jury Trial

35

 

Section 5.12

Confidentiality

35

 



 

 

Section 5.13

Specific Performance

37

 

Section 5.14

No Third Party Liability

37

 

Section 5.15

Further Assurances

37

 

Section 5.16

Splits

37

 

 

 

 

SCHEDULE A

53

 

 

 

STOCKHOLDERS

53

 

 

 

SCHEDULE B

54

 

 

 

ALTICE ENTITIES

54

 

 

 

SCHEDULE C

55

 

 

 

BCP ENTITIES

55

 

 

 

SCHEDULE D

56

 

 

 

CPPIB ENTITIES

56

 

 

 

SCHEDULE E

57

 

 

 

NEXT ALT ENTITIES

57

 

2


 

AMENDED AND RESTATED

STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT

 

This AMENDED AND RESTATED STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT (as it may be amended or otherwise modified from time to time in accordance with the terms hereof, this “ Agreement ”), dated as of [ · ], 2018, is entered into by and among Altice USA, Inc., a Delaware corporation (the “ Company ”), Altice (as defined below), Next Alt (as defined below), the Stockholders identified in Schedule A hereto (as such schedule may be updated, from time to time, by the Board as the Board deems appropriate to reflect changes thereon), and any other stockholder of the Company who becomes a party to this Agreement from time to time pursuant to the terms hereof.

 

RECITALS

 

WHEREAS , in connection with the initial public offering of the Company (the “ Initial Public Offering ”) and the transactions related thereto, the Company entered into that certain Stockholders and Registration Rights Agreement, dated June 27, 2017 (the “ Initial Agreement ”), with Altice and the Stockholders identified in Schedule A thereto.

 

WHEREAS , on January 8, 2018, Altice announced that it intended to effect a separation of the Company and Altice (the “ Separation ”) by means of a pro-rata distribution in kind of substantially all of the shares of common stock of the Company owned directly or indirectly by Altice to the Altice shareholders (the “ Distribution ”);

 

WHEREAS , as a result of the Distribution, Next Alt will have voting control of the Company; and

 

WHEREAS, in connection with the Separation and in accordance with Section 5.02 of the Initial Agreement, the Altice Entities, the BCP Entities and the CPPIB Entities have agreed to amend and restate the Initial Agreement to grant Next Alt certain rights with respect to the registration of Registrable Securities and other matters on the terms and conditions set forth herein.

 

NOW , THEREFORE , in consideration of the foregoing and the mutual promises, covenants and agreements of the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and with the intent to be legally bound, the parties hereto agree as follows:

 

ARTICLE I.

 

DEFINITIONS

 

Section 1.01          Certain Definitions .  As used in this Agreement, the following terms have the following meanings:

 

Adverse Disclosure ” means public disclosure (a) of material non-public information that, in the Board’s good faith judgment, after consultation with an independent outside counsel

 

3



 

to the Company, (i) would be required to be made in any Registration Statement or report filed with the SEC by the Company so that such Registration Statement would not be materially misleading, (ii) would not be required to be made at such time but for the filing of such Registration Statement or report, and (iii) the Company has a bona fide business purpose for not disclosing publicly, or (b) that would otherwise be materially adverse to the Company for a Registration Statement to be filed on or before the date such filing would otherwise be required under this Agreement, in the Board’s good faith judgment, after consultation with an independent outside counsel to the Company.

 

Affiliate ” means, with respect to any Person, an “affiliate” as defined in Rule 405 of the regulations promulgated under the Securities Act and, with respect to any Sponsor Entity, any Altice Entity or any Next Alt Entity, as the case may be, (i) an “affiliate” as defined in Rule 405 of the regulations promulgated under the Securities Act, (ii) an “affiliate” as defined in Rule 405 of the regulations promulgated under the Securities Act of any Person that is a general partner, manager, managing member, controlling stockholder or discretionary manager or advisor of any Sponsor Entity, any Altice Entity or any Next Alt Entity, and (iii) any investment fund, vehicle or holding company that is directly or indirectly managed or advised by any Affiliate of any Person that is a general partner, manager, managing member, controlling stockholder or discretionary manager or advisor of any Sponsor Entity, any Altice Entity or any Next Alt Entity; provided , however , that notwithstanding the foregoing, (x) an Affiliate shall not include any “portfolio company” (as such term is customarily used among institutional investors) of any Person and (y) none of the Company and its subsidiaries shall be considered an Affiliate of any Altice Entity or any Next Alt Entity.

 

Agreement ” has the meaning set forth in the Preamble.

 

Altice ” means Altice N.V., a public company with limited liability ( naamloze vennootschap ) under Dutch law, together with its successors and permitted assigns.

 

Altice Entities ” means each of the entities listed on Schedule B hereto and any Permitted Transferee that becomes a party to this Agreement in accordance with the terms hereof.

 

BCP ” means CIE Management IX Limited and its Permitted Transferees.

 

BCP Entities ” means each of the entities listed on Schedule C hereto and any Permitted Transferee that becomes a party to this Agreement in accordance with the terms hereof.

 

Board ” means the board of directors of the Company.

 

Business Day ” means any day other than a Saturday, a Sunday or a day on which banks in New York, New York, Paris or Amsterdam are authorized or obligated by law or executive order to close.

 

Class A Shares ” means shares of Class A common stock, par value $0.01, of the Company.

 

Class B Shares ” means shares of Class B common stock, par value $0.01, of the Company.

 

4



 

Class C Shares ” means shares of Class C common stock, par value $0.01, of the Company.

 

Code ” means the United States Internal Revenue Code of 1986, as amended.

 

Company ” has the meaning set forth in the Preamble, together with its successors and permitted assigns.

 

Confidential Information ” has the meaning set forth in Section 5.12 .

 

CPPIB ” means Canada Pension Plan Investment Board and its Permitted Transferees.

 

CPPIB Entities ” means each of the entities listed on Schedule D hereto and any Permitted Transferee that becomes a party to this Agreement in accordance with the terms hereof.

 

CVC 2 ” means CVC 2 B.V., a private limited liability company ( besloten vennootschap met beperkte aansprakelijkheid ) incorporated and existing under the laws of the Netherlands.

 

CVC 3 ” means CVC 3 B.V., a private limited liability company ( besloten vennootschap met beperkte aansprakelijkheid ) incorporated and existing under the laws of the Netherlands, together with its successors and permitted assigns.

 

Demand Notice ” has the meaning set forth in Section 4.01(a) .

 

Demand Period ” has the meaning set forth in Section 4.01(d) .

 

Demand Registration ” has the meaning set forth in Section 4.01(a) .

 

Demand Registration Notice ” has the meaning set forth in Section 4.01(e) .

 

Demand Registration Statement ” has the meaning set forth in Section 4.01(a) .

 

Demand Suspension ” has the meaning set forth in Section 4.01(f) .

 

Demanding Party ” has the meaning set forth in Section 4.01(a) .

 

Director ” has the meaning set forth in Section 3.01(a) .

 

Exchange Act ” means the Securities Exchange Act of 1934, and any rules and regulations promulgated thereunder.

 

FINRA ” means the Financial Industry Regulatory Authority.

 

Governmental Entity ” means any instrumentality, subdivision, court, administrative agency, commission, legislature, regulator, official or other similar recognized organization body or instrumentality of any country or any state, province, prefect, municipality, locality or other government or political subdivision thereof, or any quasi-governmental or private body

 

5



 

exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority.

 

Joinder Agreement ” means a joinder agreement to this Agreement substantially in the form attached hereto as Exhibit A .

 

Long-Form Registration ” has the meaning set forth in Section 4.01(a) .

 

Loss ” or “ Losses ” has the meaning set forth in Section 4.09(a) .

 

Material Adverse Change ” means (i) any general suspension of trading in or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States, (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) a material outbreak or escalation of armed hostilities or other international or national calamity involving the United States or the declaration by the United States of a national emergency or war or a change in national or international financial, political or economic conditions, and (iv) any event, change, circumstance or effect that is or is reasonably likely to be materially adverse, to the business, properties, assets, liabilities, condition (financial or otherwise), operations, results of operations or prospects of the Company and its subsidiaries taken as a whole.

 

Minimum Amount ” means the lowest of (i) $100,000,000, (ii) one percent (1%) of the value of the Shares that are publicly traded as of the close of business on the most recent Business Day or (iii) such lesser amount as agreed by the Sponsors, Next Alt and Altice.

 

Next Alt ” means Next Alt S.à r.l., a Luxembourg private company with limited liability, together with its successors and permitted assigns.

 

Next Alt Entities ” means each of the entities listed on Schedule E hereto and any Permitted Transferee that becomes party to this Agreement in accordance with the terms hereof.

 

NYSE ” has the meaning set forth in Section 3.01(b) .

 

Observer ” has the meaning set forth in Section 3.01(a) .

 

Participating Stockholder ” means, with respect to any Registration, any Stockholder of Registrable Securities covered by the applicable Registration Statement.

 

Permitted Transferee ” means (i) with respect to a Sponsor Entity, any other Sponsor Entity, with respect to an Altice Entity, any other Altice Entity, and with respect to any Next Alt Entity, any other Next Alt Entity, (ii) any Affiliate of a Sponsor or Sponsor Entity, Altice or Altice Entity or Next Alt or Next Alt Entity; (iii) any successor entity of such Sponsor or Sponsor Entity, Altice or such Altice Entity or Next Alt or such Next Alt Entity, or any wholly-owned and controlled Affiliate or such successor entity, or (iv) any other investment fund or vehicle of which such Sponsor, Altice or Next Alt, or an Affiliate thereof serves as a general partner, manager, managing member, controlling stockholder or discretionary manager or advisor.

 

6



 

Person ” means any individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof.

 

Piggyback Registration ” has the meaning set forth in Section 4.03(a) .

 

Pre-IPO Entity ” means CVC 2, CVC 3 and Neptune Holding US Limited Partnership.

 

Prospectus ” means the prospectus included in any Registration Statement, all amendments and supplements to such prospectus, including pre- and post-effective amendments to such Registration Statement, and all other material incorporated by reference in such prospectus.

 

Registrable Securities ” means any Shares and any securities that may be issued or distributed or be issuable in respect of any Shares by way of conversion, dividend, stock split or other distribution, merger (including a domestic or cross-border legal merger), consolidation, exchange, recapitalization or reclassification or similar transaction currently held or hereafter acquired by the Stockholders or their Permitted Transferees; provided , that any such Registrable Securities shall cease to be Registrable Securities to the extent (i) a Registration Statement with respect to the sale of such Registrable Securities has been declared effective under the Securities Act and such Registrable Securities have been disposed of in accordance with the plan of distribution set forth in such Registration Statement, (ii) such Registrable Securities have been sold pursuant to Rule 144 under the Securities Act (or any similar or analogous rule promulgated under the Securities Act), or (iii) such Registrable Securities shall have been otherwise transferred and uncertificated book-entry positions that do not have a legend restricting transfer under the Securities Act shall have been delivered by the Company and such securities may be publicly resold without Registration under the Securities Act.

 

Registration ” means a registration with the SEC of the Company’s securities for offer and sale to the public under a Registration Statement.  The terms “ Register ”, “ Registered ” and “ Registering ” shall each have a correlative meaning.

 

Registration Expenses ” has the meaning set forth in Section 4.08(a) .

 

Registration Statement ” means any registration statement of the Company filed with, or to be filed with, the SEC under the rules and regulations promulgated under the Securities Act, including the related Prospectus, amendments and supplements to such registration statement, including pre- and post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement.

 

Representatives ” means, with respect to any Person, any of such Person’s Affiliates and it and such Affiliates’ officers, directors, employees, agents, attorneys, accountants, actuaries and consultants.

 

SEC ” means the Securities and Exchange Commission.

 

Securities Act ” means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

 

7



 

Shares ” means (i) the Class A Shares as of the date hereof (including Class A Shares that would be issuable upon conversion of the Class B Shares as of the date hereof) and/or (ii) any other equity interest issued in respect thereof or into which such Class A Shares shall have been changed, whether issued or changed in connection with or in furtherance of a purchase, issuance, grant, stock split, stock dividend, reorganization, reclassification, recapitalization, combination or similar transaction, or in connection with or in furtherance of the acquisition of or investment in another company or business (whether through a purchase of securities, a merger (including a domestic or cross-border merger), consolidation, recapitalization, consolidation, purchase of assets or otherwise).

 

Shelf Notice ” has the meaning set forth in Section 4.02(c) .

 

Shelf Period ” has the meaning set forth in Section 4.02(b) .

 

Shelf Registration ” means a Registration effected pursuant to Section 4.02 .

 

Shelf Registration Statement ” means a Registration Statement for any offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (or any similar rule that may be adopted by the SEC) covering the Registrable Securities.

 

Shelf Suspension ” has the meaning set forth in Section 4.02(d) .

 

Short-Form Registration Statement ” has the meaning set forth in Section 4.01(a) .

 

Sponsor(s) ” means, either, BCP or CPPIB, and together, BCP and CPPIB.

 

Sponsor Entity ” means, either, the BCP Entities or the CPPIB Entities, and together, the BCP Entities or the CPPIB Entities.

 

Stockholder ” means any of the Altice Entities, the Next Alt Entities, the BCP Entities and the CPPIB Entities, together with their respective successors and assigns or any other holder of Shares that becomes a party to this Agreement pursuant to a Joinder Agreement.

 

Stockholder Shelf Registration Amount ” has the meaning set forth in Section 4.02(a) .

 

Underwritten Offering ” means a Registration in which Shares are sold to an underwriter or underwriters on a firm commitment basis for reoffering to the public.

 

Section 1.02          Construction .

 

(a)           The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

 

(b)           The words “ hereof ”, “ herein ”, “ hereunder ” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement and all references to articles and sections refer to articles and sections of this Agreement, and all references to exhibits and schedules are to exhibits and schedules attached hereto, each of which is made a part hereof for all purposes.

 

8



 

(c)           The term “including” is not limiting and means “including without limitation.”

 

(d)           The word “or” shall be disjunctive but not exclusive.

 

(e)           The captions and headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

 

(f)            Whenever the context requires, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms.

 

(g)           Except as otherwise specifically provided in this Agreement, where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision will be applicable whether such action is taken directly or indirectly by such Person, including actions taken by or on behalf of any Affiliate of such Person.

 

(h)           Except as otherwise specifically provided in this Agreement, any document, agreement, instrument or statute defined or referred to herein means such agreement, instrument or statute as from time to time amended, supplemented or modified, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes.

 

(i)            “$” and “dollars” means United States dollars and the term “cash” means dollars in immediately available funds.

 

(j)            The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

 

ARTICLE II.

 

REPRESENTATIONS; WARRANTIES AND COVENANTS

 

Section 2.01          Representations and Warranties of the Stockholders .  Each Stockholder hereby represents and warrants, severally and not jointly, and solely on its own behalf, to each other Stockholder and to the Company that on the date hereof:

 

(a)           Existence; Authority; Enforceability .  Such Stockholder has the necessary power and authority to enter into and deliver this Agreement, to carry out its obligations hereunder and consummate the transactions contemplated hereby.  To the extent such Stockholder is an entity, such Stockholder is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and the execution of this Agreement, and the consummation of the transactions contemplated herein, have been authorized by all necessary corporate or other action, and no other act or proceeding, corporate or otherwise, on its part is necessary to authorize the execution of this Agreement or the consummation of any of the transactions contemplated hereby.  This Agreement has been duly executed by such Stockholder and, assuming due authorization, execution and delivery by the other parties thereto, constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to

 

9



 

the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing.

 

(b)           Absence of Conflicts .  The execution and delivery by such Stockholder of this Agreement and the performance of its obligations hereunder do not and will not (i) conflict with, or result in the breach of any provision of the constitutive documents of such Stockholder; (ii) result in any violation, breach, conflict, default or event of default (or an event which with notice, lapse of time, or both, would constitute a default or event of default), or give rise to any right of acceleration or termination or any additional payment obligation, under the terms of any material contract, agreement or permit to which such Stockholder is a party or by which such Stockholder’s assets or operations are bound or affected; or (iii) violate, in any material respect, any law applicable to such Stockholder.

 

(c)           Consents .  Other than any consents that have already been obtained, no governmental consent, waiver, approval, authorization, exemption, registration, license or declaration or filing is required to be made or obtained by such Stockholder in connection with (i) the execution, delivery or performance of this Agreement or (ii) the consummation of any of the transactions contemplated herein.  There are no proceedings pending, or, to the knowledge of such Stockholder, threatened in writing against any such Stockholder that, if adversely determined, would reasonably be expected to impair in any material respect the ability of such Stockholder to perform its obligations or prevent or materially delay the consummation of the transactions contemplated hereunder.

 

Section 2.02          Representations and Warranties of the Company .  The Company hereby represents and warrants to each Stockholder that on the date hereof:

 

(a)           Existence; Authority; Enforceability .  The Company has the necessary power and authority to enter into and deliver this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby.  The Company is duly organized, incorporated and validly existing as a corporation incorporated under the laws of the State of Delaware, and the execution of this Agreement, and the consummation of the transactions contemplated herein, have been authorized by all necessary corporate or other action, and no other act or proceeding on its part is necessary to authorize the execution of this Agreement or the consummation of any of the transactions contemplated hereby.  This Agreement has been duly executed by the Company and, assuming due authorization, execution and delivery by the other parties thereto, constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing.

 

(b)           Absence of Conflicts .  The execution and delivery by the Company of this Agreement and the performance of its obligations hereunder do not and will not (i) conflict with, or result in the breach of any provision of the organizational documents of the Company or any of its subsidiaries; (ii) result in any violation, breach, conflict, default or event of default (or an

 

10



 

event which with notice, lapse of time, or both, would constitute a default or event of default), or give rise to any right of acceleration or termination or any additional payment obligation, under the terms of any material contract, agreement or permit to which the Company or any of its subsidiaries is a party or by which the Company’s or any of its subsidiaries’ assets or operations are bound or affected; or (iii) violate, in any material respect, any law applicable to the Company or any of its subsidiaries.

 

(c)           Consents .  Other than any consents that have already been obtained, no governmental consent, waiver, approval, authorization, exemption, registration, license or declaration is required to be made or obtained by the Company or any of its subsidiaries in connection with (i) the execution, delivery or performance of this Agreement or (ii) the consummation of any of the transactions contemplated herein.  There are no proceedings pending, or, to the knowledge of the Company, threatened in writing against the Company that, if adversely determined, would reasonably be expected to impair in any material respect the ability of the Company to perform its obligations or prevent or materially delay the consummation of the transactions contemplated hereunder.

 

Section 2.03          Entitlement of the Company and the Stockholders to Rely on Representations and Warranties .  The foregoing representations and warranties may be relied upon by the Company, and by the Stockholders, in connection with the entering into of this Agreement.

 

ARTICLE III.

 

GOVERNANCE

 

Section 3.01          Observer Rights

 

(a)           For so long as each of the BCP Entities and the CPPIB Entities individually own four percent (4%) or more of the issued and outstanding Class A Shares and Class B Shares (without regard to the voting power of such Class B Shares) and there is no Director who is a designee of such Sponsor Entity on the Board, such Sponsor Entity shall have the right to designate one (1) non-voting observer to the Board (each, an “ Observer ”).  The appointment and removal of any Observer shall be by written notice to the Board.  Each Observer shall be a natural person.  Each Observer shall be entitled to be present at all meetings of the Board and any committee thereof and shall be notified of any such meeting by reasonable prior notice, including such meeting’s time and place, in the same manner as the directors of the Board (the “ Directors ”) and shall receive copies of all written materials distributed to the Directors for purposes of such meetings at the same time as the Directors (except to the extent an Observer has been excluded therefrom pursuant to Section 3.01(b) ); provided , however , that the Observer shall have executed a non-disclosure and confidentiality agreement and such other acknowledgments and agreements reasonably satisfactory to the Board and the Sponsor Entity that designated such Observer, which for the avoidance of doubt, shall permit the Observer to share information as provided in Section 5.04 ; provided , further , that such Observer (x) shall not have voting rights with respect to actions taken or elected not to be taken by the Board or be counted for purposes of determining whether there is a sufficient quorum for the Board to conduct its business and (y) shall be subject to all rules governing the Board and nothing herein shall prevent the Board from

 

11



 

acting by written instrument to the extent permitted by applicable law; provided , further , that if at any time (upon written notice to the Company), a Sponsor Entity elects to suspend the receipt of the information provided by the Company under Section 5.04(b) , such Sponsor Entity may also elect to suspend the right to appoint an Observer in accordance with this Section 3.01 .

 

(b)           Notwithstanding the foregoing, the Company may exclude an Observer from access to any material or meeting or portion thereof if:

 

(i)            the Board concludes in good faith, upon advice of the Company’s outside legal counsel, (A) that such exclusion is reasonably necessary to preserve the attorney-client privilege between the Company and its counselor or (B) that an Observer has a potential conflict of interest; provided , however , that any such exclusion shall apply only to such portion of the material or such portion of the meeting which would be required to preserve such privilege and not to any other portion thereof; or

 

(ii)           such portion of a meeting is an executive session limited solely to independent director members of the Board, independent auditors and/or legal counsel, as the Board may designate, and an Observer (assuming such Observer were a member of the Board) would not meet the then-applicable standards for independence adopted by the New York Stock Exchange (the “ NYSE ”), or such other exchange on which the Company’s securities are then traded.

 

Section 3.02          Compliance with this Agreement

 

(a)           The Company and each Stockholder shall take all actions that are permitted by law and necessary to implement the provisions of this Article III .  Notwithstanding anything that may be permitted pursuant to the organizational documents of the Company, no Person shall take any action with respect to the Company that would be inconsistent with the provisions of this Agreement.

 

(b)           The Company shall use commercially reasonable efforts to have any Observer covered by the Company’s existing director and officer indemnity insurance on the same terms and conditions as such director and officer indemnity insurance provides for the coverage of any other persons covered thereby.

 

(c)           The Company shall indemnify an Observer to the same extent as a director under Article VII of the Amended and Restated Certificate of Incorporation of the Company, and the provisions thereof shall to the fullest extent possible apply mutatis mutandis to any Observer.

 

Section 3.03          Reimbursement of Expenses   The Company shall reimburse each Observer for all reasonable and documented out-of-pocket expenses incurred in connection with such Observer’s attendance at meetings of the Board and any committees thereof, including travel, lodging and meal expenses.  All reimbursements payable by the Company pursuant to this Section 3.03 shall be paid to an Observer in accordance with the Company’s policies and practices with respect to director expense reimbursement then in effect.

 

12


 

ARTICLE IV.

 

REGISTRATION RIGHTS

 

Section 4.01          Demand Registration .

 

(a)           Demand Rights .  Each Sponsor, Altice and Next Alt may, individually or jointly, make a written request to the Company for Registration (such notice, a “ Demand Notice ”) of all or part of the Registrable Securities held, directly or indirectly, by such Sponsor, Altice or Next Alt (a “ Demanding Party ”) or their Permitted Transferees (i) on Form S-1 or any similar long-form Registration Statement (a “ Long-Form Registration ”), or (ii) on Form S-3 or any similar short-form Registration Statement (a “ Short-Form Registration Statement ”) if the Company is qualified to use such short form (any such requested Long-Form Registration or Short-Form Registration shall hereinafter be referred to as a “ Demand Registration ”); provided , however , that (based on the then-current market prices) the number of Registrable Securities included in the Demand Registration would, if fully sold, yield gross proceeds (prior to deducting underwriting discounts and commission and offering expenses) to such Stockholder of at least the Minimum Amount; provided , further , that if the Company has a Shelf Registration Statement filed with the SEC and the Registrable Securities to be sold are included in such Shelf Registration Statement, then such Demand Registration shall be exercised in accordance with Section 4.02(e).  Each Demand Notice shall specify the kind and aggregate amount of Registrable Securities to be Registered and the intended methods of disposition thereof.  Upon receipt of a request for a Demand Registration from a Demanding Party, within (x) ninety (90) days from the date of delivery of the Demand Notice in the case of a request for a Long-Form Registration, or (y) thirty (30) days from the date of delivery of the Demand Notice in the case of a request for a Short-Form Registration, the Company shall use its reasonable best efforts to file a Registration Statement relating to such Demand Registration (a “ Demand Registration Statement ”).

 

(b)           Demand Registration .

 

(i)            Altice and Next Alt shall have the right to request pursuant to Section 4.01(a)  unlimited Demand Registrations during each twelve (12) month period beginning on the date hereof.

 

(ii)           Each Sponsor shall have the right (which may be exercised individually or jointly between the Sponsors) to request pursuant to Section 4.01(a)  one (1) Demand Registration during each twelve (12) month period beginning on the date hereof; provided , however , that if the managing underwriters of a proposed Underwritten Offering of the Registrable Securities advise the Board not to include all of the securities to be included in a Demand Registration pursuant to Section 4.01(h) , each Sponsor that was a Demanding Party shall have one (1) additional Demand Registration during such twelve (12) month period.

 

(c)           Demand Withdrawal .  E ach Demanding Party may withdraw its Registrable Securities from a Demand Registration at any time prior to the effectiveness of the applicable Demand Registration Statement.  Upon receipt of notices from the applicable Demanding Party

 

13



 

to such effect, the Company shall cease all efforts to secure effectiveness of the applicable Demand Registration Statement and if the Demanding Party had previously withdrawn its Registrable Securities from a Demand Registration pursuant to this Section 6.01(c)  within the last twelve (12) months, such Registration shall be deemed a Demand Registration with respect to such Demanding Party for purposes of Section 6.01(b) , unless the withdrawal is made following the occurrence of a Material Adverse Change or because the Registration would require the Company to make an Adverse Disclosure.

 

(d)           Effective Registration .  The Company shall be deemed to have effected a Demand Registration if the Demand Registration Statement is declared effective by the SEC and remains effective for not less than one hundred eighty (180) days (or such shorter period as shall terminate when all Registrable Securities covered by such Demand Registration Statement have been sold or withdrawn), or if such Registration Statement relates to an Underwritten Offering, such longer period as, in the opinion of counsel for the underwriter or underwriters, a Prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer (the applicable period, the “ Demand Period ”).  No Demand Registration shall be deemed to have been effected if (i) during the Demand Period such Registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court or (ii) the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such Registration are not satisfied or waived other than by reason of a wrongful act, misrepresentation or breach of such applicable underwriting agreement by the Demanding Party.  Notwithstanding anything to the foregoing, the Company shall use its reasonable best efforts to keep any Demand Registration Statement filed in response to a Registration Request effective for as long as is necessary for all Registrable Securities covered by such Demand Registration Statement to be sold thereunder.

 

(e)           Demand Registration Notice .  Promptly upon receipt of any request for a Demand Registration pursuant to Section 4.01(a)  (but in no event more than five (5) Business Days thereafter), the Company shall deliver a written notice (a “ Demand Registration Notice ”) of any such Registration request to all other Stockholders (including any Sponsor Entity, Altice Entity or Next Alt Entity that is not a Demanding Party), and the Company shall include in such Demand Registration all such Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten (10) Business Days after the date that the Demand Registration Notice has been delivered.  All requests made to the Company by a Stockholder pursuant to this Section 4.01(e)  shall specify the aggregate number of Registrable Securities to be registered and the intended method of distribution of such securities.  At any time prior to the effectiveness of the Registration Statement for the Demand Registration, such other Stockholder may revoke such request, without liability to the Demanding Party or the Company, by providing a written notice, no later than one Business Day prior to the scheduled effectiveness of the Registration Statement, to the Company revoking such request.

