UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
FORM 10-Q
(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period endedSeptemberJune 30, 20172020
 
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period fromto
Commission File NumberRegistrant; State of Incorporation; Address and Telephone NumberIRS Employer Identification No.
001-38126
atus-20200630_g1.jpg
38-3980194
Altice USA, Inc.
Delaware
1 Court Square West
Long Island City,New York11101
(516)803-2300
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.For the transition period fromto
Yes☒No☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes☒No☐

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)
Commission File NumberLarge Accelerated Filer☒Registrant; State of Incorporation; Address and Telephone NumberAccelerated filerIRS Employer Identification No.☐
Non-accelerated filer☐Smaller reporting company☐
001-38126(Do not check if a smaller reporting company)
alticelogoa04.jpg
Emerging growth company38-3980194
Altice USA, Inc.
Delaware
1111 Stewart Avenue
Bethpage, New York  11714
(516) 803-2300
☐


Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    ý    No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files). Yes   ý    No o
Indicate by check mark whether each 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 fileroAccelerated filero
Non-accelerated filerýSmaller reporting companyo
(Do not check if a smaller reporting company)Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).Yeso☐Noý☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, par value $0.01 per shareATUSNYSE
Number of shares of common stock outstanding as of October 27, 2017:July 24, 2020737,068,966578,097,380 







ALTICE USA, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS

Page
PART I. FINANCIAL INFORMATION
4
Item 1. Financial Statements
ALTICE USA, INC. AND SUBSIDIARIES
FORM 10-QConsolidated Financial Statements
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements of Altice USA, Inc. and Subsidiaries
Consolidated Balance Sheets - SeptemberJune 30, 20172020 (Unaudited) and December 31, 20162019
34
Consolidated StatementStatements of Operations - Three and ninesix months ended SeptemberJune 30, 20172020 and 20162019 (Unaudited)
56
Consolidated Statements of Comprehensive Income (Loss) - Three and ninesix months ended SeptemberJune 30, 20172020 and 20162019 (Unaudited)
67
Consolidated StatementStatements of Stockholders’Stockholders' Equity - NineThree and six months ended SeptemberJune 30, 20172020 and 2019 (Unaudited)
78
Consolidated StatementStatements of Cash Flows - NineSix months ended SeptemberJune 30, 20172020 and 20162019 (Unaudited)
812
Combined Notes to Consolidated Financial Statements (unaudited)(Unaudited)
1022
Supplemental Financial Statements Furnished:
CSC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Financial Statements
Consolidated Balance Sheets - June 30, 2020 (Unaudited) and December 31, 2019
14
Consolidated Statements of Operations - Three and six months ended June 30, 2020 and 2019 (Unaudited)
16
Consolidated Statements of Comprehensive Income - Three and six months ended June 30, 2020 and 2019 (Unaudited)
17
Consolidated Statements of Member's Equity - Three and six months ended June 30, 2020 and 2019 (Unaudited)
18
Consolidated Statements of Cash Flows - Six months ended June 30, 2020 and 2019 (Unaudited)
20
Combined Notes to Consolidated Financial Statements (Unaudited)
22
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
3543
Item 3. Quantitative and Qualitative Disclosures About Market Risk
6359
Item 4. Controls and Procedures
6461
PART II. OTHER INFORMATION
61
Item 1. Legal Proceedings
6561
Item 1A. Risk Factors
61
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
6562
Item 6. Exhibits
6563
SIGNATURES
SIGNATURES
6665


1







PART
Part I. FINANCIAL INFORMATION
This Quarterly Report includesForm 10-Q contains statements that expressconstitute forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Securities Act of 1934, as amended.  In this Form 10-Q there are statements concerning our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or futureoperating results and therefore are, or may be deemed to be, “forward‑looking statements.” These “forward‑looking statements” appear throughout this Quarterly Report and relate to matters such as anticipated future growth in revenues, operating income, cash provided by operating activities and other financial measures.performance.  Words such as “expects,” “anticipates,” “believes,” “estimates,” “may,” “will,” “should,” “could,” “seeks,” “potential,” “continue,” “intends,” “plans”"expects", "anticipates", "believes", "estimates", "may", "will", "should", "could", "potential", "continue", "intends", "plans" and similar words and terms used in the discussion of future operating results, future financial performance and future events identify forward‑lookingforward-looking statements.  All of these forward‑lookingInvestors are cautioned that such forward-looking statements are based on management’s current expectationsnot guarantees of future performance, results or events and beliefs about future events. As with any projectioninvolve risks and uncertainties and that actual results or forecast, they are susceptible to uncertainty and changes in circumstances.developments may differ materially from the forward-looking statements as a result of various factors. 
We operate in a highly competitive, consumer and technology driven and rapidly changing business that is affected by government regulation and economic, strategic, technological, political and social conditions. Various factors could adversely affect our operations, business or financial results in the future and cause our actual results to differ materially from those contained in the forward‑lookingforward-looking statements. In addition, important factors that could cause our actual results to differ materially from those in our forward‑lookingforward-looking statements include:
•competition for broadband, pay televisionvideo and telephony customers from existing competitors (such as broadband communications companies, DBSdirect broadcast satellite ("DBS") providers and Internet‑basedInternet-based providers) and new competitors entering our footprint;
•changes in consumer preferences, laws and regulations or technology that may cause us to change our operational strategies;
•increased difficulty negotiating programming agreements on favorable terms, if at all, resulting in increased costs to us and/or the loss of popular programming;
•increasing programming costs and delivery expenses related to our products and services;
•our ability to achieve anticipated customer and revenue growth, to successfully introduce new products and services and to implement our growth strategy;
•our ability to complete our capital investment plans on time and on budget, including our five‑year plan to build a fiber-to-the-home ("FTTH") network, and deploy Altice One, our new home communications hub;
•our ability to develop mobile voice and data services and our ability to attract customers to these services;
•the effects of economic conditions or other factors which may negatively affect our customers’ demand for our current and future products and services;
•the effects of industry conditions;
•demand for digital and linear advertising on our cable systems;
products and services;
•our substantial indebtedness and debt service obligations;
•adverse changes in the credit market;
•changes as a result of any tax reforms that may affect our business;
•financial community and rating agency perceptions of our business, operations, financial condition and the industries in which we operate;
•the restrictions contained in our financing agreements;
•our ability to generate sufficient cash flow to meet our debt service obligations;
•fluctuations in interest rates which may cause our interest expense to vary from quarter to quarter;
•technical failures, equipment defects, physical or electronic break‑insbreak-ins to our services, computer viruses and similar problems;
2



•the disruption or failure of our network, information systems or technologies as a result of computer hacking, computer viruses, “cyber‑attacks,”"cyber-attacks," misappropriation of data, outages, natural disasters, and other material events;

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


1



•our ability to obtain necessary hardware, software, communications equipment and services and other items from our vendors at reasonable costs;
•our ability to effectively integrate acquisitions and to maximize expected operating efficiencies from our acquisitions or as a result of the transactions, if any;
•significant unanticipated increases in the use of bandwidth‑intensive Internet‑basedbandwidth-intensive Internet-based services;
•the outcome of litigation, government investigations and other proceedings;
•our ability to successfully operate our business following the completion of our separation from Altice Europe; and
•other risks and uncertainties inherent in our cable and other broadband communications businesses and our other businesses, including those listed under the caption “Risk Factors”"Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Company's final prospectus dated June 21, 2017 andAltice USA's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") filed on February 14, 2020 (the "Annual Report") and in accordance with Rule 424(b) of the Securities Act of 1933, as amended (the "Securities Act") on June 23, 2017 (the "Prospectus")."Part II, Item 1A. Risk Factors" included herein.
These factors are not necessarily all of the important factors that could cause our actual results to differ materially from those expressed in any of our forward‑lookingforward-looking statements. Other unknown or unpredictable factors could cause our actual results to differ materially from those expressed in any of our forward‑lookingforward-looking statements.
Given these uncertainties, you are cautioned not to place undue reliance on such forward‑lookingforward-looking statements. The forward‑lookingforward-looking statements are made only as of the date of this Quarterly Report. Except to the extent required by law, we do not undertake, and specifically decline any obligation, to update any forward‑lookingforward-looking statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
You should read this Quarterly Report with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. We qualify all forward‑lookingforward-looking statements by these cautionary statements.
Certain numerical figures included in this quarterly reportQuarterly Report have been subject to rounding adjustments. Accordingly, such numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.


3


2




Item 1. Financial Statements
ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, 2020 (Unaudited)December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents$1,952,142  $701,898  
Restricted cash264  262  
Accounts receivable, trade (less allowance for doubtful accounts of $32,441 and $14,683)387,739  457,118  
Prepaid expenses and other current assets209,916  215,304  
Amounts due from affiliates3,452  6,774  
Total current assets2,553,513  1,381,356  
Property, plant and equipment, net of accumulated depreciation of $5,880,504 and $5,276,9215,723,109  5,753,401  
Right-of-use operating lease assets270,592  280,340  
Investment securities pledged as collateral1,674,395  1,931,697  
Derivative contracts225,791  25,207  
Other assets106,840  92,622  
Amortizable intangibles, net of accumulated amortization of $4,054,809 and $3,670,6793,097,216  3,481,109  
Indefinite-lived cable television franchises13,020,081  13,020,081  
Goodwill8,142,309  8,142,309  
Total assets$34,813,846  $34,108,122  
ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)

    
ASSETS   
    
 September 30, 2017 December 31, 2016
 (Unaudited)  
    
Current Assets:   
Cash and cash equivalents$550,131
 $486,792
Restricted cash45,205
 16,301
Accounts receivable, trade (less allowance for doubtful accounts of $14,018 and $11,677)344,742
 349,626
Prepaid expenses and other current assets (including a prepayment to an affiliate of $11,296 in 2017) (See Note 14)109,652
 88,151
Amounts due from affiliates21,153
 22,182
Investment securities pledged as collateral—
 741,515
Derivative contracts54,578
 352
Total current assets1,125,461
 1,704,919
Property, plant and equipment, net of accumulated depreciation of $2,181,306 and $1,039,2976,161,511
 6,597,635
Investment in affiliates1,694
 5,606
Investment securities pledged as collateral1,652,917
 741,515
Derivative contracts—
 10,604
Other assets (including a prepayment to an affiliate of $2,570 in 2017) (See Note 14)49,394
 48,545
Amortizable customer relationships, net of accumulated amortization of $1,207,217 and $580,2764,763,667
 5,345,608
Amortizable trade names, net of accumulated amortization of $432,402 and $83,397634,681
 983,386
Other amortizable intangibles, net of accumulated amortization of $8,805 and $3,09328,247
 23,650
Indefinite-lived cable television franchises13,020,081
 13,020,081
Goodwill7,993,499
 7,992,700
Total assets$35,431,152
 $36,474,249


See accompanying notes to consolidated financial statements.



4
3






ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(In thousands, except share and per share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITYSeptember 30, 2017 December 31, 2016
 (Unaudited)  
Current Liabilities:   
Accounts payable$685,026
 $705,672
Accrued liabilities:   
Interest315,467
 576,778
Employee related costs130,640
 232,864
Other accrued expenses412,949
 352,315
Amounts due to affiliates29,002
 127,363
Deferred revenue101,577
 94,816
Liabilities under derivative contracts102,904
 13,158
Collateralized indebtedness—
 622,332
Credit facility debt92,650
 33,150
Senior notes and debentures1,572,358
 926,045
Capital lease obligations10,376
 15,013
Notes payable30,211
 5,427
Total current liabilities3,483,160
 3,704,933
Defined benefit plan obligations93,849
 84,106
Notes payable to affiliates and related parties—
 1,750,000
Other liabilities144,601
 113,485
Deferred tax liability7,194,065
 7,966,815
Liabilities under derivative contracts121,759
 78,823
Collateralized indebtedness1,314,788
 663,737
Credit facility debt5,284,252
 3,411,640
Senior notes and debentures14,280,817
 16,581,280
Capital lease obligations5,857
 13,142
Notes payable49,314
 8,299
Total liabilities31,972,462
 34,376,260
Commitments and contingencies

 

Redeemable equity390,268
 68,147
Stockholders' Equity:   
Preferred Stock, $.01 par value, 100,000,000 shares authorized, no shares issued and outstanding at September 30, 2017—
 —
Class A common stock: $0.01 par value, 4,000,000,000 shares authorized, 246,982,292 issued and outstanding at September 30, 20172,470
 —
Class B common stock: $0.01 par value, 1,000,000,000 shares authorized, 490,086,674 issued and outstanding at September 30, 20174,901
 —
Class C common stock: $0.01 par value, 4,000,000,000 shares authorized, no shares issued and outstanding at September 30, 2017—
 —
Common Stock, $.01 par value, 1,000 shares authorized, 100 shares issued and outstanding at December 31, 2016—
 —
Paid-in capital4,466,040
 3,003,554
Accumulated deficit(1,401,548) (975,978)
 3,071,863
 2,027,576
Accumulated other comprehensive income (loss)(4,130) 1,979
Total stockholders' equity3,067,733
 2,029,555
Noncontrolling interest689
 287
Total stockholders' equity3,068,422
 2,029,842
 $35,431,152
 $36,474,249
See accompanying notes to consolidated financial statements.ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands, except share and per share amounts)
4


 June 30, 2020 (Unaudited)December 31, 2019
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable$832,011  $799,618  
Interest payable381,482  385,655  
Accrued employee related costs109,334  111,337  
Amounts due to affiliates5,722  7,456  
Deferred revenue117,925  124,777  
Debt1,859,290  170,682  
Other current liabilities387,212  378,954  
Total current liabilities3,692,976  1,978,479  
Other liabilities215,781  204,904  
Deferred tax liability4,833,305  4,762,595  
Liabilities under derivative contracts312,916  255,666  
Right-of-use operating lease liability259,297  269,062  
Long-term debt, net of current maturities24,326,397  24,249,603  
Total liabilities33,640,672  31,720,309  
Commitments and contingencies (Note 16)
Redeemable equity15,495  108,551  
Stockholders' Equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized, 0 shares issued and outstanding—  —  
Class A common stock: $0.01 par value, 4,000,000,000 shares authorized, 400,531,285 shares issued and 393,596,028 shares outstanding as of June 30, 2020 and 457,207,079 shares issued and 446,749,307 shares outstanding as of December 31, 20194,005  4,572  
Class B common stock: $0.01 par value, 1,000,000,000 shares authorized, 490,086,674 issued, 186,194,357 shares outstanding as of June 30, 2020 and 186,245,832 shares outstanding as of December 31, 20191,862  1,862  
Class C common stock: $0.01 par value, 4,000,000,000 shares authorized, 0 shares issued and outstanding—  —  
Paid-in capital817,796  2,039,918  
Retained earnings501,172  390,766  
1,324,835  2,437,118  
Treasury stock, at cost (6,935,257 and 10,457,772 Class A common shares at June 30, 2020 and December 31, 2019, respectively)(163,869) (163,904) 
Accumulated other comprehensive loss(12,118) (3,250) 
Total stockholders' equity1,148,848  2,269,964  
Noncontrolling interest8,831  9,298  
Total stockholders' equity1,157,679  2,279,262  
 $34,813,846  $34,108,122  


ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenue (including revenue from affiliates of $986 and $1,380 in 2017 and $720 in both 2016 periods) (See Note 14)$2,327,175
 $2,260,221
 $6,961,192
 $3,711,311
Operating expenses:       
Programming and other direct costs (including charges from affiliates of $1,196 and $3,026 in 2017 and $642 in both 2016 periods) (See Note 14)755,101
 738,390
 2,272,147
 1,177,808
Other operating expenses (including charges from affiliates of $28,332 and $73,263 in 2017 and $8,056 and $13,056 in 2016) (See Note 14)560,497
 660,307
 1,767,624
 1,050,046
Restructuring and other expense53,448
 47,816
 142,765
 155,086
Depreciation and amortization (including impairments)823,265
 670,929
 2,138,776
 1,085,929
 2,192,311
 2,117,442
 6,321,312
 3,468,869
Operating income134,864
 142,779
 639,880
 242,442
Other income (expense):       
Interest expense (including interest expense to affiliates and related parties of $90,405 in 2017 and $48,617 and $53,922 in 2016) (See Note 14)(379,064) (446,242) (1,232,730) (1,015,866)
Interest income961
 404
 1,373
 12,787
Gain (loss) on investments, net(18,900) 24,833
 169,888
 83,467
Gain (loss) on derivative contracts, net(16,763) 773
 (154,270) (26,572)
Gain (loss) on interest rate swap contracts1,051
 (15,861) 12,539
 24,380
Loss on extinguishment of debt and write-off of deferred financing costs (including $513,723 related to affiliates and related parties for the nine months ended September 30, 2017) (See Note 14)(38,858) —
 (600,240) (19,948)
Other income (expense), net(65) 2,531
 832
 2,548
 (451,638) (433,562) (1,802,608) (939,204)
Loss before income taxes(316,774) (290,783) (1,162,728) (696,762)
Income tax benefit134,688
 118,230
 429,664
 101,332
Net loss(182,086) (172,553) (733,064)
(595,430)
Net loss (income) attributable to noncontrolling interests(135) (256) (737) 108
Net loss attributable to Altice USA, Inc. stockholders$(182,221) $(172,809) $(733,801) $(595,322)
Basic and diluted net loss per share$(0.25) $(0.27) $(1.08) $(0.92)
Basic and diluted weighted average common shares (in thousands)737,069
 649,525
 682,234
 649,525

See accompanying notes to consolidated financial statements.


5






ALTICE USA, INC. AND SUBSIDIARIES
ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
Net loss$(182,086) $(172,553) $(733,064) $(595,430)
Other comprehensive income (loss):       
Defined benefit pension plans:       
Unrecognized actuarial gain (loss)(4,056) 5,016
 (8,389) 4,034
Applicable income taxes1,622
 (2,006) 3,356
 (1,613)
Unrecognized gain (loss) arising during period, net of income taxes(2,434) 3,010
 (5,033) 2,421
Curtailment loss, net of settlement losses of $1,014 and $1,403 for the three and nine months ended September 30, 2017 included in net periodic benefit cost1,014
 (33) (1,792) (33)
Applicable income taxes(406) 13
 716
 13
Curtailment loss, net of settlement losses included in net periodic benefit cost, net of income taxes608
 (20) (1,076) (20)
Other comprehensive gain (loss)(1,826) 2,990
 (6,109) 2,401
Comprehensive loss(183,912) (169,563) (739,173) (593,029)
Comprehensive loss (income) attributable to noncontrolling interests(135) (256) (737) 108
Comprehensive loss attributable to Altice USA, Inc. stockholders$(184,047) $(169,819) $(739,910) $(592,921)
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenue (including revenue from affiliates of $3,379, $496, $6,867, and $1,088 respectively) (See Note 15)$2,474,979  $2,451,081  $4,925,235  $4,847,648  
Operating expenses:
Programming and other direct costs (including charges from affiliates of $1,738, $2,087, $3,927 and $3,774, respectively) (See Note 15)860,875  818,994  1,725,389  1,631,979  
Other operating expenses (including charges from affiliates of $2,161, $2,020, $6,102 and $4,266, respectively) (See Note 15)542,637  569,459  1,124,946  1,133,891  
Restructuring and other expense40,966  11,465  48,260  26,709  
Depreciation and amortization (including impairments)521,794  568,620  1,069,363  1,130,048  
 1,966,272  1,968,538  3,967,958  3,922,627  
Operating income508,707  482,543  957,277  925,021  
Other income (expense):
Interest expense(351,025) (381,218) (716,236) (769,501) 
Interest income151  605  1,810  2,424  
Gain (loss) on investments and sale of affiliate interests, net197,597  103,146  (257,876) 357,871  
Gain (loss) on derivative contracts, net(152,061) (49,624) 287,800  (226,653) 
Loss on interest rate swap contracts, net(33,735) (26,900) (88,567) (50,572) 
Loss on extinguishment of debt and write-off of deferred financing costs—  (1,194) —  (159,096) 
Other income, net669  212  1,592  292  
(338,404) (354,973) (771,477) (845,235) 
Income before income taxes170,303  127,570  185,800  79,786  
Income tax expense(58,826) (41,160) (75,861) (18,574) 
Net income111,477  86,410  109,939  61,212  
Net loss (income) attributable to noncontrolling interests(213) (43) 467  156  
Net income attributable to Altice USA, Inc. stockholders$111,264  $86,367  $110,406  $61,368  

Income per share:
Basic income per share$0.19  $0.13  $0.18  $0.09  
Basic weighted average common shares (in thousands)587,587  668,031  604,500  681,703  
 
Diluted income per share$0.19  $0.13  $0.18  $0.09  
Diluted weighted average common shares (in thousands)589,466  668,648  606,597   682,014  
See accompanying notes to consolidated financial statements.



6







ALTICE USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

Class A
Common
Stock
 

Class B
Common
Stock
 
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income
 
Total
Stockholders'
Equity
 
Non-controlling
Interest
 
Total
Equity
                
Balance at January 1, 2017$—
 $—
 $3,003,554
 $(975,978) $1,979
 $2,029,555
 $287
 $2,029,842
Net loss attributable to stockholders—
 —
 —
 (733,801) —
 (733,801) —
 (733,801)
Net income attributable to noncontrolling interests—
 —
 —
 —
 —
 —
 737
 737
Pension liability adjustments, net of income taxes—
 —
 —
 —
 (6,109) (6,109) —
 (6,109)
Share-based compensation expense—
 —
 40,932
 —
 —
 40,932
 —
 40,932
Change in fair value of redeemable equity—
 —
 (322,121) —
 —
 (322,121) —
 (322,121)
Contributions from stockholders—
 —
 1,135
 —
��—
 1,135
 —
 1,135
Cash distributions to stockholders—
 —
 (839,700) —
 —
 (839,700) (335) (840,035)
Transfer of goodwill—
 —
 (23,101) —
 —
 (23,101) —
 (23,101)
Recognition of previously unrealized excess tax benefits related to share-based awards in connection with the adoption of ASU 2016-09—
 —
 —
 308,231
 —
 308,231
 —
 308,231
Issuance of common stock pursuant to organizational transactions prior to IPO2,349
 4,901
 2,257,002
 —
 —
 2,264,252
 —
 2,264,252
Issuance of common stock pursuant to IPO121
 —
 348,339
 —
 —
 348,460
 —
 348,460
Balance at September 30, 2017$2,470
 $4,901
 $4,466,040
 $(1,401,548) $(4,130) $3,067,733
 $689
 $3,068,422


Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net income$111,477  $86,410  $109,939  $61,212  
Other comprehensive income (loss):
Defined benefit pension plans:
Unrecognized actuarial gain (loss)1,880  (8,567) (11,589) (3,648) 
Applicable income taxes(503) 2,282  3,096  989  
Unrecognized gain (loss) arising during period, net of income taxes1,377  (6,285) (8,493) (2,659) 
Settlement loss included in other expense, net271  367  773  538  
Applicable income taxes(72) (101) (207) (147) 
Settlement loss included in other expense, net, net of income taxes199  266  566  391  
Foreign currency translation adjustment(517) (336) (941) (580) 
Applicable income taxes—  93  —  157  
Foreign currency translation adjustment, net(517) (243) (941) (423) 
Other comprehensive income (loss)1,059  (6,262) (8,868) (2,691) 
Comprehensive income112,536  80,148  101,071  58,521  
Comprehensive loss (income) attributable to noncontrolling interests(213) (43) 467  156  
Comprehensive income attributable to Altice USA, Inc. stockholders$112,323  $80,105  $101,538   $58,677  

See accompanying notes to consolidated financial statements.