 

(f)            Delay in Filing; Suspension of Registration .  If the filing, effectiveness or continued use of a Demand Registration Statement at any time would require the Company to make an Adverse Disclosure, the Company may, upon giving prompt written notice of such action to the Stockholders, delay the filing or effectiveness of, or suspend use of, the Demand Registration Statement (a “ Demand Suspension ”).  In the case of a Demand Suspension, the Stockholders agree to suspend use of the applicable Prospectus in connection with any sale or

 

14



 

purchase, or offer to sell or purchase, Registrable Securities, upon receipt of the notice referred to above.  The Company shall immediately notify the Stockholders upon the termination of any Demand Suspension, amend or supplement the Prospectus, if necessary, so it does not contain any misstatement of or omission of a material fact and furnish to the Stockholders such numbers of copies of the Prospectus as so amended or supplemented as the Stockholders may reasonably request.  The Company agrees, if necessary, to supplement or make amendments to the Demand Registration Statement, if required by the registration form used by the Company for the Demand Registration or by the instructions applicable to such registration form or by the Securities Act or the rules or regulations promulgated thereunder or as may reasonably be requested by the Demanding Party.

 

(g)           Underwritten Offering .  If a Demanding Party so requests, an offering of Registrable Securities pursuant to a Demand Registration shall be in the form of an Underwritten Offering.  There shall be two (2) managing underwriters, and the Demanding Party shall have the right to select one of the managing underwriters to administer such offering, with the Company selecting the other managing underwriter.  Any additional non-managing underwriters shall be agreed upon by the Demanding Party and the Company after consultation with the managing underwriters.

 

(h)           Priority of Demand Registrations .  If the managing underwriters of a proposed Underwritten Offering of the Registrable Securities included in a Demand Registration (or, in the case of a Demand Registration not being underwritten, the Demanding Party), advise the Board, in writing that, in its or their opinion, the number of securities requested to be included in such Demand Registration exceeds the number which can be sold in such offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, the securities to be included in such Demand Registration shall be allocated, (A) first, 100% of the securities proposed to be sold in such Demand Registration by the Company, (B) second, and only if all the securities referred to in clause (A)  have been included, pro rata among Altice, Next Alt and the Sponsors that have requested the Demand Registration based on the relative number of Registrable Securities then held by Altice, Next Alt or such Sponsor, and (C) third, and only if all of the Registrable Securities referred to in clause (B)  have been included in such Registration, any other securities eligible for inclusion in such Registration.

 

(i)            In the event any Stockholder requests to participate in a Registration pursuant to this Section 4.01 in connection with a distribution of Registrable Securities to its partners or members, the registration shall provide for resale by such partners or members, if requested by the Stockholder.

 

Section 4.02          Shelf Registration .

 

(a)           Filing .  After the date on which the Company is eligible to file a Shelf Registration Statement on Form S-3, as promptly as practicable following a request as may be made from time to time by one or more Stockholders, the Company shall file with the SEC a Shelf Registration Statement relating to the offer and sale by Stockholders from time to time of the number of Registrable Securities specified in the requests of the Participating Stockholder(s) pursuant to this Section 4.02 and the other Stockholders pursuant to Section 4.02(c)  in

 

15



 

accordance with the methods of distribution elected by the Participating Stockholder(s) and set forth in the Shelf Registration Statement and, as promptly as practicable thereafter, shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective under the Securities Act.  If a Stockholder makes a request pursuant to this Section 4.02(a)  to file a Shelf Registration Statement, the Company shall promptly (and, in any event, within five (5) Business Days) notify the other Stockholders in writing.  No later than ten (10) Business Days after the receipt of the initial request to file a Shelf Registration Statement pursuant to this Section 4.02(a) , each Stockholder shall notify the Company in writing of the number of its Registrable Securities (if any) that such Stockholder is requesting to be registered on such Shelf Registration Statement.  At any time prior to or after the filing of a Shelf Registration Statement, any of the Stockholders may request that the number of its Registrable Securities (if any) previously requested to be registered on such Shelf Registration Statement be increased to a larger number of its Registrable Securities and the Company shall thereafter use its reasonable best efforts to effect such increase for such Shelf Registration Statement as promptly as practicable thereafter.  The aggregate number of Registrable Securities that the Stockholders request to be so registered on such Shelf Registration Statement (as increased from time to time at the election of either of the Stockholders pursuant to the immediately foregoing sentence) shall be referred to in this Section 4.02 as the “ Stockholder Shelf Registration Amount ;” provided , that , the Company shall not be obligated to effect any registration pursuant to this Section 4.02(a), unless the Stockholder Shelf Registration Amount to be registered is reasonably expected to result in aggregate gross proceeds (prior to deducting underwriting discounts and commissions and offering expenses) of at least the Minimum Amount.

 

(b)           Continued Effectiveness .  The Company shall use its reasonable best efforts to keep such Shelf Registration Statement continuously effective under the Securities Act in order to permit the Prospectus forming a part thereof to be usable by Stockholders until the earlier of (i) the date as of which all Registrable Securities have been sold pursuant to the Shelf Registration Statement or another Registration Statement filed under the Securities Act (but in no event prior to the applicable period referred to in Section 4(3) of the Securities Act and Rule 174 thereunder) and (ii) the date as of which each of the Stockholders with Registrable Securities registered under such Shelf Registration is permitted to sell its Registrable Securities without Registration pursuant to Rule 144 under the Securities Act without volume limitation or other restrictions on transfer thereunder (such period of effectiveness, the “ Shelf Period ”).  Subject to Section 4.02(d) , the Company shall not be deemed to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the Shelf Period if the Company voluntarily takes any action or omits to take any action that would result in Stockholders of Registrable Securities covered thereby not being able to offer and sell any Registrable Securities pursuant to such Shelf Registration Statement during the Shelf Period, unless such action or omission is required by applicable law.

 

(c)           Shelf Notice .  Promptly upon receipt of any request by a Stockholder to file a Shelf Registration Statement or any request by a Stockholder to increase the number of its Registrable Securities registered on such Shelf Registration Statement pursuant to Section 4.02(a)  (but in no event more than five (5) Business Days thereafter), the Company shall deliver a written notice (a “ Shelf Notice ”) of any such request to all other Stockholders specifying the Stockholder Shelf Registration Amount.  Each Stockholder shall have the right to include in such registration its Registrable Securities by delivering an irrevocable written notice to the Company

 

16



 

specifying the number of Registrable Securities such Stockholder desires to so include no later than ten (10) Business Days of the delivery of the Shelf Notice, and the Company shall include in such registration the number of Registrable Securities for which the Company receives written notice in accordance with this provision.

 

(d)           Suspension of Registration .  If the continued use of such Shelf Registration Statement at any time would require the Company to make an Adverse Disclosure, the Company may, upon giving prompt written notice of such action to the Stockholders, suspend use of the Shelf Registration Statement (a “ Shelf Suspension ”) for up to sixty (60) days for each suspension, with not more than two (2) suspensions in any one hundred and eighty (180) day period.  In the case of a Shelf Suspension, the Stockholders agree to suspend use of the applicable Prospectus in connection with any sale or purchase of, or offer to sell or purchase, Registrable Securities, upon receipt of the notice referred to above.  The Company shall immediately notify the Stockholders upon the termination of any Shelf Suspension and amend or supplement the Prospectus, if necessary, so it does not contain any untrue statement or omission and furnish to the Stockholders such numbers of copies of the Prospectus as so amended or supplemented as the Stockholders may reasonably request.  The Company agrees, if necessary, to supplement or make amendments to the Shelf Registration Statement, if required by the registration form used by the Company for the Shelf Registration or by the instructions applicable to such registration form or by the Securities Act or the rules or regulations promulgated thereunder or as may reasonably be requested by the Sponsors.

 

(e)           Underwritten Offering .  If a Demanding Party elects that an offering of Registrable Securities pursuant to the Shelf Registration Statement shall be in the form of an Underwritten Offering, the Company shall amend or supplement the Shelf Registration Statement for such purpose.  There shall be two (2) managing underwriters, and the Demanding Party shall have the right to select one of the managing underwriters to administer such offering, with the Company selecting the other managing underwriter.  Any additional non-managing underwriters shall be agreed upon by the Demanding Party and the Company after consultation with the managing underwriters.  Each Stockholder shall have the right to include in such offering its Registrable Securities in the manner described in Section 4.02(c) .  The provisions of Section 4.01(h)  shall apply to any Underwritten Offering pursuant to this Section 4.02(e) .

 

Section 4.03          Piggyback Registration .

 

(a)           Participation .  If, at any time following the Initial Public Offering, the Company proposes to file a Registration Statement under the Securities Act with respect to any offering of its equity securities for its own account or for the account of any other Persons (other than (i) a registration incidental to an issuance of debt securities under Rule 144A, (ii) a Registration on Form S-4 or S-8 or any successor form to such Forms, or (iii) a Registration of securities solely relating to an offering and sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit plan arrangement or a dividend reinvestment plan), then, as soon as reasonably practicable (but in no event less than thirty (30) days prior to the proposed date of filing of such Registration Statement), the Company shall give written notice of such proposed filing to the Stockholders, and such notice shall offer the Stockholders the opportunity to Register under such Registration Statement such number of Registrable Securities as each such Stockholder may request in writing (a “ Piggyback Registration ”).

 

17



 

Subject to Section 4.03(b) , the Company shall include in such Registration Statement all such Registrable Securities that are requested to be included therein within fifteen (15) days after the receipt by such Stockholders of any such notice (or ten (10) Business Days in the case of a Shelf Notice); provided that if at any time after giving written notice of its intention to Register any securities and prior to the effective date of the Registration Statement filed in connection with such Registration, the Company shall, in its reasonable judgment, determine for any reason not to Register or to delay Registration of such securities, the Company shall give written notice of such determination to each Stockholder and, thereupon, (i) in the case of a determination not to Register, shall be relieved of its obligation to Register any Registrable Securities in connection with such Registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of the Sponsors to request that such Registration be effected as a Demand Registration under Section 4.01 , and (ii) in the case of a determination to delay Registering, in the absence of a request for a Demand Registration, shall be permitted to delay Registering any Registrable Securities for the same period as the delay in Registering such other securities.  Subject to Section 4.03(b) , if the offering pursuant to such Registration Statement is to be underwritten, then each Stockholder making a request for a Piggyback Registration pursuant to this Section 4.03(a)  must, and the Company shall make such arrangements with the managing underwriter or underwriters so that each such Stockholder may, participate in such Underwritten Offering.  If the offering pursuant to such Registration Statement is to be on any other basis, then each Stockholder making a request for a Piggyback Registration pursuant to this Section 4.03(a)  must, and the Company shall make such arrangements so that each such Stockholder may, participate in such offering on such basis.  Each Stockholder shall be permitted to withdraw all or part of its Registrable Securities from a Piggyback Registration at any time prior to the effectiveness of such Registration Statement by providing a written notice prior to the filing of a preliminary Prospectus that will be used to begin any “road show” to market the Registrable Securities.

 

(b)           Priority of Piggyback Registration .  If the managing underwriters of any proposed Underwritten Offering of Registrable Securities included in a Piggyback Registration informs the Company and the Stockholders of Registrable Securities in writing that, in its or their opinion, the number of securities which such Stockholders and any other Persons intend to include in such Piggyback Registration exceeds the number which can be sold in such offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, then the securities to be included in such Piggyback Registration shall be (i) first, 100% of the securities proposed to be sold by the Company, and (ii) second, and only if all the securities referred to in clause (i)  have been included, the number of Registrable Securities that, in the opinion of such managing underwriter or underwriters, can be sold without having such adverse effect, with such number to be allocated pro rata among the Stockholders that have requested to participate in such Registration based on the relative number of Registrable Securities then held by each such Stockholder ( provided that any securities thereby allocated to a Stockholder that exceed such Stockholder’s request shall be reallocated among the remaining requesting Stockholders in like manner) and (iii) third, and only if all of the Registrable Securities referred to in clauses (i)  and (ii)  have been included in such Registration, any other number of Registrable Securities that any other Person exercising a contractual right to demand Registration proposes to sell, that, in the opinion of such managing underwriter(s), can be sold.

 

18



 

(c)           No Effect on Demand Registrations .  No Registration of Registrable Securities effected pursuant to a request under this Section 4.03 shall be deemed to have been effected pursuant to Section 4.01 and Section 4.02 or shall relieve the Company of its obligations under Section 4.01 or Section 4.02 .

 

Section 4.04          Black-out Period .

 

(a)           Black-out Periods for Stockholders .  In the event of a Registration of Registrable Securities by the Company after the Initial Public Offering in an Underwritten Offering, the Stockholders agree, if requested by the managing underwriter or underwriters in such Underwritten Offering and agreed to by both Sponsors, not to effect any public sale or distribution of any securities (except, in each case, as part of the applicable Registration, if permitted) that are the same as or similar to those being Registered, or any securities convertible into or exchangeable or exercisable for such securities, during the period beginning seven (7) days before and ending ninety (90) days (or such lesser period as may be permitted by the Company or such managing underwriter or underwriters) after the effective date of the Registration Statement filed in connection with such Registration, to the extent timely notified in writing by the Company or the managing underwriter or underwriters, subject to any exceptions agreed to by such managing underwriter or underwriters.

 

(b)           Black-out Periods for the Company and Others .  In the case of a Registration of Registrable Securities pursuant to Section 4.01 or Section 4.02 for an Underwritten Offering, the Company agrees, if requested by the participating Sponsors or the managing underwriter or underwriters with respect to such Registration, not to effect any public sale or distribution of any securities that are the same as or similar to those being Registered, or any securities convertible into or exchangeable or exercisable for such securities, during the period beginning seven (7) days before, and ending ninety (90) days (or such lesser period as may be permitted by the participating Sponsors or such managing underwriter or underwriters) after, the effective date of the Registration Statement filed in connection with such Registration (or, in the case of an offering under a Shelf Registration Statement, the date of the underwriting agreement in connection therewith), to the extent timely notified in writing by the Sponsors or the managing underwriter or underwriters, subject to any exceptions agreed to by such managing underwriter or underwriters.  The Company agrees to use its reasonable best efforts to obtain from each Stockholder of restricted securities of the Company which securities are the same as or similar to the Registrable Securities being Registered, or any restricted securities convertible into or exchangeable or exercisable for any of such securities, an agreement not to effect any public sale or distribution of such securities during any such period referred to in this paragraph, except as part of any such Registration, if permitted.  Without limiting the foregoing (but subject to Section 4.07 ), if after the date hereof the Company grants any Person (other than a Stockholder) any rights to demand or participate in a Registration, the Company agrees that the agreement with respect thereto shall include such Person’s agreement to comply with any black-out period required by this Section 4.04 as if it were a Stockholder hereunder.

 

Section 4.05          Registration Procedures .

 

(a)           In connection with the Company’s Registration obligations under Section 4.01 , Section 4.02 and Section 4.03 , the Company shall use its reasonable best efforts to effect such

 

19



 

Registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of distribution thereof as expeditiously as reasonably practicable, and in connection therewith the Company shall:

 

(i)            prepare the required Registration Statement including all exhibits and financial statements required under the Securities Act to be filed therewith, and before filing a Registration Statement or Prospectus, or any amendments or supplements thereto, (x) furnish to the underwriters, if any, and to Participating Stockholders, copies of all documents prepared to be filed, which documents shall be subject to the review of such underwriters and such Stockholders and their respective counsel and (y) except in the case of a Registration under Section 4.03 , not file any Registration Statement or Prospectus or amendments or supplements thereto to which the Sponsors or the underwriters, if any, shall reasonably object;

 

(ii)           subject to the provisions of Section 4.01(e) , as soon as reasonably practicable (in the case of a Demand Registration or Shelf Registration, no later than thirty (30) days after a request for a Demand Registration or Shelf Registration on Form S-3 or ninety (90) days after a request for a Demand Registration or Shelf Registration on Form S-1) file with the SEC a Registration Statement relating to the Registrable Securities including all exhibits and financial statements required by the SEC to be filed therewith, and use its reasonable best efforts to cause such Registration Statement to become effective under the Securities Act as soon as practicable;

 

(iii)          prepare and file with the SEC such pre- and post-effective amendments to such Registration Statement and supplements to the Prospectus as may be (x) reasonably requested by a Sponsor, (y) reasonably requested by any other Participating Stockholder (to the extent such request relates to information relating to such Stockholder), or (z) necessary to keep such Registration effective for the period of time required by this Agreement, and comply with provisions of the applicable securities laws with respect to the sale or other disposition of all securities covered by such Registration Statement during such period in accordance with the intended method or methods of disposition by the sellers thereof set forth in such Registration Statement;

 

(iv)          notify the Participating Stockholders and the managing underwriter or underwriters, if any, and (if requested) confirm such advice in writing and provide copies of the relevant documents, as soon as reasonably practicable after notice thereof is received by the Company (a) when the applicable Registration Statement or any amendment thereto has been submitted confidentially, filed publicly or becomes effective, and when the applicable Prospectus or any amendment or supplement to such Prospectus has been filed, (b) of any written comments by the SEC or any request by the SEC or any other federal or state governmental authority for amendments or supplements to such Registration Statement or such Prospectus or for additional information, (c) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or any order by the SEC or any other regulatory authority preventing or suspending the use of any preliminary or final Prospectus or the initiation or threatening, of any proceedings for such purposes, (d) if, at any time, the representations and warranties of the Company in any applicable underwriting agreement cease to be true and

 

20



 

correct in all material respects, and (e) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;

 

(v)           promptly notify the Participating Stockholders and the managing underwriter or underwriters, if any, when the Company becomes aware of the happening of any event as a result of which the applicable Registration Statement contains any misstatement or omission of a material fact required to be stated therein or the Prospectus included in such Registration Statement (as then in effect) contains any misstatement or omission of a material fact necessary to make the statements therein (in the case of such Prospectus and any preliminary Prospectus) in light of the circumstances under which they were made, not misleading or, if for any other reason it shall be necessary during, such time period to amend or supplement such Registration Statement or Prospectus in order to comply with the Securities Act and, in either case as promptly as reasonably practicable thereafter, prepare and file with the SEC, and furnish without charge to the Participating Stockholder, and the managing underwriter or underwriters, if any, an amendment or supplement to such Registration Statement or Prospectus which shall correct such misstatement or omission or effect such compliance;

 

(vi)          use its reasonable best efforts to prevent, or obtain the withdrawal of, any stop order or other order suspending the use of any preliminary or final Prospectus;

 

(vii)         promptly incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters and the Sponsors agree should be included therein relating to the plan of distribution with respect to such Registrable Securities, and make all required filings of such Prospectus supplement or post-effective amendment as soon as reasonably practicable after being notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment;

 

(viii)        furnish to each Participating Stockholder and each underwriter, if any, without charge, as many conformed copies as such Stockholder or underwriter may reasonably request of the applicable Registration Statement and any amendment or post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference);

 

(ix)          deliver to each Participating Stockholder and each underwriter, if any, without charge, as many copies of the applicable Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Stockholder or underwriter may reasonably request (it being understood that the Company consents to the use of such Prospectus or any amendment or supplement thereto by such Stockholder and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto) and such other documents as such Stockholder or underwriter may reasonably request in

 

21



 

order to facilitate the disposition of the Registrable Securities by such Stockholder or underwriter;

 

(x)           on or prior to the date on which the applicable Registration Statement is declared effective, use its reasonable best efforts to register or qualify, and cooperate with the Participating Stockholders, the managing underwriter or underwriters, if any, and their respective counsel, in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or “Blue Sky” laws of each state and other jurisdiction of the United States as any Participating Stockholder or managing underwriter or underwriters, if any, or their respective counsel reasonably request in writing and do any and all other acts or things reasonably necessary or advisable to keep such registration or qualification in effect for such period as required by Section 4.01(d)  or Section 4.02(b) , whichever is applicable;

 

(xi)          cooperate with the Participating Stockholders and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of Registrable Securities to be sold and, if represented by certificates, the certificate representing such Registrable Securities not bearing any restrictive legends, and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two (2) Business Days prior to any sale of Registrable Securities to the underwriters;

 

(xii)         use its reasonable best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Securities;

 

(xiii)        not later than the effective date of the applicable Registration Statement, provide a CUSIP number for all Registrable Securities and provide the applicable transfer agent with printed certificates for the Registrable Securities which are in a form eligible for deposit with The Depository Trust Company;

 

(xiv)        make such reasonable representations and warranties to the Participating Stockholders and the underwriters or agents, if any, in form, substance and scope as are customarily made by issuers in secondary underwritten public offerings;

 

(xv)         enter into such reasonable customary agreements (including underwriting and indemnification agreements in customary form) and take all such other reasonable actions as the Sponsors or the managing underwriter or underwriters, if any, reasonably request in order to expedite or facilitate the registration and disposition of such Registrable Securities;

 

(xvi)        obtain for delivery to the Participating Stockholders and to the underwriter or underwriters, if any, an opinion or opinions from counsel for the Company dated the effective date of the Registration Statement or, in the event of an Underwritten Offering, the date of the closing under the underwriting agreement and the date of the closing of

 

22


 

any over-allotment or similar underwriter option exercise, in customary form, scope and substance, which opinions shall be reasonably satisfactory to such Stockholders or underwriters, as the case may be,  and their respective counsel;

 

(xvii)                     in the case of an Underwritten Offering, obtain for delivery to the Company and the managing underwriter or underwriters, with copies to the Participating Stockholders, a cold comfort letter from the Company’s independent certified public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters as the managing underwriter or underwriters reasonably request, dated the date of execution of the underwriting agreement and bring-down cold comfort letters dated the closing under the underwriting agreement and the date of the closing of any over-allotment or similar underwriter option exercise;

 

(xviii)                  cooperate with each Participating Stockholder and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA;

 

(xix)                        use its reasonable best efforts to comply with all applicable securities laws and make available to its Stockholders, as soon as reasonably practicable, an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and the rules and regulations promulgated thereunder;

 

(xx)                           provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by the applicable Registration Statement from and after a date not later than the effective date of such Registration Statement;

 

(xxi)                        use its best efforts to cause all Registrable Securities covered by the applicable Registration Statement to be listed on the NYSE or each other securities exchange on which any of the Company’s securities are then listed or quoted and on each inter-dealer quotation system on which any of the Company’s securities are then quoted;

 

(xxii)                     subject to appropriate confidentiality arrangements, make available upon reasonable notice at reasonable times and for reasonable periods for inspection by the Sponsors, by any underwriter participating in any disposition to be effected pursuant to such Registration Statement and by any attorney, accountant or other agent retained by the Sponsors or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company’s officers, directors and employees and the independent public accountants who have certified its financial statements to make themselves available to discuss the business of the Company and to supply all information reasonably requested by any such Person in connection with such Registration Statement as shall be necessary to enable them to exercise their due diligence responsibility; and

 

(xxiii)                  in the case of an Underwritten Offering, cause the senior executive officers of the Company to participate in the customary “road show” presentations that may be reasonably requested by the managing underwriter or underwriters in any such

 

23



 

Underwritten Offering and otherwise to facilitate, cooperate with, and participate in each proposed offering contemplated herein and customary selling efforts related thereto.

 

(b)                                  The Company may require each Participating Stockholder to furnish to the Company such information regarding the distribution of such securities and such other information relating to such Stockholder and its ownership of Registrable Securities as the Company may from time to time reasonably request in writing.  Each Participating Stockholder agrees to furnish such information to the Company and to cooperate with the Company as reasonably necessary to enable the Company to comply with the provisions of this Agreement.

 

(c)                                   Each Participating Stockholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4.05(a)(v) , such Stockholder will forthwith discontinue disposition of Registrable Securities pursuant to such Registration Statement until such Stockholder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4.05(a)(v) , or until such Stockholder is advised in writing by the Company that the use of the Prospectus may be resumed, and if so directed by the Company, such Stockholder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Stockholder’s possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice.  In the event the Company shall give any such notice, the period during which the applicable Registration Statement is required to be maintained effective shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement either receives the copies of the supplemented or amended Prospectus contemplated by Section 4.05(a)(v)  or is advised in writing by the Company that the use of the Prospectus may be resumed.

 

Section 4.06                              Underwritten Offerings .

 

(a)                                  Demand and Shelf Registrations .  If requested by the underwriters for any Underwritten Offering requested by the Stockholders or the Sponsors, as applicable, pursuant to a Registration under Section 4.01 or Section 4.02 , the Company shall enter into an underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Company, the Sponsors and the underwriters, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of that type.  The Participating Stockholders shall cooperate with the Company in the negotiation of such underwriting agreement and shall give consideration to the reasonable suggestions of the Company regarding the form thereof.  Such Stockholders shall be parties to such underwriting agreement, which underwriting agreement shall (i) contain such representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such Stockholders as are customarily made by issuers to selling holders in secondary underwritten public offerings and (ii) provide that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also shall be conditions precedent to the obligations of such Stockholders.  Such Stockholders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Stockholders, such Stockholder’s title to the Registrable Securities, such Stockholder’s intended method of distribution and any other representations required to be made by such Stockholder (provided

 

24



 

that any such representation shall be made on a several basis) under applicable law, and the aggregate amount of the liability of such Stockholder shall not exceed such Stockholder’s net proceeds from such Underwritten Offering.

 

(b)                                  Piggyback Registrations .  If the Company proposes to register any of its securities under the Securities Act as contemplated by Section 4.03 and such securities are to be distributed in an Underwritten Offering through one or more underwriters, the Company shall, if requested by any Stockholder pursuant to Section 4.03 and subject to the provisions of Section 4.03(b) , use its reasonable best efforts to arrange for such underwriters to include on the same terms and conditions that apply to the other sellers in such Registration all the Registrable Securities to be offered and sold by such Stockholder among the securities of the Company to be distributed by such underwriters in such Registration.  The Participating Stockholders shall be parties to the underwriting agreement between the Company and such underwriters, which underwriting agreement shall (i) contain such representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such Stockholders as are customarily made by issuers to selling holders in secondary underwritten public offerings and (ii) provide that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also shall be conditions precedent to the obligations of such Stockholders.  Any such Stockholder shall not be required to make any representations or warranties to, or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Stockholder, such Stockholder’s title to the Registrable Securities and such Stockholder’s intended method of distribution or any other representations required to be made by such Stockholder under applicable law, and the aggregate amount of the liability of such Stockholder shall not exceed such Stockholder’s net proceeds from such Underwritten Offering.

 

(c)                                   Participation in Underwritten Registrations .  Subject to provisions of Section 4.06(a)  and (b)  above, no Person may participate in any Underwritten Offering hereunder unless such Person (i) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Persons entitled to approve such arrangement and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

 

(d)                                  Price and Underwriting Discounts .  In the case of an Underwritten Offering under Section 4.01 or Section 4.02 , subject to the provisions of Section 4.03 , the price, underwriting discount and other financial terms for the Registrable Securities shall be determined by the holders of a majority of the Registrable Securities participating in such Registration or Shelf Registration, as the case may be, with the approval of the Board, which approval may not be unreasonably withheld.  In addition, subject to the provisions of Section 4.01(c) , in the case of any Underwritten Offering, each of the Stockholders that have not delivered a Demand Registration Notice may withdraw their request to participate in the registration pursuant to Section 4.01 , Section 4.02 or Section 4.03 after being advised of such price, discount and other terms and shall not be required to enter into any agreements, or documentation that would require otherwise.

 

Section 4.07                              No Inconsistent Agreements; Additional Rights .  The Company shall not hereafter enter into, and is not currently a party to, any agreement with respect to its securities that is inconsistent with the rights granted to the Stockholders by this Agreement.

 

25



 

Without the consent of the Sponsors (such consent not to be unreasonably withheld, conditioned or delayed), the Company shall not enter into any agreement granting registration or similar rights to any Person.

 

Section 4.08                              Registration Expenses .

 

(a)                                  All expenses incident to the Company’s performance of or compliance with this Agreement shall be paid by the Company, including (i) all registration and filing fees, and any other fees and expenses associated with filings required to be made with the SEC or FINRA, (ii) all fees and expenses in connection with compliance with any securities or “Blue Sky” laws, (iii) all printing, duplicating, word processing, messenger, telephone, facsimile and delivery expenses (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing prospectuses), (iv) all fees and disbursements of counsel for the Company and of all independent certified public accountants of the Company (including the expenses of any special audit and cold comfort letters required by or incident to such performance), (v) Securities Act liability insurance or similar insurance if the Company so desires or the underwriters so require in accordance with then-customary underwriting practice, (vi) all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange or quotation of the Registrable Securities on any inter-dealer quotation system, (vii) all applicable rating agency fees with respect to the Registrable Securities, (viii) all reasonable fees and disbursements of one (1) legal counsel chosen by the holders of a majority of the Registrable Securities participating in such Registration or Shelf Registration, as the case may be, (ix) all reasonable fees and disbursements of such local legal counsel as may reasonably be required by any selling stockholder participating in such Registration, (x) any reasonable fees and disbursements of underwriters (excluding discounts and commissions which shall be paid pro rata by holders of Registrable Securities) customarily paid by issuers or sellers of securities, (xi) all fees and expenses of any special experts or other Persons retained by the Company in connection with any Registration, (xii) all of the Company’s internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties) and (xiii) all expenses related to the “road-show” for any Underwritten Offering, including all travel, meals and lodging.  All such expenses are referred to herein as “ Registration Expenses .”

 

(b)                                  To the extent Registration Expenses are not required to be paid by the Company under Section 4.08(a) , each holder of Registrable Securities included in any Registration hereunder shall pay those Registration Expenses allocable to the Registration of such holder’s Registrable Securities so included, and any Registration Expenses not so allocable shall be borne by sellers of Registrable Securities included in such Registration in proportion to the aggregate selling price of the Registrable Securities to be so Registered.

 

Section 4.09                              Indemnification .

 

(a)                                  Indemnification by the Company .  The Company agrees to indemnify and hold harmless, to the full extent permitted by law, each Stockholder, each member, limited partner or general partner thereof, each member, limited partner or general partner of each such member, limited or general partner, each of their respective Affiliates, officers, directors, stockholders, employees, advisors, and agents and each Person who controls (within the meaning of the

 

26



 

Securities Act or the Exchange Act) such Persons and each of their respective Representatives from and against any and all losses, penalties, judgments, suits, costs, claims, damages, liabilities and expenses, joint or several (including reasonable costs of investigation and legal expenses) (each, a “ Loss ”, and collectively, “ Losses ”) arising out of or based upon (i) any misstatement or omission or alleged misstatement or omission of a material fact required to be included in any Registration Statement under which such Registrable Securities were Registered under the Securities Act (including any final, preliminary or summary Prospectus contained therein or any amendment thereof, supplement thereto or any documents incorporated by reference therein) or any other disclosure document produced by or on behalf of the Company or any of its subsidiaries including reports and other documents filed under the Exchange Act, (ii) any misstatement or omission or alleged misstatement or omission of a material fact stated in the Prospectus or preliminary prospectus or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (iii) any actions or inactions or proceedings in respect of the foregoing whether or not such indemnified party is a party thereto; provided that the Company shall not be liable to any particular indemnified party to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such Registration Statement or other document in reliance upon and in conformity with written information furnished to the Company by such indemnified party expressly for use in the preparation thereof.  This indemnity shall be in addition to any liability the Company may otherwise have.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Stockholder or any indemnified party and shall survive the transfer of such securities by such Stockholder.  The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the indemnified parties.

 

(b)                                  Indemnification by the Participating Stockholders .  Each Participating Stockholder agrees (severally and not jointly) to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act or the Exchange Act) from and against any Losses resulting from (i) any misstatement or omission or alleged misstatement or omission  of a material fact required to be included in any Registration Statement under which such Registrable Securities were Registered under the Securities Act (including any final, preliminary or summary Prospectus contained therein or any amendment thereof, supplement thereto or any documents incorporated by reference therein) or any other disclosure document produced by or on behalf of the Company or any of its subsidiaries including reports and other documents filed under the Exchange Act, (ii) any misstatement or omission or alleged misstatement or omission of a material fact stated in the Prospectus or preliminary prospectus or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case, to the extent, but only to the extent, that such misstatement or omission is contained in any information furnished in writing by such Stockholder to the Company specifically for inclusion in such Registration Statement and has not been corrected in a subsequent writing prior to or concurrently with the sale of the Registrable Securities to the Person asserting the claim.  In no event shall the liability of such Stockholder hereunder be greater in amount than the dollar amount of the net proceeds received by such Stockholder under the sale of Registrable Securities

 

27



 

giving rise to such indemnification obligation.  The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above (with appropriate modification) with respect to information furnished in writing by such Persons specifically for inclusion in any Prospectus or Registration Statement.

 

(c)                                   Conduct of Indemnification Proceedings .  Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification ( provided that any delay or failure to so notify the indemnifying party shall relieve the indemnifying party of its obligations hereunder only to the extent, if at all, that it is actually prejudiced by reason of such delay or failure) and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any Person entitled to indemnification hereunder shall have the right to select and employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (A) the indemnifying party has agreed in writing to pay such fees or expenses, (B) the indemnifying party shall have failed to assume the defense of such claim within a reasonable time after receipt of notice of such claim from the Person entitled to indemnification hereunder and employ counsel reasonably satisfactory to such Person, (C) the indemnified party has reasonably concluded (based upon advice of its counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, or (D) in the reasonable judgment of any such Person (based upon advice of its counsel), a conflict of interest may exist between such Person and the indemnifying party with respect to such claims (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such Person) in which case of such clauses (A)  through (D) , the indemnifying party will pay the reasonable fees, disbursements or other charges of such additional counsel or counsels.  If the indemnifying party assumes the defense, the indemnifying party shall not have the right to settle such action without the consent of the indemnified party.  No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of an unconditional release from all liability in respect to such claim or litigation without the prior written consent of such indemnified party.  If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its prior written consent, but such consent may not be unreasonably withheld.

 

(d)                                  Contribution .  If for any reason the indemnification provided for in paragraphs (a) and (b) of this Section 4.09 is unavailable to an indemnified party or insufficient in respect of any Losses referred to therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such Loss (i) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party or parties on the other hand in connection with the acts, statements or omissions that resulted in such Losses or (ii) if the allocation provided by clause (i)  above is not permitted by applicable law, then such proportion as is appropriate to reflect not only the relevant fault referred to in clause (i)  above but also the relative benefit of the indemnifying party on the one hand and of the indemnified party or parties on the other in connection with the statement or omissions which

 

28



 

resulted in such Losses, as well as any other relevant equitable considerations.  The relative benefits of such parties shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses).  The relative fault of the indemnifying party on the one hand and the indemnified party on the other hand shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 4.09(d)  were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 4.09(d) .  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  The amount paid or payable by an indemnified party as a result of the Losses referred to in Section 4.09(a)  and Section 4.09(b)  shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 4.09(d) , in connection with any Registration Statement filed by the Company, a Participating Stockholder shall not be required to contribute any amount in excess of the dollar amount of the net proceeds received by such Stockholder under the sale of Registrable Securities giving rise to such contribution obligation less any amounts paid by such Stockholder pursuant to Section 4.09(b) .  If indemnification is available under this Section 4.09 , the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 4.09(a)  and (d)   hereof without regard to the provisions of this Section 4.09(d) .  The remedies provided for in this Section 4.09 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.

 

Section 4.10                              Rules 144 and 144A and Regulation S .  The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the reasonable request of the Sponsors, make publicly available such necessary information for so long as necessary to permit sales pursuant to Rules 144, 144A or Regulation S under the Securities Act), and it will take such further action as the Sponsors may reasonably request, all to the extent required from time to time to enable the Sponsors to sell Registrable Securities without Registration in accordance with the provisions of this Agreement, under the Securities Act within the limitation of the exemptions provided by (i) Rules 144, 144A or Regulation S under the Securities Act, or (ii) any similar rule or regulation hereafter adopted by the SEC.  Upon the reasonable request of a Stockholder, the Company will deliver to such Stockholder a written statement as to whether it has complied with such requirements and, if not, the specifics thereof.

 

Section 4.11                              Company Cooperation .  The Company agrees to cooperate with any of the CPPIB Entities and use reasonable efforts to provide such information or certifications as may reasonably be required by any of the CPPIB Entities in the event a CPPIB Entity makes an application to the Ontario Securities Commission for a discretionary order providing a prospectus exemption from applicable Canadian securities laws to facilitate the resale of the Shares; provided , however , the Company shall only be required to comply with the foregoing if

 

29



 

(a) such application to the Ontario Securities Commission would not give rise to the Company having any listing obligations or ongoing reporting obligations in Canada and (b) the application to the Ontario Securities Commission arises in connection with a CPPIB Entity’s proposed resale of Shares on the NYSE or such other exchange on which the Shares are then traded.

 

ARTICLE V.

 

GENERAL PROVISIONS

 

Section 5.01                              Termination .  Except for the provisions of this Article V , this Agreement shall terminate automatically (without any action by any party hereto) as to each Stockholder when such Stockholder ceases to hold any Shares.

 

Section 5.02                              Entire Agreement; Amendment .  This Agreement sets forth the entire understanding and agreement between the parties hereto with respect to the transactions contemplated herein and supersedes and replaces any prior or contemporaneous understanding, agreement or statement of intent, in each case written or oral, of any kind and every nature with respect hereto.  No provision of this Agreement may be amended, modified or waived in whole or in part at any time without an agreement in writing executed by the Altice Entities, the Next Alt Entities, the BCP Entities and the CPPIB Entities.  There are no other agreements with respect to the transactions contemplated herein between any Stockholders or any of their Affiliates relating to the Company.  Each party hereto to this Agreement shall receive notice of any amendments and copies of any material amendment to this Agreement.

 

Section 5.03                              Waivers .  No waiver of any breach of any of the terms of this Agreement shall be effective unless such waiver is made expressly in writing and executed and delivered by the party against whom such waiver is claimed.  No waiver of any breach shall be deemed to be a further or continuing waiver of such breach or a waiver of any other or subsequent breach.  Except as otherwise expressly provided herein, no failure on the part of any party to exercise, and no delay in exercising, any right, power, or remedy hereunder, or otherwise available in respect hereof at law or in equity, shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof, or the exercise of any other right, power or remedy.

 

Section 5.04                              Information Rights .  (a) Subject to the terms of Section 5.12 , each of the Company and the Stockholders agrees and acknowledges that each Observer may share confidential, non-public information about the Company and its subsidiaries with the Stockholder who designated such Observer and its Affiliates on a confidential basis and solely for the purposes of evaluating such Stockholder’s investment in the Company.

 

(b)                                  For as long as each of the Sponsor Entities individually own one percent (1%) or more of the issued and outstanding Class A Shares and Class B Shares (without regard to the voting power of such Class B Shares), each of those Stockholders shall be entitled to receive as soon as available and, in any event, no later than thirty (30) days after the end of each calendar month, the un-audited monthly management accounts of the Company and its subsidiaries on a consolidated basis; provided , however , that at any time and from time to time (upon written

 

30



 

notice to the Company), each Sponsor Entity may elect to suspend the receipt of the information provided by the Company under this Section 5.04(b) .

 

Section 5.05                              Tax Matters .  Each of Next Alt, the Company and its subsidiaries shall cooperate with the Stockholders in, and use their reasonable best efforts to provide the Stockholders all requested information, records, and documents related to the Company and its subsidiaries or any Pre-IPO Entity that are reasonably necessary for (i) the completion of tax and information returns of the Stockholders or the Stockholders’ compliance with any applicable tax laws, including with respect to withholding tax obligations, (ii) the preparation for and defense of any audits or other disputes with any Governmental Entity regarding any taxes or tax returns to the extent related to the Stockholders’ direct or indirect investment in the Company and its subsidiaries or any Pre-IPO Entity, (iii) obtaining any rulings or similar determinations regarding taxes from any Governmental Entity to the extent related to the Stockholders’ direct or indirect investment in the Company and its subsidiaries or any Pre-IPO Entity and, in so far as Next Alt and its group companies will not be materially prejudiced by such cooperation, maintaining the validity of such ruling or determination, (iv) providing such additional information or other documentation as any Stockholder may reasonably request in order to provide information to any of its direct or indirect owners regarding taxes to the extent related to the Stockholders’ direct or indirect investment in the Company and its subsidiaries or any Pre-IPO Entity and (v) responding to any inquiry from any Governmental Entity regarding taxes, or obtaining refunds of, or exemptions from any, withholding taxes imposed on any Stockholder or any of its direct or indirect owners as a result of its direct or indirect investment in the Company and its subsidiaries or any Pre-IPO Entity. Without limiting the generality of the foregoing, (x) in the event that the Company makes or has made any actual or deemed distribution to its shareholders, the Company shall make commercially reasonable efforts to provide to the Stockholders such information regarding the current and accumulated  “earnings and profits” of the Company (including any projections with respect to current earnings and profits) as any Stockholder may reasonably request or order to determine what portion (if any) of any such distribution is a dividend for U.S. federal income tax purposes and (y) the Company shall, and Next Alt shall cause the Company to, (1) provide to any Stockholder, upon such Stockholder’s request and within thirty (30) days following such request, a certification as to the Company’s status as a United States real property holding company, in accordance with Treasury Regulations Sections 1.897-2(g)(1)(ii) and 1.897-2(h)(1), and (2) in connection with the provision of any certification pursuant to the preceding clause (1), comply with the notice provisions set forth in Treasury Regulations Section 1.897-2(h)(2).

 

Section 5.06                              Assignment; Benefit; Additional Parties .

 

(a)                                  Subject to Section 5.06(c) , the rights and obligations hereunder shall not be assignable without the prior written consent of the Company, Altice, the Altice Entities, Next Alt, the Next Alt Entities and the Sponsor Entities; provided , however , that an Altice Entity or a Next Alt Entity may assign its rights and obligations to (i) in the case of any Altice Entity, (A) any other Altice Entity or (B) any Affiliate of an Altice Entity, (ii) in the case of any Next Alt Entity, (A) any other Next Alt Entity or (B) any Affiliate of a Next Alt Entity, (iii) Patrick Drahi, his heirs or entities or trusts directly or indirectly under his or their control or formed for his or their benefit, and (iv) any Affiliate of Patrick Drahi, his heirs or entities or trusts directly or

 

31



 

indirectly under his or their control or formed for his or their benefit.  Any assignment of rights or obligations in violation of this Section 5.06 shall be null and void.

 

(b)                                  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, and their respective successors and permitted assigns, and there shall be no third-party beneficiaries to this Agreement except as set forth in Section 4.09 .

 

(c)                                   Upon the request of any Sponsor Entity, any Altice Entity or any Next Alt Entity, the Company shall make any Permitted Transferee of such Sponsor Entity, Altice Entity or Next Alt Entity who acquires Shares or rights to acquire Shares from the Company after the date hereof a party to this Agreement as a Stockholder and a Sponsor Entity, Altice Entity or Next Alt Entity, as the case may be, and to succeed to all of the rights and obligations of a Stockholder and a Sponsor Entity, Altice Entity or Next Alt Entity, as the case may be, under this Agreement by obtaining an executed Joinder Agreement.  Upon the execution and delivery of a Joinder Agreement by such Permitted Transferee, the Shares acquired by such Permitted Transferee shall be Registrable Securities to the extent provided herein, such Permitted Transferee shall be a Stockholder and a Sponsor Entity, an Altice Entity or a Next Alt Entity, as the case may be, under this Agreement with respect to the acquired Shares.

 

Section 5.07                              Severability .  If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining, provisions shall not in any way be affected or impaired thereby.

 

Section 5.08                              Counterparts .  This Agreement may be executed in any number of counterparts, any one of which need not contain the signatures of more than one party, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.  Any counterpart may be executed by electronic signature and such electronic signature shall be deemed an original.

 

Section 5.09                              Notices .  Unless otherwise specified herein, all notices, consents, approvals, reports, designations, requests, waivers, elections and other communications authorized or required to be given pursuant to this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by personal hand-delivery, by electronic mail, by mailing the same in a sealed envelope, registered first-class mail, postage prepaid, return receipt requested, or by air courier guaranteeing overnight delivery, sent to the Stockholders at the following addresses (or such other address as such Stockholders may specify by notice to the Company):

 

If to the Company:

 

Altice USA, Inc.

One Court Square West

Long Island City, NY 11101

USA

Attention:  David Connolly
Email:  David.Connolly@Alticeusa.com

 

32


 

with a copy to (which shall not constitute notice):

 

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022-6069

USA

Attention:  Richard Alsop

Email:  Richard.Alsop@shearman.com

 

If to Altice:

 

c/o Altice N.V.
Prins Bernhardplein 200

1097 JB Amsterdam

The Netherlands
Attention:  Jérémie Bonnin and Natacha Marty
Email:  jeremie.bonnin@altice.net; natacha.marty@altice.net

 

with a copy to (which shall not constitute notice):

 

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022-6069

USA

Attention:  Richard Alsop

Email:  Richard.Alsop@shearman.com

 

If to Next Alt, to:

 

Next Alt S.à r.l.

5, rue Eugène Ruppert

L-2453 Luxembourg

Grand Duchy of Luxembourg

Attention: Jean-Luc Berrebi
Email:    jean-luc.berrebi@yafit.co

 

with a copy to (which shall not constitute notice):

 

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022-6069

USA

Attention:  Richard Alsop

Email:  Richard.Alsop@shearman.com

 

if to BCP, to:

 

33



 

BC Partners, Inc.
650 Madison Avenue
23
rd  Floor
New York, NY 10065
USA
Attention:  Raymond Svider
Email:  raymond.svider@bcpartners.com

 

with a copy (which shall not constitute notice) to:

 

Latham & Watkins LLP
885 Third Avenue
New York NY 10022-4834
USA
Attention:  Raymond Lin and John Giouroukakis
Email: raymond.lin@lw.com; john.giouroukakis@lw.com

 

If to CPPIB, to:

 

Canada Pension Plan Investment Board
One Queen Street East
Suite 2600, P.O. Box 101
Toronto, ON M5C 2W5
Canada
Attention:  Michael Zelenczuk
Email:  mzelenczuk@cppib.com

 

with a copy (which shall not constitute notice) to:

 

Latham & Watkins LLP
885 Third Avenue
New York NY 10022-4834
USA
Attention:  Raymond Lin and John Giouroukakis
Email: raymond.lin@lw.com; john.giouroukakis@lw.com

 

Section 5.10          Governing Law; Jurisdiction .  THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.  ANY ACTION OR PROCEEDING AGAINST THE PARTIES RELATING IN ANY WAY TO THIS AGREEMENT MAY BE BROUGHT AND ENFORCED EXCLUSIVELY IN THE COURTS OF THE STATE OF DELAWARE OR (TO THE EXTENT SUBJECT MATTER JURISDICTION EXISTS THEREFOR) THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE, AND THE PARTIES IRREVOCABLY SUBMIT TO THE JURISDICTION OF BOTH SUCH COURTS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING.  EACH PARTY HEREBY

 

34



 

IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING AGAINST THE PARTIES RELATING IN ANY WAY TO THIS AGREEMENT IN SUCH COURTS OR ANY OTHER COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

Section 5.11          Waiver of Jury Trial .  BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE, APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHT OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS ENTERED INTO IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN.  The Company or any Stockholder may file an original counterpart or a copy of this Section 5.11 with any court as written evidence of the consent of the Stockholders to the waiver of their rights to trial by jury.

 

Section 5.12          Confidentiality .

 

(a)           Without the prior written consent of the Board, except (i) to the extent required by law (including requirements of regulatory authorities), rule, regulation or court order, (ii) for disclosure made in accordance with Section 5.05(a) , and (iii) for disclosure to financing sources or Affiliates of a Stockholder that have agreed to treat such information in confidence on customary terms pursuant to a legally binding confidentiality obligation to such Stockholders, no Stockholder shall disclose any trade secrets, customer lists, drawings, designs, information regarding product development, marketing plans, sales plans, management organization information, operating policies or manuals, business plans, financial records or other financial, commercial, business or technical information relating to the Company or any of its subsidiaries or information designated as confidential or proprietary that the Company or any of its subsidiaries may receive belonging to suppliers, customers or others who do business with the Company or any of its subsidiaries (collectively, “ Confidential Information ”) to any third Person unless such Stockholder can demonstrate that such Confidential Information has been previously disclosed to the public by the Company or is in the public domain (other than by reason of such Stockholder’s breach of this Section 5.12 ).

 

(b)           In the event that a Stockholder or any person to whom such Stockholder has disclosed Confidential Information is required by a Governmental Authority to disclose any Confidential Information for legal or regulatory reasons, prior to making such disclosure, such Stockholder will promptly notify in writing the Company, unless prohibited by law, to permit the Company, at its sole expense, to seek a protective order or to take other appropriate action.  Such Stockholder will also, and will direct any person to whom such Stockholder has disclosed Confidential Information to, cooperate as reasonably requested by the Company in connection with the Company’s efforts to obtain a protective order or other reasonable assurance that

 

35



 

confidential treatment will be accorded such information (at the Company’s expense).  If, in the absence of a protective order or other remedy or the receipt or waiver by the Company, such Stockholder or any person to whom such Stockholder has disclosed Confidential Information become, based on advice of counsel, legally compelled to disclose Confidential Information to such Governmental Authority or else stand liable for contempt or suffer other censure or penalty, such Stockholder or any person to whom such Stockholder has disclosed Confidential Information, as the case may be, may disclose only the part of the Confidential Information which counsel advises is legally required to be disclosed.  It is hereby understood that certain banking regulatory authorities with jurisdiction over such Stockholder or any person to whom such Stockholder has disclosed Confidential Information may conduct ordinary course examinations of books and records of such person, and that disclosure of Confidential Information in such circumstances solely for the purposes of examination may occur without prior written notice or consent of the Company or compliance with the provisions of this Section 5.12(b) ; provided , that in the event such examination is not in the ordinary course, or is targeted at the Company, its subsidiaries or any of their respective Affiliates, such Stockholder or any person to whom such Stockholder has disclosed Confidential Information shall be required to give the Company notice and otherwise comply with the provisions of this Section 5.12(b) .

 

(c)           Any Stockholder shall be responsible for any breach of this Section 5.12 by or any person to whom such Stockholder has disclosed Confidential Information and to undertake commercially reasonably precautions to safeguard and protect the confidentiality of the Confidential Information.

 

(d)           Notwithstanding the foregoing, nothing in Section 5.12(a) , Section 5.12(b)  or Section 5.12(c)  shall apply to any Next Alt Entity or any Altice Entity.

 

Section 5.13          Specific Performance .  Each party to this Agreement acknowledges that a remedy at law for any breach or attempted breach of this Agreement will be inadequate, agrees that each other party to this Agreement shall be entitled to specific performance and injunctive and other equitable relief in case of any such breach or attempted breach and further agrees to waive (to the extent legally permissible) any legal conditions required to be met for the obtaining of any such injunctive or other equitable relief (including posting any bond in order to obtain equitable relief).

 

Section 5.14          No Third Party Liability .  This Agreement may only be enforced against the named parties hereto.  All claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement (including any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement), may be made only against the entities that are expressly identified as parties hereto; and no past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney or Representative of any party hereto (including any Person negotiating or executing this Agreement on behalf of a party hereto), unless party to this Agreement, shall have any liability or obligation with respect to this Agreement or with respect to any claim or cause of action (whether in contract or tort) that may arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement (including a representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement).

 

36



 

Section 5.15          Further Assurances .  In connection with this Agreement and the transactions contemplated hereby, the Company and each Stockholder shall execute and deliver any additional documents and instruments and perform any additional acts that the Company or the parties hereto determine to be necessary or appropriate to effectuate and perform the provisions of this Agreement and the transactions contemplated hereby.

 

Section 5.16          Splits .  If, and as often as, there are any changes in the Shares by way of stock split, stock dividend, combination or reclassification, or through merger (including a domestic or cross-border legal merger), consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions of this Agreement, as may be required, so that the rights, privileges, duties and obligations hereunder shall continue with respect to the Shares as so changed.

 

[ REST OF PAGE INTENTIONALLY LEFT BLANK ]

 

37



 

IN WITNESS HEREOF, the parties hereto have duly executed this Agreement as of the date first above written.

 

 

ALTICE USA, INC.

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

ALTICE N.V.

 

 

 

By:

 

 

Name: Dennis Okhuijsen

 

Title: Authorized signatory

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

NEXT ALT S.À R.L.

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Stockholders and Registration Rights Agreement]

 


 

 

SUDDENVISION S.A.R.L.

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

BC EUROPEAN CAPITAL IX-1 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

BC EUROPEAN CAPITAL IX-2 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

BC EUROPEAN CAPITAL IX-3 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

BC EUROPEAN CAPITAL IX-4 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

BC EUROPEAN CAPITAL IX-5 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

BC EUROPEAN CAPITAL IX-6 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

BC EUROPEAN CAPITAL IX-7 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

BC EUROPEAN CAPITAL IX-8 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

BC EUROPEAN CAPITAL IX-9 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

BC EUROPEAN CAPITAL IX-10 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

BC EUROPEAN CAPITAL IX-11 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

BC EUROPEAN CAPITAL — SUDDENLINK CO-INVESTMENT-1 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

BC EUROPEAN CAPITAL — SUDDENLINK CO-INVESTMENT-2 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

BC EUROPEAN CAPITAL — SUDDENLINK CO-INVESTMENT-3 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

BC EUROPEAN CAPITAL — SUDDENLINK CO-INVESTMENT-4 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

BC EUROPEAN CAPITAL — SUDDENLINK CO-INVESTMENT-5 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

BC EUROPEAN CAPITAL — SUDDENLINK CO-INVESTMENT-1 LP

 

 

 

By: CIE Management IX Limited, its general partner

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

BC EUROPEAN CAPITAL IX LIMITED

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

CANADA PENSION PLAN INVESTMENT BOARD

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

CVC 3 B.V.

 

 

 

By:

 

 

Name: Dennis Okhuijsen

 

Title: Managing Director

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

A4 S.A.

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Stockholders and Registration Rights Agreement]

 


 

 

UPPERNEXT S.C.S.P.

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

 

NEPTUNE HOLDING US LP

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

[Signature Page to Stockholders and Registration Rights Agreement]

 



 

SCHEDULE A

 

STOCKHOLDERS

 

SuddenVision S.a.r.l.

BC European Capital IX-1 LP

BC European Capital IX-2 LP

BC European Capital IX-3 LP

BC European Capital IX-4 LP

BC European Capital IX-5 LP

BC European Capital IX-6 LP

BC European Capital IX-7 LP

BC European Capital IX-8 LP

BC European Capital IX-9 LP

BC European Capital IX-10 LP

BC European Capital IX-11 LP

BC European Capital — Suddenlink Co-Investment-1 LP

BC European Capital — Suddenlink Co-Investment-2 LP

BC European Capital — Suddenlink Co-Investment-3 LP

BC European Capital — Suddenlink Co-Investment-4 LP

BC European Capital — Suddenlink Co-Investment-5 LP

BC European Capital — Suddenlink Co-Investment-6 LP

BC European Capital IX Limited

 

Canada Pension Plan Investment Board

 

CVC 3 B.V.

A4 S.A.

Uppernext S.C.S.p.

Altice N.V.

Neptune Holding US LP

 

Next Alt S.à r.l

 



 

SCHEDULE B

 

ALTICE ENTITIES

 

CVC 3 B.V.

A4 S.A.

Uppernext S.C.S.p.

Altice N.V.

Neptune Holding US LP

 



 

SCHEDULE C

 

BCP ENTITIES

 

SuddenVision S.a.r.l.