7




ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities:   
Net loss$(733,064) $(595,430)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Depreciation and amortization (including impairments)2,138,776
 1,085,929
Gain on sale of affiliate interests—
 (206)
Equity in net loss of affiliates5,697
 400
Gain on investments, net(169,888) (83,467)
Loss on derivative contracts, net154,270
 26,572
Loss on extinguishment of debt and write-off of deferred financing costs600,240
 19,948
Amortization of deferred financing costs and discounts (premiums) on indebtedness18,517
 25,831
Settlement loss (gain) related to pension plan1,403
 (33)
Share-based compensation expense40,932
 1,670
Deferred income taxes(458,608) (105,468)
Excess tax benefit on share-based awards—
 82
Provision for doubtful accounts54,501
 32,569
Change in assets and liabilities, net of effects of acquisitions and dispositions:   
Accounts receivable, trade(45,493) (39,651)
Other receivables(5,517) 9,203
Prepaid expenses and other assets(13,275) 27,142
Amounts due from and due to affiliates(97,440) (213)
Accounts payable50,649
 37,472
Accrued liabilities(324,537) 103,409
Deferred revenue9,382
 9,549
Liabilities related to interest rate swap contracts(9,552) (24,380)
Net cash provided by operating activities1,216,993
 530,928
Cash flows from investing activities:   
Payment for acquisition, net of cash acquired(43,608) (8,988,774)
Net proceeds from sale of affiliate interests—
 13,825
Capital expenditures(763,298) (377,726)
Proceeds related to sale of equipment, including costs of disposal3,398
 1,584
Increase in other investments(4,800) (2,866)
Settlement of put-call options(24,039) —
Additions to other intangible assets(1,700) —
Net cash used in investing activities(834,047) (9,353,957)
    


8






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


Class A
Common
Stock
Class B
Common
Stock		Paid-in
Capital		Retained EarningsTreasury StockAccumulated
Other
Comprehensive
Loss		Total
Stockholders'
Equity		Non-controlling
Interest		Total
Equity
Balance at January 1, 2020$4,572  $1,862  $2,039,918  $390,766  $(163,904) $(3,250) $2,269,964  $9,298  $2,279,262  
Net loss attributable to stockholders—  —  —  (858) —  —  (858) —  (858) 
Net loss attributable to noncontrolling interests—  —  —  —  —  —  —  (680) (680) 
Pension liability adjustments, net of income taxes—  —  —  —  —  (9,503) (9,503) —  (9,503) 
Foreign currency translation adjustment, net of income taxes—  —  —  —  —  (424) (424) —  (424) 
Share-based compensation expense—  —  27,370  —  —  —  27,370  —  27,370  
Redeemable equity vested—  —  29,479  —  —  —  29,479  —  29,479  
Change in redeemable equity—  —  13,260  —  —  —  13,260  —  13,260  
Class A shares acquired through share repurchase program and retired(312) —  (749,686) —  —  —  (749,998) —  (749,998) 
Issuance of common shares pursuant to employee long term incentive plan1  —  2,495  —  11  —  2,507  —  2,507  
Balance at March 31, 2020$4,261  $1,862  $1,362,836  $389,908  $(163,893) $(13,177) $1,581,797  $8,618  $1,590,415  
ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
 Nine Months Ended September 30,
 2017 2016
Cash flows from financing activities:   
Proceeds from credit facility debt5,602,425
 2,195,256
Repayment of credit facility debt(3,684,668) (4,327,466)
Proceeds from notes payable to affiliates and related parties—
 1,750,000
Issuance of senior notes and debentures—
 1,310,000
Proceeds from collateralized indebtedness662,724
 179,388
Repayment of collateralized indebtedness and related derivative contracts(654,989) (143,102)
Distributions to stockholders(839,700) —
Redemption of senior notes, including premiums and fees(1,729,400) —
Proceeds from notes payable24,649
 —
Excess tax benefit on share-based awards—
 (82)
Principal payments on capital lease obligations(11,518) (11,376)
Additions to deferred financing costs(9,486) (193,705)
Proceeds from IPO, net of fees348,460
 —
Contributions from stockholders1,135
 1,246,498
Distributions to noncontrolling interests, net(335) —
Net cash provided by (used in) financing activities(290,703) 2,005,411
Net increase (decrease) in cash and cash equivalents92,243
 (6,817,618)
Cash, cash equivalents and restricted cash at beginning of year503,093
 8,786,536
Cash, cash equivalents and restricted cash at end of period$595,336
 $1,968,918


See accompanying notes to consolidated financial statements.





8
9


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


Class A
Common
Stock
Class B
Common
Stock		Paid-in
Capital		Retained EarningsTreasury StockAccumulated
Other
Comprehensive
Loss		Total
Stockholders'
Equity		Non-controlling
Interest		Total
Equity
Balance at March 31, 2020$4,261  $1,862  $1,362,836  $389,908  $(163,893) $(13,177) $1,581,797  $8,618  $1,590,415  
Net income attributable to stockholders—  —  —  111,264  —  —  111,264  —  111,264  
Net loss attributable to noncontrolling interests—  —  —  —  —  —  —  213  213  
Pension liability adjustments, net of income taxes—  —  —  —  —  1,576  1,576  —  1,576  
Foreign currency translation adjustment, net of income taxes—  —  —  —  —  (517) (517) —  (517) 
Share-based compensation expense—  —  33,683  —  —  —  33,683  —  33,683  
Redeemable equity vested—  —  59,081  —  —  —  59,081  —  59,081  
Change in redeemable equity—  —  (8,764) —  —  —  (8,764) —  (8,764) 
Class A shares acquired through share repurchase program and retired(258) —  (630,979) —  —  —  (631,237) —  (631,237) 
Issuance of common shares pursuant to employee long term incentive plan2  —  1,939  —  24  —  1,965  —  1,965  
Balance at June 30, 2020$4,005  $1,862  $817,796  $501,172  $(163,869) $(12,118) $1,148,848  $8,831  $1,157,679  

See accompanying notes to consolidated financial statements.




9

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


Class A
Common
Stock
Class B
Common
Stock		Paid-in
Capital		Retained EarningsTreasury StockAccumulated
Other
Comprehensive
Loss		Total
Stockholders'
Equity		Non-controlling
Interest		Total
Equity
Balance at January 1, 2019$4,961  $2,130  $3,423,803  $251,830  $—  $(11,783) $3,670,941  $9,295  $3,680,236  
Net loss attributable to stockholders—  —  —  (24,999) —  —  (24,999) —  (24,999) 
Net loss attributable to noncontrolling interests—  —  —  —  —  —  —  (199) (199) 
Distributions to noncontrolling interests—  —  —  —  —  —  —   (1,000) (1,000) 
Pension liability adjustments, net of income taxes—  —  —  —  —  3,752  3,752  —  3,752  
Foreign currency translation adjustment, net of income taxes—  —  —  —  —  (181) (181) —  (181) 
Share-based compensation expense (equity classified)—  —  13,790  —  —  —  13,790  —  13,790  
Redeemable equity vested—  —  1,364  —  —  1,364  —  1,364  
Change in redeemable equity—  —  (61,696) —  —  —  (61,696) —  (61,696) 
Class A shares acquired through share repurchase program and retired(294) —  (599,707) —  —  —  (600,001) —  (600,001) 
Conversion of Class B to Class A shares242  (242) —  —  —  —  —  —  —  
Balance at March 31, 2019$4,909  $1,888  $2,777,554  $226,831  $—  $(8,212) $3,002,970  $8,096  $3,011,066  

See accompanying notes to consolidated financial statements.
10


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

Class A Common StockClass B Common StockPaid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive LossTotal Stockholders' EquityNon-controlling InterestTotal Equity
Balance at March 31, 2019$4,909  $1,888  $2,777,554  $226,831  $—  $(8,212) $3,002,970  $8,096  $3,011,066  
Net income attributable to stockholders—  —  —  86,367  —  —  86,367  —  86,367  
Net income attributable to noncontrolling interests—  —  —  —  —  —  —  43  43  
Pension liability adjustments, net of income taxes—  —  —  —  —  (6,019) (6,019) —  (6,019) 
Foreign currency translation adjustment, net of income taxes—  —  —  —  —  (243) (243) —  (243) 
Share-based compensation expense (equity classified)—  —  16,077  —  —  —  16,077  —  16,077  
Redeemable equity vested—  —  61,702  —  —  61,702  —  61,702  
Change in redeemable equity—  —  (46,294) —  —  —  (46,294) —  (46,294) 
Class A shares acquired through share repurchase program and retired(249) —  (599,703) —  —  —  (599,952) —  (599,952) 
Conversion of Class B to Class A shares16  (16) —  —  —  —  —  —  —  
Issuance of common shares pursuant to employee long term incentive plan—  —  244  —  —  —  244  —  244  
Class A shares issued in connection with acquisition5  —  10,768  —  —  —  10,773  —  10,773  
Balance at June 30, 2019$4,681  $1,872  $2,220,348  $313,198  $—  $(14,474) $2,525,625  $8,139  $2,533,764  

See accompanying notes to consolidated financial statements.

11


ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Six Months Ended June 30,
 20202019
Cash flows from operating activities:
Net income$109,939  $61,212  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including impairments)1,069,363  1,130,048  
Non-cash restructuring charges2,383  10,014  
Loss (gain) on investments and sale of affiliate interests, net257,876  (357,871) 
Loss (gain) on derivative contracts, net(287,800) 226,653  
Loss on extinguishment of debt and write-off of deferred financing costs—  159,096  
Amortization of deferred financing costs and discounts (premiums) on indebtedness48,217  53,876  
Settlement loss related to pension plan773  538  
Share-based compensation expense related to equity classified awards61,053  29,867  
Deferred income taxes51,105  19,604  
Decrease in right-of-use assets23,071  23,147  
Provision for doubtful accounts41,857  34,814  
Change in assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable, trade27,522  1,804  
Other receivables—  2,740  
Prepaid expenses and other assets(5,577) (72,638) 
Amounts due from and due to affiliates1,588  (3,282) 
Accounts payable10,256  18,549  
Accrued liabilities(12,796) (98,551) 
Deferred revenue(17,302) 12,022  
Liabilities related to interest rate swap contracts148,013  41,322  
Net cash provided by operating activities1,529,541  1,292,964  
Cash flows from investing activities: 
Capital expenditures(527,805) (657,253) 
Payment for acquisitions, net of cash acquired—  (172,659) 
Proceeds related to sale of equipment and costs of disposal(1,846) 898  
Decrease in other investments4,008  —  
Additions to other intangible assets(237) (867) 
Net cash used in investing activities(525,880) (829,881) 
See accompanying notes to consolidated financial statements.
12

ALTICE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
(Unaudited)

Six Months Ended June 30,
20202019
Cash flows from financing activities:
Proceeds from credit facility debt, net of discounts200,000  1,940,000  
Repayment of credit facility debt(228,875) (602,830) 
Issuance of senior notes, including premiums1,725,000  1,754,375  
Redemption of senior notes, including premiums and fees—  (2,462,692) 
Proceeds from notes payable—  39,856  
Repayment of notes payable(48,239) (74,061) 
Principal payments on finance lease obligations(11,935) (3,273) 
Purchase of shares of Altice USA Class A common stock pursuant to a share repurchase program(1,381,235) (1,199,953) 
Additions to deferred financing costs(5,894) (12,488) 
Proceeds from stock option exercises3,650  —  
Contingent payment for acquisition(4,947) (500) 
Distributions to noncontrolling interests, net—  (1,000) 
Net cash provided by (used in) financing activities247,525  (622,566) 
Net increase (decrease) in cash and cash equivalents excluding effect of exchange rate changes1,251,186  (159,483) 
Effect of exchange rate changes on cash and cash equivalents(940) (580) 
Net increase (decrease) in cash and cash equivalents1,250,246  (160,063) 
Cash, cash equivalents and restricted cash at beginning of year702,160  299,038  
Cash, cash equivalents and restricted cash at end of period$1,952,406  $138,975  

See accompanying notes to consolidated financial statements.

13


CSC HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, 2020 (Unaudited)December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents$1,952,128  $697,741  
Restricted cash264  262  
Accounts receivable, trade (less allowance for doubtful accounts of $32,441 and $14,683)387,739  457,118  
Prepaid expenses and other current assets209,916  211,642  
Amounts due from affiliates3,322  6,774  
Total current assets2,553,369  1,373,537  
Property, plant and equipment, net of accumulated depreciation of $5,880,504 and $5,276,9215,723,109  5,753,401  
Right-of-use operating lease assets270,592  280,340  
Investment securities pledged as collateral1,674,395  1,931,697  
Derivative contracts225,791  25,207  
Other assets106,840  92,622  
Amortizable intangibles, net of accumulated amortization of $4,054,809 and $3,670,6793,097,216  3,481,109  
Indefinite-lived cable television franchises13,020,081  13,020,081  
Goodwill8,142,309  8,142,309  
Total assets$34,813,702  $34,100,303  

See accompanying notes to consolidated financial statements.

14


CSC HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(In thousands, except per membership unit amounts)

 June 30, 2020 (Unaudited)December 31, 2019
LIABILITIES AND MEMBER'S EQUITY
Current Liabilities:
Accounts payable$832,011  $799,618  
Interest payable381,482  385,655  
Accrued employee related costs109,334  111,337  
Amounts due to affiliates5,722  7,456  
Deferred revenue117,925  124,777  
Debt1,859,290  170,682  
Other current liabilities387,212  378,948  
Total current liabilities3,692,976  1,978,473  
Other liabilities215,779  204,904  
Deferred tax liability5,156,281  4,980,599  
Liabilities under derivative contracts312,916  255,666  
Right-of-use operating lease liability259,297  269,062  
Long-term debt, net of current maturities24,326,397  24,249,603  
Total liabilities33,963,646  31,938,307  
Commitments and contingencies (Note 16)
Redeemable equity15,495  108,551  
Member's Equity:
Retained earnings7,480  13,515  
Other member's equity (100 membership units issued and outstanding)830,368  2,033,882  
837,848  2,047,397  
Accumulated other comprehensive loss(12,118) (3,250) 
Total member's equity825,730  2,044,147  
Noncontrolling interest8,831  9,298  
Total member's equity834,561  2,053,445  
 $34,813,702  $34,100,303  

See accompanying notes to consolidated financial statements.

15


CSC HOLDINGS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)


Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenue (including revenue from affiliates of $3,379, $496, $6,867, and $1,088 respectively) (See Note 15)$2,474,979  $2,451,081  $4,925,235  $4,847,648  
Operating expenses:
Programming and other direct costs (including charges from affiliates of $1,738, $2,087, $3,927 and $3,774, respectively) (See Note 15)860,875  818,994  1,725,389  1,631,979  
Other operating expenses (including charges from affiliates of $2,161, $2,020, $6,102 and $4,266, respectively) (See Note 15)542,637  569,459  1,124,946  1,133,891  
Restructuring and other expense40,966  11,465  48,260  26,709  
Depreciation and amortization (including impairments)521,794  568,620  1,069,363  1,130,048  
 1,966,272  1,968,538  3,967,958  3,922,627  
Operating income508,707  482,543  957,277  925,021  
Other income (expense):
Interest expense(351,025) (356,818) (716,236) (720,857) 
Interest income151  605  1,810  2,424  
Gain (loss) on investments and sale of affiliate interests, net197,596  103,146  (258,223) 357,871  
Gain (loss) on derivative contracts, net(152,061) (49,624) 287,800  (226,653) 
Loss on interest rate swap contracts, net(33,735) (26,900) (88,567) (50,572) 
Loss on extinguishment of debt and write-off of deferred financing costs—  (1,194) —  (159,096) 
Other income, net669  212  1,592  292  
(338,405) (330,573) (771,824) (796,591) 
Income before income taxes170,302  151,970  185,453  128,430  
Income tax expense(56,629) (47,828) (61,658) (32,152) 
Net income113,673  104,142  123,795  96,278  
Net loss (income) attributable to noncontrolling interests(213) (43) 467  156  
Net income attributable to CSC Holdings, LLC sole member$113,460  $104,099  $124,262  $96,434  

See accompanying notes to consolidated financial statements.

16


CSC HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)


Three Months Ended June 30,Six Months Ended June 30,
202020192020 2019
Net income$113,673  $104,142  $123,795  $96,278  
Other comprehensive income (loss):
Defined benefit pension plans:
Unrecognized actuarial gain (loss)1,880  (8,567) (11,589) (3,648) 
Applicable income taxes(503) 2,282  3,096  989  
Unrecognized gain (loss) arising during period, net of income taxes1,377  (6,285) (8,493) (2,659) 
Settlement loss included in other expense, net271  367  773   538  
Applicable income taxes(72) (101) (207) (147) 
Settlement loss included in other expense, net, net of income taxes199  266  566  391  
Foreign currency translation adjustment(517) (336) (941) (580) 
Applicable income taxes—  93  —  157  
Foreign currency translation adjustment, net(517) (243) (941) (423) 
Other comprehensive income (loss)1,059  (6,262) (8,868) (2,691) 
Comprehensive income114,732  97,880  114,927  93,587  
Comprehensive loss (income) attributable to noncontrolling interests(213) (43) 467  156  
Comprehensive income attributable to CSC Holdings, LLC's sole member$114,519  $97,837  $115,394  $93,743  

See accompanying notes to consolidated financial statements.

17


CSC HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL MEMBER'S EQUITY
(In thousands)
(Unaudited)


Retained EarningsOther Member's EquityAccumulated Other Comprehensive Income (Loss)Total Member's EquityNoncontrolling InterestTotal Equity
Balance at January 1, 2020$13,515  $2,033,882  $(3,250) $2,044,147  $9,298  $2,053,445  
Net income attributable to CSC Holdings' sole member10,802  —  —  10,802  —  10,802  
Net loss attributable to noncontrolling interests—  —  —  —  (680) (680) 
Pension liability adjustments, net of income taxes—  —  (9,503) (9,503) —  (9,503) 
Foreign currency translation adjustment—  —  (424) (424) —  (424) 
Share-based compensation expense—  27,370  —  27,370  —  27,370  
Redeemable equity vested—  29,479  —  29,479  —  29,479  
Change in redeemable equity—  13,260  —  13,260  —  13,260  
Cash distributions to parent(24,317) (696,033) —  (720,350) —  (720,350) 
Non-cash distributions to parent—  (150,602) —  (150,602) —  (150,602) 
Balance at March 31, 2020—  1,257,356  (13,177) 1,244,179  8,618  1,252,797  
Net income attributable to CSC Holdings' sole member113,460  —  —  113,460  —  113,460  
Net loss attributable to noncontrolling interests—  —  —  —  213  213  
Pension liability adjustments, net of income taxes—  —  1,576  1,576  —  1,576  
Foreign currency translation adjustment—  —  (517) (517) —  (517) 
Share-based compensation expense—  33,683  —  33,683  —  33,683  
Redeemable equity vested—  59,081  —  59,081  —  59,081  
Change in redeemable equity—  (8,764) —  (8,764) —  (8,764) 
Cash distributions to parent(105,980) (546,403) —  (652,383) —  (652,383) 
Non-cash contributions from parent—  35,415  —  35,415  —  35,415  
Balance at June 30, 2020$7,480  $830,368  $(12,118) $825,730  $8,831  $834,561  

See accompanying notes to consolidated financial statements.
18


CSC HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL MEMBER'S EQUITY (continued)
(In thousands)
(Unaudited)


Retained EarningsOther Member's EquityAccumulated Other Comprehensive LossTotal Member's EquityNoncontrolling InterestsTotal Equity
Balance at January 1, 2019$549,691  $3,451,937  $(11,783) $3,989,845  $9,295  $3,999,140  
Net loss attributable to CSC Holdings' sole member(7,665) —  —  (7,665) —  (7,665) 
Net loss attributable to noncontrolling interests—  —  —  —  (199) (199) 
Distributions to noncontrolling interests—  —  —  —  (1,000) (1,000) 
Pension liability adjustments, net of income taxes—  —  3,752  3,752  —  3,752  
Foreign currency translation adjustment, net of income taxes—  —  (181) (181) —  (181) 
Share-based compensation expense—  13,790  —  13,790  —  13,790  
Redeemable equity vested—  1,364  —  1,364  —  1,364  
Change in redeemable equity—  (61,696) —  (61,696) —  (61,696) 
Cash distributions to parent(543,217) (51,245) —  (594,462) —  (594,462) 
Other—  (276) —  (276) —  (276) 
Balance at March 31, 2019(1,191) 3,353,874  (8,212) 3,344,471  8,096  3,352,567  
Net income attributable to CSC Holdings' sole member104,099  —  —  104,099  —  104,099  
Net income attributable to noncontrolling interests—  —  —  —  43  43  
Pension liability adjustments, net of income taxes—  —  (6,019) (6,019) —  (6,019) 
Foreign currency translation adjustment, net of income taxes—  —  (243) (243) —  (243) 
Share-based compensation expense—  16,077  —  16,077  —  16,077  
Redeemable equity vested—  61,702  —  61,702  —  61,702  
Change in redeemable equity—  (46,294) —  (46,294) —  (46,294) 
Cash distributions to parent(90,324) (544,704) —  (635,028) —  (635,028) 
Impact of Cheddar acquisition—  10,773  —  10,773  —  10,773  
Other—  244  —  244  —  244  
Balance at June 30, 2019$12,584  $2,851,672  $(14,474) $2,849,782  $8,139  $2,857,921  


See accompanying notes to consolidated financial statements.
19


CSC HOLDINGS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


Six Months Ended June 30,
 20202019
Cash flows from operating activities:
Net income$123,795  $96,278  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including impairments)1,069,363  1,130,048  
Non-cash restructuring charges2,383  10,014  
Loss (gain) on investments and sale of affiliate interests, net258,223  (357,871) 
Loss (gain) on derivative contracts, net(287,800) 226,653  
Loss on extinguishment of debt and write-off of deferred financing costs—  159,096  
Amortization of deferred financing costs and discounts (premiums) on indebtedness48,217  44,751  
Settlement loss related to pension plan773  538  
Share-based compensation expense related to equity classified awards61,053  29,867  
Deferred income taxes156,077  33,183  
Decrease in right-of-use assets23,071  23,147  
Provision for doubtful accounts41,857  34,814  
Change in assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable, trade27,522  1,804  
Other receivables—  2,740  
Prepaid expenses and other assets(9,239) (72,638) 
Amounts due from and due to affiliates(114,290) (13,668) 
Accounts payable10,256  18,349  
Accrued liabilities(12,794) (98,673) 
Deferred revenue(17,302) 12,022  
Liabilities related to interest rate swap contracts148,013  41,322  
Net cash provided by operating activities1,529,178  1,321,776  
Cash flows from investing activities: 
Capital expenditures(527,805) (657,253) 
Payment for acquisitions, net of cash acquired—  (172,659) 
Proceeds related to sale of equipment and costs of disposal(1,846) 898  
Decrease in other investments3,662  —  
Additions to other intangible assets(237) (867) 
Net cash used in investing activities(526,226) (829,881) 
See accompanying notes to consolidated financial statements.
20

CSC HOLDINGS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
(Unaudited)

Six Months Ended June 30,
20202019
Cash flows from financing activities:
Proceeds from credit facility debt, net of discounts$200,000  $1,940,000  
Repayment of credit facility debt(228,875) (602,830) 
Issuance of senior notes, including premiums1,725,000  1,754,375  
Redemption of senior notes, including premiums and fees—  (2,462,692) 
Distributions to parent(1,372,733) (1,229,489) 
Proceeds from notes payable—  39,856  
Repayment of notes payable(48,239) (74,061) 
Principal payments on finance lease obligations(11,935) (3,273) 
Additions to deferred financing costs(5,894) (12,488) 
Contingent payment for acquisition(4,947) (500) 
Distributions to noncontrolling interests, net—  (1,000) 
Net cash provided by (used in) financing activities252,377  (652,102) 
Net increase (decrease) in cash and cash equivalents excluding effect of exchange rate changes1,255,329  (160,207) 
Effect of exchange rate changes on cash and cash equivalents(940) (580) 
Net increase (decrease) in cash and cash equivalents1,254,389  (160,787) 
Cash, cash equivalents and restricted cash at beginning of year698,003  298,784  
Cash, cash equivalents and restricted cash at end of period$1,952,392  $137,997  

See accompanying notes to consolidated financial statements.