BC European Capital IX-1 LP

BC European Capital IX-2 LP

BC European Capital IX-3 LP

BC European Capital IX-4 LP

BC European Capital IX-5 LP

BC European Capital IX-6 LP

BC European Capital IX-7 LP

BC European Capital IX-8 LP

BC European Capital IX-9 LP

BC European Capital IX-10 LP

BC European Capital IX-11 LP

BC European Capital — Suddenlink Co-Investment-1 LP

BC European Capital — Suddenlink Co-Investment-2 LP

BC European Capital — Suddenlink Co-Investment-3 LP

BC European Capital — Suddenlink Co-Investment-4 LP

BC European Capital — Suddenlink Co-Investment-5 LP

BC European Capital — Suddenlink Co-Investment-6 LP

BC European Capital IX Limited

 



 

SCHEDULE D

 

CPPIB ENTITIES

 

Canada Pension Plan Investment Board

 



 

SCHEDULE E

 

NEXT ALT ENTITIES

 

Next Alt S.à r.l

 

[ · ](1)

 


(1)                                ATUS INTERNAL NTD : Next Alt entities to be confirmed.

 


 

EXHIBIT A

 

Joinder Agreement

 

FORM OF JOINDER TO THE AMENDED AND RESTATED STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT

 

THIS JOINDER AGREEMENT (this “ Joinder ”) to the Stockholders Agreement (as defined below) is dated as of [ · ], by and among [Stockholder], (the “ Stockholder ”) and Altice USA, Inc., a Delaware corporation (the “ Company ”).  Reference is made to that certain Amended and Restated Stockholders and Registration Rights Agreement, dated as of [ · ], 2018 (as amended, the “ Stockholders Agreement ”), by and among the Company and the other parties thereto.  All capitalized terms used and not otherwise defined in this Joinder shall have the meaning assigned to such terms in the Stockholders Agreement.

 

WHEREAS, the Stockholder, as of the date hereof, owns either directly and of record, or indirectly, the number of Shares set forth on Exhibit A attached hereto; and

 

WHEREAS, pursuant to the Stockholders Agreement, the Stockholder, who prior to the date hereof was not a party to the Stockholders Agreement, desires to become a party to the Stockholders Agreement and a “Stockholder” thereunder by executing this Joinder;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree, as follows:

 

1.             Joinder .  The Stockholder hereby agrees that, as of the date hereof, it is hereby made a party to the Stockholders Agreement and a “Stockholder” under the Stockholders Agreement.  The Stockholder hereby agrees that, as of the date hereof, it will be bound by, and subject to, and will comply with all of the representations, warranties, covenants, agreements, obligations, duties, terms and conditions of the Stockholders Agreement that are applicable to a “Stockholder”, including without limitation, the representations and warranties made to the Company by each Stockholder, severally and not jointly, in Section 2.01 of the Stockholders Agreement and the confidentiality obligations set forth in Section 5.12 of the Stockholders Agreement, in each case, as if the Stockholder was an original signatory thereto.  Execution and delivery of this Joinder by the Stockholder shall also constitute execution and delivery by the Stockholder of the Stockholders Agreement, without further action of any party.

 

2.             Schedules .  If necessary and appropriate, the Company will amend the schedules to the Stockholders Agreement and the books and records of the Company to reflect the information set forth by the Stockholder in Exhibit A hereto.

 

3.             Headings .  The headings in this Joinder have been inserted for convenience of reference only and shall in no way restrict or otherwise modify any of the terms or provisions hereof.

 

4.             Successors and Assigns; Binding Effect .  The terms and conditions of this Joinder shall be binding upon and inure to the benefit of the parties hereto and their respective successors, heirs and assigns.

 



 

5.             Governing Law .  All issues and questions concerning the construction, validity, interpretation and enforceability of this Joinder, and all claims and disputes arising hereunder or thereunder or in connection herewith or therewith, whether purporting to be sound in contract or tort, or at law or in equity, shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

 

6.             Counterparts .  This Joinder may be executed in multiple counterparts, any one of which need not contain the signature of more than one party, but all such counterparts taken together shall constitute one and the same instrument.  Any counterpart may be executed by facsimile signature and such facsimile signature shall be deemed an original.

 

7.             Notices .  All notices, consents, approvals, reports, designations, requests, waivers, elections and other communications authorized or required to be given to the Stockholder pursuant to the Stockholders Agreement as a result of this Joinder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by personal hand-delivery, by electronic mail, by mailing the same in a sealed envelope, registered first-class mail, postage prepaid, return receipt requested, or by air courier guaranteeing overnight delivery, sent to the Stockholder at the following addresses (or such other address as such Stockholder may specify by notice to the Company):

 

[ · ]

Attention:  [ · ]
Email:  [ · ]

 

[Signature Page Follows]

 



 

IN WITNESS WHEREOF, the undersigned have caused this Joinder to be signed and delivered as of the day and year first above written.

 

 

[STOCKHOLDER]

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

ALTICE USA, INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 



 

EXHIBIT A TO JOINDER AGREEMENT

 

[To Come]

 




Exhibit 5.1

 

 

599 Lexington Avenue

New York, NY 10022-6069

+1.212.848.4000

 

 

May 21, 2018

 

Altice USA, Inc.
1 Court Square West

Long Island City, NY 11101

 

Altice USA, Inc.

 

Ladies and Gentlemen:

 

We have acted as counsel to Altice USA, Inc., a Delaware corporation (the “ Company ”), in connection with the registration statement on Form S-1 (Registration No. 333-222475) filed with the Securities and Exchange Commission (the “ Commission ”) on January 8, 2018, and each amendment thereto (the “ Registration Statement ”), relating to the registration under the Securities Act of 1933, as amended (the “ Securities Act ”), of 5,281,258 shares of the Company’s Class A common stock, par value $0.01 per share (the “ Class A Shares ”), 490,085,674 shares of the Company’s Class B common stock, par value $0.01 per share (the “ Class B Shares ”), and up to 490,085,674 shares of the Company’s Class A common stock, par value $0.01 per share (the “ Converted Class A Shares ” and, collectively with the Class A Shares and Class B Shares, the “ Shares ”) that are issuable upon conversion of the Class B Shares.  The Shares are to be distributed by Altice N.V. to its shareholders pursuant to the terms and conditions of the Master Separation Agreement to be entered into by and between the Company and Altice N.V.  The distribution of the Shares will be as set forth in the prospectus contained in the Registration Statement (the “ Prospectus ”).

 

In that connection, we have reviewed originals or copies of the following documents:

 

(a)                                  The Registration Statement.

 

(b)                                  The Prospectus.

 

(c)                                   The Amended and Restated Certificate of Incorporation of the Company (the “ Certificate of Incorporation ”).

 

(d)                                  The Amended and Restated Bylaws of the Company.

 

SHEARMAN.COM

 

Shearman & Sterling LLP is a limited liability partnership organized in the United States under the laws of the state of Delaware, which laws limit the personal liability of partners.

 



 

(e)                                   The originals or copies of such other corporate records of the Company, certificates of public officials and officers of the Company and such other documents and instruments as we have deemed necessary as a basis for the opinions expressed below.

 

For the purposes of this opinion letter, we have assumed:

 

(a)                                  The genuineness of all signatures.

 

(b)                                  The authenticity of the originals of the documents submitted to us.

 

(c)                                   The conformity to authentic originals of any documents submitted to us as copies.

 

(d)                                  As to matters of fact, the truthfulness of the representations made in certificates of public officials and officers of the Company.

 

We have not independently established the validity of the foregoing assumptions.

 

Based upon the foregoing and upon such other investigation as we have deemed necessary and subject to the qualifications set forth below, we are of the opinion that the Class A Shares and Class B Shares are validly issued, fully paid and non-assessable and, in the case of the Converted Class A Shares, upon conversion of Class B Shares in accordance with the Certificate of Incorporation, the Converted Class A Shares will be validly issued, fully paid and non-assessable.

 

Our opinion set forth above is limited to the General Corporation Law of the State of Delaware and we do not express any opinion herein concerning any other law.

 

This opinion letter is provided solely in connection with the distribution of the Shares pursuant to the Registration Statement and is not to be relied upon for any other purpose.

 

We hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement and to the use of our name therein and in the Prospectus under the caption “Legal Matters.”  In giving this consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and regulations of the Commission thereunder.

 

Very truly yours,

 

 

 

/s/ Shearman & Sterling LLP

 

 

 

RA/RB/AP/BL

 

KWL

 

 

2




Exhibit 10.25

 


 

MASTER SEPARATION AGREEMENT

 


 

between

ALTICE N.V.

 

and

 

ALTICE USA, INC.

 

Dated as of May 18, 2018

 



 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

1

Section 1.01

Certain Defined Terms

1

Section 1.02

Other Defined Terms

6

Section 1.03

Interpretation and Rules of Construction

6

 

 

ARTICLE II ASSETS AND LIABILITIES

7

Section 2.01

Transfer of Assets; Treatment of Liabilities

7

Section 2.02

AMI Vendor Contracts

9

 

 

ARTICLE III CERTAIN ACTIONS AT OR PRIOR TO THE DISTRIBUTION

10

Section 3.01

Transfer of ATUS Common Stock

10

Section 3.02

Certificate of Incorporation and Bylaws

10

Section 3.03

Transaction Documents

10

 

 

ARTICLE IV THE DISTRIBUTION

10

Section 4.01

Manner of the Distribution

11

Section 4.02

Actions in Connection with the Distribution

11

Section 4.03

Distribution Date

11

Section 4.04

Conditions to Distribution

11

 

 

ARTICLE V MUTUAL RELEASE; INDEMNIFICATION

13

Section 5.01

Mutual Release

13

Section 5.02

Indemnification of ATUS

13

Section 5.03

Indemnification of ANV

14

Section 5.04

Limitations on Indemnification

14

Section 5.05

No Right to Set-Off

14

Section 5.06

Procedures for Indemnification

14

Section 5.07

Nominal Defendant Cooperation

15

Section 5.08

Remedies

16

Section 5.09

Tax Indemnities

16

 

 

ARTICLE VI ACCESS TO INFORMATION; PRIVILEGE

16

Section 6.01

Provision of Corporate Records

16

Section 6.02

Retention of Records; Access to Information

16

Section 6.03

Witness Services

17

Section 6.04

Privileged Matters

17

Section 6.05

Financial Statements and Accounting

19

Section 6.06

Ownership of Information

20

Section 6.07

Confidentiality

20

Section 6.08

Reimbursement

20

Section 6.09

Liability for Information Provided

20

 

 

ARTICLE VII CERTAIN OTHER MATTERS

20

Section 7.01

Insurance

21

Section 7.02

Bulk Sales Laws

22

 



 

Section 7.03

Corporate Opportunities

22

Section 7.04

Further Actions

23

 

 

ARTICLE VIII Dispute Resolution

23

Section 8.01

Good Faith Officer Negotiation

23

Section 8.02

CEO Negotiations

23

Section 8.03

Arbitration

24

Section 8.04

Litigation and Unilateral Commencement of Arbitration

25

Section 8.05

Conduct During Dispute Resolution Process

25

 

 

ARTICLE IX DISCLAIMER

25

Section 9.01

Disclaimer

25

Section 9.02

Limitation of Liability

26

 

 

ARTICLE X TAX MATTERS

27

Section 10.01

Tax Indemnification

27

Section 10.02

Tax Contests

27

Section 10.03

Cooperation

27

Section 10.04

FIRPTA Certificate

28

 

 

ARTICLE XI GENERAL PROVISIONS

28

Section 11.01

Termination

28

Section 11.02

Survival of Covenants

28

Section 11.03

Expenses

28

Section 11.04

Notices

28

Section 11.05

Public Announcements

29

Section 11.06

Severability

30

Section 11.07

Entire Agreement; Construction

30

Section 11.08

Assignment

30

Section 11.09

Amendment

30

Section 11.10

Waiver

30

Section 11.11

No Third-Party Beneficiaries

31

Section 11.12

Specific Performance

31

Section 11.13

Governing Law

31

Section 11.14

Waiver of Jury Trial

31

Section 11.15

No Duplication; No Double Recovery

31

Section 11.16

Mutual Drafting

31

Section 11.17

Counterparts

32

 

 

SCHEDULES

 

 

 

Schedule 1.01

Transaction Documents

 

Schedule 2.02(c)

Third Party Vendors

 

Schedule 4.04(g)(i)

Governmental Approvals

 

Schedule 4.04(g)(ii)

Governmental Authority Notices

 

Schedule 7.01

ANV/ATUS Shared Policies

 

 

ii


 

MASTER SEPARATION AGREEMENT

 

MASTER SEPARATION AGREEMENT, dated as of May 18, 2018, between Altice N.V., a Dutch public company with limited liability ( naamloze vennootschap ) (“ ANV ”) and Altice USA, Inc., a Delaware corporation (“ ATUS ”) (ANV and ATUS each a “ Party ” and together, the “ Parties ”).

 

WHEREAS, on January 8, 2018, ANV announced that it intended to effect a separation of ATUS and ANV (the “ Separation ”) by means of a special pro-rata distribution (the “ Distribution ”) in kind of substantially all of the shares of ATUS Common Stock (as defined below) owned directly or indirectly by ANV to the ANV shareholders out of ANV’s share premium reserve; and

 

WHEREAS, ANV and ATUS have determined that it is necessary and desirable to set forth the agreements that will effect the Separation and to set forth certain other agreements that will govern certain other matters following the Separation.

 

NOW, THEREFORE, in consideration of the foregoing premises and the covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the Parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01          Certain Defined Terms .  For purposes of this Agreement:

 

Action ” means any claim, action, suit, inquiry, proceeding or investigation by or before any Governmental Authority or arbitral tribunal.

 

Advisory and Consulting Services Agreement ” means that certain Advisory and Consulting Services Agreement, dated as of June 21, 2016, as amended on June 21, 2017 by and between ATUS and ANV.

 

Affiliate ” means, with respect to any specified Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

 

Agreement ” means this Master Separation Agreement between the Parties (including the Schedules hereto) and all amendments hereto made in accordance with the provisions of Section 11.09 .

 

AMI ” means Altice Management International, a Swiss Company with a share capital of CHF 100,000, whose registered office is located at 15 rue Pierre Fatio, 1204 Geneva, Switzerland and which is registered with the Trade Registry of the canton of Geneva under number CHE-170.900.961.

 



 

AMI Vendor Contract ” means any Contract (a) between AMI or its predecessor, Altice Management Europe SA, and a third-party vendor that inures to the benefit or burden of any member of the ATUS Group and (b) that a member of the ATUS Group has, does, or may purchase products or services pursuant to the terms of such Contract.

 

ANV Assets ” means, without duplication, any and all Assets owned, directly or indirectly, by any member of the ANV Group as of the Effective Time other than the ATUS Assets.

 

ANV Board ” means the board of directors of ANV.

 

ANV Business ” means any business now or formerly conducted by ANV and its present and former Affiliates, other than the ATUS Business.

 

ANV Group ” means ANV and the Subsidiaries of ANV, other than ATUS and the ATUS Subsidiaries.

 

ANV Liabilities ” means, without duplication, any and all Liabilities of any member of the ANV Group as of the Effective Time, other than the ATUS Liabilities.

 

ANV/ATUS Shared Policies ” means (a) the Policies set forth on Schedule 7.01 and (b) any claims-made Policies entered into after the Distribution Date that are owned or maintained by any member of the ANV Group which relate to the conduct or operation of the ATUS Business prior to the Distribution Date.

 

Asset ” means all rights, properties or other assets, whether real, personal or mixed, tangible or intangible, of any kind, nature and description, whether accrued, contingent or otherwise, and wherever situated and whether or not carried or reflected, or required to be carried or reflected, on the books of any Person.

 

ATUS Assets ” means, except as otherwise expressly provided in this Agreement or any Transaction Document, (a) all of the equity interests in the ATUS Subsidiaries, (b) all Assets of the ATUS Subsidiaries immediately prior to the Effective Time, (c) any Contract that exclusively relates to the ATUS Business, and (d) any and all Assets owned or held immediately prior to the Effective Time by ANV or any Subsidiary of ANV that are used exclusively in, or that exclusively relate to, the ATUS Business; provided that, for the avoidance of doubt, the ATUS Assets shall not include (i) any shares of ATUS Common Stock held by Neptune Holdings US LP or (ii) any ownership interest in the “Altice” brand.

 

ATUS Business ” means all business and operations conducted by any member of the ATUS Group, as described in the Registration Statement.

 

ATUS Class A Common Stock ” means the Class A common stock, par value $.01 per share, of ATUS.

 

ATUS Class B Common Stock ” means the Class B common stock, par value $.01 per share, of ATUS.

 

2



 

ATUS Common Stock ” means ATUS Class A Common Stock and ATUS Class B Common Stock.

 

ATUS Group ” means ATUS and the ATUS Subsidiaries.

 

ATUS Liabilities ” means (a) all Liabilities to the extent arising out of, resulting from, or relating to, the conduct of the ATUS Business, the ATUS Subsidiaries, or the ATUS Assets; and (b) any and all Liabilities to be assumed by ATUS pursuant to this Agreement or any Transaction Document.

 

ATUS Subsidiaries ” means the Subsidiaries of ATUS as of the date of this Agreement and any Subsidiary of any such entities and any direct or indirect Subsidiary of ATUS formed after the date of this Agreement and prior to the Distribution Date.

 

Business Day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in New York, New York or Amsterdam, The Netherlands.

 

Confidential Information ” means confidential or proprietary information concerning a Party and/or its Subsidiaries which, prior to or following the date of this Agreement, has been disclosed by a Party or its Subsidiaries to the other Party or its Subsidiaries, in written, oral (including by recording), electronic, or visual form to, or otherwise has come into the possession of, the other Party or its Subsidiaries, including pursuant to the provisions of Section 6.01 , 6.02 or 6.05 or any other provision of this Agreement (except to the extent that such information can be shown to have been (i) in the public domain through no fault of such Party or its Subsidiaries or (ii) lawfully acquired from other sources by such Party or its Subsidiaries to which it was furnished; provided , however , in the case of clause (ii) that, to the furnished Party’s knowledge, such sources did not provide such information in breach of any confidentiality obligations).

 

Contract ” means any agreement, contract, obligation, indenture, instrument, lease, arrangement, commitment or undertaking (whether written or oral and whether express or implied).

 

control ” (including the terms “ controlled by ” and “ under common control with ”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract or otherwise.

 

Distribution Date ” means the date on which the Distribution occurs.

 

Effective Time ” means 12:01 a.m., Amsterdam time, on the Distribution Date.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

3



 

Governmental Approvals ” means any notice or report to be submitted to, or other filing to be made with, or any consent, registration, approval, license, permit or authorization to be obtained from, any Governmental Authority, in each case, in connection with the transactions contemplated hereby.

 

Governmental Authority ” means any federal, national, foreign, supranational, state, provincial, local or other government, governmental, regulatory or administrative authority, agency, commission or any court of competent jurisdiction.

 

Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

Group ” means the ANV Group or the ATUS Group, as the context requires.

 

Indemnification Agreement ” means that certain Indemnification Agreement, dated as of January 8, 2018, between ANV and ATUS.

 

Indemnified Party ” means an ATUS Indemnified Party or an ANV Indemnified Party, as the case may be.

 

Indemnifying Party ” means, as the case may be, (a) ANV pursuant to Section 5.02 or (b) ATUS pursuant to Section 5.03 .

 

Law ” means any federal, national, foreign, supranational, state, provincial or local statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

 

Liabilities ” means any and all claims, debts, demands, requirements, actions, causes of action,  suits, damages, liabilities, costs, expenses, interest, accruals, accounts payable, bonds, indemnities and obligations, whether accrued or unaccrued, fixed or variable, known or unknown, absolute or contingent, matured or unmatured, reserved or unreserved or determined or determinable, including those arising under any Law or Action, whether asserted or unasserted, or Governmental Order and those arising under any contract, lease, agreement, arrangement, commitment or undertaking.

 

Local Conveyances ” means the asset transfer agreements, share transfer agreements, bills of sale, and other documents between or among the applicable members of the ATUS Group and the applicable members of the ANV Group pursuant to which Transferred Assets will be transferred to the applicable members of the ATUS Group and the applicable members of the ANV Group in accordance with this Agreement .

 

Person ” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of Exchange Act.

 

Policies ” means insurance policies and insurance Contracts of any kind (other than life and benefits policies or Contracts), including primary, excess and umbrella policies, comprehensive general liability policies, director and officer liability, fiduciary liability,

 

4



 

automobile, aircraft, property and casualty, workers’ compensation and employee dishonesty insurance policies, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder.

 

Pre-Distribution Tax Period ” means any taxable period ending on or before the Distribution Date or the portion of any taxable period through the end of the Distribution Date.

 

Registration Statement ” means any registration statement of ATUS filed with, or to be filed with, the SEC under the rules and regulations promulgated under the Securities Act in connection with the Separation, including the related US Prospectus, amendments and supplements to such registration statement, including pre- and post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement.

 

Representatives ” means with respect to any Person, such Person’s Affiliates and its and their respective directors, officers, employees, agents and advisors.

 

RPT Policy ” means the Related Party Transaction Policy of ATUS in effect on the date hereof and as such policy may be amended or modified.

 

SEC ” means the United States Securities and Exchange Commission or any successor agency thereto.

 

Securities Act ” means the Securities Act of 1933, as amended.

 

Subsidiary ” of any Person means any corporation, partnership, limited liability company or other organization, whether incorporated or unincorporated, which is controlled by such Person.

 

Tax ” or “ Taxes ” means all income, capital gain, gross receipts, windfall profits, severance, property, production, license, excise, net worth, franchise, capital, transfer, conveyance, stamp, stamp duty, ad valorem, sales, use, recording, employment, withholding, social security contributions and other taxes, duties, fees, charges or imposts, however denominated, together with any interest, additions or penalties in respect thereof, imposed by any Taxing Authority.

 

Tax Benefit ” means the actual reduction of Tax liabilities (calculated on the basis of the actual reduction in cash payments for Taxes) from an increase in deductions, losses or tax credits or decrease in the income, gain or recapture of tax credits that the Indemnified Party or any of its Affiliate actually reported or took into account.

 

Taxing Authority ” means any Governmental Authority that is responsible for the administration or imposition of any Tax, including any federal, national, international, supranational, state, provincial, local or other government, governmental, regulatory or administrative authority, agency or commission and any court, tribunal or judicial or arbitral body empowered to issue binding decisions.

 

Transaction Documents ” means this Agreement, the Local Conveyances and each of the documents identified on Schedule 1.01 .

 

5



 

Transferred Assets ” means, collectively, the ANV Assets and the ATUS Assets to be assigned, transferred, conveyed and delivered to the applicable members of the ATUS Group or the applicable members of the ANV Group, as the case may be, pursuant to Section 2.01(a) .

 

US Prospectus ” means the prospectus with respect to the Separation included in any Registration Statement, all amendments and supplements to such prospectus, including pre- and post-effective amendments to such Registration Statement, and all other material incorporated by reference in such prospectus.

 

Section 1.02          Other Defined Terms .  The following terms have the meanings set forth in the Sections set forth below:

 

Defined Term

 

Location of Definition

 

 

 

 

 

ANV

 

Preamble

 

ANV Indemnified Parties

 

§ 5.03

 

ANV Meeting Resolution

 

§ 4.02(c)

 

ANV Taxes

 

§ 10.01

 

Arbitration Request

 

§ 8.03(a)

 

Arbitration Rules

 

§ 8.03(a)

 

ATUS

 

Preamble

 

ATUS Indemnified Parties

 

§ 5.02

 

ATUS Taxes

 

§ 10.01

 

CEO Negotiation Request

 

§ 8.02

 

Dispute

 

§ 8.01

 

Distribution

 

Recitals

 

Losses

 

§ 5.02

 

Officer Negotiation Request

 

§ 8.01

 

Party

 

Preamble

 

Privilege

 

§ 6.04(a)

 

Privileged Information

 

§ 6.04(a)

 

Releasees

 

§ 5.01(a)

 

Replacement ATUS Contract

 

§ 2.02(c)

 

Replacement ATUS Contract Date

 

§ 2.02(c)

 

Separation

 

Recitals

 

Tax Contest

 

§ 10.02

 

Transferee

 

§ 2.01(c)

 

Transferor

 

§ 2.01(c)

 

 

Section 1.03          Interpretation and Rules of Construction .  In this Agreement, except to the extent otherwise provided or that the context otherwise requires:

 

(a)           when a reference is made in this Agreement to an Article, Section or Schedule, such reference is to an Article or Section of, or Schedule to, this Agreement;

 

6



 

(b)           the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

 

(c)           whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

 

(d)           the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(e)           all terms defined in this Agreement have the defined meanings when used in any certificate or other document delivered or made available pursuant hereto, unless otherwise defined therein;

 

(f)            references to “day” or “days” are to calendar days;

 

(g)           the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

 

(h)           references to a Person are also to its successors and permitted assigns;

 

(i)            when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded.  If the last day of such period is not a Business Day, the period in question shall end on the next succeeding Business Day;

 

(j)            references to sums of money are expressed in lawful currency of the United States of America, and “$” refers to U.S. dollars; and

 

(k)           any portion of this Agreement or any Transaction Document obligating a Party to take any action or refrain from taking any action, as the case may be, shall mean that such Party shall also be obligated to cause its relevant Subsidiaries to take such action or refrain from taking such action, as the case may be.

 

ARTICLE II

 

ASSETS AND LIABILITIES

 

Section 2.01          Transfer of Assets; Treatment of Liabilities .

 

(a)           Transfer of Assets .  On the terms and subject to the conditions set forth in this Agreement, on or prior to the Effective Time:

 

(i)            ANV shall, on behalf of itself and the other members of the ANV Group, as applicable, transfer, contribute, assign and convey or cause to be transferred, contributed, assigned and conveyed to ATUS or another member of the ATUS Group all of the members of the ANV Group’s’ right, title and interest, if any and to the extent of

 

7



 

such right, title and interest, in and to the ATUS Assets owned or held by a member of the ANV Group as of the Distribution Date ; and

 

(ii)           ATUS shall, on behalf of itself and ATUS’s Subsidiaries, as applicable, transfer, contribute, assign and convey or cause to be transferred, contributed, assigned and conveyed to ANV or another member of the ANV Group all of its and the ATUS Subsidiaries’ right, title and interest, if any and to the extent of such right, title and interest, in and to the ANV Assets owned or held by a member of the ATUS Group as of the Distribution Date; and

 

(b)           Treatment of Liabilities .  On the terms and subject to the conditions set forth in this Agreement and except as specifically set forth herein or in any Transaction Document, (i)  the members of the ANV Group, as applicable, shall retain all of the ANV Liabilities and (ii) ATUS and the ATUS Subsidiaries, as applicable, shall retain all of the ATUS Liabilities.

 

(c)           Costs and Expenses for Transfer of Assets and Liabilities .  Any costs and expenses incurred to effect any assignment, transfer, conveyance and delivery contemplated by this Section 2.01 (including any transfer effected pursuant to Section 2.01(e) ) shall, except as set forth in any Transaction Document, be shared equally by the respective transferor (“ Transferor ”) and transferee (“ Transferee ”).  Other than costs and expenses incurred in accordance with the foregoing, nothing in this Section 2.01(c)  shall require any Party or any other member of such Party’s Group to incur any material obligation or grant any material concession for the benefit of any member of the other Party’s Group in order to effect any transaction contemplated by this Section 2.01 .

 

(d)           Local Conveyances .  In furtherance of the assignment, transfer, conveyance and delivery of the Transferred Assets contemplated by this Agreement, the Parties shall, and shall cause their respective Subsidiaries to, execute and deliver Local Conveyances, as and to the extent necessary, to evidence the assignment, transfer, conveyance and delivery of all of the applicable Transferor’s right, title and interest in and to the Transferred Assets to the applicable Transferee.

 

(e)           Assets Not Transferred .

 

(i)            Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign, directly or indirectly, any Asset, if an attempted direct or indirect assignment thereof without the consent of a third party or approval of a Governmental Authority would constitute a breach, default, violation or other contravention of the rights of such third party or Governmental Authority or of applicable Law, until such time as the necessary consent or approval is obtained.