21

ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)







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 September 30, 2017,Through June 8, 2018, Altice USA is majority‑ownedwas majority-owned by Altice Europe N.V. ("Altice Europe"), a public company with limited liability (naamloze vennootshcap)vennootschap) under Dutch lawlaw. On June 8, 2018, Altice Europe distributed substantially all of its equity interest in the Company through a distribution in kind to holders of Altice Europe's common shares A and common shares B (the "Distribution"). Altice USA is now majority-owned by Patrick Drahi through Next Alt. S.a.r.l. ("Altice N.V."Next Alt").
Altice N.V., thoughUSA is a holding company that does not conduct any business operations of its own. Altice Europe, 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 three and nine months ended September 30, 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)2016.
Altice USA, through CSC Holdings, LLC (a wholly-owned subsidiary of Cablevision) and its consolidated subsidiaries ("CSC Holdings," and collectively with Altice USA, the results of operations of Cablevision are included with"Company"), principally provides broadband communications and video services in the results of operations of Cequel for the three and nine months ended September 30, 2017. The three and nine months ended September 30, 2016 operating results include the operating results of Cablevision from the date of acquisition, June 21, 2016.
The Company classifiesUnited States. It markets its operations intoresidential services primarily under two reportable segments: Cablevision, which operatesbrands: Optimum, in the New York metropolitan area, and Cequel, whichSuddenlink, principally operates in markets in the south‑centralsouth-central United States.
Initial Public Offering
It operates enterprise services under the brands Lightpath and Altice Business. It delivers broadband, video, telephony services, proprietary content and advertising services to residential and business customers. In June 2017,September 2019, the Company completedlaunched Altice Mobile, a full service voice and data offering, to consumers across its initial public offering ("IPO")footprint. As these brands are managed on a consolidated basis, the Company classifies its operations in 1 segment.
The accompanying consolidated financial statements of 71,724,139 sharesAltice USA include the accounts of Altice USA and its majority-owned subsidiaries and the accompanying consolidated financial statements of CSC Holdings include the accounts of CSC Holdings and its majority-owned subsidiaries and gives effect to the ATS Acquisition and the i24 Acquisition discussed below. Altice USA has no business operations independent of its Class A common stock (12,068,966 shares sold by the CompanyCSC Holdings subsidiary, whose operating results and 59,655,173 shares sold by existing stockholders) at a pricefinancial position are consolidated into Altice USA. The consolidated balance sheets and statements of operations of Altice USA are essentially identical to the publicconsolidated balance sheets and statements of $30.00 per share, including the underwriters full exerciseoperations 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 connectionCSC Holdings, with the salefollowing exceptions: Altice USA has additional cash and deferred taxes on its consolidated balance sheet. In addition, CSC Holdings and its subsidiaries have certain intercompany receivables from and payables to Altice USA. Differences between Altice USA's results of its Class A common stock, the Company received proceedsoperations and those of approximately $362,069, before deducting the underwriting discount and expenses directly relatedCSC Holdings primarily include incremental interest expense for periods prior to the issuanceassumption of the securities of $13,609. 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%Cablevision senior notes that mature in 2025 issued by CSC Holdings an indirect wholly-owned subsidiaryin November 2019, loss (gain) on investments and sale of affiliate interests, net, and income tax benefit (expense).
The combined notes to the consolidated financial statements relate to the Company, which, except as noted, are essentially identical for Altice USA and CSC Holdings. All significant intercompany transactions and balances between Altice USA or CSC Holdings and their respective consolidated subsidiaries are eliminated in both sets of consolidated financial statements. Intercompany transactions between Altice USA and CSC Holdings are not eliminated in the related call premium of approximately $34,341.CSC Holdings consolidated financial statements, but are eliminated in the Altice USA consolidated financial statements.
The following organizational transactions were consummated prior to the IPO:
the Company amended and restated its certificatefinancial statements of incorporation to, among other things, provide for Class A common stock, Class B common stock and Class C common stock;
BC Partners LLP ("BCP") and Canada Pension Plan Investment Board (‘‘CPPIB and together with BCP, the‘‘Co-Investors’’) and Uppernext S.C.S.p. ("Uppernext"),CSC Holdings are included herein as supplemental information as CSC Holdings is not an entity controlled by Mr. Patrick Drahi (founder and controlling stockholder of Altice N.V.), exchanged their indirect ownership interest in the Company for shares of the Company’s common stock;
Neptune Management LP (‘‘Management LP’’) redeemed its Class B units for shares of the Company’s common stock that it received from the redemption of its Class B units in Neptune Holding US LP;
the Company converted $525,000 aggregate principal amount of notes issued by the Company to the Co-Investors (together with accrued and unpaid interest and applicable premium) into shares of the Company’s common stock at the IPO price (see Note 9 for further details);
$1,225,000 aggregate principal amount of notes issued by the Company to a subsidiary of Altice N.V. (together

SEC registrant.

22
10



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



with accrued and unpaid interest and applicable premium) was transferred to CVC 3 B.V., an indirect subsidiaryStock Repurchase Plan
In June 2018, the Board of Directors of Altice N.V. ("CVC 3")USA authorized a share repurchase program of $2,000,000, and thenon July 30, 2019, the Company converted such notes intoBoard of Directors authorized a new incremental three-year share repurchase program of $5,000,000 that took effect following the completion in August 2019 of the $2,000,000 repurchase program. Under these repurchase programs, shares of the Company’s common stock at the IPO price (see Note 9 for further details);
the Co-Investors, Neptune Holding US LP, A4 S.A. (an entity controlled by the family of Mr. Drahi), and former Class B unitholders of Management LP (including Uppernext) exchanged shares of the Company’s common stock for new shares of the Company’s Class A common stock; and
CVC 3 and A4 S.A. exchanged shares of the Company’s common stock for new shares of the Company’s Class B common stock.
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 GroupUSA Class A common stock par value $0.01 per share ("CNYG Class A Shares"),may be purchased from time to time in the open market and Cablevision NY Group Class B common stock, par value $0.01 per share ("CNYG Class B Shares", and togethermay include trading plans entered into 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.one or any of their respective wholly-owned subsidiaries, in each case not held on behalf of third parties in a fiduciary capacity, received $34.90 in cash without interest, less applicable tax withholdings (the "Cablevision Acquisition Consideration").
Pursuant to an agreement, dated December 21, 2015, by and among CVC 2 B.V., CIE Management IX Limited, for and on behalf of the limited partnerships BC European Capital IX-1 through 11 and Canada Pension Plan Investment Board, certain affiliates of BCP and CPPIB (the "Co-Investors") funded approximately $1,000,000 toward the payment of the aggregate Per Share Cablevision Acquisition Consideration, and indirectly acquired approximately 30% of the Shares of Cablevision.
Also in connection with the Cablevision Acquisition, outstanding equity-based awards granted under Cablevision’s equity plans were cancelled and converted into cash based upon the $34.90 per Share Cablevision Acquisition Considerationmore brokerage firms in accordance with Rule 10b5-1 under the original termsSecurities Exchange Act of 1934. Size and timing of these purchases will be determined based on market conditions and other factors.  
For the awards. Thesix months ended June 30, 2020, Altice USA repurchased an aggregate of 56,956,374 shares for a total considerationpurchase price of approximately $1,381,235. From inception through June 30, 2020, Altice USA repurchased an aggregate of 157,653,766 shares for a total purchase price of approximately $3,568,109. These acquired shares were retired and the outstanding CNYGcost of these shares was recorded in paid in capital in Altice USA's consolidated balance sheet.  As of June 30, 2020, Altice USA had approximately $3,431,891 of availability remaining under the incremental share repurchase program and had 579,790,385 combined Class A Shares, the outstanding CNYGand Class B Shares, and the equity-based awards amounted to $9,958,323.shares outstanding.
In connection with the Cablevision Acquisition, in October 2015, Neptune Finco Corp. ("Finco"), an indirect wholly-owned subsidiary of Altice N.V. formed to complete the financing described herein and the merger with CSC Holdings, LLC ("CSC Holdings"), a wholly-owned subsidiary of Cablevision, borrowed an aggregate principal amount of $3,800,000 under a term loan facility (the "Term Credit Facility") and entered into revolving loan commitments in an aggregate principal amount of $2,000,000 (the "Revolving Credit Facility" and, together with the Term Credit Facility, the "Credit Facilities").
Finco also issued $1,800,000 aggregate principal amount of 10.125% senior notes due 2023 (the "2023 Notes"), $2,000,000 aggregate principal amount of 10.875% senior notes due 2025 (the "2025 Notes"), and $1,000,000 aggregate principal amount of 6.625% senior guaranteed notes due 2025 (the "2025 Guaranteed Notes") (collectively the "Cablevision Acquisition Notes").
On June 21, 2016, immediately following the Cablevision Acquisition, Finco merged with and into CSC Holdings, with CSC Holdings surviving the merger (the "CSC Holdings Merger"), and the Cablevision Acquisition Notes and the Credit Facilities became obligations of CSC Holdings.
On June 21, 2016, in connection with the Cablevision Acquisition, the Company issued notes payable to affiliates and related parties aggregating $1,750,000, of which $875,000 bear interest at 10.75% and $875,000 bear interest at 11%. 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.


11


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)

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 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.
NOTE 2. SUMMARYBASIS OF SIGNIFICANT ACCOUNTING POLICIESPRESENTATION
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information.��  Accordingly, these financial statements do not include all the information and notes required for complete annual financial statements.
The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 included in the Company's final prospectus dated June 21, 2017 and filed with the Securities and Exchange Commission ("SEC") in accordance with Rule 424(b) of the Securities Act of 1933, as amended (the "Securities Act") on June 23, 2017 (the "Prospectus").2019.
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, 2017.2020.
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. See Note 12 for a discussion of fair value estimates.
Recently Adopted Accounting PronouncementCommon Stock of Altice USA
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, whichThe following table provides simplificationdetails of income tax accounting for share-based payment awards. The new guidance became effective for the Company on January 1, 2017. Amendments relatedAltice USA's shares of common stock outstanding:
 Shares of Common Stock Outstanding
 Class A
Common Stock		Class B
Common Stock
Balance at December 31, 2019446,749,307  186,245,832  
Conversion of Class B common stock to Class A common stock51,475  (51,475) 
Shares issued in connection with stock option exercises209,105  —  
Retirement of Class A common shares in connection with the Company's stock
repurchase plan (see Note 1)
(56,956,374) —  
Shares issued from treasury upon vesting of redeemable equity and restricted awards3,542,515  —  
Balance at June 30, 2020393,596,028  186,194,357  
Reclassifications
Certain reclassifications have been made 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 were applied prospectively. The Company elected2019 financial statements to apply the amendments relatedconform 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 $308,231 for previously unrealized excess tax benefits was recognized with the offset recorded to accumulated deficit.
Recently Issued But Not Yet Adopted Accounting Pronouncements
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

2020 presentation.

23
12



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



entity to apply modification accounting in Topic 718. NOTE 3. ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
ASU No. 2017‑09 becomes2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04")
In March 2020, the Financial Accounting Standards Board ("FASB") issued new accounting guidance related to the effects of reference rate reform on financial reporting. The guidance, effective for reporting periods through December 31, 2022, provides accounting relief for contract modifications that replace an interest rate impacted by reference rate reform (e.g., LIBOR) with a new alternative reference rate. The Company adopted the Companyguidance as of March 31, 2020. The adoption of this guidance did not have an impact on January 1, 2018 with early adoption permitted and will be applied prospectively.the Company's consolidated financial statements.
ASU No. 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12")
In March 2017,December 2019, the FASB issued ASU No. 2017‑07 Compensation-Retirement Benefits2019-12, Income Taxes (Topic 715)740). ASU No. 2017‑07 requires2019-12 simplifies the accounting for income taxes by eliminating certain exceptions for investments, intraperiod allocations and interim calculations. The new guidance also simplifies aspects of the accounting for franchise taxes, enacted changes in tax laws or rates, and clarifies the accounting for transactions 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 costresult in a step-up in the income statement and what componenttax basis of net benefit cost is eligible for capitalization. ASU No. 2017‑07 becomes effective forgoodwill. The amendments did not create new accounting requirements. The Company adopted the Company onstandard as of January 1, 2018 with early2020. The adoption permitted and will be applied retrospectively. The Company hasof this standard did not yet completedhave a significant impact on the evaluation of the effect that ASU No. 2017‑07 will have on itsCompany's consolidated financial statements.
ASU No. 2018-15, Customer’s Accounting for Implementation Costs in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15")
In August 2018, the FASB issued ASU 2018-15 which requires upfront implementation costs incurred in a cloud computing arrangement (or hosting arrangement) that is a service contract to be amortized to hosting expense over the term of the arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. The Company adopted the standard as of January 1, 2020. The adoption of this standard did not have a significant impact on the Company's consolidated financial statements.
ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350) ("ASU 2017-04")
In January 2017, the FASB issued ASU No. 2017‑04, Intangibles-Goodwill and Other (Topic 350). ASU No. 2017‑042017-04 which simplifies the subsequent measurement of goodwill by removing the second step of the two‑steptwo-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. The Company adopted the standard as of January 1, 2020. The adoption of this standard did not have an impact on the Company's consolidated financial statements.
ASU No. 2017‑042016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13")
In June 2016, the FASB issued ASU 2016-13 which requires a financial asset (or a group of financial assets) measured at amortized cost to be assessed for impairment under the current expected credit loss model rather than an incurred loss model. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount.  ASU 2016-13 became effective for the Company on January 1, 2020 and the adoption of this standard did not have a significant impact on the Company's consolidated financial statements. The Company will continue to actively monitor the impact of the recent coronavirus (COVID-19) pandemic on expected credit losses.
Recently Issued But Not Yet Adopted Accounting Pronouncements
ASU No. 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU 2018-14")
In August 2018, the FASB issued ASU 2018-14 which amends ASC 715 to clarify certain disclosure requirements related to defined benefit pension and other postretirement plans. ASU 2018-14 becomes effective for the Company on January 1, 2020 with2021, although 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 becomes effective for the Company on January 1, 2018 with early adoption permitted 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 becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively.is permitted. The Company hasdoes not yet completedexpect the evaluationadoption of the effect that ASU No. 2016-15 will2018-14 to have a material impact on its consolidated financial statements.
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.  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 becomes effective for the Company on January 1, 2018.  The Company has not yet completed the evaluation of the effect that ASU No. 2016-01 will have on its consolidated financial statements.
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


24
13



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



in this update affect the guidance in ASU No. 2014-09, which is not yet effective. ASU No. 2014-09 will be effective January 1, 2018 for the Company, reflecting the one-year deferral.  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. The Company currently expects the adoption to impact the timing of the recognition of residential installation revenue and the recognition of commission expenses.
Reclassifications
Certain reclassifications have been made to the 2016 financial statements to conform to the 2017 presentation.
NOTE 3.    BUSINESS COMBINATIONS4. REVENUE
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 receivable271,305
  
Property, plant and equipment4,864,621
 2-18 years
Goodwill5,842,172
  
Indefinite-lived cable television franchises8,113,575
 Indefinite-lived
Customer relationships4,850,000
 8 to 18 years
Trade names (a)1,010,000
 12 years
Amortizable intangible assets23,296
 1-15 years
Other non-current assets748,998
  
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.
The fair value of customer relationships and cable television franchises were valued using derivations of the "income" approach. The future expected earnings from these assets were discounted to their present value equivalent.
Trade names were valued using the relief from royalty method, which is based on the present value of the royalty payments avoided as a result of the company owning the intangible asset.
The basis for the valuation methods was the Company’s projections. These projections were based on management’s assumptions including among others, penetration rates for video, high speed data, and voice; revenue growth rates; operating margins; and capital expenditures. The assumptions are derived based on the Company’s and its peers’ historical operating performance adjusted for current and expected competitive and economic factors surrounding the cable industry. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash


14


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)

flows generated by the respective intangible asset. The value is highly dependent on the achievement of the future financial results contemplated in the projections. The estimates and assumptions made in the valuation are inherently subject to significant uncertainties, many of which are beyond the Company's control, and there is no assurance that these results can be achieved. The primary assumptions for which there is a reasonable possibility of the occurrence of a variation that would have significantly affected the value include the assumptions regarding revenue growth, programming expense growth rates, the amount and timing of capital expenditures and the discount rate utilized.
In establishing fair value for the vast majority of the acquired property, plant and equipment, the cost approach was utilized. The cost approach considers the amount required to replace an asset by constructing or purchasing a new asset with similar utility, then adjusts the value in consideration of physical depreciation, and functional and economic obsolescence as of the appraisal date. The cost approach relies on management’s assumptions regarding current material and labor costs required to rebuild and repurchase significant components of our property, plant and equipment along with assumptions regarding the age and estimated useful lives of our property, plant and equipment.
The estimates of expected useful lives take into consideration the effects of contractual relationships, customer attrition, eventual development of new technologies and market competition.
Long-term debt assumed was valued using quoted market prices (Level 2). The carrying value of most other assets and liabilities approximated fair value as of the acquisition 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.
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:composition of revenue:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Residential:
Broadband$920,363  $806,250  $1,805,892  $1,581,823  
Video952,526  1,018,426  1,899,587  2,035,756  
Telephony117,322  150,232  242,352  304,696  
Business services and wholesale365,564  357,806  730,094  708,495  
News and advertising96,631  114,450  202,171  209,188  
Mobile19,866  —  38,222  —  
Other2,707  3,917  6,917  7,690  
Total revenue$2,474,979  $2,451,081  $4,925,235  $4,847,648  
 Nine Months Ended September 30, 2016
Revenue$6,848,916
Net loss$(527,851)
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.
Acquisition
In connection with the acquisition of an entity in the first quarter 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 $20,687, which represents the excess of the purchase price of approximately $75,000 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 entity is included in the Cablevision segment.
NOTE 4.    NET LOSS PER SHARE ATTRIBUTABLE TO STOCKHOLDERS
Basic and diluted net loss per common share attributable to Altice USA stockholders is computed by dividing net loss attributable to Altice USA stockholders by the weighted average number of common shares outstanding during the period.  Diluted net loss per common share attributable to Altice USA stockholders excludes the effects of common stock equivalents as they are anti-dilutive. 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, discussed in Note 1, that occurred prior to the Company's IPO and the shares of common stock issued pursuant to the Company's IPO.


15


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)

NOTE 5.    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, inIn 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 customercustomers are recorded as revenue. For the three and ninesix months ended SeptemberJune 30, 2017,2020 and 2019, the amount of franchise fees and certain other taxes and fees included as a component of revenue aggregated $64,254$65,280 and $194,045,$130,190, and $63,920 and $128,156, respectively. For
The following table provides information about customer contract costs and deferred revenue related to contracts with customers:
June 30, 2020December 31, 2019
Customer contract costs (a)$21,724  $30,758  
Deferred revenue (b)164,732  182,034  

(a)Customer contract costs include primarily sales commissions for business services enterprise customers that are deferred and amortized over the threeaverage contract term.
(b)Deferred revenue represents payments received from customers for services that have yet to be provided and nine months ended September 30, 2016,installation revenue which is deferred and recognized over the benefit period. A portion of the Company's deferred revenue represents payments for services for up to one month in advance from residential and small and medium sized business ("SMB") customers which is realized within the following month as services are performed and the remaining portion is recognized over the contract period.
A significant portion of our revenue is derived from residential and SMB customer contracts which are month-to month. As such, the amount of franchise fees and certain other taxes and fees included as a componentrevenue related to unsatisfied performance obligations is not necessarily indicative of revenue aggregated $62,249 and $92,146, respectively.
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 securitiesfuture revenue to be cash equivalents.  The carrying amount of cashrecognized from our existing customer base. Contracts with enterprise customers generally range from three years to five years, and cash equivalents either approximates fair value due toservices may only be terminated in accordance with 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:
 Nine Months Ended September 30,
 2017 2016
Non-Cash Investing and Financing Activities:   
Continuing Operations:   
Conversion of notes payable to affiliates and related parties of $1,750,000 (together with accrued and unpaid interest and applicable premium) to common stock (See Note 9)$2,264,252
 $—
Property and equipment accrued but unpaid84,847
 83,722
Leasehold improvements paid by landlord3,998
 —
Notes payable to vendor25,879
 —
Supplemental Data:   
Cash interest paid1,481,363
 931,345
Income taxes paid, net26,396
 5,342
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. contractual terms.
25
The following table summarizes the activity for the 2016 Restructuring Plan during 2017:  
 Severance and Other Employee Related Costs Facility Realignment and Other Costs Total
Accrual balance at December 31, 2016$102,119
 $8,397
 $110,516
Restructuring charges140,071
 1,007
 141,078
Payments and other(92,905) (3,833) (96,738)
Accrual balance at September 30, 2017$149,285
 $5,571
 $154,856
The Company recorded restructuring charges of $44,656 and $141,818 for the three and nine months ended September 30, 2016, respectively, relating to the 2016 Restructuring Plan.


16



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



Cumulative costsNOTE 5. NET INCOME PER SHARE
Basic net income per common share attributable to date relatingAltice USA stockholders is computed by dividing net income attributable to Altice USA stockholders by the 2016 Restructuring Plan amounted to $302,870 and $64,784 for our Cablevision segment and Cequel segments, respectively.
Transaction Costs
For the three and nine months ended September 30, 2017, the Company incurred transaction costsweighted average number of $1,367 and $1,687 related to the acquisition of a businesscommon shares outstanding during the first quarterperiod.  Diluted income per common share attributable to Altice USA stockholders reflects the dilutive effects of 2017stock options and other transactions.restricted stock. For such awards that are performance based, the three and nine months ended September 30, 2016,diluted effect is reflected upon the Company incurred transaction costsachievement of $3,177 and $13,285, respectively, related to the acquisitions of Cablevision and Suddenlink.
NOTE 8.    INTANGIBLE ASSETSperformance criteria.
The following table summarizes information relatingpresents a reconciliation of weighted average shares used in the calculations of the basic and diluted income per share attributable to the Company's acquired intangible assets as of September 30, 2017: 
 Amortizable Intangible Assets
 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Estimated Useful Lives
        
Customer relationships$5,970,884
 (1,207,217) $4,763,667
 8 to 18 years
Trade names (a)1,067,083
 (432,402) 634,681
 2 to 4 years
Other amortizable intangibles37,052
 (8,805) 28,247
 1 to 15 years
 $7,075,019
 $(1,648,424) $5,426,595
  
(a)On May 23, 2017, Altice N.V. announced the adoption of a global brand which will replace the Company's brands in the future, reducing the remaining useful lives of these trade name intangibles. The Company has estimated the remaining useful lives to be 3 years from the date of the adoption, which reflects one year as an in-use asset and two years as a defensive asset. Amortization expense is calculated on an accelerated basis based on the Company's estimate of the intangible asset during the in-use period. The remaining estimated value of the defensive asset once it is no longer in use will be amortized over the defensive period. Estimated amortization expense related to the Optimum and Lightpath trade names are approximately $545,805 for 2017 (of which $334,312 has been expensed through September 30, 2017), $355,006 for 2018, $46,627 for 2019 and $18,140 through May 2020.
Amortization expenseAltice USA stockholders for the three and ninesix months ended SeptemberJune 30, 2017 aggregated $426,419,2020 and $981,657, respectively,2019:
Three Months Ended
June 30, 2020		Six Months Ended
June 30, 2020		Three Months Ended
June 30, 2019		Six Months Ended
June 30, 2019
(in thousands)
Basic weighted average shares outstanding587,587  604,500  668,031  681,703  
Effect of dilution:
Stock options1,857  2,079  566  285  
Restricted stock22  18  51  26  
Diluted weighted average shares outstanding589,466  606,597  668,648  682,014  
Weighted average shares excluded from diluted weighted average shares outstanding:
Anti-dilutive shares28,514  24,362  1,292  6,350  
Performance stock units and restricted stock whose performance metrics have not been achieved.8,943  7,758  —  —  
Net income (loss) per membership unit for CSC Holdings is not presented since CSC Holdings is a limited liability company and for the three and nine months ended September 30, 2016 aggregated $258,670 and $402,994, respectively.
The following table summarizes information relating to the Company's acquired indefinite-lived intangible assets asa wholly-owned subsidiary of September 30, 2017: Altice USA.
26
 Cablevision Cequel Total
Cable television franchises$8,113,575
 $4,906,506
 $13,020,081
Goodwill5,839,757
 2,153,742
 7,993,499
Total$13,953,332
 $7,060,248
 $21,013,580


17



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



NOTE 6. SUPPLEMENTAL CASH FLOW INFORMATION
The carrying amountCompany's non-cash investing and financing activities and other supplemental data were as follows:
Six Months Ended June 30,
20202019
Non-Cash Investing and Financing Activities:
Altice USA and CSC Holdings:
Property and equipment accrued but unpaid$210,204  $245,692  
Notes payable issued to vendor for the purchase of equipment and other assets11,582  16,204  
Right-of-use assets acquired in exchange for finance lease obligations78,564  6,501  
Deferred financing costs accrued but unpaid1,644  853  
CSC Holdings:
Distributions to parent115,187  —  

Supplemental Data:
Altice USA:
Cash interest paid673,222  763,819  
Income taxes paid, net28,406  6,247  
CSC Holdings:
Cash interest paid673,222  724,299  
Income taxes paid, net28,406  6,247  
NOTE 7. RESTRUCTURING AND OTHER EXPENSE
Restructuring
Beginning in the first quarter of goodwill is presented below:2016, the Company commenced restructuring initiatives that were intended to simplify the Company's organizational structure ("2016 Restructuring Plan").

The following table summarizes the activity for the 2016 Restructuring Plan:
Severance and Other Employee Related CostsFacility Realignment and Other CostsTotal
Accrual balance at December 31, 2019$1,676  $2,332  $4,008  
Restructuring charges—  2,059  2,059  
Payments and other(1,639) (1,813) (3,452) 
Accrual balance at June 30, 2020$37  $2,578  $2,615  

Cumulative costs to date relating to 2016 Restructuring Plan amounted to $436,984.
In May 2019, the Company commenced another restructuring initiative to further simplify the Company's organization structure ("2019 Restructuring Plan").
27
Gross goodwill as of January 1, 2017$7,992,700
Goodwill recorded in connection with acquisition in first quarter 2017 (Cablevision Segment)20,687
Adjustments to purchase accounting relating to Cablevision Acquisition3,213
Transfer of Cablevision goodwill related to Altice Technical Services US Corp. (See Note 14 for further details)(23,101)
Net goodwill as of September 30, 2017$7,993,499


18



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



NOTE 9.    DEBT
The following table summarizes the activity for the 2019 Restructuring Plan:
Severance and Other Employee Related Costs
Accrual balance at December 31, 2019$37,946 
Restructuring charges3,180 
Payments and other(18,186)
Accrual balance at June 30, 2020$22,940 
CSC Holdings Credit FacilitiesCumulative costs to date relating to the 2019 Restructuring Plan amounted to $45,895.
Restructuring and other expense for the three and six months ended June 30, 2020 also includes $40,128 related to contractual payments for terminated employees. As of June 30, 2020, the outstanding amount due to terminated employees amounted to $29,735 and is reflected in accrued employee related costs in our consolidated balance sheet.
In addition, the Company recorded restructuring charges of $611 and $2,316 for the three and six months ended June 30, 2020, and $147 and $8,696, for the three and six months ended June 30, 2019, respectively, related primarily to the impairment of right-of-use operating lease assets, included in the Company's restructuring initiatives, as their carrying amount was not recoverable and exceeded their fair value.
Transaction Costs
For the three and six months ended June 30, 2020, the Company incurred transaction costs of $88 and $577, respectively, related to certain transactions not related to the Company's operations. The Company recorded transaction costs of $574 and $970 for the three and six months ended June 30, 2019, respectively, primarily related to costs incurred in connection with the Cablevision Acquisition, in October 2015, Finco, a wholly-owned subsidiaryCompany's acquisition of the Company, 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 ($2,992,500 outstanding at September 30, 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 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”).Cheddar, Inc.
NOTE 8. LEASES
The amendmentCompany's operating leases are comprised primarily of facility leases and its finance leases are comprised primarily of vehicle and equipment leases.
Balance sheet information related 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.Company's leases is presented below:
During the nine months ended September 30, 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 $350,256 with cash on hand. In October 2017, CSC Holdings made a voluntary repayment under its revolving credit facility of $50,000. This amount was reclassified from long term debt to current debt on the consolidated balance sheet as of September 30, 2017.
Balance Sheet locationJune 30, 2020December 31, 2019
Operating leases:
Right-of-use lease assetsRight-of-use operating lease assets$270,592  $280,340  
Right-of-use lease liability, currentOther current liabilities40,440  38,836  
Right-of-use lease liability, long-termRight-of-use operating lease liability259,297�� 269,062  
Finance leases:
Right-of-use lease assetsProperty, plant and equipment137,370  70,339  
Right-of-use lease liability, currentCurrent portion of long-term debt49,478  22,017  
Right-of-use lease liability, long-termLong-term debt86,571  47,403  
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, with the remaining balance scheduled to be paid on July 17, 2025, beginning with the fiscal quarter ended September 30, 2017.
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.
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


28
19



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



The following provides details of the Company's lease expense:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Operating lease expense, net$14,849  $14,948  $29,853  $30,226  

Finance lease expense:
Amortization of assets6,960  1,630  11,420  3,192  
Interest on lease liabilities1,477  388  2,504  746  
Total finance lease expense8,437  $2,018  13,924  3,938  
$23,286  $16,966  $43,777  $34,164  
Other information related to any liens permitted byleases is presented below:
As of June 30,
20202019
Right-of-use assets acquired in exchange for operating lease obligations$15,430  $43,441  
Cash Paid For Amounts Included In Measurement of Liabilities:
Operating cash flows related to finance leases2,504  746  
Operating cash flows related to operating leases32,126  32,481  
Weighted Average Remaining Lease Term:
Operating leases9.3 years9.6 years
Finance leases2.9 years4.6 years
Weighted Average Discount Rate:
Operating leases5.86 %6.06 %
Finance leases5.66 %5.86 %
The minimum future annual payments under non-cancellable leases during the Credit Facilities, by capital stock held bynext five years and thereafter, at rates now in force, are as follows:
Finance leasesOperating leases
2020 (excluding the six months ended June 30, 2020)$30,527  $27,389  
202150,543  43,615  
202246,298  49,668  
202315,501  39,694  
20243,413  35,261  
Thereafter300  200,665  
Total future minimum lease payments, undiscounted146,582  396,292  
Less: Imputed interest(10,533) (96,555) 
Present value of future minimum lease payments$136,049  $299,737  

29

ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 9. INTANGIBLE ASSETS
The following table summarizes information relating to the Company's acquired amortizable intangible assets: 
As of June 30, 2020As of December 31, 2019
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying AmountEstimated Useful Lives
Customer relationships$6,017,524  $(3,174,454) $2,843,070  $6,017,524  $(2,843,561) $3,173,963  8 to 18 years
Trade names1,081,083  (846,929) 234,154  1,081,083  (798,484) 282,599  2 to 5 years
Other amortizable intangibles53,418  (33,426) 19,992  53,181  (28,634) 24,547  1 to 15 years
$7,152,025  $(4,054,809) $3,097,216  $7,151,788  $(3,670,679) $3,481,109  
Amortization expense for the three and six months ended June 30, 2020 and 2019 aggregated $183,031 and $384,130 and $201,279 and $401,898, respectively.
30

ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 10. DEBT
The following details the Company's outstanding debt:
Interest RateJune 30, 2020December 31, 2019
Date IssuedMaturity DatePrincipal AmountCarrying Amount (a)Principal AmountCarrying Amount (a)
Senior Notes:
November 15, 2011November 15, 20216.750 %$1,000,000  $984,412  $1,000,000  $979,178  
September 27, 2012September 15, 20225.875 %649,024  608,861  649,024  600,849  
May 23, 2014June 1, 20245.250 %750,000  690,331  750,000  683,940  
October 18, 2018July 15, 20257.750 %(e)1,740  1,698  1,740  1,695  
October 9, 2015October 15, 202510.875 %1,684,221  1,666,435  1,684,221  1,665,237  
October 18, 2018April 1, 20287.500 %4,118  4,112  4,118  4,112  
November 27, 2018July 15, 20257.750 %(e)617,881  606,479  617,881  605,583  
November 27, 2018April 1, 20287.500 %1,045,882  1,044,349  1,045,882  1,044,278  
July 10 and October 7, 2019January 15, 20305.750 %2,250,000  2,287,660  2,250,000  2,289,168  
June 16, 2020December 1, 20304.625 %625,000  622,176  —  —  
Senior Guaranteed Notes:
October 9, 2015October 15, 20256.625 %1,000,000  990,233  1,000,000  989,483  
September 23, 2016April 15, 20275.500 %1,310,000  1,305,688  1,310,000  1,305,430  
January 29, 2018February 1, 20285.375 %1,000,000  993,116  1,000,000  992,757  
November 27, 2018July 15, 20235.375 %(e)1,095,825  1,083,676  1,095,825  1,081,879  
November 27, 2018May 15, 20265.500 %1,498,806  1,486,760  1,498,806  1,485,911  
January 24, 2019February 1, 20296.500 %1,750,000  1,747,118  1,750,000  1,746,996  
June 16, 2020December 1, 20304.125 %1,100,000  1,095,311  —  —  
17,382,497  17,218,415  15,657,497  15,476,496  
CSC Holdings Restricted Group:
Revolving Credit Facility(c)(c)(b)—  —  —  —  
Term Loan BJuly 17, 20252.435 %2,910,000  2,897,887  2,925,000  2,911,729  
Incremental Term Loan B-3January 15, 20262.435 %1,259,063  1,254,243  1,265,438  1,260,200  
Incremental Term Loan B-5April 15, 20272.685 %2,992,500  2,970,328  3,000,000  2,976,358  
7,161,563  7,122,458  7,190,438  7,148,287  
Collateralized indebtedness (see Note 11)1,699,566  1,601,107  1,699,566  1,585,088  
Finance lease obligations (see Note 8)136,049  136,049  69,420  69,420  
Notes payable and supply chain financing (d)119,889  107,658  156,519  140,994  
26,499,564  26,185,687  24,773,440  24,420,285  
Less: current portion of credit facility debt(72,750) (72,750) (65,250) (65,250) 
Less: current portion of senior guaranteed notes(1,095,825) (1,083,676) —  —  
Less: current portion of senior notes(619,621) (608,177) —  —  
Less: current portion of finance lease obligations(49,478) (49,478) (22,017) (22,017) 
Less: current portion of notes payable and supply chain financing(45,209) (45,209) (83,415) (83,415) 
(1,882,883) (1,859,290) (170,682) (170,682) 
Long-term debt$24,616,681  $24,326,397  $24,602,758  $24,249,603  
(a)The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums and with respect to certain notes, a fair value adjustment resulting from the Cequel and Cablevision acquisitions.
(b)At June 30, 2020, $141,949 of the revolving credit facility was restricted for certain letters of credit issued on behalf of
31

ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)


the Company and $2,333,051 of the facility was undrawn and available, subject to covenant limitations.
(c)The revolving credit facility of an aggregate principal amount of $2,275,000 matures in January 2024 and priced at LIBOR plus 2.25%. The remaining revolving credit facility of an aggregate principal amount of $200,000 matures in November 2021 and priced at LIBOR plus 3.25%.
(d)Includes $37,581 related to supply chain financing agreements that is required to be repaid within one year from the date of the respective agreement. The principal amounts include $59,451 of notes payable that will be reclassified to collateralized indebtedness upon the maturity, in January 2021, of a monetization contract related to the synthetic monetization closeout transaction in November 2019.
(e)These notes were repaid in July 2020 with proceeds from the issuance of new notes in June 2020. See discussion below. Accordingly, the carrying amount of these notes was reclassified to current debt in the accompanying balance sheets as of June 30, 2020.
In June 2020, CSC Holdings or any guarantorissued $1,100,000 in certain subsidiariesaggregate principal amount of senior guaranteed notes that bear interest at a rate of 4.125% and mature on December 1, 2030 and $625,000 in aggregate principal amount of senior notes that bear interest at a rate of 4.625% and mature on December 1, 2030. The net proceeds from the sale of the these notes was used in July 2020 to early redeem the $1,095,825 aggregate principal amount of CSC Holdings, subjectHoldings' 5.375% senior notes due July 15, 2023, the $617,881 and the $1,740 aggregate principal amount of CSC Holdings' 7.750% senior notes due July 15, 2025, plus pay accrued interest and the associated premiums related to certain exclusionsthe early redemption of these notes. In connection with the early redemptions, the Company will recognize a loss on the extinguishment of debt aggregating $62,096, reflecting the early redemption premiums and limitations.the write-off of outstanding deferred financing costs on these notes.
The CVC Credit Facilities AgreementFor financing purposes, the Company is structured as a restricted group (the "Restricted Group") and an unrestricted group, which includes certain negative covenants which, among other thingsdesignated subsidiaries 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(the "Unrestricted Group"). The Restricted Group is comprised of CSC Holdings and substantially all of its restrictedwholly-owned operating subsidiaries. These subsidiaries are subject to the covenants and restrictions 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 undercredit facility and indentures governing the CVC Revolving Credit Facility (including swingline loans but excluding any cash collateralized letters ofnotes issued by CSC Holdings. 
CSC Holdings' credit and undrawn letters of credit not to exceed $15,000).
The CVC Credit Facilities Agreement alsofacilities agreement 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 Facilitiescredit facilities will be entitled to take various actions, including the acceleration of amounts due under the CVC Credit Facilitiescredit facilities and all actions permitted to be taken by a secured creditor.
As of June 30, 2020, CSC Holdings was in compliance with all of its financial covenants under the CVC Credit Facilities asits credit facilities and with all of September 30, 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 ($1,261,838 outstanding at September 30, 2017) (the “Cequel Term Loan Facility” and the term loans extendedits financial covenants under the Cequel Term Loan Facility,indentures under which the “Cequel Term Loans”)senior 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”).senior guaranteed notes were issued.
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 closingfollowing table provides a summary 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 the write-off of deferred financingsfinancing costs aggregating $28,684.
Under the Cequel Extension Amendment,recorded by the Company is required to make scheduled quarterly payments equal to 0.25% (or $3,163)upon the redemption of senior notes and the principal amountrefinancing of the Cequel Term Loan, with the remaining balance scheduled to be paid on July 28, 2025, beginning with the fiscal quarter ended September 30, 2017.credit facilities:
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.

Three months ended
June 30, 2019		Six months ended June 30, 2019
CSC Holdings 10.125% Senior Notes due 2023$—  $154,666  
Refinancing and subsequent amendment to CSC Holdings credit facility1,194  4,430  
$1,194  $159,096  

32
20



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)


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 Suddenlink and substantially all of the present and future assets of Suddenlink and its restricted subsidiaries, and is guaranteed by Cequel Communications Holdings II, LLC, a subsidiary of Cequel (the "Parent Guarantor"), as well as all of Suddenlink’s existing and future direct and indirect subsidiaries, subject to certain exceptions set forth in the Cequel Credit 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 Suddenlink and its subsidiaries to incur indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments or loans, engage in transactions with affiliates, pay dividends, and make acquisitions and dispose of assets. The Cequel Credit Facilities Agreement also contains a maximum senior secured leverage maintenance covenant of 5.0 times EBITDA as defined in the Cequel Credit Facilities Agreement. 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 September 30, 2017, Cequel was in compliance with all of its financial covenants under the Cequel Credit Facilities Agreement.
The following table provides details of the Company's outstanding credit facility debt:
       Carrying Amount (a)
 Maturity Date Interest Rate Principal September 30, 2017 December 31, 2016
CSC Holdings Restricted Group:         
Revolving Credit Facility (b)$20,000 on October 9, 2020, remaining balance on November 30, 2021 4.49% $1,175,000
 $1,149,024
 $145,013
Term Loan FacilityJuly 17, 2025 3.48% 2,992,500
 2,974,768
 2,486,874
Cequel:         
Revolving Credit Facility (c)November 30, 2021 — —
 —
 —
Term Loan FacilityJuly 28, 2025 3.49% 1,261,838
 1,253,110
 812,903
     $5,429,338
 5,376,902
 3,444,790
Less: Current portion92,650
 33,150
Long-term debt$5,284,252
 $3,411,640

(a)The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums.
(b)At September 30, 2017, $123,473 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $1,001,527 of the facility was undrawn and available, subject to covenant limitations.
(c)At September 30, 2017, $16,575 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $333,425 of the facility was undrawn and available, subject to covenant limitations.


21


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)

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:
     Interest Rate Principal Amount Carrying Amount (a)
IssuerDate Issued Maturity Date   September 30, 2017 December 31, 2016
CSC Holdings (b)(f)February 6, 1998 February 15, 2018 7.875% $300,000
 $303,531
 $310,334
CSC Holdings (b)(f)July 21, 1998 July 15, 2018 7.625% 500,000
 511,312
 521,654
CSC Holdings (c)(f)February 12, 2009 February 15, 2019 8.625% 526,000
 544,422
 553,804
CSC Holdings (c)(f)November 15, 2011 November 15, 2021 6.750% 1,000,000
 957,954
 951,702
CSC Holdings (c)(f)May 23, 2014 June 1, 2024 5.250% 750,000
 657,903
 650,193
CSC Holdings (e)October 9, 2015 January 15, 2023 10.125% 1,800,000
 1,777,085
 1,774,750
CSC Holdings (e)(l)October 9, 2015 October 15, 2025 10.875% 1,684,221
 1,660,583
 1,970,379
CSC Holdings (e)October 9, 2015 October 15, 2025 6.625% 1,000,000
 986,394
 985,469
CSC Holdings (g)September 23, 2016 April 15, 2027 5.500% 1,310,000
 1,304,353
 1,304,025
Cablevision (k)September 23, 2009 September 15, 2017 8.625% —
 —
 926,045
Cablevision (c)(f)April 15, 2010 April 15, 2018 7.750% 750,000
 757,515
 767,545
Cablevision (c)(f)April 15, 2010 April 15, 2020 8.000% 500,000
 491,224
 488,992
Cablevision (c)(f)September 27, 2012 September 15, 2022 5.875% 649,024
 568,796
 559,500
Cequel and Cequel Capital Senior Notes (d)(m)Oct. 25, 2012 Dec. 28, 2012 September 15, 2020 6.375% 1,050,000
 1,025,616
 1,457,439
Cequel and Cequel Capital Senior Notes (d)May 16, 2013 Sept. 9, 2014 December 15, 2021 5.125% 1,250,000
 1,132,926
 1,115,767
Altice US Finance I Corporation Senior Secured Notes (h)June 12, 2015 July 15, 2023 5.375% 1,100,000
 1,081,815
 1,079,869
Cequel and Cequel Capital Senior Secured Notes (i)June 12, 2015 July 15, 2025 7.750% 620,000
 604,001
 602,925
Altice US Finance I Corporation Senior Notes (j)April 26, 2016 May 15, 2026 5.500% 1,500,000
 1,487,745
 1,486,933
       $16,289,245
 15,853,175
 17,507,325
Less: Current portion 1,572,358
 926,045
Long-term debt $14,280,817
 $16,581,280
(a)
The carrying amount is net of the unamortized deferred financing costs and/or discounts/premiums.
(b)
The debentures are not redeemable by CSC Holdings prior to maturity.
(c)
Notes are redeemable at any time at a specified "make-whole" price plus accrued and unpaid interest to the redemption date.
(d)The Company may redeem some or more of all the notes at the redemption price set forth in the relevant indenture, plus accrued and unpaid interest.


22


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)

(e)The Company may redeem some or all of the 2023 Notes at any time on or after January 15, 2019, and some or all of the 2025 Notes and 2025 Guaranteed Notes at any time on or after October 15, 2020, at the redemption prices set forth in the relevant indenture, plus accrued and unpaid interest, if any.  The Company may also redeem up to 40% of each series of the Cablevision Acquisition Notes using the proceeds of certain equity offerings before October 15, 2018, at a redemption price equal to 110.125% for the 2023 Notes, 110.875% for the 2025 Notes and 106.625% for the 2025 Guaranteed Notes, in each case plus accrued and unpaid interest. In addition, at any time prior to January 15, 2019, CSC Holdings may redeem some or all of the 2023 Notes, and at any time prior to October 15, 2020, the Company may redeem some or all of the 2025 Notes and the 2025 Guaranteed Notes, at a price equal to 100% of the principal amount thereof, plus a “make whole” premium specified in the relevant indenture plus accrued and unpaid interest.
(f)The carrying value of the notes was adjusted to reflect their fair value on the Cablevision Acquisition Date (aggregate reduction of $52,788).
(g)The 2027 Guaranteed Notes are redeemable at any time on or after April 15, 2022 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any.  In addition, up to 40% may be redeemed for each series of the 2027 Guaranteed Notes using the proceeds of certain equity offerings before October 15, 2019, at a redemption price equal to 105.500%, plus accrued and unpaid interest.
(h)Some or all of these notes may be redeemed at any time on or after July 15, 2018, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 105.375%.
(i)Some or all of these notes may be redeemed at any time on or after July 15, 2020, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before July 15, 2018, at a redemption price equal to 107.750%.
(j)Some or all of these notes may be redeemed at any time on or after May 15, 2021, plus accrued and unpaid interest, if any. Up to 40% of the notes may be redeemed using the proceeds of certain equity offerings before May 15, 2019, at a redemption price equal to 105.500%.
(k)In April 2017, the Company redeemed $500,000 of the senior notes from proceeds from the CVC Term Loan facility. In September 2017, these senior notes matured and the Company repaid the remaining principal balance of $400,000.
(l)In July 2017, the Company used approximately $350,120 of the proceeds from the IPO to fund the redemption of $315,779 principal amount of CSC Holdings senior notes due October 2025 and the related call premium of approximately $34,341which was recorded as a loss on extinguishment of debt. The Company also recorded a write-off of deferred financings costs in connection with this redemption aggregating $4,516.
(m)In April 2017, the Company redeemed $450,000 of the senior notes from proceeds from the Cequel Term Loan facility.
The 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 September 30, 2017.
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 nine months ended September 30, 2017. In connection with the conversion of the notes, the Company recorded a credit to paid in capital of $2,264,252.
For the nine months ended September 30, 2017, the Company recognized $90,405 of interest expense related to these notes prior to their conversion.


23


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Summary of Debt Maturities
The future maturities of debt payable by the Company under its various debt obligations outstanding as of SeptemberJune 30, 2017,2020, including notes payable and collateralized indebtedness (see Note 10)11), and capital leases,but excluding finance lease obligations (see Note 8), are as follows:
2020 (excluding the six months ended June 30, 2020) (a)$1,782,180  
20211,092,181  
2022728,667  
20231,835,383  
2024822,889  
Thereafter20,102,215  
Years Ending December 31,Cablevision Cequel Total
2017$29,925
 $5,256
 $35,181
20181,598,699
 14,421
 1,613,120
2019561,995
 12,713
 574,708
2020530,007
 1,062,723
 1,592,730
20213,664,638
 1,263,578
 4,928,216
Thereafter10,058,245
 4,428,075
 14,486,320
_____________________
(a)Includes the CSC Holdings notes redeemed in July 2020 discussed above.
NOTE 10.11. DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS
Prepaid Forward Contracts
The Company has entered into various transactions to limit the exposure against equity price risk on its shares of Comcast Corporation ("Comcast") common stock.  The Company has monetized all of its stock holdings in Comcast through the execution of prepaid forward contracts, collateralized by an equivalent amount of the respective underlying stock.  At maturity, the contracts provide for the option to deliver cash or shares of Comcast stock with a value determined by reference to the applicable stock price at maturity.  These contracts, at maturity, are expected to offset declines in the fair value of these securities below the hedge price per share while allowing the Company to retain upside appreciation from the hedge price per share to the relevant cap price.  
The Company received cash proceeds upon execution of the prepaid forward contracts discussed above which has been reflected as collateralized indebtedness in the accompanying consolidated balance sheets.  In addition, the Company separately accounts for the equity derivative component of the prepaid forward contracts.  These equity derivatives have not been designated as hedges for accounting purposes.  Therefore, the net fair values of the equity derivatives have been reflected in the accompanying consolidated balance sheets as an asset or liability and the net increases or decreases in the fair value of the equity derivative component of the prepaid forward contracts are included in gain (loss) on derivative contracts in the accompanying consolidated statements of operations.
All of the Company's monetization transactions are obligations of its wholly-owned subsidiaries that are not part of the Restricted Group; however, CSC Holdings has provided guarantees of the subsidiaries' ongoing contract payment expense obligations and potential payments that could be due as a result of an early termination event (as defined in the agreements).  If any one of these contracts werewas 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 SeptemberJune 30, 2017,2020, 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 SeptemberJune 30, 2017.2020.
Put/Call OptionsInterest Rate Swap Contracts
InTo manage interest rate risk, we have from time to time entered into interest rate swap contracts to adjust the third quarterproportion of 2017,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 enteredto 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 a put-call contractinterest rate swap contracts with financial institutions that expires in the third quarter of 2018 whereby the Company sold a put option and purchased a call option with the same strike price. In connection with this transaction, the Company provided cash collateral of approximately $45,000are rated investment grade. All such contracts are carried at September 30, 2017, which reflects the aggregate difference between the strike price and the closing price of the underlying shares and is reflected as restricted cash intheir fair market values on our consolidated balance sheet. Thesheet, with changes in fair value of the put-call contract of $48,326 as of September 30, 2017 is reflected in liabilities under derivative contracts on the Company’s balance sheet. For the three months ended September 30, 2017, $72,365 was recorded in theconsolidated statement of operations as a loss on derivative contracts which reflected a change in the fair valueoperations. As of the put-call contract of $48,326 and a realized loss on the settlement of certain put-call options of $24,039. In October 2017,June 30, 2020, the Company settled the remaining put-call optionsdid not hold and recognized an incremental loss of approximately $25,000.

has not issued derivative instruments for trading or speculative purposes.

33
24



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



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.
The following represents the location of the assets and liabilities associated with the Company's derivative instruments within the consolidated balance sheets:
Derivatives Not Designated as Hedging InstrumentsBalance Sheet LocationFair Value at
June 30, 2020December 31, 2019
Asset Derivatives:
Interest rate swap contractsDerivative contracts, long-term$4,058  $—  
Prepaid forward contractsDerivative contracts, long-term221,733  25,207  
225,791  25,207  
Liability Derivatives:
Interest rate swap contractsOther current liabilities(4,016) (469) 
Prepaid forward contractsLiabilities under derivative contracts, long-term(3,520) (94,795)��
Interest rate swap contractsLiabilities under derivative contracts, long-term(309,396) (160,871) 
 $(316,932) $(256,135) 
    Asset Derivatives Liability Derivatives
Derivatives Not Designated as Hedging Instruments 
Balance Sheet
Location
 Fair Value at September 30, 2017 Fair Value at December 31, 2016 Fair Value at September 30, 2017 Fair Value at December 31, 2016
           
Prepaid forward contracts Derivative contracts, current $54,578
 $352
 $(54,578) $(13,158)
Prepaid forward contracts Derivative contracts, long-term —
 10,604
 (52,488) —
Put/Call options Liabilities under derivative contracts, current —
 —
 (48,326) —
Interest rate swap contracts Liabilities under derivative contracts, long-term —
 —
 (69,271) (78,823)
    $54,578
 $10,956
 $(224,663) $(91,981)
Gain (loss)The following table presents certain statement of operations data related to the Company'sour derivative contracts relatedand the underlying common stock:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Gain (loss) on derivative contracts related to change in the value of equity derivative contracts related to Comcast common stock$(152,061) $(49,624) $287,800  $(226,653) 
Change in the fair value of Comcast common stock included in gain (loss) on investments197,594  98,794  (257,302) 353,519  
Loss on interest rate swap contracts, net of a gain of $74,835 recorded in the 2020 six month period in connection with the early termination of the swap agreements discussed below(33,735) (26,900) (88,567) (50,572) 
In March 2020, the Company terminated two swap agreements whereby the Company was paying a floating rate of interest and receiving a fixed rate of interest on an aggregate notional value of $1,500,000. These contracts were due to mature in May 2026. In connection with the Comcast common stock forearly termination, the threeCompany received cash of $74,835 which has been recorded in loss on interest swap contracts, net in our consolidated statement of operations and nine months ended September 30, 2017presented in operating activities in our consolidated statement of $55,602cash flows.
In addition, in March 2020, the Company executed amendments to two interest swap contracts that reduced the fixed rate of interest that the Company was paying on an aggregate notional value of $1,000,000 and $(81,905), respectively, are reflectedextended the maturity date of the contracts to January 15, 2025 from January 15, 2022. The difference in gain (loss)the fair value of the amended contracts and the original contracts on the date of the transaction of $5,689 (an increase in the liability) is being amortized to loss on derivative contracts net inover the Company's consolidated statementremaining term of operations.the contracts.
ForDuring the three and ninesix months ended SeptemberJune 30, 2017,2020, the Company recorded a gain (loss) on investments of $(18,900) and $169,888, respectively, representing the net increase (decrease) in the fair values of the investment securities pledged as collateral. 
For theentered into three and nine months ended September 30, 2017, the Company recorded a gain onnew interest rate swap contracts of $1,051 and $12,539, respectively.
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 theon an aggregate notional value of the related equity derivative contracts during the nine months ended September 30, 2017: $3,850,000. See table below.
Number of shares (a)21,477,618
Collateralized indebtedness settled$(617,151)
Derivatives contracts settled(37,838)
 (654,989)
Proceeds from new monetization contracts662,724
Net cash proceeds$7,735
34
______________________
(a)Share amounts are adjusted for the 2 for 1 stock split in February 2017.