 

(ii)           If any direct or indirect transfer or assignment by any Transferor, or any direct or indirect acquisition by any Transferee, of any interest in any Transferred Asset as contemplated by this Agreement requires the consent of a third party or approval of a Governmental Authority, then such transfer or assignment shall be made subject to such consent of a third party or approval of a Governmental Authority being obtained. The

 

8



 

Parties shall, and shall cause their respective Subsidiaries to, use their commercially reasonable efforts to obtain any third-party consent or approval of a Governmental Authority that is required in order to effect the transactions contemplated herein.

 

(iii)          If any third-party consent or approval of a Governmental Authority referred to in Section 2.01(e)(ii)  is not obtained prior to the Distribution Date, the Distribution shall, subject to the satisfaction of the conditions set forth in Article IV , nevertheless take place on the terms set forth herein, and the Parties shall, and shall cause their respective Subsidiaries to, use their commercially reasonable efforts to establish arrangements under which, (A) on or prior to the Distribution Date, the applicable Transferee shall obtain the economic claims, rights and benefits associated with such Transferred Asset with respect to which the third-party consent or approval of a Governmental Authority has not been obtained; (B) on or prior to the Distribution Date, such Transferee shall have dominion and control over such Transferred Asset and the applicable Transferor of such Transferred Asset shall operate such Transferred Asset only as directed by such Transferee; and (C) from and after the Distribution Date, such Transferee shall assume the economic burden with respect to such Transferred Asset.

 

(iv)          If and when any such third-party consent or approval of a Governmental Authority is obtained after the Distribution, the assignment of the applicable Transferred Asset shall be promptly effected in accordance with the terms of this Agreement without the payment of additional consideration.

 

(v)           In the event that at any time after the Effective Time, a Party becomes aware that a Transferred Asset has not been transferred to the applicable Transferee pursuant to Section 2.01(a) , the Parties shall, and shall cause their respective Subsidiaries to, cause the prompt transfer of such asset to the applicable Transferee.

 

Section 2.02          AMI Vendor Contracts .

 

(a)           From and after the date hereof (including following the Distribution Date), ANV shall, and shall cause AMI to, provide ATUS with fully executed copies of all AMI Vendor Contracts, as each AMI Vendor Contract may be amended, modified, abridged, or extended from time to time.

 

(b)           During the term of the AMI Vendor Contracts, ANV shall, and shall cause AMI and the other members of the ANV Group to, take such action or actions as may be reasonably requested by ATUS to enforce the terms of any AMI Vendor Contract as in effect on the date of this Agreement, including, if requested, at ATUS’s cost and expense, making any claim, suit, demand, or seeking any remedy appropriate under the law or contract, for the benefit of ATUS or the applicable member of the ATUS Group.

 

(c)           ATUS shall use commercially reasonable efforts to negotiate and execute a separate agreement with the third party vendors under the AMI Vendor Contracts identified on Schedule 2.02(c)  to this Agreement (each such contract, a “ Replacement ATUS Contract ” and the earlier of July 31, 2018 and date on which such Replacement ATUS Contract is entered into, the “ Replacement ATUS Contract Date ”), which Replacement ATUS Contract shall be

 

9



 

independent from the corresponding AMI Vendor Contract such that a failure by a member of the ANV Group to comply with a term of the applicable AMI Vendor Contract will not adversely impact the rights or benefits of the applicable member of the ATUS Group under the Replacement ATUS Contract, and such that a failure by a member of the ATUS Group to comply with a term of the applicable Replacement ATUS Contract will not adversely impact the rights or benefits of the applicable member of the ANV Group under the AMI Vendor Contract.  ANV shall, and shall cause the members of the ANV Group to, reasonably cooperate with ATUS in any such negotiations through July 31, 2018, as such date may be extended by mutual agreement of ATUS and ANV.  ATUS shall keep ANV and AMI reasonably informed of any material developments with respect to the negotiation and execution of each Replacement ATUS Contract, and, to the extent permitted pursuant to the terms of the applicable Replacement ATUS Contract, ATUS shall provide ANV and AMI a true, correct and complete copy of each executed Replacement ATUS Contract.  From and after a Replacement ATUS Contract Date, with respect to each such AMI Vendor Contract covered by a Replacement ATUS Contract,ANV and the other members of the ANV Group shall have no further obligations to any member of the ATUS Group under (A)  Section 2.02(b) , and (B) the AMI Vendor Contract replaced by the Replacement ATUS Contract.

 

ARTICLE III

 

CERTAIN ACTIONS AT OR PRIOR TO THE DISTRIBUTION

 

Section 3.01          Transfer of ATUS Common Stock .  ANV shall take all such action as may be reasonably necessary or appropriate to cause the shares of ATUS Class A Common Stock and ATUS Class B Common Stock owned by CVC 3 B.V., a Dutch private company with limited liability and a wholly-owned subsidiary of ANV, to be distributed to ANV prior to the Distribution Date.

 

Section 3.02          Certificate of Incorporation and Bylaws .  On or prior to the Distribution Date, ANV and ATUS shall take or cause to be taken all necessary actions (including, with respect to the Second Amended and Restated Certificate of Incorporation of ATUS, the filing with the SEC of an information statement required by Rule 14c-2 under the Exchange Act) to approve and adopt the form of Second Amended and Restated Certificate of Incorporation of ATUS and Second Amended and Restated Bylaws of ATUS filed by ATUS with the SEC as exhibits to the Registration Statement filed by ATUS in connection with the Distribution, in each case, such that they become effective immediately following the Distribution.

 

Section 3.03          Transaction Documents .  On or prior to the Distribution Date, each of ANV and ATUS shall enter into, or, as applicable, shall cause another member or other members of their respective Groups to enter into, the applicable Transaction Documents.

 

10


 

ARTICLE IV

 

THE DISTRIBUTION

 

Section 4.01          Manner of the Distribution .  ATUS and ANV agree that the Distribution shall be effected as set forth in the Registration Statement to be filed by ATUS in connection with the Distribution, including with respect to the election of shares of ATUS Common Stock by shareholders of ANV, the proration of shares of ATUS Class B Common Stock in the event such shares of ATUS Class B Common Stock is oversubscribed and the treatment of fractional shares of ATUS Common Stock.

 

Section 4.02          Actions in Connection with the Distribution .

 

(a)           ATUS shall file such amendments and supplements to the Registration Statement as may be necessary in order to cause the same to become and remain effective as required by Law, including filing such amendments and supplements to the Registration Statement as may be required by the SEC or applicable securities Laws.

 

(b)           The Parties shall cooperate in preparing and filing any filings (including any amendments thereto) to be made by ATUS with the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten) and, if required, any other relevant regulators in other countries within the European Union under the Financial Markets Supervision Act or any other relevant Law in a country in the European Union in connection with the Separation or the Distribution.  The Parties shall each use commercially reasonable efforts to obtain all necessary approvals from the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten) and, if required, such other relevant regulators with respect to such filings as soon as practicable.

 

(c)           ANV shall take or cause to be taken all reasonable actions necessary to duly call, give notice of, prepare and timely distribute to shareholders of ANV all documentation required under applicable Law to convene and hold a general meeting of the shareholders of ANV in order for ANV’s general meeting to adopt (i) the proposal to approve the separation of the U.S. business from ANV by way of a special distribution in kind in the form of shares in ATUS and (ii) the proposal to amend ANV’s articles of association and to authorize each lawyer and paralegal employed by De Brauw Blackstone Westbroek N.V. to execute the deed of amendment of ANV’s articles of association  (collectively, the “ ANV Meeting Resolution ”).

 

Section 4.03          Distribution Date .  ANV shall, in its sole discretion, determine (a) the Distribution Date, (b) subject to the RPT Policy, all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and (c) the timing of and conditions to the consummation thereof.  In addition, regardless of whether the conditions to the Distribution set forth in Section 4.04 have been satisfied or waived (to the extent permitted by applicable Law), the ANV Board may at any time and from time to time until the completion of the Distribution, (i) subject to the RPT Policy, decide to modify or change the terms of the Distribution or (ii) accelerate or delay the timing of the consummation of all or part of the Distribution.

 

Section 4.04          Conditions to Distribution .  Subject to Section 4.03 , the Distribution shall be subject to the satisfaction or waiver (to the extent permitted by applicable Law) of the following conditions, which satisfaction or waiver (to the extent permitted by applicable Law) shall be determined by the ANV Board in its sole discretion and which

 

11



 

conditions are for the sole benefit of the ANV Board and shall not give rise to or create any duty on the part of ANV or the ANV Board to waive (to the extent permitted by applicable Law) or not waive any such condition:

 

(a)           The ANV Meeting Resolution shall have been adopted by the requisite shareholder vote at the general meeting of the shareholders of ANV;

 

(b)           The board of directors of ATUS shall have declared a one-time dividend of $1,500,000,000 to the holders of the shares of ATUS Common Stock as of a record date prior to the Distribution Date;

 

(c)           Each Transaction Document shall have been executed by each party thereto;

 

(d)           The Registration Statement shall have been declared effective by the SEC, no stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for such purpose shall be pending before or threatened by the SEC;

 

(e)           The prospectus prepared by ATUS in connection with the Distribution for the purposes of Article 3 of Directive 2003/71/EC of the European Parliament and the Council has been approved by the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten) ;

 

(f)            (i) The Second Amended and Restated Certificate of Incorporation of ATUS shall have been approved and adopted by the affirmative vote of the holders of a majority of the aggregate voting power of all outstanding shares of capital stock of ATUS, (ii) ATUS shall have mailed or cause to be mailed to its stockholders an Information Statement on Schedule 14C with respect to such approval and adoption and the 20-day waiting period under Regulation 14C shall have elapsed, and (iii) ATUS shall have filed or caused to be filed with the Secretary of State of the State of Delaware the Second Amended and Restated Certificate of Incorporation following the completion of the 20-day waiting period under Regulation 14C;

 

(g)           There shall not be in effect any Law or any Governmental Order issued by a Governmental Authority of competent jurisdiction that enjoins or makes illegal the Separation; and

 

(h)           (i) The Governmental Approvals set forth on Schedule 4.04(g)(i)  shall have been obtained and be in full force and effect, and (ii) the notices to the Governmental Authorities set forth on Schedule 4.04(g)(ii)  shall have been delivered to each applicable Governmental Authority.

 

(i)            The Advisory and Consulting Services Agreement shall have been terminated.

 

12



 

ARTICLE V

 

MUTUAL RELEASE; INDEMNIFICATION

 

Section 5.01          Mutual Release .

 

(a)           Effective as of the Distribution and except as otherwise specifically set forth in this Agreement (including Section 5.01(b) ) or in any of the other Transaction Documents, each Party, on behalf of itself and each of the other members of its Group, hereby irrevocably, unconditionally and completely waives and releases and forever discharges the other Party and the other members of its Group, and their respective Representatives and their respective heirs, executors and administrators (such released Persons, the “ Releasees ”), of and from all debts, demands, actions, causes of action, suits, accounts, covenants, contracts, agreements, damages, claims and other Liabilities whatsoever of every name and nature, both in law and in equity, arising out of, resulting from, or related to, events, circumstances or actions taken by the other Party occurring or failing to occur, in each case, at or prior to the Distribution.  No Party shall make, and no Party shall permit any other members of its Group or their respective Representatives to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against any member of the Group of the other Party or any Releasees of the other Party with respect to any Liabilities released pursuant to this Section 5.01(a) .

 

(b)           Nothing contained in Section 5.01(a)  shall waive, release or otherwise discharge any Person from:

 

(i)            any right to enforce or any Liability provided for in, or resulting from, any Transaction Document;

 

(ii)           any Liability retained, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with any Transaction Document;

 

(iii)          any right to enforce or any Liability provided for in, or resulting from, any Contract in effect as of the Distribution between any member of the ATUS Group, on the one hand, and any member of the ANV Group, on the other hand;

 

(iv)          any Liability that the Parties have with respect to indemnification or contribution pursuant to this Agreement, which Liability shall be governed by the provisions of this Article V and, if applicable, the appropriate provisions of the other Transaction Documents; or

 

(v)           any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 5.01 .

 

Section 5.02          Indemnification of ATUS .  Except as provided in any Transaction Document, ATUS , each other member of the ATUS Group and each of their respective officers, directors, employees and agents (collectively, the “ ATUS Indemnified Parties ”) shall, from and after the Distribution Date, be indemnified and held harmless by ANV from and against any and all claims, losses, damages, costs, expenses, interest, awards, judgments and penalties (including

 

13



 

reasonable attorneys’ fees and expenses) actually suffered or incurred by them (collectively, “ Losses ”), to the extent arising out of, or resulting from, (a) any ANV Liability or (b)  any breach by any member of the ANV Group of any provision of this Agreement or any other Transaction Document, unless such Transaction Document expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder.

 

Section 5.03          Indemnification of ANV .  Except as provided in any Transaction Document, ANV, each other member of the ANV Group and each of their respective officers, directors, employees and agents (collectively, the “ ANV Indemnified Parties ”) shall, from and after the Distribution Date, be indemnified and held harmless by ATUS from and against any and all Losses, to the extent arising out of, or resulting from, (a) any ATUS Liability or (b) any breach by any member of the ATUS Group of any provision of this Agreement or any other Transaction Document, unless such Transaction Document expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder.

 

Section 5.04          Limitations on Indemnification .

 

(a)           For all purposes of this Article V , “Losses” shall be net of (i) any recovery or benefit (including insurance and indemnification) payable to the Indemnified Party or any of its Affiliates in connection with the facts giving rise to the right of indemnification and, if the Indemnified Party or any of its Affiliates receives such recovery or benefit and payment from the Indemnifying Party, then the amount of such recovery or benefit, net of reasonable expenses incurred in obtaining such recovery or benefit, shall be paid to the Indemnifying Party; and (ii) any Tax Benefit actually realized by the Indemnified Party or any of its Affiliates in the taxable period in which the Loss occurred or in the two taxable periods immediately thereafter.

 

(b)           Each Party shall, and shall cause its respective Representatives to, take all reasonable steps to mitigate its Losses upon and after becoming aware of any event that would reasonably be expected to give rise to any Losses.  No Party shall be entitled to any payment, adjustment or indemnification more than once with respect to the same matter.

 

Section 5.05          No Right to Set-Off .  No Party shall have any right to set off any Losses under this Article V against any payments to be made by such Party pursuant to this Agreement or any other agreement between the Parties or their respective Affiliates, including any Transaction Document.

 

Section 5.06          Procedures for Indemnification .

 

(a)           An Indemnified Party shall (i) give prompt written notice to Indemnifying Party of any claim with respect to which it seeks indemnification ( provided that any delay or failure to so notify Indemnifying Party shall relieve Indemnifying Party of its obligations hereunder only to the extent, if at all, that it is actually prejudiced by reason of such delay or failure) and (ii) permit Indemnifying Party to assume the defense of such claim with counsel reasonably satisfactory to the Indemnified Party; provided that any Indemnified Party shall have the right to select and employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (A)

 

14



 

Indemnifying Party has agreed in writing to pay such fees or expenses, (B) Indemnifying Party shall have failed to assume the defense of such claim within a reasonable time after receipt of notice of such claim from such Indemnified Party and employ counsel reasonably satisfactory to such Indemnified Party, (C) the Indemnified Party has reasonably concluded (based upon advice of its counsel) that there may be legal defenses available to it or other Indemnified Parties that are different from or in addition to those available to Indemnifying Party, (D) in the reasonable judgment of any such Indemnified Party (based upon advice of its counsel), a conflict of interest may exist between such Indemnified Party and Indemnifying Party with respect to such claims (in which case, if such Indemnified Party notifies Indemnifying Party in writing that such Indemnified Party elects to employ separate counsel at the expense of Indemnifying Party, Indemnifying Party shall not have the right to assume the defense of such claim on behalf of such Person), in which case of such clauses (A)  through (D) , Indemnifying Party will pay the reasonable fees, disbursements or other charges of such additional counsel or counsels.  If the Indemnifying Party assumes the defense, the Indemnifying Party shall not have the right to settle such action without the consent of the Indemnified Party.  The Indemnifying Party shall not consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of an unconditional release from all liability in respect to such claim or litigation without the prior written consent of such Indemnified Party.  If such defense is not assumed by the Indemnifying Party, the Indemnifying Party will not be subject to any liability for any settlement made without its prior written consent, but such consent may not be unreasonably withheld, conditioned or delayed.

 

(b)           Notwithstanding anything to the contrary set forth in Section 5.06(a) :

 

(i)            ANV shall not have the right to assume the defense of an Action for which an ATUS Indemnified Party is entitled to indemnification pursuant to Section 5.02 on behalf of such ATUS Indemnified Party (without the prior written consent of such ATUS Indemnified Party) if (A) such Action is brought by or before a Governmental Authority in the United States of America, (B) such Action seeks an injunction or equitable relief against such ATUS Indemnified Party, or (C) such Action relates to or arises in connection with any criminal or quasi criminal proceeding; and

 

(ii)           ATUS shall not have the right to assume the defense of an Action for which an ANV Indemnified Party is entitled to indemnification pursuant to Section 5.03 on behalf of such ANV Indemnified Party (without the prior written consent of such ANV Indemnified Party) if (A) such Action is brought by or before a Governmental Authority in a member state of the European Union, (B) such Action seeks an injunction or equitable relief against such ANV Indemnified Party, or (C) such Action relates to or arises in connection with any criminal or quasi criminal proceeding.

 

Section 5.07          Nominal Defendant Cooperation .  The Parties agree that, from and after the date hereof (including after the date of the Distribution), if an Action is made against an Indemnified Party by any Person who is not the Indemnifying Party or an Affiliate of the Indemnifying Party with respect to which an Indemnified Party is a nominal defendant, then the Indemnifying Party shall use commercially reasonable efforts to cause such nominal defendant to be removed from such Action.

 

15



 

Section 5.08          Remedies .  Each of the Parties acknowledges and agrees that, notwithstanding anything herein to the contrary, (a) other than as provided in Section 11.12 , (i) the indemnification provisions set forth in this Article V shall be the sole and exclusive remedies of the Parties and the parties to the Local Conveyances, as applicable, for any breach of any Local Conveyance and for any failure to perform and comply with any covenant or agreement in this Agreement or in any Local Conveyance; (ii) none of the Parties, their respective Representatives or any other Person may bring a claim under any Local Conveyance; and (iii) any and all claims arising out of, resulting from, or in connection with, the ATUS Assets, the ATUS Liabilities, the ATUS Business, the ANV Assets, the ANV Liabilities, the ANV Business or the transactions contemplated in this Agreement must be brought under and in accordance with the terms of this Agreement; and (b) notwithstanding anything herein to the contrary, no breach of this Agreement or any Local Conveyance shall give rise to any right on the part of any Party or the parties to the Local Conveyances, as applicable, after the consummation of the transactions contemplated by this Agreement, to rescind this Agreement, any Local Conveyance or any of the transactions contemplated hereby or thereby.  Each Party shall cause its Representatives to comply with this Section 5.08 .

 

Section 5.09          Tax Indemnities .  The provisions of this Article V shall not apply with respect to Taxes (other than any Taxes that represent losses, claims or damages arising from any non-Tax claim) or Tax Contests, which shall be governed by the provisions of Article X.

 

ARTICLE VI

 

ACCESS TO INFORMATION; PRIVILEGE

 

Section 6.01          Provision of Corporate Records .  Other than in circumstances in which indemnification is sought pursuant to Article V or the Indemnification Agreement (in which event the provisions of such Article or Indemnification Agreement shall govern), and subject to appropriate confidentiality restrictions and restrictions for Privileged Information, after the Distribution Date, upon the prior written request by a Party for specific and identified information in the possession or control of the other Party or its Subsidiaries which relates to the requesting Party’s Group or its business, as the case may be, prior to the Distribution Date, such other Party shall provide, as soon as reasonably practicable following the receipt of such request, appropriate copies of such information (or the originals thereof if the Party making the request has a reasonable need for such originals).

 

Section 6.02          Retention of Records; Access to Information .  To facilitate the possible exchange of information pursuant to Section 6.01 , this Section 6.02 and the other applicable provisions of this Agreement, until the later of the seventh anniversary of the Distribution Date or the expiration of the relevant period of the applicable statute of limitations (including any extension thereof), each Party shall, and shall cause the other members of its Group to, retain the books and records and financial and operational data relating to the periods prior to the Distribution.  Other than in circumstances in which indemnification is sought pursuant to Article V or the Indemnification Agreement (in which event the provisions of such Article or Indemnification Agreement shall govern), and subject to appropriate confidentiality restrictions and restrictions for Privileged Information, upon reasonable notice, each Party shall afford the Representatives of the other Party reasonable access (including the right to make, at

 

16



 

such other Party’s expense, copies), during normal business hours, to the personnel, properties, books and records of such Party and its Subsidiaries insofar as such access is reasonably required by the other Party and relates to such other Party or the conduct of its business prior to the Effective Time.  Nothing in this Section 6.02  shall require any Party to (i) violate any agreement with any third party regarding the confidentiality of information relating to that third party or its business; provided , however , that in the event that a Party is required to disclose any such information, such Party shall use commercially reasonable efforts to seek to obtain such third party’s consent to the disclosure of such information; (ii) jeopardize any Privilege; or (iii) contravene any applicable Law or fiduciary duty.

 

Section 6.03          Witness Services .  At all times from and after the Distribution Date, each Party shall, and shall cause the members of its Group to, use commercially reasonable efforts to make available to the other Party, upon reasonable written request, its and its Group members’ officers, directors, employees and agents (taking into account the business demands of such individuals) as witnesses to the extent that such persons may reasonably be required to testify in connection with the prosecution or defense of any Action in which the requesting Party may from time to time be involved, except for Actions in which a Party or one or more members of its Group is adverse to the other Party or one or more members of its Group, with respect to which the provisions of Article V shall apply. A Party providing a witness to the other Party pursuant to this Section 6.03 shall be entitled to receive from the recipient of such witness services, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred.

 

Section 6.04          Privileged Matters .

 

(a)           Pre-Separation Services . The Parties recognize that legal and other professional services that have been and will be provided prior to the Effective Time have been and will be rendered for the collective benefit of each of the members of the ATUS Group and the ANV Group, and that each of the members of the ATUS Group and the ANV Group should be deemed to be the client with respect to such pre-separation services for the purposes of asserting all privileges, immunities, or other protections from disclosure which may be asserted under applicable Law, including attorney-client privilege, business strategy privilege, joint defense privilege, common interest privilege, and protection under the work-product doctrine (“ Privilege ”).  The Parties and their respective Group members shall have a shared Privilege with respect to all information subject to Privilege (“ Privileged Information ”) which relates to such pre-separation services.  For the avoidance of doubt, Privileged Information within the scope of this Section 6.04 includes services rendered by legal counsel retained or employed by any Party (or any other member of such Party’s respective Group), including outside counsel and in-house counsel.

 

(b)           Post-Separation Services .  The Parties recognize that certain legal and professional post-separation services will be rendered solely for the benefit of a member of the ATUS Group or of a member of the ANV Group, as the case may be, while other legal and professional post-separation services may be rendered with respect to Actions or other matters which involve members of both Groups. With respect to such post-separation services and related Privileged Information, the Parties agree as follows:

 

17



 

(i)            All Privileged Information relating to any Actions or other matters which involve members of both Groups shall be subject to a shared Privilege among the parties involved in the claims, proceedings, litigation, disputes, or other matters at issue.

 

(ii)           Except as otherwise provided in Section 6.04(b)(i) , Privileged Information relating to post-separation services provided solely to members of one Group shall not be deemed shared between the Parties; provided , that the foregoing shall not be construed or interpreted to restrict the right or authority of the Parties (x) to enter into any further agreement, not otherwise inconsistent with the terms of this Agreement, concerning the sharing of Privileged Information; or (y) otherwise to share Privileged Information without waiving any Privilege which could be asserted under applicable Law.

 

(c)           The Parties agree as follows regarding all Privileged Information with respect to which the Parties shall have a shared Privilege under Section 6.04(a)  or (b) :

 

(i)            Subject to Section 6.04(c)(ii)  and (iii) , no Party may, and each Party shall cause the members of its Group not to, waive, nor allege or purport to waive, any Privilege which could be asserted under any applicable Law, and in which a member of the Group of the other Party has a shared Privilege, without the written consent of such other Party, which shall not be unreasonably withheld, conditioned or delayed.

 

(ii)           In the event of any litigation or dispute between or among the Parties, or any other members of their respective Groups, neither internal nor external counsel for the members of any Group, including with regard to the transactions contemplated herein, shall be subject to disqualification.  In the event of any litigation or dispute between or among the Parties or any other members of their respective Groups, each Party agrees not to, and to cause the members of its Group not to, request disqualification of any employee of any Party from providing legal services to its employer on the basis that it was a former employee of the other Party.

 

(iii)          If a dispute arises between or among the Parties or their respective Subsidiaries regarding whether a Privilege should be waived to protect or advance the interest of any Party, each Party agrees that it shall negotiate in good faith, shall endeavor to minimize any prejudice to the rights of the other Party, and shall not unreasonably withhold consent to any request for waiver by the other Party.  Each Party specifically agrees that it shall not withhold consent to waiver for any purpose except to protect its own legitimate interests.

 

(iv)          Upon receipt by a Party or by any Subsidiary thereof of any subpoena, discovery or other request which arguably calls for the production or disclosure of Privileged Information subject to a shared Privilege or as to which the other Party has the sole right hereunder to assert a Privilege, or if a Party obtains knowledge that any of its or any of its Subsidiaries’ current or former directors, officers, agents or employees have received any subpoena, discovery or other requests which arguably calls for the production or disclosure of such Privileged Information, such Party shall promptly notify the other Party of the existence of the request and shall provide such other Party a reasonable opportunity to review the Privileged Information and to assert any rights such

 

18



 

other Party may have under this Section 6.04 or otherwise to prevent the production or disclosure of such Privileged Information.

 

(d)           The transfer of all information pursuant to this Agreement is made in reliance on the agreement of the Parties as set forth in this Section 6.04 , to maintain the confidentiality of Privileged Information and to assert and maintain any applicable Privilege.  The access to information being granted pursuant to Sections 6.01 , 6.02 and 6.05 , the agreement to provide witnesses and individuals pursuant to Section 6.03 , and the transfer of Privileged Information between the Parties and their respective Subsidiaries pursuant to this Agreement or any other Transaction Document shall not be deemed a waiver of any Privilege that has been or may be asserted under this Agreement or otherwise.

 

Section 6.05          Financial Statements and Accounting .

 

(a)           Each of ATUS and ANV agrees to provide the other Party and its auditors reasonable assistance and reasonable access to its and its Subsidiaries’ properties, books and records, other information and personnel set forth in this Section 6.05 , from the Effective Time until the completion of each Party’s respective audit for the fiscal year ending December 31, 2018, (i) in connection with the preparation and audit of each Party’s respective quarterly and annual financial statements for the fiscal year ended December 31, 2018, and (ii) to the extent reasonably necessary to respond (and for the limited purpose of responding) to any written request or official comment from a Governmental Authority;

 

(b)           So long as both of ATUS and ANV are controlled by (i) Patrick Drahi, his heirs or Persons directly or indirectly under his or their control or formed for his or their benefit or (ii) an Affiliate of Patrick Drahi, his heirs or Persons directly or indirectly under his or their control or formed for his or their benefit, each of ATUS and ANV agrees to provide to the other Party and its auditors reasonable assistance, including information reasonably requested, in connection with the preparation of any disclosure regarding related party transactions required to be included in each Party’s quarterly and annual financial statements;

 

(c)           Without limiting subsections (a) and (b) of this Section 6.05 , ANV shall provide all historical financial information reasonably requested by ATUS with respect to business operations related to (i) Altice Technical Services US Corp., (ii) i24 News US LLC, (iii) i24 News France S.A.S. and (iv) i24 News S.à r.l.

 

(d)           Except to the extent otherwise contemplated by the Transaction Documents, ATUS shall authorize and request its auditors to make reasonably available to ANV’s auditors the personnel performing its annual audits and work papers related thereto (subject to the execution of any reasonable and customary access letters that such party’s auditors may require in connection with such review of such work papers), in all cases within a reasonable time prior to ANV’s auditors’ opinion date, so that ANV’s auditors are able to perform the procedures they reasonably consider necessary to take responsibility for the work of ATUS’ auditors as it relates to ANV’s auditors’ report on ATUS’ financial statements, all within sufficient time to enable ANV to meet its timetable for the filing of its annual financial statements with the applicable Governmental Authority.

 

19


 

Section 6.06                              Ownership of Information .  Any information owned by one Party or any of its Subsidiaries that is provided to a requesting Party pursuant to this Article VI shall be deemed to remain the property of the providing party.  Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such information.

 

Section 6.07                              Confidentiality .  Notwithstanding any termination of this Agreement, the Parties shall hold, and shall cause each of the members of their respective Groups to hold, and shall each cause its and their other respective Representatives to hold, in strict confidence, and not to disclose or release or use, without the prior written consent of the other Party, any and all Confidential Information concerning the other Party; provided that the Parties may disclose, or may permit disclosure of, Confidential Information (i) to their respective auditors, attorneys, financial advisors, bankers and other appropriate consultants and advisors who have a need to know such information and are informed of their obligation to hold such information confidential to the same extent as is applicable to the Parties and in respect of whose failure to comply with such obligations, the applicable Party will be responsible, (ii) if the Parties or any member of their respective Groups are required or compelled to disclose any such Confidential Information by judicial or administrative process or by other requirements of Law or stock exchange rule, (iii) as required in connection with any legal or other proceeding by one Party against the other Party, or (iv) as necessary in order to permit a Party to prepare and disclose its financial statements, tax returns or other disclosures required by applicable Law, including the rules and regulations of any securities exchange such Party’s securities are traded on.  Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made pursuant to clause (ii) above, each Party, shall promptly notify the other of the existence of such request or demand and shall provide the other a reasonable opportunity to seek an appropriate protective order or other remedy, which such Parties will cooperate in obtaining.  In the event that such appropriate protective order or other remedy is not obtained, the Party whose Confidential Information is required to be disclosed shall or shall cause the other Party to furnish, or cause to be furnished, only that portion of the Confidential Information that is legally required to be disclosed and shall take commercially reasonable steps to ensure that confidential treatment is accorded such information.

 

Section 6.08                              Reimbursement .  Except to the extent otherwise contemplated by this Agreement or any other Transaction Document, a Party providing information or access to information to the other Party under this Article VI shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such information or access to such information.

 

Section 6.09                              Liability for Information Provided .  No Party shall have any Liability to the other Party in the event that any information exchanged or provided pursuant to this Article VI is found to be inaccurate, in the absence of intentional misconduct by the Party providing such information.

 

20



 

ARTICLE VII

 

CERTAIN OTHER MATTERS

 

Section 7.01                              Insurance .

 

(a)                                  ANV and ATUS agree to cooperate in good faith to provide for an orderly transition of the ANV/ATUS Shared Policies from the date hereof through the Effective Time. In no event shall ANV, any other member of the ANV Group or any ANV Indemnified Party have Liability or obligation whatsoever to any member of the ATUS Group in the event that any ANV/ATUS Shared Policy shall be terminated or otherwise cease to be in effect for any reason, shall be unavailable or inadequate to cover any Liability of any member of the ATUS Group for any reason whatsoever or shall not be renewed or extended beyond the current expiration date.

 

(b)                                  From and after the Effective Time, with respect to any losses, damages and other Liabilities incurred by any member of the ATUS Group prior to the Effective Time, ANV will provide ATUS with access to, and ATUS may make claims under, the ANV/ATUS Shared Policies in place immediately prior to the Effective Time (and any extended reporting for claims made Policies), but solely to the extent that such ANV/ATUS Shared Policies provided coverage for members of the ATUS Group or the ATUS Business prior to the Effective Time; provided that such access to, and the right to make claims under, such ATUS Shared Policies, shall be subject to the terms, conditions and exclusions of such ANV/ATUS Shared Policies, including any limits on coverage or scope, any deductibles, self-insured retentions and other fees and expenses, and shall be subject to the following additional conditions:

 

(i)                                      ATUS shall notify ANV, as promptly as practicable, of any claim made by ATUS pursuant to this Section 7.01(b) ;

 

(ii)                                   ATUS and the members of the ATUS Group shall indemnify, hold harmless and reimburse ANV and the members of the ANV Group for any deductibles, self-insured retention, fees, indemnity payments, settlements, judgments, legal fees, allocated claims expenses and claim handling fees, and other expenses incurred by ANV or any members of the ANV Group to the extent resulting from any access to, or any claims made by ATUS or any other members of the ATUS Group under, any ANV/ATUS Shared Policy pursuant to this Section 7.01(b) , whether such claims are made by ATUS or its employees; and

 

(iii)                                ATUS shall exclusively bear (and neither ANV nor any members of the ANV Group shall have any obligation to repay or reimburse ATUS or any member of the ATUS Group for) and shall be liable for all excluded, uninsured, uncovered, unavailable or uncollectible amounts of all such claims made by ATUS or any member of the ATUS Group under the ANV/ATUS Shared Policies as provided for in this Section 7.01(b) . In the event an insurance policy aggregate is exhausted, or believed likely to be exhausted, due to noticed claims, the ATUS Group, on the one hand, and the ANV Group, on the other hand, shall be responsible for their pro rata portion of the reinstatement premium, if any, based upon the losses of such Group submitted to insurance carriers (including any submissions prior to the Effective Time) of the applicable ANV/ATUS Shared Policy.  To the extent that the ANV Group or the ATUS Group is allocated more than its pro rata portion of such premium due to the timing of losses submitted to the insurance carrier of the applicable ANV/ATUS Shared Policy, the other Party shall promptly pay the first Party an amount so that each Group has been properly allocated its pro rata portion of the

 

21



 

reinstatement premium.  Subject to the following sentence, a Party may elect not to reinstate the policy aggregate.  In the event that a Party elects not to reinstate the policy aggregate, it shall provide prompt written notice to the other Party.  A Party which elects to reinstate the policy aggregate shall be responsible for all reinstatement premiums and other costs associated with such reinstatement.

 

(c)                                   Except as provided in Section 7.01(b) , from and after the Effective Time, neither ATUS nor any member of the ATUS Group shall have any rights to or under any of the Policies of ANV or any other member of the ANV Group.

 

(d)                                  All payments and reimbursements by ATUS pursuant to this Section 7.01 will be made within forty-five (45) days after ATUS’s receipt of an invoice therefor from ANV. ANV shall retain the exclusive right to control its Policies, including the right to exhaust, settle, release, commute, buyback or otherwise resolve disputes with respect to any of its Policies and to amend, modify or waive any rights under any such insurance policies and programs, notwithstanding whether any such policies or programs apply to any ATUS Liabilities and/or claims ATUS has made or could make in the future, and no member of the ATUS Group shall erode, exhaust, settle, release, commute, buyback or otherwise resolve disputes with ANV’s insurers with respect to any ANV/ATUS Shared Policy, or amend, modify or waive any rights under any such ANV/ATUS Shared Policies.  ATUS shall cooperate with ANV and share such information as is reasonably necessary in order to permit ANV to manage and conduct its insurance matters as ANV deems appropriate.  ANV shall use commercially reasonable efforts to obtain extended reporting for any claims made Policies or portions of Policies with claims made coverage features for acts or omissions by any member of the ATUS Group incurred prior to the Effective Time. For the avoidance of doubt, each Party and any member of its applicable Group has the sole right to settle or otherwise resolve third-party claims made against it or any member of its applicable Group covered under an applicable ANV/ATUS Shared Policy.

 

(e)                                   This Agreement shall not be considered as an attempted assignment of any ANV/ATUS Shared Policy or as a contract of insurance and shall not be construed to waive any right or remedy of any member of the ANV Group in respect of any ANV/ATUS Shared Policy.

 

(f)                                    ATUS does hereby, for itself and each other member of the ATUS Group, agree that no member of the ANV Group shall have any Liability whatsoever as a result of the ANV/ATUS Shared Policy and insurance practices of ANV and the members of the ANV Group as in effect at any time, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, or the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.

 

Section 7.02                              Bulk Sales Laws .  Each Party hereby waives compliance by each member of its Group with the requirements and provisions of the “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to any of the transactions contemplated in this Agreement.

 

Section 7.03                              Corporate Opportunities .  ANV shall, and shall cause its Affiliates to, comply with the terms of the Second Amended and Restated Certificate of Incorporation (as it

 

22



 

may be amended from time to time) applicable to it, including the provisions of Article V (Corporate Opportunities).

 

Section 7.04                              Further Actions .

 

(a)                                  Except as otherwise provided in this Agreement, the Parties shall, and shall cause their respective Subsidiaries to, use their commercially reasonable efforts to take, or cause to be taken, all appropriate action, to do, or cause to be done, and to assist and cooperate with the other Party in doing, all things necessary, proper or advisable under applicable Law to execute and deliver the Transaction Documents and such other documents and other papers as may be required to carry out the provisions of this Agreement and to consummate and make effective the transactions contemplated by this Agreement.

 

(b)                                  From time to time after the Distribution Date, without additional consideration, each Party shall, and shall cause its Subsidiaries to, execute and deliver such further instruments and take such other action as may be necessary or is reasonably requested by the other Party to make effective the transactions contemplated by this Agreement and the other Transaction Documents.  Without limiting the foregoing, upon reasonable request of a Party, the other Party shall, and shall cause its respective Subsidiaries to, execute, acknowledge and deliver all such further assurances, deeds, assignments, consequences, powers of attorney and other instruments and papers as may be required for the transfer of direct or indirect ownership of the applicable Transferred Assets, as contemplated by this Agreement.

 

ARTICLE VIII

 

DISPUTE RESOLUTION

 

Section 8.01                              Good Faith Officer Negotiation .   Subject to Section 8.04 and except if the relevant Transaction Document provides otherwise, either Party seeking resolution of any dispute, controversy or claim with respect to the other Party or member of the other Party’s Group arising out of or relating to this Agreement or any Transaction Document (including regarding the validity, interpretation, breach or termination of this Agreement or any Transaction Document) (each a “ Dispute ”), shall provide written notice thereof to the other Party (the “ Officer Negotiation Request ”).  Within thirty (30) days of the delivery of the Officer Negotiation Request, the Parties shall attempt to resolve the Dispute through good faith negotiation.  All such negotiations shall be conducted by members of senior management of each Party and who have authority to settle the Dispute. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.  If the Parties are unable for any reason to resolve a Dispute within thirty (30) days of receipt of the Officer Negotiation Request, and such thirty (30) day period is not extended by mutual written consent of the Parties, the Chief Executive Officers of the Parties shall enter into good faith negotiations in accordance with Section 8.02 .

 

Section 8.02                              CEO Negotiations .   If any Dispute is not resolved pursuant to Section 8.01 , the Party that delivered the Officer Negotiation Request shall provide written notice of such Dispute to the Chief Executive Officer of each Party (a “ CEO Negotiation Request ”). As soon as reasonably practicable following receipt of a CEO Negotiation Request,

 

23



 

the Chief Executive Officers of the Parties shall begin conducting good faith negotiations with respect to such Dispute. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. If the Chief Executive Officers of the Parties are unable for any reason to resolve a Dispute within sixty (60) days of receipt of a CEO Negotiation Request, and such sixty (60) day period is not extended by mutual written consent of the Parties, the Dispute shall be submitted to arbitration in accordance with Section 8.03 .

 

Section 8.03                              Arbitration .

 

(a)                                  In the event that a Dispute has not been resolved within sixty (60) days of the receipt of a CEO Negotiation Request in accordance with Section 8.02 , or within such longer period as the Parties may agree to in writing, except if the relevant Transaction Document provides otherwise, then such Dispute shall, upon the written request of a Party (the “ Arbitration Reques t”) be submitted to be finally resolved by binding arbitration pursuant to the then-current Rules of Arbitration of the International Court of Arbitration of the International Chamber of Commerce, except as modified herein (the “ Arbitration Rules ”).  The arbitration shall be held in (i) Paris, France or (ii) such other place as the Parties may mutually agree in writing.  The legal seat of the arbitration shall be New York, NY. Unless otherwise agreed by the Parties in writing, any Dispute to be decided pursuant to this Section 8.03 will be decided by binding arbitration (x) before a sole arbitrator if the amount in dispute, inclusive of all claims and counterclaims, totals less than $10,000,000; or (y) by a panel of three (3) arbitrators if the amount in dispute, inclusive of all claims and counterclaims, totals $10,000,000 or more.

 

(b)                                  The panel of three (3) arbitrators will be chosen as follows:  (i) within fifteen (15) days from the date of the receipt of the Arbitration Request, each Party will name an arbitrator who shall have such qualifications as the Parties may mutually agree from time to time; and (ii) the two (2) Party-appointed arbitrators will thereafter, within thirty (30) days from the date on which the second of the two (2) arbitrators was named, name a third, independent arbitrator who will act as chairperson of the arbitral tribunal.  In the event that either Party fails to name an arbitrator within fifteen (15) days from the date of receipt of the Arbitration Request, then upon written application by either Party, that arbitrator shall be appointed pursuant to the Arbitration Rules.  In the event that the two (2) Party-appointed arbitrators fail to appoint the third, then the third, independent arbitrator will be appointed pursuant to the Arbitration Rules.  If the arbitration will be before a sole independent arbitrator, then the sole independent arbitrator will be appointed by agreement of the Parties within fifteen (15) days of the date of receipt of the Arbitration Request.  If the Parties cannot agree to a sole independent arbitrator, then upon written application by either Party, the sole independent arbitrator will be appointed pursuant to the Arbitration Rules; provided that the arbitrator shall have such qualifications as the Parties may mutually agree from time to time.

 

(c)                                   The arbitrator(s) will have the right to award, on an interim basis, or include in the final award, any relief which it deems proper in the circumstances, including money damages (with interest on unpaid amounts from the due date), injunctive relief (including specific performance) and attorneys’ fees and costs; provided that the arbitrator(s) will not award any relief not specifically requested by the Parties and, in any event, will not award any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages

 

24



 

of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a claim by a Person who is not a member of the ANV Group or the ATUS Group). Upon selection of the arbitrator(s) following any grant of interim relief by a special arbitrator or court pursuant to Section 8.04 , the arbitrator(s) may affirm or disaffirm that relief, and the Parties will seek modification or rescission of the order entered by the court as necessary to accord with the decision of the arbitrator(s). The award of the arbitrator(s) shall be final and binding on the Parties, and may be enforced in any court of competent jurisdiction. The initiation of arbitration pursuant to this Article VIII will toll the applicable statute of limitations for the duration of any such proceedings.

 

Section 8.04                              Litigation and Unilateral Commencement of Arbitration .   Notwithstanding the foregoing provisions of this Article VIII , (a) a Party may seek preliminary provisional or injunctive judicial relief with respect to a Dispute without first complying with the procedures set forth in Section 8.01 , Section 8.02 and Section 8.03 if such action is reasonably necessary to avoid irreparable damage and (b) either Party may initiate arbitration before the expiration of the periods specified in Section 8.01 , Section 8.02 and/or Section 8.03 if such Party has submitted an Officer Negotiation Request, a CEO Negotiation Request and/or an Arbitration Request and the other Party has failed to comply with Section 8.01 , Section 8.02 and/or Section 8.03 in good faith with respect to such negotiation and/or the commencement and engagement in arbitration. In such event, the other Party may commence and prosecute such arbitration unilaterally in accordance with the Arbitration Rules.  Immediately following the issuance of any preliminary provisional or injunctive relief pursuant to clause (a), the Party seeking such relief will consent to the stay of any judicial proceedings pending the resolution of the Dispute pursuant to the procedures set forth in Section 8.01 , Section 8.02 and Section 8.03 .

 

Section 8.05                              Conduct During Dispute Resolution Process .   Unless otherwise agreed in writing, the Parties shall, and shall cause the respective members of their Groups to, continue to honor all commitments under this Agreement and each Transaction Document to the extent required by such agreements during the course of dispute resolution pursuant to the provisions of this Article VIII , unless such commitments are the specific subject of the Dispute at issue.

 

ARTICLE IX

 

DISCLAIMER

 

Section 9.01                              Disclaimer .   (a)  EACH OF THE PARTIES (ON BEHALF OF ITSELF AND EACH OTHER MEMBER OF ITS RESPECTIVE GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY TRANSACTION DOCUMENT, NO PARTY TO THIS AGREEMENT, ANY TRANSACTION DOCUMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, ANY TRANSACTION DOCUMENTS OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY, AND HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, AS TO THE ASSETS, BUSINESSES OR LIABILITIES CONTRIBUTED, TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR GOVERNMENTAL APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR

 

25



 

FREEDOM FROM ANY ENCUMBRANCES OF, AS TO NONINFRINGEMENT, VALIDITY OR ENFORCEABILITY OR ANY OTHER MATTER CONCERNING, ANY ASSETS OR BUSINESS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY ACTION OR OTHER ASSET OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY CONTRIBUTION, ASSIGNMENT, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF.  EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY TRANSACTION DOCUMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS (AND, IN THE CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD TITLE, FREE AND CLEAR OF ANY ENCUMBRANCE; AND (II) ANY NECESSARY CONSENTS OR GOVERNMENTAL APPROVALS ARE NOT OBTAINED OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

(b)                                  Each Party (on behalf of itself and each other member of its respective Group) further understands and agrees that if the disclaimer of express or implied representations and warranties contained in Section 9.01(a)  is held unenforceable or is unavailable for any reason under the Laws of any jurisdiction outside the United States or if, under the Laws of a jurisdiction outside the United States, any of the Parties or any other members of their respective Group are jointly or severally liable for any Liability allocated under this Agreement to a Party, then the Parties intend that, notwithstanding any provision to the contrary under the Laws of such foreign jurisdictions, the provisions of this Agreement (including the disclaimer of all representations and warranties, allocation of Liabilities among the Parties and their respective Subsidiaries, releases, indemnification and contribution of Liabilities) shall prevail for any and all purposes among the Parties and their respective Subsidiaries.

 

Section 9.02                              Limitation of Liability .  IN NO EVENT SHALL ANY PARTY OR ANY OTHER MEMBER OF ANY GROUP BE LIABLE TO THE OTHER PARTY OR ANY MEMBER OF THE OTHER GROUP FOR PUNITIVE, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES, INCLUDING LOSS OF FUTURE PROFITS, REVENUE OR INCOME, DIMINUTION IN VALUE OR LOSS OF BUSINESS REPUTATION OR OPPORTUNITY, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES EXCEPT TO THE EXTENT AWARDED BY A COURT OF COMPETENT JURISDICTION IN CONNECTION WITH A THIRD-PARTY CLAIM.

 

26



 

ARTICLE X

 

TAX MATTERS

 

Section 10.01                       Tax Indemnification .  ANV shall be liable for, and shall indemnify and hold harmless the ATUS Group from and against, any liability for Taxes of any member of the ANV Group or imposed with respect to the income, receipts, property, profits, wages, capital, net worth, employees or operations of any member of the ANV Group attributable to any Pre-Distribution Tax Period (including, for the avoidance of doubt, any withholding Taxes imposed on payments made by any member of the ATUS Group to any member of the ANV Group) (the “ ANV Taxes ”).  ATUS shall be liable for, and shall indemnify and hold harmless the ANV Group from and against, any liability for Taxes imposed  on any member of the ATUS Group or imposed with respect to the income, receipts, property, profits, wages, capital, net worth, employees or operations of any member of the ATUS Group attributable to any Pre-Distribution Tax Period (including, for the avoidance of doubt, any withholding Taxes imposed on payments made by any member of the ANV Group to any member of the ATUS Group) (the “ ATUS Taxes ”).

 

Section 10.02                       Tax Contests .  Each Party shall promptly notify the other Party in writing upon receipt by such Party or any of its Affiliates of a written communication from any Taxing Authority with respect to any pending or threatened audit, claim, dispute, suit, action, proposed assessment or other proceeding (a “ Tax Contest ”) concerning any Taxes for which the other Party may be liable pursuant to this Agreement.  In the case of any Tax Contest relating to ANV Taxes that is undertaken against a member of the ATUS Group, ATUS shall (i) use reasonable best efforts to keep ANV informed regarding the progress and substantive aspects of such Tax Contest, (ii) offer ANV a reasonable opportunity to comment before submitting to any Taxing Authority any written materials prepared or furnished in connection with such Tax Contest, and allow ANV to participate in any related meeting or telephonic conference with the applicable Taxing Authority and (iii) not settle or otherwise dispose of any item subject to such Tax Contest that could reasonably be expected to adversely affect the ANV Group without obtaining the prior written consent of ANV, which consent shall not be unreasonably withheld, conditioned or delayed.  In the case of any Tax Contest relating to ATUS Taxes that is undertaken against a member of the ANV Group, ANV shall (i) use reasonable best efforts to keep ATUS informed regarding the progress and substantive aspects of such Tax Contest, (ii) offer ATUS a reasonable opportunity to comment before submitting to any Taxing Authority any written materials prepared or furnished in connection with such Tax Contest, and allow ATUS to participate in any related meeting or telephonic conference with the applicable Taxing Authority and (iii) not settle or otherwise dispose of any item subject to such Tax Contest that could reasonably be expected to adversely affect the ATUS Group without obtaining the prior written consent of ATUS, which consent shall not be unreasonably withheld, conditioned or delayed.

 

Section 10.03                       Cooperation .  The Parties shall cooperate (and cause their respective Affiliates to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, in connection with Tax matters relating to the Parties and their Affiliates, including (i) preparation and filing of Tax returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any refund of Taxes, (iii) examinations of Tax returns, and (iv) any administrative or judicial

 

27



 

proceeding in respect of Taxes assessed or proposed to be assessed. Such cooperation shall include making all information and documents in their possession relating to the other Party and its Affiliates reasonably available to such other Party. Each Party shall also make available to the other Party, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Parties or their respective Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes. Any information or documents provided under this Section 10.03 shall be kept confidential by the Party receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax returns or in connection with any administrative or judicial proceedings relating to Taxes. In addition, in the event that a Party determines that the provision of any information or documents to the other Party could be commercially detrimental, violate any Law or agreement or waive any Privilege, the Parties shall use commercially reasonable efforts to permit each other’s compliance with its obligations under this Section 10.03 in a manner that avoids any such harm or consequence.

 

Section 10.04                       FIRPTA Certificate .  Prior to the Distribution Date, ATUS shall deliver to ANV a statement issued by ATUS, and dated not more than thirty (30) days prior to the Distribution Date, certifying that the shares of ATUS Common Stock do not constitute a U.S. real property interest pursuant to Treasury Regulations §§1.897-2(h) and 1.1445-5(b)(4)(iii).  ATUS shall provide notice of the issuance of such statement to the Internal Revenue Service pursuant to Treasury Regulation § 1.897-2(h)(2) on or before the thirtieth (30 th ) day after delivery of the statement to ANV.

 

ARTICLE XI

 

GENERAL PROVISIONS

 

Section 11.01                       Termination .  This Agreement may be terminated and the Separation and the Distribution may be abandoned at any time prior to the Distribution Date by and in the sole discretion of ANV.

 

Section 11.02                       Survival of Covenants .  Except as expressly set forth in this Agreement or any other Transaction Document, all covenants and agreements contained in this Agreement and each of the other Transaction Documents shall survive the Distribution and remain in full force and effect in accordance with their applicable terms.

 

Section 11.03                       Expenses .  Except as otherwise specified in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be borne by the Party incurring such costs and expenses.

 

Section 11.04                       Notices .  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and, in the case of delivery in person or by overnight mail, shall be deemed to have been duly given upon receipt) by delivery in person or overnight mail to the respective parties or delivery by electronic mail transmission

 

28



 

(providing confirmation of transmission) to the respective Parties.  Any notice sent by electronic mail transmission shall be deemed to have been given and received at the time of confirmation of transmission.  Any notice sent by electronic mail transmission shall be followed reasonably promptly with a copy delivered by overnight mail.  All notices, requests, claims, demands and other communications hereunder shall be addressed as follows, or to such other address or email address for a Party as shall be specified in a notice given in accordance with this Section 11.04 :

 

(a)                                  if to ANV:

 

Altice N.V.

Prins Bernhardplein 200

1097 JB Amsterdam

The Netherlands

Email:                                     jeremie.bonnin@altice.net

                                                                        natacha.marty@altice.net

Attention:                  Jérémie Bonnin

                                                                        Natacha Marty

 

(b)                                  if to ATUS:

 

Altice USA, Inc.

One Court Square West

Long Island City, NY 11101

Email:                                     david.connolly@alticeusa.com

Attention:                  David Connolly

 

with a copy to (which shall not constitute notice):

 

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022-6069

USA

Email:                                     spetepiece@shearman.com

daniel.litowitz@shearman.com

Attention:                  Scott Petepiece

Daniel Litowitz

 

Section 11.05                       Public Announcements .  From and after the Effective Time, the Parties shall consult with each other before issuing, and give each other the opportunity to review and comment upon, that portion of any press release or other public statements that relates to the transactions contemplated by this Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except: (a) as may be required by applicable Law or applicable stock exchange regulation, in which case the Party that is so required shall, to the extent legally permissible, consult with the other Party before issuing such press release or making such public statement; (b) for disclosures made that are substantially consistent with disclosure contained in any press release or public statement previously issued with the prior

 

29


 

written consent of the other Party; or (c) as may pertain to disputes between ATUS or any other member of the ATUS Group, on one hand, and any ANV or any other member of the ANV Group, on the other hand.

 

Section 11.06                       Severability .  If any provision of this Agreement shall be held to be illegal, invalid or unenforceable under any applicable Law, then such contravention or invalidity shall not invalidate the entire Agreement.  Such provision shall be deemed to be modified to the extent necessary to render it legal, valid and enforceable, and if no such modification shall render it legal, valid and enforceable, then this Agreement shall be construed as if not containing the provision held to be invalid, and the rights and obligations of the Parties shall be construed and enforced accordingly.

 

Section 11.07                       Entire Agreement; Construction .  This Agreement and the other Transaction Documents constitute the entire agreement of the Parties and their Affiliates with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, among the Parties with respect to the subject matter hereof and thereof.  In the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Transaction Document, each of this Agreement and the other Transaction Documents, as applicable, is to be interpreted and construed, if possible, so as to avoid or minimize such conflict, but, to the extent (and only to the extent) of such conflict, this Agreement shall prevail and control.

 

Section 11.08                       Assignment .  This Agreement may not be assigned by a Party without the consent of the other Party; provided that a Party may assign this Agreement or any of its rights and obligations hereunder to one or more of its Affiliates without the consent of the other Party provided that (a) no such assignment shall relieve the assignor of any of its obligations hereunder and (b) such rights shall be assigned back to the assigning Party if such Affiliate ceases to be an Affiliate of the assigning Party.  Any attempted assignment that is not in accordance with this Section 11.08 shall be null and void.

 

Section 11.09                       Amendment .  This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, each Party that expressly references the Section of this Agreement to be amended or (b) by a waiver in accordance with Section 11.10 .

 

Section 11.10                       Waiver .  Any Party may (a) extend the time for the performance of any of the obligations or other acts of the other Party; (b) waive any inaccuracies in the representations and warranties of the other Party contained herein or in any document delivered by the other Party pursuant to this Agreement; or (c) waive compliance with any of the agreements of the other Party or conditions to such obligations contained herein.  Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby.  Notwithstanding the foregoing, no failure or delay by any Party in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or future exercise of any other right hereunder.  Any waiver of any term or condition hereof shall not be construed as a waiver of any subsequent breach or as a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement.