25



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



The cash to settle the collateralized indebtedness was obtained from the proceedsfollowing is a summary of new monetizationinterest rate swap 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. outstanding at June 30, 2020:
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 $64,793 (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 $46,864.
Trade DateMaturity DateNotional AmountCompany PaysCompany Receives
December 2018January 2025$500,000 Fixed rate of 1.53%Three-month LIBOR
December 2018January 2022500,000 Fixed rate of 2.733%Three-month LIBOR
December 2018January 2025500,000 Fixed rate of 1.625%Three-month LIBOR
December 2018December 2026750,000 Fixed rate of 2.9155%Three-month LIBOR
December 2018December 2026750,000 Fixed rate of 2.9025%Three-month LIBOR
March 2020January 2025500,000 Fixed rate of 1.458%Three-month LIBOR
March 2020January 2022500,000 Three-month LIBORFixed rate of 2.733%
April 2020April 20212,850,000 Six-month LIBOR minus 0.5185%One-month LIBOR

NOTE 11.12. 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.
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		June 30, 2020December 31, 2019
Assets:
Money market fundsLevel I$1,842,086  $563,704  
Investment securities pledged as collateralLevel I1,674,395  1,931,697  
Prepaid forward contractsLevel II221,733  25,207  
Interest rate swap contractsLevel II4,058  —  
Liabilities:
Prepaid forward contractsLevel II3,520  94,795  
Interest rate swap contractsLevel II313,412  161,340  
Contingent consideration related to 2017 and 2018 acquisitionsLevel III1,767  7,250  
 
Fair Value
Hierarchy
 September 30, 2017 December 31, 2016
Assets:     
Money market funds (of which $14,700 is classified as restricted cash as of December 31, 2016)Level I $65,801
 $100,139
Investment securities pledged as collateralLevel I 1,652,917
 1,483,030
Prepaid forward contractsLevel II 54,578
 10,956
Liabilities:     
Prepaid forward contractsLevel II 107,066
 13,158
Put/Call OptionsLevel II 48,326
 —
Interest rate swap contractsLevel II 69,271
 78,823
Contingent consideration related to 2017 acquisitionLevel III 30,000
 —
The Company's cash equivalents investment securities(money market funds) and investment securities pledged as collateral are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.
The Company's derivative contracts and liabilities under derivative contracts on the Company's consolidated balance sheets are valued using market-based inputs to valuation models.  These valuation models require a variety of inputs, including contractual terms, market prices, yield curves, and measures of volatility.  When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit risk considerations.  Such adjustments are generally based on available market evidence.  Since model inputs can generally be verified and do not involve significant management judgment, the Company has concluded that these instruments should be classified within Level II of the fair value hierarchy.


35
26



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



The fair value of the contingent consideration related to the acquisition in the first quarter of 2017 was estimated based on a probability assessment of attaining the targets. The estimated amount recorded as of September 30, 2017 is the full contractual amount.
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 PayableSupply Chain Financing
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 value of outstanding amounts related to supply chain financing agreements approximates the fair value due to the short-term nature of their maturity (less than one year).
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:
June 30, 2020December 31, 2019
Fair Value
Hierarchy		Carrying
Amount (a)		Estimated
Fair Value		Carrying
Amount (a)		Estimated
Fair Value
Credit facility debtLevel II$7,122,458  $7,161,563  $7,148,287  $7,190,438  
Collateralized indebtednessLevel II1,601,107  1,696,376  1,585,088  1,611,095  
Senior guaranteed notesLevel II8,701,902  9,094,711  7,602,456  8,220,518  
Senior notesLevel II8,516,513  9,037,404  7,874,040  8,728,870  
Notes payable and supply chain financingLevel II107,658  108,619  140,994  141,713  
$26,049,638  $27,098,673  $24,350,865  $25,892,634  
   September 30, 2017 December 31, 2016
 
Fair Value
Hierarchy
 
Carrying
Amount (a)
 
Estimated
Fair Value
 
Carrying
Amount (a)
 
Estimated
Fair Value
Altice USA debt instruments:         
Notes payable to affiliates and related partiesLevel II $—
 $—
 $1,750,000
 $1,837,876
CSC Holdings debt instruments:   
  
  
  
Credit facility debtLevel II 4,123,792
 4,167,500
 2,631,887
 2,675,256
Collateralized indebtednessLevel II 1,314,788
 1,286,557
 1,286,069
 1,280,048
Senior guaranteed notesLevel II 2,290,748
 2,460,675
 2,289,494
 2,416,375
Senior notes and debenturesLevel II 6,412,789
 7,421,261
 6,732,816
 7,731,150
Notes payableLevel II 76,442
 72,802
 13,726
 13,260
Cablevision senior notes:Level II 1,817,536
 1,998,340
 2,742,082
 2,920,056
Cequel debt instruments:  

 

 

 

Cequel credit facilityLevel II 1,253,110
 1,261,838
 812,903
 815,000
Senior secured notesLevel II 2,569,559
 2,745,750
 2,566,802
 2,689,750
Senior notesLevel II 2,762,543
 3,036,850
 3,176,131
 3,517,275
Notes payableLevel II 3,083
 3,083
 —
 —
   $22,624,390
 $24,454,656
 $24,001,910
 $25,896,046
(a)Amounts are net of unamortized deferred financing costs and discounts/premiums.
(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 12.13. INCOME TAXES
In general, the Company is required to use an estimated annual effective tax rate ("AETR") to measure the income tax expense or benefit recognized in an interim period. The estimated annual effective tax rate is revised on a quarterlyyear to date basis and therefore may be different from the rate used in a prioran 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.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ("CARES Act") was enacted and signed into law. Certain provisions of the CARES Act impacted the 2019 income tax provision computations of the Company and have been reflected in the consolidated financial statements for the six months ended June 30, 2020. The CARES Act modified the interest limitation under section 163(j) of the Internal Revenue Code ("163(j)") for 2019 and 2020, increasing the allowable business interest deduction from 30% to 50% of adjusted taxable income. This modification significantly increased the allowable interest deduction for the Company in 2019, resulting in less utilization of net operating loss carryforwards. For state tax purposes, an estimated net benefit of approximately $10,500 was recognized for the three months ended March 31, 2020 driven by a decrease in federal taxable income for 2019 due to the 163(j) law change under the CARES Act. However, due to the decoupling from the CARES Act by New York State and New York City, the net benefit decreased approximately $8,000 in the three months ended June 30, 2020, resulting in a net state tax benefit of approximately $2,500 for the six months ended June 30, 2020. In addition, the CARES Act accelerated the ability of companies to receive refunds of Alternative Minimum Tax credits. For the Company, the remaining approximately $12,000 in tax credits will be refunded as part of the 2019 tax filing and is included in prepaid expenses and other current assets in the accompanying balance sheets.

36
27



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



The Company recorded income tax benefit of $134,688 and $429,664 forAltice USA
For the three and ninesix months ended SeptemberJune 30, 2017,2020, Altice USA recorded a tax expense of $58,826 and $75,861 on pre-tax income of $170,303 and $185,800, respectively, reflectingresulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was due to the impact of 43%certain non-deductible expenses and 37%, respectively. Nondeductible share-based compensationcertain state tax expense foradjustments, partially offset by a benefit resulting from the recently enacted CARES Act.
For the three and ninesix months ended SeptemberJune 30, 2017 reduced2019, Altice USA recorded a tax expense of $41,160 and $18,574 on pre-tax income of $127,570 and $79,786, respectively, resulting in an effective tax benefit by $6,002rate that was higher than the U.S. federal statutory tax rate. The primary differences between the effective tax rate and $16,373, respectively.the statutory tax rate are due to a revaluation of state deferred taxes primarily due to certain changes to the state tax rates used to measure the Company’s deferred tax liabilities and certain non-deductible expenses.
The Company recorded income tax benefit of $118,230 and $101,332 forCSC Holdings
For the three and ninesix months ended SeptemberJune 30, 2016, respectively. On June 9, 20162020, CSC Holdings recorded a tax expense of $56,629 and $61,658 on pre-tax income of $170,302 and $185,453, respectively, resulting in an effective tax rate that was higher than the common stock of Cequel CorporationU.S. statutory tax rate. The higher tax rate was contributeddue to the Company. On June 21, 2016, the Company completed its acquisitionimpact of Cablevision. Accordingly, Cequel and Cablevision joined the federal consolidatedcertain non-deductible expenses and certain state combinedtax expense adjustments, partially offset by a benefit resulting from the recently enacted CARES Act.
For the three and six months ended June 30, 2019, CSC Holdings recorded a tax expense of $47,828 and $32,152 on pre-tax income tax returns of the Company. As a result, the applicate$151,970 and $128,430, respectively, resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was due to revaluation of state deferred taxes primarily due to certain changes to the state tax rates used to measure CSC Holdings’ deferred tax assets and liabilities, increased, resulting in a non-cash deferred income tax charge of $153,660 inpartially offset by certain non-deductible expenses.
NOTE 14. SHARE-BASED COMPENSATION
Long Term Incentive Plan
Pursuant to the second quarter of 2016. In addition, there was no state income tax benefit on the pre-merger accrued interest at Finco, resulting in additional deferred tax expense of $2,431 and $18,542 for the three and nine months ended September 30, 2016, respectively.
On January 1, 2017 Altice USA Long Term Incentive Plan, as amended (the "LTIP"), the Company adopted ASU 2016-09 usingmay grant awards of options, restricted shares, restricted share units, stock appreciation rights, performance stock, performance stock units and other awards (the 2017 Long Term Incentive Plan or the prospective transition method with respect"LTIP"). In June 2020, shareholders of the Company approved an increase to the presentationnumber of excess tax benefits inshares authorized for issuance under the statementLTIP by 35,000,000 shares to 54,879,291, and approved the extension of cash flows. In connection with the adoption, a deferred tax asset of $308,231 for previously unrealized excess tax benefits relatedterm to share-based payment awards was recognized with the offset recorded to accumulated deficit.June 10, 2030.
As of September 30, 2017, the Company's federal net operating losses (“NOLs”) were approximately $2,674,000. 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 COMPENSATIONCarry 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,Limited Partnership ("Neptune LP").
The following table summarizes activity relating to these carry units:
Number of Time
Vesting Awards		Weighted Average Grant Date Fair Value
Balance, December 31, 201937,518,750  $2.35  
Vested(27,343,750) 2.31  
Forfeited(212,500) 0.56  
Balance, June 30, 20209,962,500  $2.71  
The weighted average fair value per unit was $1.75 and $3.25, as of June 30, 2020 and December 31, 2019, respectively. For the general partner of Neptune Management LP, has the right to repurchase (or to assign to an affiliate, includingthree and six months ended June 30, 2020 and 2019, 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 therecognized share-based compensation with respectexpense of $3,937 and $7,057, and $7,861 and $14,334, respectively, related to these awards at the end of each reporting period. The carry unit plan has 259,442,785 units authorized for issuance, of which 215,295,834 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 September 30, 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 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. 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.

plan.

37
28



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



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.Stock Options
The following table summarizes activity relatingrelated to carry units:the stock options granted to Company employees:
 Shares Under OptionWeighted Average
Exercise
Price Per Share		Weighted Average Remaining
Contractual Term
(in years)		Aggregate Intrinsic
Value (a)
Balance at December 31, 201914,083,741  $19.12  8.74$112,915  
Granted26,093,256  28.32  
Exercised(209,105) 17.46  
Forfeited(1,749,476) 21.44  
Balance at June 30, 202038,218,416  25.31  9.1449,108,141  
Options exercisable at June 30, 2020788,053  $17.70  7.17$3,848,578  
 
Number of Time
Vesting Awards
 
Number of Performance
Based Vesting Awards
 Weighted Average Grant Date Fair Value
Balance, December 31, 2016192,800,000
 10,000,000
 $0.37
Granted28,025,000
 —
 3.14
Forfeited(4,229,166) —
 0.37
Balance, September 30, 2017216,595,834
 10,000,000
 0.71
Awards vested at September 30, 2017—
 —
  
(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 and six months ended June 30, 2020 and 2019 of $25,327 and $45,676 and $7,817 and $15,134, respectively. As of June 30, 2020, there was $200,745 of total unrecognized compensation cost related to stock options which is expected to be recognized over a weighted-average period of approximately 3.16 years.
The following weighted-average assumptions were used to calculate the fair values of stock option awards granted during the six months ended June 30, 2020:
Risk-free interest rate1.45%
Expected life (in years)6.38
Dividend yield—%
Volatility28.46%
Grant date fair value$7.74
Performance Stock Unit Awards
In January 2020, certain employees of the Company were granted performance stock units ("PSUs"). Each PSU gives the employee the right to receive one share of Altice USA class A common stock, upon achievement of a specified stock price hurdle. The PSUs will be forfeited if the applicable performance measure is not achieved prior to January 29, 2024 (January 29, 2026 in the event of a recession or market disruption event prior to achievement of the performance measure, which criteria was met in June 2020) or if the employee does not continue to provide services to the Company through the achievement date of the applicable performance measure.
As of June 30, 2020, the Company had 7,480,469 PSUs outstanding. The PSUs have a weighted average grant date fair value of $10.65 per unit was $1.76 and $3.49 as of December 31, 2016 and September 30, 2017, respectively.unit. For the three and ninesix months ended SeptemberJune 30, 2017,2020, the Company recognized anshare based compensation expense of $15,005$4,419 and $40,932$8,320 related to the push downthese PSUs. As of share-basedJune 30, 2020 there was $71,127 of total unrecognized compensation cost related to outstanding PSUs which is expected to be recognized over a weighted-average period of approximately 5.6 years.
The following assumptions were used to calculate the carry unit planfair values of which approximately $14,448the PSUs granted during the six months ended June 30, 2020:
Risk-free interest rate1.46%
Expected life (in years)4 and 6
Dividend yield—%
Volatility34.22%
38

ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and $39,150per share amounts)
(Unaudited)


Restricted Awards
For the three and six months ended June 30, 2020, the Company recorded share based compensation expense of $636 and $1,212, respectively, related to unitsrestricted awards granted to certain employees pursuant to the LTIP. In January 2020, certain restricted awards granted to employees in the prior year were cancelled. These employees received new grants of the Companystock options and $557 and $1,782 related to employees of Altice N.V. and affiliated companies allocated to the Company.PSUs.
NOTE 14.15. 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 September 30, 2017, 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 $1,694 and is included in investments in affiliates on our consolidated balance sheet. The operating results of Newsday and i24NEWS are recorded on the equity basis. For the three and nine months ended September 30, 2017, the Company recorded equity in net loss of Newsday of $1,034 and $2,571, respectively, and equity in net loss of I24NEWS of $541 and $3,126, respectively.
Affiliate and Related Party Transactions
Altice USA is controlled by Patrick Drahi who is also the controlling stockholder of Altice Europe and its subsidiaries and other entities.
As the transactions discussed below were conducted between subsidiaries of Altice N.V.entities under common control and equity method investees,by Mr. Drahi, 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.
Altice Technical Services US Corp. ("ATS")
ATS is a wholly-owned subsidiary of Altice Technical Services B.V., a 70% owned subsidiary of Altice N.V. 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 FTTH network. The Company also entered into a transition services agreement (“TSA”) for the use of the Company’s resources to provide various overhead functions to ATS, including accounting, legal and human resources and for the


29


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)

use of certain facilities, vehicles and technician tools during a transitional period that generally ends on December 31, 2017, although the term can be extended on a service-by-service basis. The TSA requires ATS to reimburse the Company for its cost to provide such services.
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. It is anticipated that a substantial portion of the Cequel segment technical workforce will become employees of ATS later in 2017.
From the formation of ATS and up until an equity contribution was made by its parent in June 2017, ATS met the definition of a variable interest entity in accordance with ASC 810-10-15-14. The Company evaluated whether its arrangement under the terms of the Independent Contractor Agreement is a variable interest, whether the Company is the primary beneficiary and whether the Company should consolidate ATS. The Company concluded that it is not the primary beneficiary of ATS because ATS is controlled by its parent, which in turn is controlled by Altice N.V. who has the power to direct the most significant activities of ATS.
As of September 30, 2017, the Company had a prepayment balance of $11,296 primarily to ATS which is reflected in prepaid expenses and other current assets and $2,570 which is reflected in other long-term assets on the Company's balance sheet.
The Company reduced goodwill to reflect the preliminary estimate of the historical value of the goodwill associated with the transfer to ATS described above of $23,101, that has been recorded as a reduction to stockholders' equity.
The following table summarizes the revenue and charges related to services provided to or received from subsidiaries of Altice N.V.affiliates and Newsday:related parties:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenue$3,379  $496  $6,867  $1,088  
Operating expenses:
Programming and other direct costs$(1,738) $(2,087) $(3,927) $(3,774) 
Other operating expenses, net(2,161) (2,020) (6,102) (4,266) 
Operating expenses, net(3,899) (4,107) (10,029) (8,040) 
Net charges - Altice USA$(520) $(3,611) $(3,162) $(6,952) 
Capital Expenditures$3,676  $2,536  $10,901  $5,890  
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenue$986
 $720
 $1,380
 $720
Operating expenses: 
      
Programming and other direct costs$(1,196) $(642) $(3,026) $(642)
Other operating expenses, net(28,332) (8,056) (73,263) (13,056)
Operating expenses, net(29,528) (8,698) (76,289) (13,698)
        
Interest expense (a)—
 (48,617) (90,405) (53,922)
Loss on extinguishment of debt and write-off of deferred financing costs—
 —
 (513,723) —
Net charges$(28,542) $(56,595) $(679,037) $(66,900)
Capital Expenditures$72,185
 $—
 $98,234
 $—
(a)See Note 9 for a discussion of interest expense related to notes payable to affiliates and related parties of $90,405 for the nine months ended September 30, 2017.
Revenue
The Company recognized revenue in connection with the sale of pay television, broadband and telephony services to ATS andprimarily from the sale of advertising to Newsday.a subsidiary of Altice Europe and a foundation controlled by Patrick Drahi.
Programming and other direct costs
Programming and other direct costs include costs incurred by the Company for the transport and termination of voice and dataadvertising services provided by a subsidiary of Altice N.V.Europe.

Other operating expenses, net
Other operating expenses primarily include charges for services provided by other subsidiaries of Altice Europe and other related parties.
Capital Expenditures
Capital expenditures primarily include costs for equipment purchased and software development services provided by subsidiaries of Altice Europe.

39
30



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



Other operating expenses
Other operating expenses includes charges of $20,030 and $48,997 from ATS for the three and nine months ended September 30, 2017, respectively, pursuant to the Independent Contractor Agreement, net of charges to ATS pursuant to the TSA, discussed above.
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 and $22,500, for the three and nine months ended September 30, 2017, respectively, and $8,056 and $13,056 for the three and nine months ended September 30, 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.
Other operating expenses also include charges for services provided by other subsidiaries of Altice N.V. aggregating $802 and $1,766, respectively, net of a credit of $76 and $917 for transition services provided to Newsday for the three and nine months ended September 30, 2017, respectively.
Capital Expenditures
Capital expenditures include $68,636 and $85,320 (including advance payments related to the FTTH project of $41,036) for installation and construction activities performed by ATS for the three and nine months ended September 30, 2017, respectively, and $3,549 and $12,914, respectively, for equipment purchases and software development services provided by subsidiaries of Altice NV.
Aggregate amounts that were due from and due to affiliates and related parties are summarized below:
 September 30, 2017 December 31, 2016
Due from:   
Altice US Finance S.A. (a)$12,951
 $12,951
Newsday (b)4,177
 6,114
Altice Management Americas (b)615
 3,117
i24NEWS (b)3,373
 —
Other Altice N.V. subsidiaries (b)37
 —
 $21,153
 $22,182
Due to:   
CVC 3BV (c)—
 71,655
Neptune Holdings US LP (c)—
 7,962
Altice Management International (d)—
 44,121
ATS (b)(e)22,541
 —
Newsday (b)103
 275
Other Altice N.V. subsidiaries (f)6,358
 3,350
 $29,002
 $127,363
Altice USACSC HoldingsAltice USA and CSC Holdings
June 30,
2020		June 30,
2020		December 31, 2019
Due from:
Altice Europe$432  $302  $4,076  
Other affiliates and related parties3,020  3,020  2,698  
$3,452  $3,322  $6,774  
Due to:
Altice Europe$5,722  $5,722  $7,456  
$5,722  $5,722  $7,456  

Amounts due from affiliates presented in the table above represent amounts paid by the Company on behalf of or for services provided to the respective related party. Amounts due to affiliates relate to the purchase of equipment and advertising services, as well as reimbursement for payments made on our behalf.
(a)Represents interest on senior notes paid by the Company on behalf of the affiliate.
(b)Represents amounts paid by the Company on behalf of the respective related party and for Newsday and ATS, the net amounts due from the related party also include charges for certain transition services provided.
(c)Represents distributions payable to stockholders.
(d)Amounts payable as of December 31, 2016 primarily represent amounts due for equipment purchases and software development services discussed above.

In June 2020, pursuant to the Company's share repurchase program, the Company purchased 3,582,525 Altice USA Class A common stock held by Altice Europe for a total consideration of $84,906. See further information regarding the Company's share repurchase program in Note 1.
CSC Holdings
CSC Holdings made cash equity distribution payments to its parent aggregating $652,383, and $1,372,733, respectively, during the three and six months ended June 30, 2020. The distributions for the three months ended June 30, 2020 were recorded as a decrease in retained earnings of $105,980, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $546,403. The distributions for the six months ended June 30, 2020 were recorded as a decrease in retained earnings of $130,297, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $1,242,436.
CSC Holdings made cash equity distribution payments to its parent aggregating $635,028 and $1,229,490, respectively, during the three and six months ended June 30, 2019. The distributions for the three months ended June 30, 2019 were recorded as a decrease in retained earnings of $90,324, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $544,704. The distributions for the six months ended June 30, 2019 were recorded as a decrease in retained earnings of $633,541, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $595,949.
For the three and six months ended June 30, 2020, CSC Holdings recorded net non-cash equity contributions (distributions) of $35,415 and $(115,187), respectively, which represent the non-cash settlement of intercompany balances with Altice USA. These balances primarily include amounts due to/ due from Altice USA pursuant to a historical tax allocation policy and tax sharing agreements between the entities.
NOTE 16. COMMITMENTS AND CONTINGENCIES
Legal Matters
In the latter half of 2018, eight named plaintiffs, each on behalf of a putative class of stockholders who purchased Company common stock in Altice USA's IPO pursuant to the Registration Statement and Prospectus, filed complaints (seven in New York State Supreme Court, one in United States District Court for the Eastern District of New York). The lawsuits name as defendants Altice USA, Altice Europe, and Altice USA's directors, among others, and assert that all defendants violated Sections 11 and 12 of the Securities Act of 1933 (the "Securities Act") and that the individual defendants violated Section 15 of the Securities Act as control persons. In a consolidated amended complaint filed in the lawsuit in the Eastern District of New York, plaintiff also asserts violations of Section 10(b) of the Securities Act of 1934 ("34 Act"), Rule 10b-5 promulgated thereunder, and Section 20 of the 34 Act against Altice USA, Altice Europe, and certain individual directors. The facts underlying each case are substantively similar, with plaintiffs alleging that the Registration Statement and Prospectus misrepresented or omitted material facts

40
31



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



(e)Represents amounts due to ATS for construction, maintenance, and installation services, net of charges to ATS pursuant to the TSA. See discussion above.
(f)Represents amounts due to affiliates for services provided to the Company.
The table above does not include notes payablerelating to affiliatesthe negative performance of Altice France and related partiesAltice Portugal, the disclosure of $1,750,000 andwhich in November 2017 negatively impacted the related accrued interestvalue of $102,557 asAltice USA’s stock. In June of December 31, 2016, respectively, which is reflected in accrued interest2019, plaintiffs in the Company's balance sheet. See discussion in Note 9.
In the second quarter of 2017,New York State action filed a consolidated amended complaint, which the Company made cash distributions aggregating $839,700moved to stockholders, $500,000dismiss in July of which were funded with proceeds from borrowings under CSC Holdings' revolving credit facility.
NOTE 15.    COMMITMENTS AND CONTINGENCIES
Legal Matters
Following expiration of2019. The Company moved to dismiss 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 consolidatedcomplaint 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.October 2019. On March 28, 2012, in ruling on Cablevision'sJune 26, 2020, the state Court granted the Company’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, 2016, the Company had an estimated liability associated with a potential settlement totaling $5,200. During the nine months ended September 30, 2017, the Company recorded an additional liability of $800. The amount ultimately paid dismiss. Plaintiffs in connection with the proposed settlement could exceed the amount recorded.
In October 2015, the New York Attorney General began an investigation into whetherState action filed a notice of appeal on July 21, 2020.
On June 23, 2020, a purported stockholder of the major Internet Service ProvidersCompany filed a complaint in New Yorkthe Court of Chancery of the State deliver advertised Internet speeds. of Delaware, derivatively on behalf of the Company, against Patrick Drahi, Next Alt S.A.R.L., and those directors of the Company who are members of the Compensation Committee (collectively, the “Director Defendants”).The Company is cooperating with this investigation and is currentlyalso named as a nominal defendant in discussions with the New York Attorney General about resolvingcomplaint.The complaint alleges that the investigation asDirector Defendants breached their fiduciary duties to the Company’s stockholders, and wasted corporate assets, by approving certain equity grants for Patrick Drahi.The complaint seeks rescission of the equity awards, monetary damages, and costs and disbursements for the plaintiff.
The Company which resolution may involve operational and or financial components. While the Company is unableintends to predictvigorously defend these lawsuits. Although the outcome of the investigation ormatter cannot be predicted and the impact of the final resolution of these discussions,matters on the Company’s results of operations in any particular subsequent reporting period is not known at this time, itmanagement does not expectbelieve that the outcomeultimate resolution of these matters will have a material adverse effect on the operations or financial position of the Company or the ability of the Company to meet its financial obligations as they become due.
On November 6, 2018, Sprint Communications Company L.P ("Sprint") filed a complaint in the U.S. District Court for the District of Delaware alleging that the Company infringes Sprint’s patents purportedly by providing Voice over Internet Protocol ("VoIP") services. On December 3, 2018, Sprint filed a second complaint alleging that the Company infringes Sprint’s patents purportedly by providing certain VOD related services. The lawsuits are part of a pattern of litigation that was initiated as far back as 2005 by Sprint against numerous broadband and telecommunications providers, which has resulted in judgments and settlements of significant value for Sprint. The Company intends to vigorously defend the lawsuits. Although the outcome of the matter cannot be predicted and the impact of the final resolution of this matter on the Company’s results of operations in any particular subsequent reporting period is not known at this time, management does not believe that the ultimate resolution of the matter will have a material adverse effect on the operations or financial conditionsposition of the Company or the ability of the Company to meet its financial obligations as they become due, but it could be material to the Company’s consolidated results of operations or cash flows.flows for any one period.
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.
In the event that the Company is found to infringe on any patent rights, the Company may be subject to substantial damages and/or an injunction that could require the Company or its vendors to modify certain products and services the Company offers to its subscribers, as well as enter into royalty or license agreements with respect to the patents at issue. 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, disputes and investigations, some involvingof which may involve claims for substantial damages.damages, fines or penalties. 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


41
32



ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)



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:
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Cablevision Cequel Total Cablevision (a) Cequel Total
Operating income (loss)$11,185
 $123,679
 $134,864
 $39,947
 $102,832
 $142,779
Share-based compensation11,555
 3,450
 15,005
 1,091
 579
 1,670
Restructuring and other expense35,364
 18,084
 53,448
 45,176
 2,640
 47,816
Depreciation and amortization (including impairments)656,102
 167,163
 823,265
 481,497
 189,432
 670,929
Adjusted EBITDA$714,206
 $312,376
 $1,026,582
 $567,711
 $295,483
 $863,194
 Nine months ended September 30, 2017 Nine months ended September 30, 2016
 Cablevision Cequel Total Cablevision (a) Cequel Total
Operating income (loss)$244,667
 $395,213
 $639,880
 $(32,133) $274,575
 $242,442
Share-based compensation28,597
 12,335
 40,932
 1,091
 579
 1,670
Restructuring and other expense105,182
 37,583
 142,765
 143,891
 11,195
 155,086
Depreciation and amortization (including impairments)1,641,477
 497,299
 2,138,776
 526,057
 559,872
 1,085,929
Adjusted EBITDA$2,019,923
 $942,430
 $2,962,353
 $638,906
 $846,221
 $1,485,127
(a) Reflects operating results of Cablevision from the date of acquisition.
A reconciliation of reportable segment amounts to the Company's consolidated balances are as follows:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Operating income for reportable segments$134,864
 $142,779
 $639,880
 $242,442
Items excluded from operating income:
 
    
Interest expense(379,064) (446,242) (1,232,730) (1,015,866)
Interest income961
 404
 1,373
 12,787
Gain (loss) on investments, net(18,900) 24,833
 169,888
 83,467
Gain (loss) on derivative contracts, net(16,763) 773
 (154,270) (26,572)
Gain (loss) on interest rate swap contracts1,051
 (15,861) 12,539
 24,380
Loss on extinguishment of debt and write-off of deferred financing costs(38,858) —
 (600,240) (19,948)
Other income (expense), net(65) 2,531
 832
 2,548
Loss before income taxes$(316,774) $(290,783) $(1,162,728) $(696,762)


33


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)

The following tables present the composition of revenue by segment for the three and nine months ended September 30, 2017 and 2016:
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Cablevision Cequel Eliminations Total Cablevision (a) Cequel Total
Residential:             
Pay TV$782,214
 $272,178
 $—
 $1,054,392
 $772,886
 $279,109
 $1,051,995
Broadband404,153
 241,941
 —
 646,094
 366,166
 212,439
 578,605
Telephony172,904
 31,849
 —
 204,753
 178,000
 38,186
 216,186
Business services and wholesale230,274
 94,486
 —
 324,760
 220,352
 89,014
 309,366
Advertising67,563
 17,456
 (480) 84,539
 67,815
 20,944
 88,759
Other7,211
 5,426
 —
 12,637
 9,480
 5,830
 15,310
Total Revenue$1,664,319
 $663,336
 $(480) $2,327,175
 $1,614,699
 $645,522
 $2,260,221
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Cablevision (a) Cequel Eliminations Total Cablevision (a) Cequel Total
Residential:             
Pay TV$2,356,230
 $829,380
 $—
 $3,185,610
 $859,932
 $840,354
 $1,700,286
Broadband1,177,731
 709,548
 —
 1,887,279
 406,057
 613,012
 1,019,069
Telephony524,696
 99,381
 —
 624,077
 198,282
 116,855
 315,137
Business services and wholesale690,168
 278,123
 —
 968,291
 244,685
 260,278
 504,963
Advertising203,351
 54,384
 (480) 257,255
 75,458
 63,476
 138,934
Other21,366
 17,314
 —
 38,680
 14,145
 18,777
 32,922
Total Revenue$4,973,542
 $1,988,130
 $(480) $6,961,192
 $1,798,559
 $1,912,752
 $3,711,311
(a) Reflects revenue from the Cablevision Acquisition Date.
Capital expenditures (cash basis) by reportable segment are presented below:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
Cablevision$228,594
 $150,815
 $550,231
 $150,965
Cequel75,042
 97,341
 213,067
 226,761
 $303,636
 $248,156
 $763,298
 $377,726
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 EVENTEVENTS
On October 31, 2017,July 14, 2020, the Company completed its acquisition of certain cable assets in New Jersey for approximately $150,000, subject to certain closing adjustments as set forth in the asset purchase agreement.
In July 2020, the Company entered into an agreement to sell 49.99% of its Lightpath fiber enterprise business for an implied enterprise value of $3,200,000. The Company will receive total gross cash proceeds of approximately $2,300,000 from the sale and related financing activity and will record a gain upon closing. Approximately $1,100,000 of the net proceeds after tax are expected to be used by the Company to repay debt such that the transaction is at least leverage-neutral to CSC Holdings. The Company will retain a 50.01% interest in Lightpath and maintain control. Accordingly, the Company will continue to consolidate the operating results of the Lightpath business. The transaction is currently expected to close in the fourth quarter of 2020 following the satisfaction of closing conditions, including receipt of necessary regulatory approvals. Upon closing, Lightpath will be financed independently outside of the CSC Holdings made a voluntary repayment under its revolving credit facility of $500,000.restricted group.



42
34





Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
All dollar amounts and customer metrics, except per customer and per share data, included in the following discussion, are presented in thousands.
The preparation of our consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses. For a complete discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our consolidated financial statements, please refer to our Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019.
Overview
Our Business
We principally provide broadband communications and video services in the United States and market our services primarily under two brands: Optimum, in the New York metropolitan area, and Suddenlink, principally in markets in the south-central United States. We deliver broadband, pay television,video, and telephony services Wi‑Fi hotspot access, proprietary content and advertising services to approximatelymore than 4.9 million residential and business customers. Our footprint extends across 21 states through a fiber‑richfiber-rich broadband network with approximately 8.68.9 million homes passed as of June 30, 2020. Additionally, we offer news programming and content, and advertising services. In September 30, 2017. We have two reportable segments: Cablevision and Cequel. Cablevision provides broadband, pay television and telephony services2019, the Company launched Altice Mobile, a full service mobile offering, 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 ofconsumers across its customers located in the ten states of Texas, West Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, Arizona, California, Missouri and Ohio.
Recent Transactions
Operating results for the nine months ended September 30, 2016 include the operating results of Cablevision from the date of acquisition, June 21, 2016,
On June 21, 2016, Altice USA acquired Cablevision for a total purchase price of approximately $9,958,323 (the "Cablevision Acquisition"). 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 LLC 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.footprint.
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,” “Industry Overview”"Risk Factors" and “Business-Competition”"Business-Competition" included in our Annual Report on Form 10-K for the Prospectus.year ended December 31, 2019.
In March 2020, the United States declared a national emergency concerning the outbreak of the coronavirus ("COVID-19"). There have also been extraordinary and wide-ranging actions taken by federal, state and local governmental authorities to contain and combat the outbreak and spread of the virus. We have continued to provide our telecommunications services to our customers during this pandemic. We expect that our future results may be impacted, including if residential or business customers discontinue their service or are unable to pay for our products and services, or if advertising revenue continues to decline. Additionally, in order to prioritize the demands of the business, we may continue to delay certain capital investments. Due to the uncertainty surrounding the magnitude and duration of business and economic impacts relating to COVID-19, including the effort to contain and combat the spread of the virus, and business impacts of government actions, we currently cannot reasonably estimate the ultimate impact of COVID-19 on our business. See "Risk Factors - Our business, financial condition and results of operations may be adversely affected by the recent COVID-19 pandemic."
We derive revenue principally through monthly charges to residential subscriberscustomers of our broadband, pay televisionvideo, and telephony services. We also derive revenue from equipment rental, DVR, VOD, pay‑per‑view,digital video recorder ("DVR"), video-on-demand ("VOD"), pay-per-view, installation and home shopping commissions. Our residential pay television, broadband, video, and telephony services accounted for approximately 46%37%, 27%39%, and 9%5%, respectively, of our consolidated revenue for the ninesix months ended SeptemberJune 30, 2017.2020. We also derive revenue from the sale of a wide and growing variety of products and services to both large enterprise and SMB customers, including broadband, telephony, networking and pay televisionvideo services. For the ninesix months ended SeptemberJune 30, 2017, 14%2020, 15% of our consolidated revenue was derived from these business services. In addition, we derive revenues from the sale of advertising time available on the programming carried on our cable television systems, digital advertising and data analytics, and affiliation fees for news programming, which accounted for approximately 4% of our consolidated revenue for the ninesix months ended SeptemberJune 30, 2017.2020. Our mobile and other revenue for the ninesix months ended SeptemberJune 30, 20172020 accounted for less thanapproximately 1% of our consolidated revenue.
Revenue increases are derived fromis impacted by rate increases, increaseschanges in the number of subscriberscustomers to our services, including additional services sold to our existing subscribers,customers, programming package upgradeschanges by our pay televisionvideo customers, speed tier upgradeschanges by our broadband customers, and acquisitions and construction of cable systems that result in the addition of new subscribers.customers.
Our ability to increase the number of subscriberscustomers to our services is significantly related to our penetration rates.
43

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


35




DirecTV subsidiary, CenturyLink, DISH, Network, Frontier and Verizon. Consumers’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,” “Industry Overview”"Risk Factors" and “Business-Competition”"Business-Competition" included in our Annual Report on Form 10-K for the Prospectus.year ended December 31, 2019.
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.increases. See “-Results"Results of Operations”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 commencedare constructing a five‑year plan to build a fiber-to-the-home ("FTTH")FTTH network, which will enable us to deliver more than 10 Gbps broadband speeds in areas where FTTH is deployed. In addition, we launched Altice Mobile to consumers across our entire Cablevision footprint and part of our Cequel footprint.in September 2019. We may incur greater than anticipated capital expenditures in connection with this initiative,these initiatives, fail to realize anticipated benefits, experience delays and business disruptions or encounter other challenges to executing itthem as planned. See “-Liquidity"Liquidity and Capital Resources-Capital Expenditures”Resources" for additional information regarding our capital expenditures.
Basis of Presentation
Altice USA - Comparison of Actual Results for the Three and Nine Months Ended September 30, 2017 compared to the Three and Nine Months Ended September 30, 2016 and Comparison of Actual Results for the Nine Months Ended September 30, 2017 to Pro Forma Results for the Nine Months Ended September 30, 2016.Certain Transactions
The actual resultsfollowing transactions occurred during the periods covered by this Management's Discussion and Analysis of Altice USA forFinancial Condition and Results of Operations:
In June 2019, the three and nine months ended September 30, 2017 and forCompany completed the three months ended September 30, 2016 include the operating resultsacquisition of Cequel and Cablevision. The actual results of Altice USA for the nine months ended September 30, 2016 include the operating results of CequelCheddar Inc., a digital-first news company and the operating results of Cablevision for the period from the dateCheddar were consolidated as of the Cablevision Acquisition, June 21, 2016, through September 30, 2016.1, 2019.
The unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2016 presented herein reflect the Cablevision Acquisition as if it had occurred on January 1, 2016. The pro forma results have been prepared based on assumptions deemed appropriate by the Company. The pro forma adjustments include (i) the elimination of incremental costs that were directly related to the Cablevision Acquisition, (ii) the 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 its property, plant and equipment and identifiable intangible assets resulting from the application of business combinations accounting, (iii) the incremental interest resulting from the issuance of debt to fund the acquisition, net of the reversal of interest and amortization of deferred financing costs related to the credit facility that was repaid on the date of acquisition and the accretion/ amortization of fair value adjustments associated with the long‑term debt acquired, (iv) the elimination of interest income earned on cash proceeds from the issuance of debt prior to the Cablevision Acquisition and (v) the income tax impact of these pro forma adjustments, and the Cablevision Acquisition.
The unaudited pro forma consolidated statements of operations are for informational purposes only. We believe that the pro forma information is useful as it provides additional information given the significant impact of the Cablevision acquisition 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 actual results for the nine months ended September 30, 2017 to the pro forma results for the nine months ended September 30, 2016 provides useful information because it reflects the business operations on a more comparable basis. The pro forma consolidated statements of operations are unaudited and do 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.
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,


36




gain (loss) on investments and sale of affiliate interests, 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.

We also use Operating Free Cash Flow (defined as Adjusted EBITDA less cash capital expenditures), and Free Cash Flow (defined as net cash flows from operating activities less cash capital expenditures) as indicators of the Company’s financial performance. We believe these measures are one of several benchmarks used by investors, analysts and peers for comparison of performance in the Company’s industry, although they may not be directly comparable to similar measures reported by other companies.

44

37




Results of Operations - Altice USA
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016 2016Three Months Ended June 30,Six Months Ended June 30,
Historical Historical Pro Forma Historical2020201920202019
Revenue:         Revenue:
Residential:
        Residential:
Pay TV$1,054,392
 $1,051,995
 $3,185,610
 $3,168,292
 $1,700,286
Broadband646,094
 578,605
 1,887,279
 1,692,079
 1,019,069
Broadband$920,363  $806,250  $1,805,892  $1,581,823  
VideoVideo952,526  1,018,426  1,899,587  2,035,756  
Telephony204,753
 216,186
 624,077
 657,279
 315,137
Telephony117,322  150,232  242,352  304,696  
Business services and wholesale324,760
 309,366
 968,291
 916,065
 504,963
Business services and wholesale365,564  357,806  730,094  708,495  
Advertising84,539
 88,759
 257,255
 258,661
 138,934
News and advertisingNews and advertising96,631  114,450  202,171  209,188  
MobileMobile19,866  —  38,222  —  
Other12,637
 15,310
 38,680
 156,540
 32,922
Other2,707  3,917  6,917  7,690  
Total revenue2,327,175
 2,260,221
 6,961,192
 6,848,916
 3,711,311
Total revenue2,474,979  2,451,081  4,925,235  4,847,648  
Operating expenses:         Operating expenses:
Programming and other direct costs755,101
 738,390
 2,272,147
 2,266,365
 1,177,808
Programming and other direct costs860,875  818,994  1,725,389  1,631,979  
Other operating expenses560,497
 660,307
 1,767,624
 2,187,015
 1,050,046
Other operating expenses542,637  569,459  1,124,946  1,133,891  
Restructuring and other expense53,448
 47,816
 142,765
 162,491
 155,086
Restructuring and other expense40,966  11,465  48,260  26,709  
Depreciation and amortization823,265
 670,929
 2,138,776
 1,918,678
 1,085,929
Depreciation and amortization (including impairments)Depreciation and amortization (including impairments)521,794  568,620  1,069,363  1,130,048  
Operating income134,864
 142,779
 639,880
 314,367
 242,442
Operating income508,707  482,543  957,277  925,021  
Other income (expense):         Other income (expense):
Interest expense, net(378,103) (445,838) (1,231,357) (1,324,832) (1,003,079)Interest expense, net(350,874) (380,613) (714,426) (767,077) 
Gain (loss) on investments, net(18,900) 24,833
 169,888
 213,457
 83,467
Gain (loss) on investments and sale of affiliate interests, netGain (loss) on investments and sale of affiliate interests, net197,597  103,146  (257,876) 357,871  
Gain (loss) on derivative contracts, net(16,763) 773
 (154,270) (62,855) (26,572)Gain (loss) on derivative contracts, net(152,061) (49,624) 287,800  (226,653) 
Gain (loss) on interest rate swap contracts1,051
 (15,861) 12,539
 24,380
 24,380
Loss on interest rate swap contracts, netLoss on interest rate swap contracts, net(33,735) (26,900) (88,567) (50,572) 
Loss on extinguishment of debt and write-off of deferred financing costs(38,858) —
 (600,240) (19,948) (19,948)Loss on extinguishment of debt and write-off of deferred financing costs—  (1,194) —  (159,096) 
Other income (loss), net(65) 2,531
 832
 7,392
 2,548
Loss before income taxes(316,774) (290,783) (1,162,728) (848,039) (696,762)
Income tax benefit134,688
 118,230
 429,664
 320,188
 101,332
Net loss(182,086) (172,553) (733,064) (527,851) (595,430)
Other income, netOther income, net669  212  1,592  292  
Income before income taxesIncome before income taxes170,303  127,570  185,800  79,786  
Income tax expenseIncome tax expense(58,826) (41,160) (75,861) (18,574) 
Net incomeNet income111,477  86,410  109,939  61,212  
Net loss (income) attributable to noncontrolling interests(135) (256) (737) 108
 108
Net loss (income) attributable to noncontrolling interests(213) (43) 467  156  
Net loss attributable to Altice USA, Inc. stockholders$(182,221) $(172,809) $(733,801) $(527,743) $(595,322)
Net income attributable to Altice USA, Inc. stockholdersNet income attributable to Altice USA, Inc. stockholders$111,264  $86,367  $110,406  $61,368  

45

38




The following is a reconciliation of net lossincome to Adjusted EBITDA:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net income$111,477  $86,410  $109,939  $61,212  
Income tax expense58,826  41,160  75,861  18,574  
Other income, net(669) (212) (1,592) (292) 
Loss on interest rate swap contracts, net33,735  26,900  88,567  50,572  
Loss (gain) on derivative contracts, net152,061  49,624  (287,800) 226,653  
Loss (gain) on investments and sales of affiliate interests, net(197,597) (103,146) 257,876  (357,871) 
Loss on extinguishment of debt and write-off of deferred financing costs—  1,194  —  159,096  
Interest expense, net350,874  380,613  714,426  767,077  
Depreciation and amortization521,794  568,620  1,069,363  1,130,048  
Restructuring and other expense40,966  11,465  48,260  26,709  
Share-based compensation34,318  16,535  62,264  30,325  
Adjusted EBITDA1,105,785  1,079,163  2,137,164  2,112,103  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Operating Free Cash Flow$877,062  $762,296  $1,609,359  $1,454,850  
Net cash flows from operating activities$935,976  $788,970  $1,529,541  $1,292,964  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Free Cash Flow$707,253  $472,103  $1,001,736  $635,711  

 Altice USA
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016 2016
 Historical Historical Pro Forma Historical
Net loss$(182,086) $(172,553) $(733,064) $(527,851) $(595,430)
Income tax benefit(134,688) (118,230) (429,664) (320,188) (101,332)
Other expense (income), net (a)65
 (2,531) (832) (7,392) (2,548)
Loss (gain) on interest rate swap contracts(1,051) 15,861
 (12,539) (24,380) (24,380)
Loss (gain) on derivative contracts, net (b)16,763
 (773) 154,270
 62,855
 26,572
Loss (gain) on investments, net18,900
 (24,833) (169,888) (213,457) (83,467)
Loss on extinguishment of debt and write-off of deferred financing costs38,858
 —
 600,240
 19,948
 19,948
Interest expense, net378,103
 445,838
 1,231,357
 1,324,832
 1,003,079
Depreciation and amortization823,265
 670,929
 2,138,776
 1,918,678
 1,085,929
Restructuring and other expense53,448
 47,816
 142,765
 162,491
 155,086
Share-based compensation15,005
 1,670
 40,932
 26,901
 1,670
Adjusted EBITDA$1,026,582
 $863,194
 $2,962,353
 $2,422,437
 $1,485,127
(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):excluding Altice Mobile customers, for the Company:
June 30,March 31,June 30,
2020 (f)2020 (f)2019 (g)
Homes passed (a)8,880.1  8,834.8  8,750.4  
Total customer relationships (b)(c)4,997.1  4,950.1  4,923.2  
Residential4,621.4  4,568.4  4,538.9  
SMB375.7  381.7  384.4  
Residential customers:
Broadband4,307.8  4,237.4  4,165.4  
Video3,102.9  3,137.5  3,255.3  
Telephony2,337.1  2,359.8  2,485.8  
Penetration of homes passed (d)56.3 %56.0 %56.3 %
ARPU(e)$144.38  $143.39  $145.02  
 September 30, 2017 June 30, 2017 September 30, 2016
 CablevisionCequelTotal CablevisionCequelTotal CablevisionCequelTotal
 (in thousands, except per customer amounts)
Homes passed (a)5,134
3,443
8,577
 5,140
3,430
8,570
 5,105
3,389
8,494
Total customer relationships (b)(c)3,149
1,749
4,898
 3,151
1,753
4,904
 3,135
1,736
4,871
Residential2,887
1,642
4,529
 2,889
1,648
4,537
 2,873
1,636
4,510
SMB262
107
369
 262
106
367
 261
100
361
Residential customers:

         
Pay TV2,382
1,048
3,430
 2,401
1,062
3,463
 2,443
1,113
3,556
Broadband2,653
1,368
4,021
 2,646
1,358
4,004
 2,603
1,324
3,927
Telephony1,959
588
2,547
 1,954
590
2,544
 1,969
594
2,563
Residential triple product customer penetration (d):64.3%25.4%50.2% 64.3%25.3%50.1% 65.3%25.6%50.9%
Penetration of homes passed (e):61.3%50.8%57.1% 61.3%51.1%57.2% 61.4%51.2%57.3%
ARPU(f)$156.88
$110.64
$140.10
 $156.00
$110.01
$139.25
 $152.55
$108.19
$136.50
(a)Represents the estimated number of single residence homes, apartments and condominium units passed by the broadband network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our broadband network. Broadband services were not available to approximately 30 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 fixed-line 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.  With the exception of free Altice Advantage 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
46

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 total customer relationships divided by homes passed.
(e)Calculated by dividing the average monthly revenue for the respective quarter (fourth quarter for annual periods) derived from the sale of broadband, video and telephony services to residential customers for the quarter by the average number of total residential customers for the same period.
(4)Customer metrics for the 2020 periods include customers that have not been disconnected pursuant to the Keep Americans Connected pledge ("Pledge") that the Company made in response to the COVID-19 pandemic and customers that have not been disconnected pursuant to the New Jersey Executive Order No. 126 ("NJ Order") enacted in April 2020 that protects New Jersey residents from disconnection of internet and voice services for non-payment. However, the metrics exclude new customers with students in the household that are receiving broadband services for free until the end of the 2019-20 school year ("Altice Advantage"). The following table provides details of these COVID-19 related offers and programs:
June 30, 2020March 31, 2020
Pledge and NJ Order (i)Altice Advantage CustomersPledgeAltice Advantage Customers
Included(Excluded)Included(Excluded)
Total customer relationships18.7  (17.8) 0.0(9.3) 
Residential18.1  (17.8) 0.0(9.3) 
SMB0.6  —  —  —  
Residential customers:
Broadband17.9  (17.8) 0.0(9.3) 
Video8.0  —  0.0—  
Telephony8.9  —  0.0—  
(i)Represent customers who would have been disconnected as a result of non-payment under our normal policies, but were not disconnected pursuant to the Pledge and the NJ Order. As of June 30, 2020, an aggregate of 56.1 thousand customers (54.8 thousand residential and 1.3 thousand SMB) with past-due account balances requested protection pursuant to the Pledge or are protected pursuant to the NJ Order.
(f)Customer metrics for prior periods have been adjusted to conform definitions between Suddenlink and Optimum in connection with the migration of Suddenlink customers to the Optimum billing system in 2019. The following table summarizes the adjustments made to previously reported amounts.
(a)
Represents the estimated numberAs 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.