 

30



 

Section 11.11                       No Third-Party Beneficiaries .  Except (a) as provided in Article V relating to Indemnified Parties and for the release under Section 5.01 of any Person provided therein and (b) as specifically provided in any Transaction Document, this Agreement shall be binding upon and inure solely to the benefit of, and be enforceable by, only the Parties and nothing herein, express or implied, is intended to, or shall confer upon, any other Person any right, benefit or remedy of any nature whatsoever, including any rights of employment for any specified period, under or by reason of this Agreement.

 

Section 11.12                       Specific Performance .  The Parties acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  Each Party agrees that, in the event of any breach or threatened breach by the other Party of any obligation contained in this Agreement, the non-breaching Party shall be entitled to (a) an order of specific performance to enforce the observance and performance of such obligation and (b) an injunction restraining such breach or threatened breach.  Each Party further agrees that the non-breaching Party shall not be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 11.12 , and each Party irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.

 

Section 11.13                       Governing Law .  This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without giving effect to any applicable principles of conflict of Laws that would cause the Laws of another state to otherwise govern this Agreement.

 

Section 11.14                       Waiver of Jury Trial .  EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION AMONG THE PARTIES DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.14 .

 

Section 11.15                       No Duplication; No Double Recovery .  Nothing in this Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement, obligation or recovery with respect to any matter arising out of or resulting from the same facts and circumstances (including with respect to the rights, entitlements, obligations and recoveries that may arise out of Article V ).

 

Section 11.16                       Mutual Drafting .  The Parties have participated jointly in the negotiation and drafting of this Agreement with the assistance of counsel and other advisors and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be

 

31



 

construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement or interim drafts of this Agreement.

 

Section 11.17                       Counterparts .  This Agreement may be executed in any number of counterparts and by different Parties in separate counterparts, and delivered by means of electronic mail transmission or otherwise, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

 

[ Signature page follows ]

 

32



 

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed as of the date first written above by its respective officers thereunto duly authorized.

 

 

ALTICE N.V.

 

 

 

 

 

By:

 

 

 

Name:

Dennis Okhuijsen

 

 

Title:

Authorized signatory

 

 

 

 

 

[Signature Page to Master Separation Agreement]

 



 

 

ALTICE USA, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

[Signature Page to Master Separation Agreement]

 



 

SCHEDULE 1.01

 

Transaction Documents

 

The following agreements have been or will be entered into in connection with the Separation:

 

1.                     Trademark License Agreement by and between Next Alt and ATUS

 

2.                     Amendment No. 2 to the Brand License and Services Agreement by and between Next Alt and ANV

 

3.                     Termination Agreement of Advising and Consulting Agreement by and between ATUS and ANV

 

4.                     Stockholders’ Agreement Termination Agreement by and among ANV, the ATUS and A4 S.A.

 

5.                     Stockholders’ Agreement by and among ATUS, Next Alt and A4 S.A.

 

6.                     Amended and Restated Stockholders and Registration Rights Agreement by and among ATUS, the Stockholders thereto and the other parties thereto

 

7.                     Stockholders Agreement by and between Next Alt and each of the following (either directly or through personal holding companies): Charlie Steward, Hakim Boubazine, Dexter Goei, Dennis Okhuijsen, Jérémie Bonnin, Jean-Luc Berrebi, Patrice Giami and Nicolas Rotkoff (collectively, the “ ATUS Executives ”)

 

8.                     Right of First Refusal Agreement Termination Agreement by and between ANV and each manager of ATUS, including the relevant ATUS Executives, who previously entered into a Right of First Refusal Agreement with ANV

 

9.                     Agreement and Plan of Merger, dated as of January 22, 2018, by and among CSC Holdings, LLC (“ CSC ”), Panacea Merger Sub LLC, Altice Technical Services US Corp. and Altice Technical Services B.V. (“ ATS B.V. ”)

 

10.              Amended and Restated Limited Liability Company Agreement of Altice Technical Services US, LLC by and among CSC, ATS B.V. and Altice Technical Services US, LLC

 

11.              LLC Unit Purchase Agreement, dated March 19, 2018, by and between CSC and ATS B.V.

 

12.              Stock Purchase Agreement by and between i24news B.V. and CVC 3 regarding the sale of all the capital stock of i24 US Corp.

 

13.              Stock Purchase Agreement by and between CVC 3 and ATUS regarding the sale of all the capital stock of i24 US Corp.

 



 

14.              Shares Purchase Agreement by and between SFR Presse and CVC 3 regarding the sale of all the capital stock of i24 news S.à r.l.

 

15.              Shares Purchase Agreement by and between CVC 3 and ATUS regarding the sale of all the capital stock of i24 news S.à r.l.

 

16.              Sale and Purchase Agreement by and between Altice Entertainment News & Sport SA and CVC 3 regarding the sale of all the capital stock of i24 News France S.A.S.

 

17.              Sale and Purchase Agreement by and between CVC 3 and ATUS regarding the sale of all the capital stock of i24 News France S.A.S.

 

18.              Proxy Agreement by and between Neptune Holding US LP and Next Alt

 

19.              Assignment and Assumption Agreement by and between CVC 3 and ATUS

 

20.              Third Amended and Restated Agreement of Limited Partnership of Neptune Holding US LP by and among Neptune Holding US LP, CVC 3 and the other Persons listed therein

 

21.              Amended and Restated Limited Liability Company Agreement of Neptune Holding US GP LLC by and between ATUS and Neptune Holding US GP LLC

 

22.              Indemnification Agreement, dated as of January 8, 2018, between ANV and ATUS

 


 

SCHEDULE 2.02(c)

 

Third Party Vendors

 

ATUS shall use commercially reasonable efforts to negotiate and execute a separate agreement with the third party vendors under the following AMI Vendor Contracts:

 

1.                     The Master Agreement, dated as of April 1, 2015, as amended, by and between Altice Management Europe and Sagemcom Broadband SA

 

2.                     Master Agreement for the Supply of Solutions and Associated Services, dated as of January 23, 2018, as amended, by and between Altice Management International, S.A. and Nagravision S.A.

 



 

SCHEDULE 4.04(g)(i)

 

Governmental Approvals

 

Approval by the following Governmental Authorities:

 

1.                     Federal Communications Commission

 

2.                     Department of Justice

 

3.                     Department of Public Service of New York

 

4.                     The Division of Telecommunications of New Jersey

 

5.                     Public Utilities Commission of California

 

6.                     Public Utilities Commission of Texas

 



 

SCHEDULE 4.04(g)(ii)

 

Governmental Authority Notices

 

Notice to the following Governmental Authorities:

 

1.                     New Mexico Public Regulation Commission

 

2.                     Louisiana Public Service Commission

 

3.                     Public Utilities Commission of Nevada

 

4.                     Mississippi Public Service Commission

 

5.                     North Carolina Utilities Commission

 

6.                     Public Utilities Commission of California (with respect to Video only)

 

7.                     State of Connecticut Public Utilities Regulatory Authority

 



 

SCHEDULE 7.01

 

ANV/ATUS Shared Policies

 

 

 

Type of Insurance

 

Lead Insurance 
Company

 

Policy Number

 

Policy Term

1.

 

Directors & Officers
Liability Insurance

 

AIG Europe Limited

 

SPRDP1700002

 

June 21, 2017 - June 21, 2018

2.

 

Commercial Property
Insurance

 

XL Insurance
America, Inc.

 

US00077299PR18A

 

January 1, 2018 - January 1, 2019

3.

 

Cyber/Network
Security/Privacy

 

National Union Fire
Insurance Company of
Pittsburgh, PA

 

06-880-26-11

 

August 31, 2016 - July 1, 2018

4.

 

Crime Insurance

 

National Union Fire
Insurance Company of
Pittsburgh, PA

 

06-880-26-10

 

August 31, 2016 - July 1, 2018

5.

 

Employee Benefit Plan
Fiduciary Liability
Insurance

 

National Union Fire
Insurance Company of
Pittsburgh, PA

 

06-880-26-09

 

August 31, 2016 - July 1, 2018

6.

 

Employment Practices
Liability Insurance

 

National Union Fire
Insurance Company of
Pittsburgh, PA

 

06-880-26-08

 

August 31, 2016 - July 1, 2018

7.

 

Special Risk (K&R)

 

Hiscox Insurance

 

HP16061/16

 

September 10, 2016 - August 31, 2019

8.

 

Commercial General
Liability

 

XL Insurance
America, Inc.

 

US00077296LI18A

 

January 1, 2018 - January 1, 2019

9.

 

Umbrella Liability

 

XL Insurance
America, Inc.

 

US00077297LI18A

 

January 1, 2018 - January 1, 2019

 




Exhibit 10.26

 

STOCKHOLDERS’ AGREEMENT

 

dated as of

 

[ · ] , 2018

 

by and among

 

ALTICE USA, INC.,

 

NEXT ALT S.À R.L.

 

and

 

A4 S.A.

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

ARTICLE I

 

 

 

 

 

DEFINITIONS

 

Section 1.1

Certain Definitions

2

Section 1.2

Other Terms

5

 

 

 

 

ARTICLE II

 

 

 

 

 

CORPORATE GOVERNANCE MATTERS

 

 

 

 

Section 2.1

Board Composition

6

Section 2.2

Director Nomination Rights

6

Section 2.3

Board Observer Rights

7

Section 2.4

Next Alt Agreement to Vote

8

 

 

 

 

ARTICLE III

 

 

 

 

 

APPROVAL AND CONSENT RIGHTS

 

 

 

 

Section 3.1

Approval and Consent Rights

9

Section 3.2

Significant Action Notification

11

 

 

 

 

ARTICLE IV

 

 

 

 

 

MISCELLANEOUS

 

 

 

 

Section 4.1

Corporate Power; Fiduciary Duty

11

Section 4.2

Related Party Transactions

11

Section 4.3

Expenses

11

Section 4.4

Governing Law

12

Section 4.5

Waiver of Jury Trial

12

Section 4.6

Notices

12

Section 4.7

Severability

13

Section 4.8

Entire Agreement

13

Section 4.9

Term and Termination

13

Section 4.10

Assignment; No Third-Party Beneficiaries

13

Section 4.11

Amendment; Waiver

14

Section 4.12

Specific Performance

14

Section 4.13

Interpretations

14

Section 4.14

Mutual Drafting

15

Section 4.15

Counterparts; Electronic Transmission of Signatures

15

 


 

STOCKHOLDERS’ AGREEMENT

 

STOCKHOLDERS’ AGREEMENT, dated [ · ], 2018 (this “ Agreement ”), by and among Altice USA, Inc., a Delaware corporation (the “ Company ”), Next Alt S.à r.l., a Luxembourg private company with limited liability (“ Next Alt ”), and A4 S.A., a Luxembourg public limited liability company controlled by the family of Patrick Drahi (“ A4 ”).  Each of the Company, Next Alt and A4 are referred to herein as a “ Party ” and together as the “ Parties ”.

 

W I T N E S S E T H:

 

WHEREAS, in connection with the initial public offering (the “ IPO ”) of shares of Class A common stock of the Company, par value $0.01 (“ Class A Common Stock ”), the Company, A4 and Altice N.V., a Dutch public company with limited liability ( naamloze vennootschap ) (“ Altice N.V. ”), entered into that certain Stockholders’ Agreement, dated June 27, 2017 (the “ Prior SHA ”);

 

WHEREAS, on January 8, 2018, Altice N.V. announced that it intended to effect a separation of the Company and Altice N.V. (the “ Separation ”) by means of a pro rata distribution in kind of substantially all of the shares of the Company owned directly or indirectly by Altice N.V. to the Altice N.V. shareholders (the “ Distribution ”);

 

WHEREAS, in connection with the Separation, the Company, A4 and Altice N.V. will terminate the Prior SHA effective as of the consummation of the Distribution;

 

WHEREAS, Next Alt, immediately following the consummation of the Distribution, will own [ · ] shares of Class A Common Stock and [ · ] shares of Class B common stock of the Company, par value $0.01 (“ Class B Common Stock ”), and A4 owns [1,000] shares of Class A Common Stock and [1,000] shares of Class B Common Stock, which, in the aggregate, will represent [ · ]% of the voting power of the issued and outstanding Company Common Stock; and

 

WHEREAS, the Company, Next Alt and A4 desire to set forth certain agreements that will govern the relationship between them as from the consummation of the Distribution.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1                                     Certain Definitions .  For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1 :

 

A4 Group ” means A4 and each Person that is an Affiliate of A4.

 



 

Action ” means any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any Governmental Entity or any arbitration or mediation tribunal.

 

Affiliate ” means, as to any Person, any other Person which, directly or indirectly, controls, or is controlled by, or is under common control with, such Person; provided , however , that none of the Company and its Subsidiaries shall be considered an Affiliate of a member of the PDR Group for purposes of this Agreement.

 

beneficially own ” means, with respect to Company Common Stock, having “beneficial ownership” of such stock for purposes of Rule 13d-3 or 13d-5 promulgated under the Exchange Act, without giving effect to the limiting phrase “within sixty days” set forth in Rule 13d-3(1)(i), including, for the avoidance of doubt, any shares of Company Common Stock over which a Person has a right to vote, through voting agreement, proxy or otherwise.  The terms “ beneficial owner ”, “ beneficial ownership ” and “ beneficially owned ” shall have correlative meanings.

 

Bylaws ” means the Amended and Restated Bylaws of the Company, as amended from time to time in accordance with the terms thereof and this Agreement.

 

Change of Control ” means (a) the sale, lease, conveyance, disposition, in one or a series of related transactions (other than a merger or consolidation), of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person or group of Persons (other than a member or members of the PDR Group) or (b) a merger, reorganization, recapitalization, combination or consolidation of, or any other transaction (including the purchase of the Company Securities) involving, the Company with any other Person after which a member or members of the PDR Group cease to beneficially own fifty percent (50%) or more of the voting power of the Company or the surviving entity in such transaction, as the case may be.

 

Charter ” means the Second Amended and Restated Certificate of Incorporation of the Company, as amended from time to time in accordance with the terms thereof and this Agreement.

 

Company Board ” means the board of directors of the Company.

 

Company Common Stock ” means, collectively, (i) the Class A Common Stock, (ii) the Class B Common Stock, (iii) the Class C common stock of the Company, par value $0.01, and (iv) any equity interest into which such shares of common stock set forth in clauses (i), (ii) or (iii) shall have been changed, or any equity interest resulting from any reclassification, recapitalization, reorganization, merger, consolidation, conversion, stock or other equity split or dividend or similar transactions with respect to such shares of common stock.

 

Company Securities ” means (i) the Company Common Stock, (ii) any preferred stock of the Company, (iii) any other common stock issued by the Company and (iv) any securities convertible into or exchangeable for, or options, warrants or other rights to

 



 

acquire, Company Common Stock or any other common or preferred stock issued by the Company.

 

control ” (including the terms “ controlled by ” and “ under common control with ”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract or otherwise.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

 

Expiration Date ” means the first date on which the PDR Group, in the aggregate, ceases to beneficially own at least twenty percent (20%) of the voting power of the outstanding Company Common Stock.

 

Governmental Entity ” means any United States federal, state or local, or foreign, international or supranational, government, court or tribunal, or administrative, executive, governmental or regulatory or self-regulatory body, agency or authority thereof.

 

Independent Director ” means a director who is independent under the New York Stock Exchange listing rules.

 

Law ” means any federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Entity.

 

Next Alt Group ” means Next Alt and each Person that is an Affiliate of Next Alt.

 

Organizational Documents ” means the Charter and the Bylaws.

 

PDR Group ” means (i) Next Alt, (ii) each member of the Next Alt Group, (iii) A4, (iv) each member of the A4 Group, (v) Patrick Drahi, his heirs or entities or trusts directly or indirectly under his or their control or formed for his or their benefit, and (vi) any Affiliate of Patrick Drahi, his heirs or entities or trusts directly or indirectly under his or their control or formed for his or their benefit.

 

Person ” means an individual, corporation, partnership, joint venture, association, trust, unincorporated organization, limited liability company, Governmental Entity or other entity.

 

Related Party Transactions Policy ” means the Related Party Transaction Policy of the Company in effect on the date hereof and as such policy may be amended or modified following the date hereof in accordance with the terms thereof and this Agreement.

 



 

Stepdown Date ” means a date on which the PDR Group, in the aggregate, ceases to beneficially own at least fifty per cent (50%) of the voting power of the outstanding Company Common Stock.

 

Step-up Date ” means a date on which, following the occurrence of a Stepdown Date, the PDR Group, in the aggregate, regains beneficial ownership of at least fifty per cent (50%) of the voting power of the outstanding Company Common Stock.

 

Subsidiary ” of any specified Person means any other Person of which such first Person owns (either directly or through one or more other Subsidiaries) voting securities or other voting ownership interests sufficient, together with any contractual rights, to elect at least a majority of the board of directors or other governing body of such Person (or, if there are no such voting interests, 50% or more of the equity interests of which is owned directly or indirectly by such first Person).

 

Section 1.2                                     Other Terms .  For purposes of this Agreement, the following terms have the meanings set forth in the sections indicated.

 

Term

 

Section

Agreement

 

Preamble

A4

 

Preamble

A4-Next Alt Designee

 

Section 2.2(a)

A4-Next Alt Director

 

Section 2.1(b)

Altice N.V.

 

Recitals

CEO

 

Section 3.1(i)

CFO

 

Section 3.1(i)

Class A Common Stock

 

Recitals

Class B Common Stock

 

Recitals

Company

 

Preamble

COO

 

Section 3.1(i)

Distribution

 

Recitals

IPO

 

Recitals

Next Alt

 

Preamble

Next Alt Designee

 

Section 2.2(a)

Next Alt Director

 

Section 2.1(a)

Observer

 

Section 2.3(a)

Party

 

Preamble

Prior SHA

 

Recitals

Separation

 

Recitals

Significant Action

 

Section 3.1

Significant Action Notice

 

Section 3.2

 



 

ARTICLE II

 

CORPORATE GOVERNANCE MATTERS

 

Section 2.1                                     Board Composition .

 

(a)                                  As of the date hereof, the Company Board consists of nine (9) members comprised of (i) four (4) director designees of Next Alt (collectively, with their successors and those two (2) director designees selected by Next Alt to fill the vacancies identified in subsection (iii) of this Section 2.1(a)  and their successors, the “ Next Alt Directors ”), (ii) three (3) directors that are Independent Directors designated by the Company and reasonably acceptable to Next Alt and (iii) two (2) vacancies that will be filled by director designees of Next Alt. From and after the date hereof, subject to Section 2.2 , the Company shall cause the Company Board to consist of a majority of Next Alt Directors.

 

(b)                                  Next Alt and A4 agree that one Next Alt Director shall, at all times, be designated by A4 (such Next Alt Director, the “ A4-Next Alt Director ”).

 

Section 2.2                                     Director Nomination Rights .

 

(a)                                  Until a Stepdown Date and, in the event of a Stepdown Date, from and after any Step-up Date until any subsequent Stepdown Date or the Expiration Date, in connection with any annual or special meeting of the stockholders of the Company at which directors shall be elected, Next Alt shall have the right to designate the number of directors specified in Section 2.1(a)(i)  and Section 2.1(a)(iii)  for nomination by the Company Board for election to the Company Board (the “ Next Alt Designees ”).  From a Stepdown Date until the earlier of a Step-up Date or the Expiration Date, Next Alt shall have the right to designate a number of Next Alt Designees equal to the total number of directors comprising the entire Company Board multiplied by the percentage of the voting power of the outstanding Company Common Stock beneficially owned, in the aggregate, by the PDR Group, rounding up in the case of any resulting fractional number of Next Alt Designees; provided that, at all times that Next Alt is entitled to designate at least one Next Alt Designee, at least one Next Alt Designee shall be designated by A4 (such Next Alt Designee the “ A4-Next Alt Designee ”); provided , however , notwithstanding anything to the contrary in this sentence, from a Stepdown Date until any Step-up Date, Next Alt shall not have the right to designate a number of Next Alt Designees equal to or exceeding 50% of directors comprising the entire Company Board.  Until the Expiration Date, Next Alt and A4, as applicable, shall have full authority and ability to nominate, elect and remove the Next Alt Designees; provided , however , that in no event shall Next Alt cause the A4-Next Alt Designee to be removed without the prior written consent of A4.  Neither Next Alt nor A4, as applicable, shall designate any person to be a Next Alt Designee who it believes does not meet the requirements for director nominees as set forth in the applicable policies of the Company relating to director qualification from time to time.  For the avoidance of doubt, current or former employment of any Next Alt Designee by Next Alt or any of its Subsidiaries or Affiliates or service by any such Next Alt Designee on the board of directors (or equivalent body) of Next Alt or any of its Subsidiaries or Affiliates shall not automatically disqualify such individual from serving on the Company Board as a Next Alt Designee.

 



 

(b)                                  The Company shall cause each Next Alt Designee to be included in the slate of nominees recommended by the Company Board to holders of Company Common Stock for election (including at any special meeting of stockholders held for the election of directors) and shall use its best efforts to cause the election of each such Next Alt Designee.

 

(c)                                   Until the Expiration Date, in the event that any Next Alt Director (including the A4-Next Alt Director) shall cease to serve as a director for any reason (whether as a result of resignation (other than a resignation in accordance with Section 2.2(d) ), removal or incapacity), then (i) in the case of a Next Alt Director (other than the A4-Next Alt Director), Next Alt will designate a substitute Next Alt Designee to fill such vacancy and (ii) in the case of the A4-Next Alt Director, A4 will designate a substitute A4-Next Alt Designee to fill such vacancy.

 

(d)                                  From a Stepdown Date until the earlier of a Step-up Date or the Expiration Date, Next Alt shall cause such number of Next Alt Directors then serving on the Company Board to resign from the Company Board (such resigning Next Alt Director to be replaced by nominees chosen by the Independent Directors) as is necessary so that the remaining number of Next Alt Directors then serving on the Board is equal to the number of Next Alt Designees that Next Alt is then entitled to designate for nomination pursuant to Section 2.2(a) ; provided , however , that in no event shall Next Alt cause the A4-Next Alt Director to resign without the prior written consent of A4.  Any resignation of a Next Alt Designee required to give effect to this Section 2.2(d)  will comply with the applicable rules of the New York Stock Exchange; provided that, for the avoidance of doubt, any such resignation need not be effective until the next annual meeting of the stockholders of the Company.

 

Section 2.3                                     Board Observer Rights.

 

(a)                                  In the event Patrick Drahi is not a member of the Company Board, until the Expiration Date, the Company shall permit one (1) representative of the PDR Group (the “ Observer ”) (i) to attend all (whether in person, telephonic or otherwise) of the meetings of the Company Board in a non-voting, observer capacity and (ii) to attend all meetings (whether in person, telephonic or otherwise) of any committee of the Company Board in a non-voting, observer capacity.  In addition, the Company shall provide to the Observer, concurrently with the members of the Company Board or the committees thereof, as applicable, and in the same manner, notice of such meeting and a copy of all materials provided to such members, including all materials provided to such members in connection with any action to be taken by the Company Board or the committees thereof, as applicable, without a meeting.

 

(b)                                  The Company shall use commercially reasonable efforts to have the Observer covered by the Company’s existing director and officer indemnity insurance on the same terms and conditions as such director and officer indemnity insurance provides for the coverage of any other persons covered thereby.

 

(c)                                   The Company shall indemnify the Observer to the same extent as a director under Article VII of the Charter, and the provisions thereof shall to the fullest extent possible apply mutatis mutandis to the Observer.

 



 

(d)                                  The Company shall reimburse the Observer for all reasonable and documented out-of-pocket expenses incurred in connection with the Observer’s attendance at meetings of the Company Board and any committees thereof, including travel, lodging and meal expenses.  All reimbursements payable by the Company pursuant to this Section 2.3 shall be paid to the Observer in accordance with the Company’s policies and practices with respect to director expense reimbursement then in effect.

 

Section 2.4                                     Next Alt Agreement to Vote.

 

(a)                                  Until the Expiration Date, Next Alt shall, and shall cause each of its Affiliates to, cause the shares of Company Common Stock beneficially owned by members of the Next Alt Group to (i) be present for quorum purposes at any meeting of the stockholders of the Company, (ii) vote in favor of the A4-Next Alt Designee and (iii) not vote in favor of the removal of the A4-Next Alt Director unless A4 shall have consented to such removal in writing; provided that if A4 shall request in writing the removal, with or without cause, of the A4-Next Alt Director, Next Alt shall, and shall cause each of its Affiliates to, vote all of the shares of Company Common Stock beneficially owned by members of the Next Alt Group that are entitled to vote in favor of such removal as promptly as practicable and take promptly all other actions to effect the foregoing.

 

(b)                                  If requested in writing by A4 to remove the A4-Next Alt Director, Next Alt shall either (i) promptly cause the Company to call a special meeting of the stockholders of the Company and Next Alt shall, and shall cause each of its Affiliates to, vote the shares of Company Common Stock beneficially owned by members of the Next Alt Group in favor of (A) the removal of the A4-Next Alt Director and (B) the election of A4-Next Alt Designee identified in such notice or (ii) promptly deliver a written consent to the Company removing the A4-Next Alt Director and electing the A4-Next Alt Designee identified in such notice.

 

(c)                                   Next Alt hereby appoints during the term of this Agreement A4 (and, upon an assignment of this Agreement by A4, such permitted assignee of A4) and any designee of A4, and each of them individually, its proxies and attorneys-in-fact, with full power of substitution and resubstitution, to vote the shares of Company Common Stock beneficially owned by Next Alt at any meeting of stockholders of the Company (or acting by written consent in lieu of a meeting), in accordance with the agreements contained in this Section 2.4 . This proxy and power of attorney is given to secure the performance by Next Alt of the agreements contained in this Section 2.4 . Next Alt shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy.  This proxy and power of attorney granted by Next Alt shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by Next Alt with respect to the shares of Company Common Stock beneficially owned by Next Alt. The power of attorney granted by Next Alt herein is a durable power of attorney and shall survive the dissolution or bankruptcy of Next Alt.  The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement.