June 30, 2019



39



(b)
Represents number of households/businesses that receive at least one of the Company's services.
(c)Homes passed
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.
(38.2)
(d)Total customer relationships
Represents the number of customers that subscribe to three of our services divided by total residential customer relationships.
(19.0)
(e)Residential
Represents the number of total customer relationships divided by homes passed.
(23.7)
(f)SMB
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.
4.8 
Residential customers:
Broadband(2.7)
Video(21.2)
Telephony(1.0)
ARPU$0.75 
The following table reflects total net customer increases (decreases) for the periods presented:

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in thousands)
Total customer relationships(6.1) 1.6
 6.3
 43.5
Residential(7.9) (0.7) 0.8
 34.2
SMB1.8
 2.3
 5.5
 9.3
Residential customers:       
Pay TV(32.5) (40.1) (104.4) (84.5)
Broadband16.5
 17.5
 58.4
 88.7
Telephony3.4
 (27.1) (11.8) (25.7)



40



 Historical
 Three Months Ended September 30,
 2017 2016
 Cablevision Cequel Eliminations Total Cablevision Cequel Total
Revenue:             
Residential:             
Pay TV$782,214
 $272,178
 $—
 $1,054,392
 $772,886
 $279,109
 $1,051,995
Broadband404,153
 241,941
 —
 646,094
 366,166
 212,439
 578,605
Telephony172,904
 31,849
 —
 204,753
 178,000
 38,186
 216,186
Business services and wholesale230,274
 94,486
 —
 324,760
 220,352
 89,014
 309,366
Advertising67,563
 17,456
 (480) 84,539
 67,815
 20,944
 88,759
Other7,211
 5,426
 —
 12,637
 9,480
 5,830
 15,310
Total revenue1,664,319
 663,336
 (480) 2,327,175
 1,614,699
 645,522
 2,260,221
Operating expenses:             
Programming and other direct costs570,995
 184,283
 (177) 755,101
 554,370
 184,020
 738,390
Other operating expenses390,673
 170,127
 (303) 560,497
 493,709
 166,598
 660,307
Restructuring and other expense35,364
 18,084
 —
 53,448
 45,176
 2,640
 47,816
Depreciation and amortization656,102
 167,163
 —
 823,265
 481,497
 189,432
 670,929
Operating income$11,185
 $123,679
 $—
 $134,864
 $39,947
 $102,832
 $142,779
 Historical
 Nine Months Ended September 30,
 2017 2016
 Cablevision Cequel Eliminations Total Cablevision Cequel Total
Revenue:             
Residential:             
Pay TV$2,356,230
 $829,380
 $—
 $3,185,610
 $859,932
 $840,354
 $1,700,286
Broadband1,177,731
 709,548
 —
 1,887,279
 406,057
 613,012
 1,019,069
Telephony524,696
 99,381
 —
 624,077
 198,282
 116,855
 315,137
Business services and wholesale690,168
 278,123
 —
 968,291
 244,685
 260,278
 504,963
Advertising203,351
 54,384
 (480) 257,255
 75,458
 63,476
 138,934
Other21,366
 17,314
 —
 38,680
 14,145
 18,777
 32,922
Total revenue4,973,542
 1,988,130
 (480) 6,961,192
 1,798,559
 1,912,752
 3,711,311
Operating expenses:             
Programming and other direct costs1,710,245
 562,079
 (177) 2,272,147
 616,860
 560,948
 1,177,808
Other operating expenses1,271,971
 495,956
 (303) 1,767,624
 543,884
 506,162
 1,050,046
Restructuring and other expense105,182
 37,583
 —
 142,765
 143,891
 11,195
 155,086
Depreciation and amortization1,641,477
 497,299
 —
 2,138,776
 526,057
 559,872
 1,085,929
Operating income (loss)$244,667
 $395,213
 $—
 $639,880
 $(32,133) $274,575
 $242,442



41



The following table sets forth certain operating information by segment on a pro forma basis:
 Pro Forma
 Nine Months Ended September 30, 2016
 Cablevision Cequel Total
Revenue:     
Residential:     
Pay TV$2,327,938
 $840,354
 $3,168,292
Broadband1,079,067
 613,012
 1,692,079
Telephony540,424
 116,855
 657,279
Business services and wholesale655,787
 260,278
 916,065
Advertising195,185
 63,476
 258,661
Other137,763
 18,777
 156,540
Total revenue4,936,164
 1,912,752
 6,848,916
Operating expenses:     
Programming and other direct costs1,705,417
 560,948
 2,266,365
Other operating expenses1,680,853
 506,162
 2,187,015
Restructuring and other expense151,296
 11,195
 162,491
Depreciation and amortization1,358,806
 559,872
 1,918,678
Operating income$39,792
 $274,575
 $314,367
Altice USA -USA- Comparison of Actual Results for the Three and NineSix Months Ended SeptemberJune 30, 20172020 compared to the Three and NineSix Months Ended SeptemberJune 30, 2016 and Comparison of Actual Results for the Nine Months Ended September 30, 2017 to Pro Forma Results for the Nine Months Ended September 30, 2016.2019
Please see “-Basis of Presentation” for an explanation of why we believe that a comparison of the actual results for the nine months ended September 30, 2017 to the pro forma results for the nine months ended September 30, 2016 provides useful information.
Pay Television Revenue
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Pay television revenue for the three and nine months ended September 30, 2017 was $1,054,392 and $3,185,610, respectively, of which $782,214 and $2,356,230 was derived from the Cablevision segment and $272,178 and $829,380 relates to our Cequel segment. Pay television revenue for the three and nine months ended September 30, 2016 was $1,051,995 and $1,700,286 of which $772,886 and $859,932 relates to the Cablevision segment and $279,109 and $840,354 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.
Pay television revenue for our Cablevision segment increased $9,328 (1%) for the three months ended September 30, 2017 as compared to the same period in the prior year. The increase was due primarily to rate increases for certain video services implemented near the end of the fourth quarter of 2016, an increase in pay-per-view revenue and an increase in late fees. 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 $6,931 (2%) for the three months ended September 30, 2017 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 certain rate increases, an increase in pay-per-view revenue, an increase in installation services revenue and an increase in late fees as compared to the prior year period.



42



Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Pay television revenue for the nine months ended September 30, 2017 was $3,185,610 compared to $3,168,292 for the nine months ended September 30, 2016, on a pro forma basis. The pro forma increase of $17,318 (1%) is comprised of a pro forma increase of $28,292 (1%) for our Cablevision segment, partially offset by a decrease of $10,974 (1%) for our Cequel segment.
Pay television revenue for our Cablevision segment increased $28,292 (1%) for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, on a pro forma basis. The pro forma increase was due primarily to rate increases for certain video services implemented near the end of the fourth quarter of 2016, 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 $10,974 (1%) for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, on a pro forma basis. The pro forma 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, an increase in installation services revenue 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
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Broadband revenue for the three and ninesix months ended SeptemberJune 30, 20172020 was $646,094$920,363 and $1,887,279,$1,805,892, respectively, of which $404,153 and $1,177,731 was derived from our Cablevision segment and $241,941 and $709,548 was derived from our Cequel segment. Broadbandwhile broadband revenue for the three and ninesix months ended SeptemberJune 30, 20162019 was $578,605$806,250 and $1,019,069, respectively, of which $366,166 and $406,057 relates to the Cablevision segment and $212,439 and $613,012 relates to our Cequel segment.$1,581,823,
47

respectively. Broadband revenue is derived principally through monthly charges to residential subscribers of our broadband services. Revenue increases are derived primarily fromis impacted by rate increases, increaseschanges in the number of subscribers,customers, including additional services sold to our existing subscribers, and changes in speed tier upgrades.tiers. Additionally, revenue is impacted by changes in the standalone selling price of each performance obligation within our promotional bundled offers.
Broadband revenue for our Cablevision segment increased $37,987 (10%$114,113 (14%) and $224,069 (14%) for the three and six months ended SeptemberJune 30, 20172020 compared to the three and six months ended SeptemberJune 30, 2016.2019. The increase was due primarily to higher average recurring broadband revenue per broadband customer, an increase in broadband customers,primarily driven by certain rate increases and an increase in late fees.
Broadband revenue for our Cequel segment increased $29,502 (14%) for the three months ended September 30, 2017 compared to the same period in the prior year. The increase 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 late fees.broadband customers.
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016Video Revenue
BroadbandVideo revenue for the ninethree and six months ended SeptemberJune 30, 20172020 was $1,887,279 compared to $1,692,079$952,526 and $1,899,587, respectively. Video revenue for the ninethree and six months ended SeptemberJune 30, 2016, on a pro forma basis. On a pro forma basis, broadband2019 was $1,018,426 and $2,035,756, respectively. Video revenue increased $195,200 (12%is derived principally through monthly charges to residential customers of our video 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. Additionally, revenue is impacted by changes in the standalone selling price of each performance obligation within our promotional bundled offers.
Video revenue decreased $65,900 (6%) and is comprised of a pro forma increase of $98,664 (9%) for our Cablevision segment and an increase of $96,536 (16%) for our Cequel segment.
Broadband revenue for our Cablevision segment increased $98,664 (9%$136,169 (7%) for the ninethree and six months ended SeptemberJune 30, 20172020 compared to the ninethree and six months ended SeptemberJune 30, 2016, on a pro forma basis.2019. The pro forma increasedecrease was due primarily to highera decline in video customers and lower average recurring broadband revenue per broadband customer, an increase in broadband customers, and an increase in late fees.
Broadband revenue for our Cequel segment increased $96,536 (16%) for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, on a pro forma basis. The pro forma increase was due primarily to an increase in broadband customers, an increase in rates, an increase resulting from the impact of service level changes, an increase in residential home networking revenue and an increase in late fees.



43



video customer.
Telephony Revenue
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Telephony revenue for the three and ninesix months ended SeptemberJune 30, 20172020 was $204,753$117,322 and $624,077 of which $172,904 and $524,696 was derived from the Cablevision segment and $31,849 and $99,381 was derived from our Cequel segment.$242,352, respectively. Telephony revenue for the three and ninesix months ended SeptemberJune 30, 20162019 was $216,186$150,232 and $315,137, respectively, of which $178,000 and $198,282 relates to the Cablevision segment and $38,186 and $116,855 relates to our Cequel segment.$304,696, respectively. Telephony revenue is derived principally through monthly charges to residential subscriberscustomers of our telephony services. Revenue increases are derived primarily from rate increases, increasesis impacted by changes in rates for services, changes in the number of subscribers,customers, and additional services sold to our existing subscribers.customers. Additionally, revenue is impacted by changes in the standalone selling price of each performance obligation within our promotional bundled offers.
Telephony revenue for our Cablevision segment decreased $5,096 (3%$32,910 (22%) and $62,344 (20%) for the three and six months ended SeptemberJune 30, 20172020 compared to the three months ended SeptemberJune 30, 2016.2019, respectively. The decrease was due primarily to a decline in international callinglower average revenue per telephony customer and a decline in telephony customers.
Telephony revenue for our Cequel segment decreased $6,337 (17%) for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. The decrease was due primarily to a decline in telephony customers and lower rates offered to customers.
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Telephony revenue for the nine months ended September 30, 2017 was $624,077 compared to $657,279 for the nine months ended September 30, 2016, on a pro forma basis. On a pro forma basis, telephony revenue decreased $33,202 (5%) for the nine months ended September 30, 2017 as compared to the prior year period and is comprised of a pro forma decrease of $15,728 (3%) for our Cablevision segment and a decrease of $17,474 (15%) for our Cequel segment.
Telephony revenue for our Cablevision segment decreased $15,728 (3%) for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, on a pro forma basis. The pro forma decrease was due primarily to a decline in international calling and a decline in telephony customers.
Telephony revenue for our Cequel segment decreased $17,474 (15%) for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, on a pro forma basis. The pro forma decrease was due primarily to a decline in telephony customers and lower rates offered to customers.
Business Services and Wholesale Revenue
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Business services and wholesale revenue for the three and ninesix months ended SeptemberJune 30, 20172020 was $324,760$365,564 and $968,291, respectively of which $230,274 and $690,168 was derived from the Cablevision segment and $94,486 and $278,123 was derived from our Cequel segment.$730,094, respectively. Business services and wholesale revenue for the three and ninesix months ended SeptemberJune 30, 20162019 was $309,366$357,806 and $504,963, respectively, of which $220,352 and $244,685 relates to the Cablevision segment and $89,014 and $260,278 relates to our Cequel segment.$708,495, respectively. 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 televisionvideo and telephony services to small and medium sized businesses ("SMB").SMB customers.
Business services and wholesale revenue for our Cablevision segment increased $9,922 (5%$7,758 (2%) and $21,599 (3%) for the three and six months ended SeptemberJune 30, 2017 as2020 compared to the three and six months ended SeptemberJune 30, 2016.2019, respectively. The increase was primarily due to higher average recurring telephony and broadband revenue per SMB customer, partially offsetprimarily driven by reduced traditional voicecertain rate increases and data services for commercial customers.
Business services and wholesale revenue for our Cequel segment increased $5,472 (6%) for the three months ended September 30, 2017 as compared to the three months ended September 30, 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.



44



Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Business services and wholesale revenue for the nine months ended September 30, 2017 was $968,291 compared to $916,065 for the nine months ended September 30, 2016, on a pro forma basis. The increase of $52,226 (6%) for the nine months ended September 30, 2017 as compared to the prior year period is comprised of a pro forma increase of $34,381 (5%) for our Cablevision segment and a pro forma increase of $17,845 (7%) for our Cequel segment.
Business services and wholesale revenue for our Cablevision segment increased $34,381 (5%) for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, on a pro forma basis. The pro forma increase was primarily due to higher average recurring telephony and broadband revenue per SMB customerservice level changes and an increase in Ethernet revenue resulting from a larger numberrelated to an indefeasible right of services installed,use contract recorded in the second quarter of 2020, partially offset by reduced traditional voicea decrease in SMB customers.
News and data services for commercial customers.
Business services and wholesale revenue for our Cequel segment increased $17,845 (7%) for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, on a pro forma basis. The pro forma 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
Actual ThreeNews and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Advertisingadvertising revenue for the three and ninesix months ended SeptemberJune 30, 2017, net of inter-segment revenue,2020 was $84,539$96,631 and $257,255, respectively, of which $67,563$202,171, respectively. News and $203,351 was derived from our Cablevision segment and $17,456 and $54,384 was derived from our Cequel segment. Advertisingadvertising revenue for the three and ninesix months ended SeptemberJune 30, 20162019 was $88,759$114,450 and $138,934, respectively, of which $67,815$209,188, respectively. News and $75,458 relates to the Cablevision segment and $20,944 and $63,476 relates to our Cequel segment. Advertisingadvertising revenue is primarily derived from the sale of (i) advertising timeinventory available on the programming carried on our cable television systems.systems, (ii) advertising on over the top ("OTT") platforms, (iii) digital advertising, and (iv) data analytics. News and advertising revenue also includes affiliation fees for news programming.
AdvertisingNews and advertising revenue for our Cablevision segment decreased $252 (0%$17,819 (16%) and $7,017 (3%) for the three and six months ended SeptemberJune 30, 2017 as2020, respectively, compared to the three and six months ended SeptemberJune 30, 2016.
Advertising2019. The decrease was primarily due to a decline in advertising spending, partially offset by growth in national and political sales and higher affiliate revenue for our Cequel segment decreased $3,488 (17%)News 12.
48

Mobile Revenue
Mobile revenue for the three and six months ended June 30, 2020 was $19,866 and $38,222, respectively, and relates to sales of devices and mobile services. Our mobile service launched to consumers in September 2019. As of June 30, 2017 as compared to the three months ended September 30, 2016. The decrease is due to declines in political, auto and retail advertising.2020, we had approximately 144,000 mobile lines.
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Advertising revenue for the nine months ended September 30, 2017 was $257,255, net of inter-segment revenue, compared to $258,661 for the nine months ended September 30, 2016, on a pro forma basis. The pro forma decrease of $1,406 (1%) for the nine months ended September 30, 3017 as compared to the prior year period is comprised of a pro forma increase of $8,166 (4%) for our Cablevision segment, offset by a pro forma decrease of $9,092 (14%) for our Cequel segment.
Advertising revenue for our Cablevision segment increased of $8,166 (4%) for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, on a pro forma basis. The pro forma increase is due primarily to an increase in digital advertising revenue.
Advertising revenue for our Cequel segment decreased $9,092 (14%) for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, on a pro forma basis. The pro forma decrease is due to declines in political, auto and retail advertising.
Other Revenue
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Other revenue for the three and ninesix months ended SeptemberJune 30, 20172020 and 2019 was $12,637$2,707 and $38,680, respectively, of which $7,211 and $21,366 was derived from our Cablevision segment and $5,426 and $17,314 was derived from our Cequel segment.$6,917, respectively. Other revenue for the three and ninesix months ended SeptemberJune 30, 20162019 was $15,310$3,917 and $32,922, respectively,



45



of which $9,480 and $14,145 relates to the Cablevision segment and $5,830 and $18,777 relates to our Cequel segment.$7,690, respectively. Other revenue includes revenue from other miscellaneous revenue streams.
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Other revenue for the nine months ended September 30, 2017 was $38,680 compared to $156,540 for the nine months ended September 30, 2016 on a pro forma basis. The pro forma decrease of $117,860 (75%) for the nine months ended September 30, 3017 as compared to the prior year period is comprised of a pro forma decrease of $116,397 (84%) for our Cablevision segment and a pro forma decrease of $1,463 (8%) for our Cequel segment.
Other revenue for our Cablevision segment decreased of $116,397 (84%) for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, on a pro forma basis. The pro forma decrease is due primarily 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 method.
Other revenue for our Cequel segment decreased of $1,463 (8%) for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, on a pro forma basis.
Programming and Other Direct Costs
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Programming and other direct costs for the three and ninesix months ended SeptemberJune 30, 20172020 amounted to $755,101$860,875 and $2,272,147, respectively, of which $570,995 and $1,710,245 relate to our Cablevision segment and $184,283 and $562,079 relate to our Cequel segment.$1,725,389, respectively. Programming and other direct costs for the three and ninesix months ended SeptemberJune 30, 2016 was $738,3902019 amounted to $818,994 and $1,177,808, respectively, of which $554,370 and $616,860 relates to the Cablevision segment and $184,020 and $560,948 relates to our Cequel segment.$1,631,979, respectively. 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)pay-per-view) and are generally paid on a per‑subscriberper-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 televisionvideo 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. Additionally, these costs include the costs of mobile devices sold to our customers and direct costs of providing mobile services.
The increaseincreases of $16,711 (2%$41,881 (5%) in programming and other direct costs$93,410 (6%) for the three and six months ended SeptemberJune 30, 2017, net of inter-segment eliminations,2020, as compared to the prior year period isthree and six months ended June 30, 2019 are primarily attributable to the following:



46



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$16,517
Increase in costs of digital media advertising spots for resale5,251
Decrease in call completion and transport costs primarily due to lower level of activity(3,205)
Decrease in costs primarily related to the sale of Newsday in July 2016(1,731)
Other net decreases(207)
 16,625
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 costs2,057
Decrease in franchise costs due to lower pay television customers(1,113)
Other net decreases(681)
 263
Inter-segment eliminations(177)
 $16,711
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Programming and other direct costs for the nine months ended September 30, 2017 amounted to $2,272,147 compared to $2,266,365 for the nine months ended September 30, 2016, on a pro forma basis, of which $1,710,245 and $1,705,417 relates to the Cablevision segment and $562,079 and $560,948 relates to our Cequel segment.
The pro forma increase of $5,782 for the nine months ended September 30, 2017, net of inter-segment eliminations, as compared to the prior year period 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$46,340
Increase in costs of digital media advertising spots for resale10,761
Decrease in costs primarily related to the sale of Newsday in July 2016(33,889)
Decrease in call completion and transport costs primarily due to lower level of activity(15,297)
Decrease in cost of sales (which includes the bulk sale of handset inventory of $5,445 during the first quarter of 2016)(4,543)
Other net increases1,456
 4,828
Cequel segment: 
Increase in programming costs due primarily to contractual rate increases and an increase in pay-per-view costs primary from an event in August 2017, partially offset by lower pay television customers and lower video-on-demand costs7,195
Decrease in franchise costs due to lower pay television customers(2,976)
Decrease in media cost of sales(1,156)
Net decrease in call completion and interconnection costs due to lower level of activity(1,065)
Other net decreases(867)
 1,131
Inter-segment eliminations(177)
 $5,782



47



Three MonthsSix Months
Increase in programming costs due primarily to net contractual rate increases, partially offset by lower video customers$19,718  $47,899  
Costs of mobile devices14,581  25,646  
Increase in call completion and transfer costs primarily related to our mobile business ($6,358 and $13,199 for the three and six months) and an increase in call activity8,132  13,724  
Increase (decrease) primarily relating to costs of digital media and linear advertising spots for resale(828) 6,759  
Other net increase (decrease)278  (618) 
 $41,881  $93,410  
Programming costs
Programming costs aggregated $629,833$702,674 and $1,898,100$1,413,264 for the three and ninesix months ended SeptemberJune 30, 2017, respectively, on an actual basis. On a pro forma basis programming costs aggregated $1,844,565 for nine months ended September 30, 2016. Our programming costs increased 3%2020 and $682,956 and $1,365,365 for the three and six months ended SeptemberJune 30, 2017 as compared to the same period in the prior year and for the nine months ended September 30, 2017 as compared to the same period in the prior year, on a pro forma basis.2019, respectively. Our programming costs in 20172020 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 televisionvideo customers.
Other Operating Expenses
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Other operating expenses for the three and ninesix months ended SeptemberJune 30, 20172020 amounted to $560,497,$542,637 and $1,767,624, respectively, of which $390,673 and $1,271,971 relate to our Cablevision segment and $170,127 and $495,956 relate to our Cequel segment.$1,124,946, respectively. Other operating expenses for the three and ninesix months ended SeptemberJune 30, 20162019 amounted to $660,307$569,459 and $1,050,046, respectively, of which $493,709 and $543,884 relates to the Cablevision segment and $166,598 and $506,162 relates to our Cequel segment.$1,133,891, respectively. Other operating expenses include staff costs and employee benefits including salaries of company employees and related taxes, benefits and other employee related expenses.expenses, as well as third-party labor costs. 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 network 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
49

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 televisionvideo and telephony services are capitalized (asset-based). In circumstances whereThe redeployment of 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 fluctuateexpensed as capitalizable network upgrade and enhancement activity changes.
In connection with the execution of an agreement with ATS in the second quarter of 2017 (see Note 14 of our consolidated financial statements), the Company’s operating results reflect a reduction in employee related expenses due to certain employees becoming employed by ATS and an increase in contractor costs for services provided by ATS. See further details in the table below. The Company anticipates this trend to continue as it plans to transfer certain Cequel employees to ATS later in 2017.incurred.
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.