 

ARTICLE III

 

APPROVAL AND CONSENT RIGHTS

 

Section 3.1                                     Approval and Consent Rights .  Until the Expiration Date,

 



 

notwithstanding anything to the contrary herein or in the Organizational Documents or in the governing documents of any of the Subsidiaries of the Company, without the prior written approval of Next Alt, the Company shall not (either directly or indirectly through an Affiliate or otherwise or through one or a series of related transactions) take, or permit a Subsidiary of the Company to take, any of the following actions (each, a “ Significant Action ”):

 

(a)                                  effect or consummate a Change of Control or publicly endorse a Change of Control (including by recommending any tender or exchange offer that would result in a Change of Control) or enter into any agreement or arrangement to effect or consummate a Change of Control;

 

(b)                                  make any material change in the scope of the Company’s or its Subsidiaries’ business from the scope of the Company’s or its Subsidiaries’ business immediately prior to the date of this Agreement;

 

(c)                                   acquire, dispose of or spin off any securities, assets or liabilities other than acquisitions or dispositions of assets or liabilities in the ordinary course of business consistent with past practice;

 

(d)                                  enter into any joint venture, recapitalization, reorganization or other strategic alliance with any other Person;

 

(e)                                   issue any Company Securities, except issuances pursuant to a compensation or similar plan approved by the Company Board or a duly authorized committee thereof;

 

(f)                                    incur, guarantee, assume, or refinance any indebtedness for borrowed money having a principal amount greater than $10 million (including debt obligations of any other Person existing at the time such other Person merged with or into or became a Subsidiary of, or substantially all of its business and assets were acquired by, the Company or a Subsidiary of the Company, and debt obligations secured by a lien encumbering any asset acquired by the Company or any such Subsidiary and including debt securities) or pledge or grant a security interest in any of the Company’s or its Subsidiaries’ assets having a value of more than $10 million (other than debt obligations incurred in the ordinary course of business by the Company and its Subsidiaries), or enter into any derivative transactions involving a notional amount greater than $10 million;

 

(g)                                   redeem, repurchase or otherwise acquire Company Common Stock or any warrants, options, rights or securities convertible into, exchangeable for or exercisable for, Company Common Stock, or redeem, repurchase or otherwise acquire or make any payment with respect to any share appreciation rights or phantom share plans (other than repurchases of Company Common Stock from employees upon termination of employment pursuant to terms of duly approved equity grants or pursuant to a cashless exercise of equity grants) or any re-pricing of duly approved equity awards;

 

(h)                                  amend (or approve or recommend amendment of) the Company’s or any of the Company’s Subsidiaries’ certificates of incorporation or bylaws (or other similar organizational documents);

 



 

(i)                                      elect, hire, replace or dismiss, or establish or modify the remuneration of, the Chief Executive Officer of the Company (or the equivalent successor position) (such person, the “ CEO ”), Chief Financial Officer of the Company (or the equivalent successor position) (such person, the “ CFO ”), or Chief Operating Officer of the Company (or the equivalent successor position) (such person, the “ COO ”), in each case, as elected or appointed by the Company Board;

 

(j)                                     elect, hire, replace or dismiss, or establish or modify the remuneration of, any officer of the Company that directly reports to the CEO, CFO or COO;

 

(k)                                  establish or modify the remuneration of directors on the Company Board;

 

(l)                                      decrease or increase the number of directors serving on the Company Board;

 

(m)                              approve (or adopt) any operating and capital budgets of the Company for each fiscal year commencing with the fiscal year ended December 31, 2018, or any material amendments thereto or deviations therefrom;

 

(n)                                  pay, declare or set aside any sums or other property for the payment of dividends on any Company Common Stock or make any other distributions in respect of any Company Common Stock or any warrants, options, rights or securities convertible into, exchangeable for or exercisable for, Company Common Stock;

 

(o)                                  other than as required by applicable Law, form, or delegate authority to, any new committee, or subcommittee thereof, of the Company Board, or delegate authority to any existing committee or subcommittee thereof not set forth in the committee’s charter or authorized by the Company Board prior to the date of this Agreement;

 

(p)                                  commence any liquidation, dissolution or voluntary bankruptcy, administration, recapitalization or reorganization in any form of transaction, make arrangements with creditors, or consent to the entry of an order for relief in any involuntary case, or take the conversion of an involuntary case to a voluntary case, or consent to the appointment of or take possession by a receiver, trustee or other custodian for all or substantially all of its or its Subsidiaries’ property, or otherwise seek the protection of any applicable bankruptcy or insolvency law;

 

(q)                                  amend, modify or supplement (or approve or recommend amendment, modification or supplement of) the Related Party Transactions Policy; and

 

(r)                                     enter into any agreement or arrangement to do any of the foregoing.

 

Section 3.2                                     Significant Action Notification .  In the event the Company wishes to take, or to cause a Subsidiary of the Company to take, a Significant Action, then the Company shall submit a written request (a “ Significant Action Notice ”) to Next Alt to approve such Significant Action at least 15 days (or such shorter period as approved in writing (including by email) by the Chairman of the board of managers of Next Alt) prior to the date on which the

 



 

Company wishes for such Significant Action to be effected.  A Significant Action Notice shall set forth in reasonable detail the material terms of the Significant Action to be undertaken and include any other information reasonably necessary in order to enable Next Alt to make an informed decision with respect to such Significant Action.

 

ARTICLE IV

 

MISCELLANEOUS

 

Section 4.1                                     Corporate Power; Fiduciary Duty .

 

(a)                                  The Company represents on behalf of itself, Next Alt represents on behalf of itself and A4 represents on behalf of itself, as follows:

 

(i)                                      each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and

 

(ii)                                   this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

 

(b)                                  Notwithstanding any provision of this Agreement, none of the Company, Next Alt or A4 shall be required to take or omit to take any act that would violate its fiduciary duties to any minority stockholders of the Company or any non-wholly-owned Subsidiary of Next Alt, A4 or the Company, as the case may be (it being understood that directors’ qualifying shares or similar interests will be disregarded for purposes of determining whether a Subsidiary is wholly owned).

 

Section 4.2                                     Related Party Transactions .  All Related Party Transactions (as defined in the Related Party Transactions Policy) shall be governed by the Related Party Transactions Policy. Any amendments to or modifications or terminations of or material waivers, consents or elections under any Related Party Transactions, shall require the consent of the Audit Committee of the Company Board, subject to and consistent with the Related Party Transactions Policy.

 

Section 4.3                                     Expenses .  Except as otherwise specified in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be borne by the Party incurring such costs and expenses.

 

Section 4.4                                     Governing Law .  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any applicable principles of conflict of laws that would cause the Laws of another State to otherwise govern this Agreement.  The Parties agree that any Action seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against any party

 


 

or any of its Affiliates) shall be heard and determined exclusively in the Delaware Court of Chancery; provided , however , that if the Delaware Court of Chancery does not have jurisdiction over such Action, such Action shall be heard and determined exclusively in the Superior Court of the State of Delaware (Complex Commercial Division); provided , further , that if subject matter jurisdiction over the matter that is the subject of the Action is vested exclusively in the courts of the United States of America, such Action shall be heard in the United States District Court for the District of Delaware.  Consistent with the preceding sentence, each of the Parties hereby (i) submits to the exclusive jurisdiction of such courts for the purpose of any Action arising out of or relating to this Agreement brought by any Party; (ii) agrees that service of process will be validly effected by sending notice in accordance with Section 4.6 ; (iii) irrevocably waives, and agrees not to assert by way of motion, defense, or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement or the transactions contemplated by this Agreement may not be enforced in or by any of the above named courts; and (iv) agrees not to move to transfer any such Action to a court other than any of the above-named courts.

 

Section 4.5                                     Waiver of Jury Trial .  EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION AMONG THE PARTIES DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

Section 4.6                                     Notices .  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and, in the case of delivery in person or by overnight mail, shall be deemed to have been duly given upon receipt) by delivery in person or overnight mail to the respective parties or delivery by electronic mail transmission (providing confirmation of transmission) to the respective Parties.  Any notice sent by electronic mail transmission shall be deemed to have been given and received at the time of confirmation of transmission.  Any notice sent by electronic mail transmission shall be followed reasonably promptly with a copy delivered by overnight mail.  All notices, requests, claims, demands and other communications hereunder shall be addressed as follows, or to such other address or email address for a Party as shall be specified in a notice given in accordance with this Section 4.6 :

 

If to Next Alt, to:

 

Next Alt S.à r.l.

5, rue Eugène Ruppert

L-2453 Luxembourg

Grand Duchy of Luxembourg

 



 

Attention: Jean-Luc Berrebi
Email:
            jean-luc.berrebi@yafit.co

 

If to A4, to:

 

A4 S.A.

5, rue Eugène Ruppert

L-2453 Luxembourg

Grand Duchy of Luxembourg

Attention: Jérémie Bonnin
 Email:          Jeremie.Bonnin@altice.net

 

If to the Company, to:

 

Altice USA, Inc.

One Court Square West

Long Island City, NY 11101

Attention:  David Connolly

Email:  david.connolly@alticeusa.com

 

Section 4.7                                     Severability .  If any provision of this Agreement shall be held to be illegal, invalid or unenforceable under any applicable Law, then such contravention or invalidity shall not invalidate the entire Agreement.  Such provision shall be deemed to be modified to the extent necessary to render it legal, valid and enforceable, and if no such modification shall render it legal, valid and enforceable, then this Agreement shall be construed as if not containing the provision held to be invalid, and the rights and obligations of the Parties shall be construed and enforced accordingly.

 

Section 4.8                                     Entire Agreement .  This Agreement constitutes the entire agreement, and supersedes all other prior agreements and understandings (both written and oral), among the Parties with respect to the subject matter hereof and thereof.

 

Section 4.9                                     Term and Termination .  The covenants, obligations and other agreements contained in this Agreement shall continue until such time as they are fully performed or satisfied in accordance with their terms, or are no longer required to be performed or satisfied, as agreed in writing by the Parties; provided that no covenant, obligation or other agreement shall be considered to be performed or satisfied to the extent of any breach of such covenant, obligation or other agreement.

 

Section 4.10                              Assignment; No Third-Party Beneficiaries .  This Agreement may not be assigned by operation of law or otherwise without the express written consent of the Parties, except that Next Alt or A4 may assign their respective rights and obligations to any member of the PDR Group.  This Agreement is for the sole benefit of the Parties to this Agreement and their permitted successors and assigns and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable

 



 

right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.  Any purported assignment in breach of this Section 4.10 shall be null and void.

 

Section 4.11                              Amendment; Waiver .  No provision of this Agreement may be amended or modified except by a written instrument signed by all the Parties to such agreement.  Each of Next Alt, A4 and the Company may, in its sole discretion, waive any and all rights granted to it in this Agreement; provided , that no waiver by any Party of any provision hereof shall be effective unless explicitly set forth in writing and executed by the Party so waiving.  The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other subsequent breach.

 

Section 4.12                              Specific Performance .  The Parties acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  Each Party agrees that, in the event of any breach or threatened breach by any other Party of any obligation contained in this Agreement, a non-breaching Party shall be entitled to (a) an order of specific performance to enforce the observance and performance of such obligation and (b) an injunction restraining such breach or threatened breach.  Each Party further agrees that the non-breaching Party shall not be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 4.12 , and each Party irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.

 

Section 4.13                              Interpretations .  When a reference is made in this Agreement to an Article, Section or Schedule, such reference shall be to an Article, Section or Schedule to this Agreement unless otherwise indicated.  The words “include” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.”  Any references in this Agreement to “the date hereof” refers to the date of execution of this Agreement.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  References to “this Agreement,” “hereof,” “herein,” and “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement and include any schedules, annexes, exhibits or other attachments to this Agreement.  The word “or” shall be deemed to mean “and/or.”  The words “writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.  When a reference is made to Law, such reference means any such Law as amended, modified, codified or reenacted, in whole or in part, including rules and regulations promulgated thereunder.  When reference is made to a contract (including this Agreement), document, or instrument, such reference is to such contract, document or instrument as amended or modified in accordance with the terms thereof and, if applicable, the terms hereof. References to a Person are also to its permitted successors and assigns.

 



 

Section 4.14                              Mutual Drafting .  The Parties have participated jointly in the negotiation and drafting of this Agreement with the assistance of counsel and other advisors and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement or interim drafts of this Agreement.

 

Section 4.15                              Counterparts; Electronic Transmission of Signatures .  This Agreement may be executed in any number of counterparts and by different Parties in separate counterparts, and delivered by means of electronic mail transmission or otherwise, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

 

[ The remainder of this page has been intentionally left blank; the next page is the signature page. ]

 



 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the date first written above by their respective duly authorized officers.

 

 

ALTICE USA, INC.

 

 

 

By:

 

 

 

Name

 

 

Title:

 

[Signature Page to Stockholders Agreement]

 



 

 

NEXT ALT S.À R.L.

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

[Signature Page to Stockholders Agreement]

 



 

 

A4 S.A.

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

[Signature Page to Stockholders Agreement]

 




Exhibit 21.1

 

LIST OF SUBSIDIARIES OF ALTICE USA, INC.

 

Name of Subsidiary

 

Jurisdiction of Incorporation or Organization

1111 Stewart Corporation

 

Delaware

4Connections LLC

 

New Jersey

a4 Media and Data Solutions, LLC

 

Delaware

A R H, LTD.

 

Colorado

doing business as Suddenlink Communications - CO

 

Colorado, West Virginia

A-R Cable Services — NY, Inc.

 

New York

Altice Media Solutions LLC

 

Delaware

Altice Real Estate Corporation

 

New York

Altice Technical Services US, LLC

 

Delaware

Altice US Finance I Corporation

 

Delaware

Altice USA Employee Disaster Relief Fund

 

Delaware

Altice, USA, Inc.

 

Delaware

doing business as Altice

 

New York

doing business as Altice USA

 

New York

Altice USA Wireless, Inc.

 

Delaware

ATS Home Security Installers, Inc.

 

Delaware

Audience Partners Canada, Inc.

 

Canada

Audience Partners, LLC

 

Pennsylvania

Audience Partners Worldwide LLC

 

Delaware

A-R Cable Services - NY, Inc.

 

New York

Cable Systems, Inc.

 

Kansas

doing business as Suddenlink Communications

 

Kansas, West Virginia

Cablevision Lightpath CT LLC

 

Delaware

Cablevision Lightpath NY LLC

 

Delaware

Cablevision Lightpath, Inc.

 

Delaware

Cablevision NYI L.L.C.

 

Delaware

Cablevision Of Brookhaven, Inc.

 

Delaware

 



 

Cablevision Of Hudson County, LLC

 

Delaware

Cablevision Of Litchfield, Inc.

 

Delaware

Cablevision Of Monmouth, LLC

 

Delaware

Cablevision Of New Jersey, LLC

 

Delaware

Cablevision Of Newark

 

New York

Cablevision Of Oakland, LLC

 

Delaware

Cablevision of Ossining Limited Partnership

 

Massachusetts

Cablevision Of Paterson, LLC

 

Delaware

doing business as Cablevision of Allamuchy

 

New Jersey

Cablevision of Rockland/Ramapo, LLC

 

Delaware

Cablevision Of Southern Westchester, Inc.

 

New York

Cablevision Of Wappingers Falls, Inc.

 

Delaware

Cablevision Of Warwick, LLC

 

Delaware

Cablevision Systems Brookline Corporation

 

Delaware

Cablevision Systems Corporation

 

Delaware

Cablevision Systems Dutchess Corporation

 

New York

Cablevision Systems East Hampton Corporation

 

New York

Cablevision Systems Great Neck Corporation

 

New York

Cablevision Systems Huntington Corporation

 

New York

 Cablevision Systems Islip Corporation

 

New York

Cablevision Systems Long Island Corporation

 

New York

Cablevision Systems New York City Corporation

 

Delaware

 



 

Cablevision Systems Suffolk Corporation

 

New York

Cablevision Systems Westchester Corporation

 

New York

Cebridge Acquisition, L.P.

 

Delaware

doing business as Cebridge Connections

 

Arkansas, North Carolina, Ohio, Virginia

doing business as Cebridge Connections OK

 

Oklahoma

doing business as Suddenlink Communications

 

Arkansas, California, Delaware, Louisiana, Mississippi, Missouri, New Mexico, North Carolina, Oklahoma, Texas

doing business as Suddenlink Communications VI

 

Kentucky

doing business as Suddenlink Media

 

Arkansas, California, Delaware, Louisiana, Mississippi, Missouri, New Mexico, North Carolina, Oklahoma, Texas

Cebridge Acquisition, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware, Kentucky, Ohio, Virginia, West Virginia

doing business as Suddenlink Media

 

Ohio, Virginia, West Virginia

doing business as Suddenlink Media I

 

Kentucky

Cebridge Connections Finance Corp.

 

Delaware

doing business as Suddenlink Communications

 

Delaware

Cebridge Connections, Inc.

 

Delaware

doing business as Suddenlink Communications

 

Delaware

Cebridge Corporation

 

Delaware

doing business as Suddenlink Communications

 

Delaware

Cebridge General, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware

Cebridge Limited, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware

 



 

Cebridge Telecom CA, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware, California

Cebridge Telecom General, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware

Cebridge Telecom ID, LLC

 

Delaware

doing business as Suddenlink Communications

 

Idaho

Cebridge Telecom IN, LLC

 

Delaware

doing business as Suddenlink Communications

 

Indiana

Cebridge Telecom KS, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware, Kansas

Cebridge Telecom KY, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware

doing business as Suddenlink Communications V

 

Kentucky

Cebridge Telecom LA, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware

doing business as Suddenlink Communications LA

 

Louisiana

doing business as Suddenlink LA

 

Louisiana

Cebridge Telecom Limited, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware

Cebridge Telecom MO, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware, Missouri

Cebridge Telecom MS, LLC

 

Delaware

 



 

doing business as Suddenlink Communications

 

Delaware, Mississippi

Cebridge Telecom NC, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware, North Carolina

doing business as Cox Business Services

 

North Carolina

doing business as Cox Communications

 

North Carolina

Cebridge Telecom NM, LLC

 

Delaware

doing business as Suddenlink Communications

 

New Mexico

Cebridge Telecom OH, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware, Ohio

Cebridge Telecom OK, LLC

 

Oklahoma

doing business as Suddenlink Communications

 

Delaware

doing business as Suddenlink Communications OK

 

Oklahoma

doing business as Cebridge Communications Telecom

 

Oklahoma

Cebridge Telecom TX, L.P.

 

Delaware

doing business as Suddenlink Communications

 

Delaware

Cebridge Telecom VA, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware, Virginia

Cebridge Telecom WV, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware, West Virginia

doing business as Cebridge Connections

 

West Virginia

Cequel Capital Corporation

 

Delaware

Cequel Communications Access Services, LLC

 

Delaware

Cequel Communications Holdco, LLC

 

Delaware

Cequel Communications Holdings I, LLC

 

Delaware

Cequel Communications Holdings II, LLC

 

Delaware

Cequel Communications Holdings, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware

Cequel Communications II, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware

Cequel Communications III, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware

Cequel Communications, LLC

 

Delaware

doing business as Suddenlink Communications

 

Delaware, Missouri

Cequel Corporation

 

Delaware

Cequel III Communications I, LLC

 

Delaware

doing business as Suddenlink Communications

 

California, Idaho, Ohio, Texas, West Virginia

doing business as Cebridge Connections

 

Delaware, Idaho, Texas, Virginia, West Virginia

doing business as Suddenlink Communications IV

 

Kentucky

doing business as Suddenlink Communications VI

 

Louisiana

Cequel III Communications II, LLC

 

Delaware

doing business as Suddenlink Communications

 

Arkansas, Delaware, Indiana, Missouri, North Carolina, Ohio, West Virginia

doing business as Cebridge Connections

 

Arkansas, Delaware, Illinois, Indiana, Pennsylvania, Virginia, West Virginia

doing business as Suddenlink Communications II

 

Illinois, Kentucky

Cequel Wireless, LLC

 

Delaware

Classic Cable of Lousiana, L.L.C.

 

Louisiana

doing business as Classic Cable

 

Louisiana

doing business as Correctional Cable

 

Louisiana

doing business as Suddenlink Communications IV

 

Louisiana

 



 

Classic Cable of Oklahoma, Inc.

 

Delaware

doing business as Cebridge Connections

 

Delaware, Oklahoma

doing business as Suddenlink Communications

 

Delaware

doing business as Cable Network Advertising

 

Oklahoma

doing business as Correctional Cable

 

Oklahoma

doing business as Suddenlink Communications II

 

Oklahoma

Classic Cable, Inc.

 

Delaware

doing business as Suddenlink Communications

 

Delaware

Classic Communications, Inc.

 

Delaware

doing business as Cebridge Connections, Inc.

 

Delaware

doing business as Suddenlink Communications

 

Delaware

doing business as Cebridge Connections, Inc.

 

Texas

Coram Route 112 Corporation

 

Delaware

CSC Acquisition Corporation

 

Delaware

CSC Acquisition-MA, Inc.

 

Delaware

CSC Acquisition-NY, Inc.

 

New York

CSC Gateway, LLC

 

Delaware

CSC Holdings, LLC

 

Delaware

CSC Investments LLC

 

Delaware

CSC MVDDS LLC

 

Delaware

CSC NASSAU II, LLC

 

Delaware

CSC Optimum Holdings, LLC

 

Delaware

CSC T Holdings I, INC.

 

Delaware

CSC T Holdings II, INC.

 

Delaware

CSC T Holdings III, INC.

 

Delaware

CSC T Holdings IV, INC.

 

Delaware

CSC Technology, LLC

 

Delaware

CSC TKR, LLC

 

Delaware

doing business as Cablevision of Elizabeth

 

New Jersey

doing business as Cablevision of Hamilton

 

New Jersey

doing business as Cablevision of Morris

 

New Jersey

doing business as Cablevision of Raritan Valley

 

New Jersey

CSC Transport II, Inc.

 

Delaware

CSC Transport III, Inc.

 

Delaware

CSC Transport, Inc.

 

Delaware

CSC Wireless, LLC

 

Delaware

CSC Wireless NY, LLC

 

Delaware

CSC VT, Inc.

 

Vermont

DTV Norwich LLC

 

Delaware

Friendship Cable Of Arkansas, Inc.

 

Texas

doing business as Cable Network Advertising

 

Arkansas

doing business as Cebridge Connections

 

Arkansas, Texas

doing business as Classic Cable

 

Arkansas

doing business as Classic Communications

 

Arkansas, Missouri

doing business as Correctional Cable

 

Arkansas, Missouri, Texas

doing business as Friendship Cable

 

Arkansas

 



 

doing business as Suddenlink Communications

 

Arkansas, Missouri, Texas

doing business as Suddenlink Communications V

 

Arkansas

Friendship Cable Of Texas, Inc.

 

Texas

doing business as Suddenlink Communications

 

California, Indiana, New Jersey, Ohio, Texas, West Virginia, Wisconsin

doing business as Cebridge Connections

 

Colorado, Pennsylvania, Texas

doing business as Correctional Cable

 

Colorado, Illinois, Indiana, Iowa, Kentucky, Maryland, Michigan, Montana, New York, North Carolina, North Dakota, Ohio, Pennsylvania, Tennessee, Texas, Virginia, West Virginia, Wisconsin

doing business as Suddenlink Communications I

 

Colorado, Illinois, Kentucky, Louisiana, Michigan, Tennessee

doing business as Classic Cable

 

Indiana, Kentucky, North Carolina, Pennsylvania, Virginia, West Virginia

doing business as Classic Communications

 

Indiana, Kentucky, North Carolina, Pennsylvania, West Virginia

doing business as Cable Network Advertising

 

Kentucky, North Carolina, Pennsylvania, Texas, Virginia, West Virginia

doing business as Correctional Cable TV

 

New Jersey

Friendship Cable of Texas

 

Texas

Frowein Road Corporation

 

Delaware

Hornell Television Services, Inc.

 

New York

doing business as Charter Communications

 

New York

doing business as Suddenlink Communications

 

West Virginia

i24 News France

 

France

i24 News S.a. r.l.

 

Luxenberg

i24 US Corp

 

Delaware

I24 US, LLC

 

Delaware

Kingwood Holdings, LLC

 

Delaware

Kingwood Security Services, LLC

 

Delaware

doing business as Suddenlink Security

 

Arizona, Arkansas, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, Ohio, Texas, West Virginia

doing business as Correctional Cable

 

Nevada

Lightpath VOIP, LLC

 

Delaware

Mercury Voice and Data, LLC

 

Delaware

doing business as Suddenlink Communications

 

Arizona, California, Delaware, Missouri, Nevada

MSGVN LLC

 

Delaware

N12N LLC

 

Delaware

Nes 12 Company

 

New York

doing business as 12 Long Island

 

New York

News 12 Connecticut LLC

 

Delaware

News 12 Networks LLC

 

Delaware

News 12 New Jersey Holding LLC

 

Delaware

News 12 New Jersey II Holding LLC

 

Delaware

News 12 New Jersey LLC

 

Delaware

News 12 The Bronx Holding LLC

 

Delaware

News 12 The Bronx, L.L.C.

 

Delaware

 



 

News 12 Traffic and Weather LLC

 

Delaware

News 12 Varsity Network LLC

 

Delaware

News 12 Westchester LLC

 

Delaware

Newsday Holdings LLC

 

Delaware

Newsday LLC

 

Delaware

NMG Holdings, INC.

 

Delaware

NPG Cable, LLC

 

Delaware

doing business as Suddenlink Communications

 

Arizona, California, Delaware, Missouri, Nevada

NPG DIGITAL PHONE, LLC

 

Delaware

doing business as Suddenlink Communications

 

Arizona, California, Delaware, Missouri

Ntelligis Holdings, LLC

 

Delaware

NY Interconnect, LLC

 

Delaware

NY OV LLC

 

Delaware

ORBIS1, L.L.C.

 

Louisiana

OV LLC

 

Delaware

Petra Cablevision Corp.

 

New York

Princeton Video Image Israel, Ltd.

 

Israel

Samson Cablevision Corp.

 

New York

SL3TV, LLC

 

Delaware

Suffolk Cable Corporation

 

New York

Suffolk Cable Of Shelter Island, Inc.

 

New York

Suffolk Cable Of Smithtown, Inc.

 

New York

TCA Communications, L.L.C.

 

Texas

doing business as Suddenlink Communications

 

Arkansas, Texas

Telerama, Inc.

 

Ohio

The New York Interconnect L.L.C.

 

Delaware

Tristate Digital Group LLC

 

Delaware

Universal Cable Holdings, Inc.

 

Delaware

doing business as Suddenlink Communications

 

Arizona, California, Colorado, Delaware, Illinois, Indiana, Maryland, Nebraska, New Jersey, Ohio, Tennessee, Texas, Washington, West Virginia

doing business as Suddenlink Communications III

 

Kentucky, Louisiana, Oklahoma

doing business as Correctional Cable

 

Nebraska, Texas

doing business as Correctional Cable TV

 

New Jersey

W.K. Communications, Inc.

 

Kansas

doing business as Suddenlink Communications

 

Missouri

 




Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

 

The Board of Directors
Altice USA, Inc.:

 

We consent to the use of our report dated March 6, 2018, except for Note 20 which is as of May 21, 2018, with respect to the consolidated balance sheets of Altice USA, Inc. and subsidiaries (the Company) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the two-year period ending December 31, 2017, and the related notes (collectively, the “Consolidated Financial Statements”) and our report dated April 10, 2017 on the consolidated balance sheet of Cablevision Systems Corporation and subsidiaries as of December 31, 2015 and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity (deficiency), and cash flows for the period from January 1, 2016 to June 20, 2016, and the year ended December 31, 2015, included herein, and to the reference to our firm under the heading “Experts” in the Registration Statement on Form S-1 and related Prospectus.

 

Our report on the consolidated financial statements of the Company contains emphasis of matter paragraphs that state that:

 

The Company was incorporated on September 14, 2015 and had no operations of its own other than the issuance of debt prior to the contribution of Cequel Corporation on June 9, 2016 by Altice N.V. The results of operations of Cequel Corporation for the year ended December 31, 2016 have been included in the results of operations of the Company for the same period as Cequel Corporation was under common control with the Company throughout 2016.

 

As discussed in Notes 1 and 20 to the consolidated financial statements, a substantial portion of the Company’s technical workforce at the Cablevision and Cequel segments became employees of Altice Technical Services (ATS) in the second and fourth quarters of 2017, respectively. Subsequent to December 31, 2017 the Company acquired 100% of ATS. As a result of the acquisition of ATS, an entity under common control, the Company has retroactively consolidated the results of operations and related assets and liabilities of ATS for all periods ATS was under common control.

 

As discussed in Note 20, the Company adopted ASC 606 — Revenue from Contracts with Customers and ASU No. 2017-07 Compensation — Retirement Benefits (Topic 715).

 

/s/KPMG LLP

 

New York, New York

 

May 21, 2018

 




Exhibit 23.2

 

CONSENT OF INDEPENDENT ACCOUNTANTS

 

We hereby consent to the use in this Registration Statement on Form S-1 of Altice USA, Inc. of our report dated March 30, 2016 relating to the financial statements of Cequel Corporation (Predecessor), which appears in such Registration Statement.  We also consent to the reference to us under the heading “Experts” in such Registration Statement.

 

/s/ PricewaterhouseCoopers LLP

St. Louis, Missouri

May 21, 2018

 

1



 

CONSENT OF INDEPENDENT ACCOUNTANTS

 

We hereby consent to the use in this Registration Statement on Form S-1 of Altice USA, Inc. of our report dated March 30, 2016 relating to the financial statements of Cequel Corporation (Successor), which appears in such Registration Statement.  We also consent to the reference to us under the heading “Experts” in such Registration Statement.

 

/s/ PricewaterhouseCoopers LLP

St. Louis, Missouri

May 21, 2018

 

2