48



The decrease of $99,810 (15%)decreases in other operating expenses of $26,822 and $8,945, offset by an increase of $12,365 and $25,100 relating to our mobile service, for the three and six months ended SeptemberJune 30, 2017, net of inter-segment eliminations,2020, respectively, as compared to the prior year period isthree and six months ended June 30, 2019 was attributable to the following:
Cablevision segment: 
Decrease primarily in employee related costs related to the elimination of certain positions (including the impact of the decline in headcount resulting from the ATS agreement), and lower net benefits, partially offset by merit increases$(126,269)
Decrease in rent and insurance (including the impact of the decline in headcount resulting from the ATS agreement)(9,693)
Decrease in repairs and maintenance costs relating to our operations(8,382)
Decrease in product development costs and product consulting fees(6,368)
Decrease in costs primarily related to the sale of Newsday in July 2016(3,788)
Increase in contractor costs due primarily to the execution of the ATS agreement43,298
Increase in share-based compensation and long-term incentive plan awards expense11,298
Other net decreases(3,132)
 (103,036)
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(9,891)
Decrease in insurance costs(1,824)
Decrease in contract labor costs(295)
Increase in consulting and professional fees6,803
Increase in share-based compensation and long-term incentive plan awards expense4,174
Increase in sales and marketing costs3,761
Other net increases801
 3,529
Inter-segment eliminations(303)
 $(99,810)
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Other operating expenses for the nine months ended September 30, 2017 amounted to $1,767,624 compared to $2,187,015 for the nine months ended September 30, 2016, on a pro forma basis, of which $1,271,971 and $1,680,853 related to our Cablevision segment and $495,956 and $506,162 related to our Cequel segment.



49



The pro forma decrease of $419,391 (19%) for the nine months ended September 30, 2017, net of inter-segment eliminations, as compared to the prior year period is attributable to the following:
Cablevision segment: 
Decrease primarily in employee related costs related to the elimination of certain positions (including the impact of the decline in headcount resulting from the ATS agreement), and lower net benefits, partially offset by merit increases$(336,241)
Decrease in costs primarily related to the sale of Newsday in July 2016(95,262)
Decrease in repairs and maintenance costs relating to our operations(28,649)
Decrease in product development costs and product consulting fees(25,365)
Increase in capitalization of certain costs primarily due to a change to the asset-based approach for estimating capitalization(16,471)
Decrease in rent and insurance (including the impact of the decline in headcount resulting from the ATS agreement)(15,438)
Increase in contractor costs due primarily to the execution of the ATS agreement85,443
Increase in sales and marketing costs21,559
Increase in fees for certain executive services provided by our parent entity (nine months in 2017 compared to approximately six months in 2016)9,444
Other net decreases(7,902)
 (408,882)
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(39,191)
Decrease in insurance costs(5,433)
Decrease in contract labor costs(3,260)
Increase in consulting and professional fees15,530
Increase in share-based compensation and long-term incentive plan awards expense14,930
Increase in sales and marketing costs5,536
Other net increases1,682
 (10,206)
Inter-segment eliminations(303)
 $(419,391)
Three MonthsSix Months
Net decrease in labor costs and benefits (offset by an increase in costs related to Cheddar of $3,402 and $10,565 for the three and six months, which was acquired in June 2019), offset by a decrease in capitalizable activity$(33,584) $(42,286) 
Decrease in sales and marketing(14,455) (13,148) 
Decrease in billing costs, primarily due to systems integration(3,160) (8,810) 
Increase in share-based compensation17,783  31,939  
Increase in bad debt expense2,254  7,043  
Increase in rent and property taxes3,100  7,520  
Other net increases1,240  8,797  
$(26,822) $(8,945) 
Restructuring and Other Expense
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Restructuring and other expense for the three and ninesix months ended SeptemberJune 30, 2017 of $53,4482020 amounted to $40,966 and $142,765, respectively ($35,364 and $105,182 for our Cablevision segment and $18,084 and $37,583 for our Cequel segment)$48,260, as compared to $47,816$11,465 and $155,086$26,709 for the three and ninesix months ended SeptemberJune 30, 2016 ($45,1762019. Restructuring and $143,891other expense for our Cablevision segmentthe 2020 periods primarily includes $40,128 related to contractual payments for terminated employees. The amounts for the three and $2,640 and $11,195 for our Cequel segment). These amountssix months ended June 30, 2019 primarily relaterelated to severance and other employee related costs resulting from headcount reductions, facility realignment costs and impairments of certain ROU assets, related to initiatives which commenced in 2016 and 2019 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 and make modifications to our organizational structure.
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Restructuring and other expense for the nine months ended September 30, 2017 was $142,765 ($105,182 for our Cablevision segment and $37,583 for our Cequel segment) compared to $162,491 ($151,296 for our Cablevision segment and $11,195 for our Cequel segment) for the nine months ended September 30, 2016, on a pro forma basis.



50



Restructuring and other expense for the nine months ended September 30, 2017, as well as for the nine months ended September 30, 2016 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. Restructuring and other expense for the nine months ended September 30, 2016 related to Cablevision includes adjustments related to prior restructuring plans of $2,299 on a pro forma basis, respectively.
Depreciation and Amortization
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Depreciation and amortization for the three and ninesix months ended SeptemberJune 30, 20172020 amounted to $823,265$521,794 and $2,138,776, respectively, of which $656,102 and $1,641,477 relates to our Cablevision segment and $167,163 and $497,299 relates to our Cequel segment.$1,069,363, respectively. Depreciation and amortization for the three and ninesix months ended SeptemberJune 30, 20162019 amounted to $670,929$568,620 and $1,085,929, respectively, of which $481,497 and $526,057 relates to the Cablevision segment and $189,432 and $559,872 relates to our Cequel segment.$1,130,048, respectively.
DepreciationThe decreases in depreciation and amortization for our Cablevision segment increased of $174,605 (36%$46,826 (8%) and $60,685 (5%) for the three and six months ended SeptemberJune 30, 20172020, respectively, as compared to the three and six months ended SeptemberJune 30, 2016. The increase is2019 are due primarily to certain fixed assets and intangible assets becoming fully depreciated or amortized, partially offset by the acceleration of amortization on its trade nameexpense related to certain customer relationship intangible assets and an increase in connection with the announcement, on May 23, 2017,depreciation as a result 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 $22,269 (12%) for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. The decrease 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.
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
50
Depreciation and amortization for the nine months ended September 30, 2017 amounted to $2,138,776 compared to $1,918,678, for the nine months ended September 30, 2016, on a pro forma basis. The pro forma increase of $220,098 (11%) for the nine months ended September 30, 2017 as compared to the prior year period is comprised of a $282,671 (21%) pro forma increase for our Cablevision segment, partially offset by a pro forma decrease of $62,573 (11%) for our Cequel segment. The pro forma increase for our Cablevision segment is primarily due 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. For Cequel, the decrease 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
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Adjusted EBITDA amounted to $1,026,582$1,105,785 and $2,962,353$2,137,164 for the three and ninesix months ended SeptemberJune 30, 2017, of which $714,2062020, respectively as compared to $1,079,163 and $2,019,923 relates to our Cablevision segment and $312,376 and $942,430 relates to our Cequel segment. Adjusted EBITDA amounted to $863,194 and $1,485,127$2,112,103 for the three and ninesix months ended SeptemberJune 30, 2016, respectively, of which $567,711 and $638,906 relates to the Cablevision segment and $295,483 and $846,221 relates to our Cequel segment.2019, respectively.
Adjusted EBITDA is a non-GAAP measure that is defined as net lossincome (loss) excluding income taxes, lossincome (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 and sale of affiliate interests, interest expense, (including cash interest expense), interest income, depreciation and amortization (including impairments), share-



51



basedshare-based compensation expense or benefit, restructuring expense or credits and transaction expenses. See reconciliation of net lossincome to adjusted EBITDA above.
For our Cablevision segment,The increase in adjusted EBITDA increased $146,495 (26%) for the three months ended SeptemberJune 30, 20172020 as compared to the same period in the prior year.  The increases arethree months ended June 30, 2019 was due primarily to increasesan increase in revenue and decreases in operating expenses (excluding depreciation and amortization, restructuring expense and other expenses and share-based compensation).
For our Cequel segment, adjusted EBITDA increased $16,893 (6%) and $96,209 (11%) for the three and nine months ended September 30, 2017 as compared to the same periods in the prior year.  The increases are due primarily to increases in revenue and decreases in operating expenses (excluding depreciation and amortization, restructuring expense and other expenses and share-based compensation).
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Adjusted EBITDA for the nine months ended September 30, 2017 was $2,962,353 compared to $2,422,437 for the nine months ended September 30, 2016, on a pro forma basis. The pro forma increase of $539,916 (22%) for the nine months ended September 30, 2017 as compared to the prior year period consists of a pro forma increase of $443,707 (28%) for our Cablevision segment and a pro forma increase of $96,209 (11%) for our Cequel segment. The pro forma increases for the three and nine months were due primarily to increases in revenue and decreasesnet decrease in operating expenses (excluding depreciation and amortization, restructuring and other expense and share‑basedshare-based compensation), as discussed above.
The increase in adjusted EBITDA for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 was due to an increase in revenue, partially offset by a net increase in operating expenses (excluding depreciation and amortization, restructuring and other expense and share-based compensation), as discussed above.
Operating Free Cash Flow
Operating free cash flow was $877,062 and $1,609,359 for the three and six months ended June 30, 2020, respectively, and $762,296 and $1,454,850 for the three and six months ended June 30, 2019, respectively. The increase in operating free cash flow in the 2020 periods as compared to 2019 is due to an increase in adjusted EBITDA and a decrease in capital expenditures.
Operating Free Cash Flow is a non-GAAP measure that is defined as Adjusted EBITDA less cash capital expenditures. See discussion above under "Non-GAAP Financial Measures" for further information.
Free Cash Flow
Free cash flow was $707,253 and $1,001,736 for the three and six months ended June 30, 2020, respectively, and $472,103 and $635,711 for the three and six months ended June 30, 2019, respectively. The increase in free cash flow in the 2020 periods as compared to the 2019 periods is due to an increase in cash flows from operating activities and a decrease in capital expenditures.
Free Cash Flow is a non-GAAP measure that is defined as net cash flows from operating activities less cash capital expenditures. See discussion above under "Non-GAAP Financial Measures" for further information.
Interest Expense, net
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016expense
Interest expense, net was $378,103$350,874 and $445,838, for the three months ended September 30, 2017 and 2016, and $1,231,357 and $1,003,079 for the nine months ended September 30, 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.
The decrease of $67,735 (15%) and an increase of $228,278 (23%)$714,426 for the three and ninesix months ended SeptemberJune 30, 20172020, respectively, and $380,613 and $767,077 for the three and six months ended June 30, 2019, respectively. The decreases of $29,739 and $52,651 for the three and six months ended June 30, 2020, respectively, as compared to the prior year periods isthree and six months ended June 30, 2019 are attributable to the following:
 Three Months Nine Months
 Ended September 30, 2017
Increase (decrease) due to changes in average debt balances and interest rates on our indebtedness and collateralized debt$(73,710) $222,971
Lower (higher) interest income(557) 11,414
Other net increases (decreases), primarily amortization of deferred financing costs and original issue discounts6,532
 (6,107)
 $(67,735) $228,278
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Interest expense, net amounted to $1,231,357 for the nine months ended September 30, 2017 and $1,324,832 for the nine months ended September 30, 2016, on a pro forma basis. The pro forma decrease of $93,475 (7%) as compared to the prior year period is attributable to the following:
Decrease due to decline in average debt balances and interest rates on our indebtedness and collateralized debt$(94,917)
Lower interest income867
Other net decreases, primarily amortization of deferred financing costs and original issue discounts575
 $(93,475)
See "Liquidity and Capital Resources" discussion below for a detail of our borrower groups.



52



Three MonthsSix Months
Decrease due to changes in average debt balances and interest rates on our indebtedness, including our collateralized debt$(28,782) $(48,129) 
Lower interest income454  614  
Other net decreases, primarily amortization of deferred financing costs and original issue discounts(1,411) (5,136) 
$(29,739) $(52,651) 
Gain (loss)(Loss) on Investments net
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016Sale of Affiliate Interests, net
Gain (loss) on investments, net for the three and ninesix months ended SeptemberJune 30, 20172020, of $(18,900)$197,597 and $169,888$(257,876), respectively and $24,833$103,146 and $83,467 for the three and nine months ended September 30, 2016$357,871, respectively, consists primarily of the increase (decrease) in the fair value of Comcast common stock owned by the Company for the period.periods. The effects of these gains (losses) are partially offset by the losses (gains) on the related equity derivative contracts, net described below.
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
51

Gain on investments, net for the nine months ended September 30, 2017 amounted $169,888 compared to $213,457 for the nine months ended September 30, 2016, on a pro forma basis, assuming the Cablevision Acquisition occurred on January 1, 2016 and consists primarily of the increase in the fair value of Comcast common stock owned by the Company. The effects of these gains are partially offset by the losses on the related equity derivative contracts, net described below.
Gain (loss)(Loss) on Derivative Contracts, net
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
Gain (loss) on derivative contracts, net for the three and ninesix months ended SeptemberJune 30, 20172020 amounted to $(16,763)$(152,061) and $(154,270) compared to $773$287,800, respectively, and $(26,572)$(49,624) and $(226,653) for the three and ninesix months ended SeptemberJune 30, 2016,2019, respectively, and consists ofincludes realized and unrealized and realized gains or losses 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(losses) are offset by gains and losses (gains) on investment securities pledged as collateral, which are included in gain (loss) on investments, net discussed above. The loss for the three and nine months ended September 30, 2017 also includes the realized loss on the settlement of certain put-call options, as well as the loss resulting from the change in the fair value on the put-call contracts aggregating $72,365.
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Loss on derivative contracts,Interest Rate Swap Contracts, net for the nine months ended September 30, 2017 was $154,270 compared to $62,855 for the nine months ended September 30, 2016, on a pro forma basis, assuming the Cablevision Acquisition occurred on January 1, 2016 and consists of unrealized and realized losses due to the change in fair value of equity derivative contracts relating to the Comcast common stock owned by the Company. The loss for the nine months ended September 30, 2017 also includes the realized loss on the settlement of certain put-call options, as well as the loss resulting from the change in the fair value on the put-call contracts aggregating $72,365.
Gain (loss) on interest rate swap contracts
Gain (loss)Loss on interest rate swap contracts, net was $1,051$33,735 and $12,539$88,567 for the three and ninesix months ended SeptemberJune 30, 2017 as compared to $(15,861)2020, respectively, and $24,380$26,900 and $50,572 for the three and ninesix months ended SeptemberJune 30, 2016.2019, respectively. These amounts represent the increase or decrease in the fair value of the fixed to floating interest rate swaps entered into by our Cequel segmentswap contracts. For the six months ended June 30, 2020, the loss is net of a gain recognized in September 2016. The objectiveconnection with the early termination of these swaps is to cover the exposure to changes in the markettwo interest rate of the $1,500,000 principal amount of the Cequel 2026 Senior Secured Notes.swap contracts. These swap contracts are not designated as hedges for accounting purposes.
Loss on extinguishmentExtinguishment of debtDebt and write-offWrite-off of deferred financing costsDeferred Financing Costs
Loss on extinguishment of debt and write-off of deferred financing costs amounted to $38,858$1,194 and $600,240$159,096 for the three and ninesix months ended SeptemberJune 30, 2017 and includes the premium of $513,723 related to the notes payable to affiliates and related parties that were converted into shares2019.
The following table provides a summary of the Company’s common stock, $18,976 related to the Cablevision Extension Amendmentloss on extinguishment of debt and the redemptionwrite-off of senior notes, $28,684 related todeferred financing costs recorded by the Cequel Extension Amendment andCompany upon the redemption of senior notes and $38,858 relating primarily to a premium paid from the prepaymentrefinancing of principal on certain senior notes outstanding.credit facilities:
Loss on extinguishment of debt
Three months ended June 30, 2019Six months ended June 30, 2019
CSC Holdings 10.125% Senior Notes due 2023$—  $154,666  
Refinancing and subsequent amendment to CSC Holdings credit facility1,194  4,430  
$1,194  $159,096  
Other Income, Net
Other income, net amounted to $19,948 for the nine months ended September 30, 2016$669 and related to the repayment and termination of the Cequel credit facility.



53



Income Tax Benefit
Actual Three and Nine Months Ended September 30, 2017 Compared to Actual Three and Nine Months Ended September 30, 2016
The Company recorded income tax benefit of $134,688 and $429,664$1,592 for the three and ninesix months ended SeptemberJune 30, 2017,2020, respectively, reflectingcompared to $212 and $292 for the three and six months ended June 30, 2019, respectively.
Income Tax Expense
For the three and six months ended June 30, 2020, Altice USA recorded a tax expense of $58,826 and $75,861 on pre-tax income of $170,303 and $185,800, respectively, resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was due to the impact of 43%certain non-deductible expenses and 37%, respectively. Nondeductible share-based compensationcertain state tax expense foradjustments, partially offset by a benefit resulting from the recently enacted Coronavirus Aid, Relief and Economic Security ("CARES Act"). See further details related to the CARES Act in Note 13 of the consolidated financial statements.
For the three and ninesix months ended SeptemberJune 30, 2017 reduced income tax benefit by $6,002 and $16,373, respectively.
The Company2019, Altice USA recorded income tax benefit of $118,230 and $101,332 for the three and nine months ended September 30, 2016, respectively. On June 9, 2016 the common stock of Cequel Corporation 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 Finco, resulting in additional deferred tax expense of $2,431$41,160 and $18,542 for the three$18,574 on pre-tax income of $127,570 and nine months ended September 30, 2016, respectively.
Actual Nine Months Ended September 30, 2017 Compared to Pro Forma Nine Months Ended September 30, 2016
Income tax benefit for the nine months ended September 30, 2017 was $429,664, reflecting$79,786, respectively, resulting in an effective tax rate of 37%. Nondeductible share-based compensation expense forthat was higher than the nine months ended September 30, 2017 reduced incomeU.S. federal statutory tax benefit by $16,373.
Income tax benefit on a pro forma basis amounted to $320,188 forrate. The primary differences between the nine months ended September 30, 2016. In 2016, there was no state income tax benefit on the pre-Merger accrued interest at Finco, resulting in additional deferred tax expense of $18,542 for the nine months ended September 30, 2016.
In general, the Company is required to use an estimated annual effective tax rate and the statutory tax rate are due to a revaluation of state deferred taxes primarily due to certain changes to the state tax rates used to measure the Company’s deferred tax liabilities and certain non-deductible expenses.
52

CSC HOLDINGS, LLC
The consolidated statements of operations of CSC Holdings are essentially identical to the consolidated statements of operations of Altice USA, except for the following:
 Three months ended June 30,Six months ended June 30,
2020201920202019
(in thousands)(in thousands)
Net income attributable to Altice USA shareholders$111,264  $86,367  $110,406  $61,368  
Less: items included in Altice USA's consolidated statements of operations:
Income tax expense (benefit)2,197  (6,668) 14,203  (13,578) 
Interest expense relating to Cablevision senior notes—  24,400  —  48,644  
Gain on investments and sale of affiliate interest recorded by Altice USA(1) —  (347) —  
Net income attributable to CSC Holdings' sole member$113,460  $104,099  $124,262  $96,434  
Refer to Altice USA's Management's Discussion and Analysis of Financial Condition and Results of Operations herein.
The following is a reconciliation of CSC Holdings' net 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.to Adjusted EBITDA:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net income$113,673  $104,142  $123,795  $96,278  
Income tax expense56,629  47,828  61,658  32,152  
Other income, net(669) (212) (1,592) (292) 
Loss on interest rate swap contracts, net33,735  26,900  88,567  50,572  
Loss (gain) on derivative contracts, net152,061  49,624  (287,800) 226,653  
Loss (gain) on investments and sales of affiliate interests, net(197,596) (103,146) 258,223  (357,871) 
Loss on extinguishment of debt and write-off of deferred financing costs—  1,194  —  159,096  
Interest expense, net350,874  356,213  714,426  718,433  
Depreciation and amortization521,794  568,620  1,069,363  1,130,048  
Restructuring and other expense40,966  11,465  48,260  26,709  
Share-based compensation34,318  16,535  62,264  30,325  
Adjusted EBITDA1,105,785  1,079,163  2,137,164  2,112,103  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Operating Free Cash Flow$877,062  $762,296  $1,609,359  $1,454,850  
Net cash flows from operating activities$932,069  $809,873  $1,529,178  $1,321,776  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Free Cash Flow$703,346  $493,006  $1,001,373  $664,523  
Liquidity and Capital Resources
LIQUIDITY AND CAPITAL RESOURCES
Altice USA has no operations independent of its subsidiaries, Cablevision and Cequel, which are funded separately.subsidiaries. Funding for our subsidiaries has generally been provided by cash flow from their respective operations, cash on hand and borrowings under theirthe revolving credit facilitiesfacility 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 facilitiesfacility 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,facility, debt securities and syndicated term loans. We manage our business totarget a long-term netyear-end 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).
53

We expect to utilize free cash flow and availability under the CSC Holdings revolving credit facilities,facility, 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 redemption provisions.redemptions.
We believe existing cash balances, operating cash flows and availability under ourthe CSC Holdings revolving credit facilitiesfacility 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



54



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,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 CSC Holdings revolving credit facilitiesfacility 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 facilitiesfacility 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 domay not expect to 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 willcould be dependent upon our continued access to the capital and credit markets to issue additional debt or equity or refinance existing debt obligations.  We will needintend 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 totake other actions including deferring capital expenditures, selling assets, seeking strategic investments from third parties or reducing or eliminating stock repurchases and discretionary uses of cash.
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 $13,609. 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.



55



Debt Outstanding
The following tables summarize the carrying value of our outstanding debt, net of unamortized deferred financing costs, discounts and premiums (excluding accrued interest), as well as interest expense.
As of June 30, 2020
Debt outstanding:
Credit facility debt$7,122,458 
Senior guaranteed notes8,701,902 
Senior notes8,516,513 
Subtotal24,340,873 
Finance lease obligations136,049 
Notes payable and supply chain financing107,658 
Subtotal24,584,580 
Collateralized indebtedness relating to stock monetizations (a)1,601,107 
Total debt$26,185,687 
Interest expense:
Credit facility debt, senior notes, finance leases, notes payable and supply chain financing$680,112 
Collateralized indebtedness relating to stock monetizations (a)36,124 
Total interest expense$716,236 
 As of September 30, 2017
 Cablevision Cequel Altice USA Eliminations Total
Debt outstanding:         
Credit facility debt$4,123,792
 $1,253,110
 $—
 $—
 $5,376,902
Senior guaranteed notes2,290,748
 —
 —
 —
 2,290,748
Senior secured notes—
 2,569,559
 —
 —
 2,569,559
Senior notes and debentures (a)8,230,325
 2,762,543
 —
 —
 10,992,868
Capital lease obligations14,388
 1,845
 —
 —
 16,233
Notes payable (includes $43,706 related to collateralized debt)76,442
 3,083
 —
 —
 79,525
Subtotal14,735,695
 6,590,140
 —
 —
 21,325,835
Notes payable to affiliates and related parties—
 —
 —
 —
 —
Collateralized indebtedness relating to stock monetizations (a)1,314,788
 —
 —
 —
 1,314,788
Total debt$16,050,483
 $6,590,140
 $—
 $—
 $22,640,623
Interest expense:         
Credit facility debt, senior notes, capital leases and notes payable$779,265
 $308,788
 $4,888
 $(4,882) $1,088,059
Notes payable to affiliates and related parties—
 —
 90,405
 —
 90,405
Collateralized indebtedness and notes payable relating to stock monetizations (a)54,266
 —
 —
 —
 54,266
Total interest expense$833,531
 $308,788
 $95,293
 $(4,882) $1,232,730
(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 from the proceeds of monetization contracts entered into pursuant to the Synthetic Monetization Closeout discussed below.
(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, or (ii) delivering cash from the net proceeds from new monetization contracts.
54

The following table provides details of our outstanding credit facility debt, net of unamortized discounts and deferred financing costs as of SeptemberJune 30, 2017:2020: 
Maturity DateInterest RatePrincipalCarrying Value
Revolving Credit Facility (a)(b)—%$—  $—  
Term Loan BJuly 17, 20252.43%2,910,000  2,897,887  
Incremental Term Loan B-3January 15, 20262.43%1,259,063  1,254,243  
Incremental Term Loan B-5April 15, 20272.68%2,992,500  2,970,328  
$7,161,563  $7,122,458  
 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 4.49% $1,175,000
 $1,149,024
CSC Holdings Term Credit FacilityJuly 17, 2025 3.48% 2,992,500
 2,974,768
Cequel:       
Revolving Credit Facility (c)November 30, 2021 — —
 —
Term Credit FacilityJuly 28, 2025 3.49% 1,261,838
 1,253,110
     $5,429,338
 $5,376,902
(a)Carrying amounts are net of unamortized discounts and deferred financing costs.
(b)At September 30, 2017, $123,473 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $1,001,527 of the facility was undrawn and available, subject to covenant limitations.
(c)At September 30, 2017, $16,575 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $333,425 of the facility was undrawn and available, subject to covenant limitations.

(a)At June 30, 2020, $141,949 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $2,333,051 of the facility was undrawn and available, subject to covenant limitations.

(b)The revolving credit facility of an aggregate principal amount of $2,275,000 matures in January 2024 and is priced at LIBOR plus 2.25%. The remaining revolving credit facility of an aggregate principal amount of $200,000 matures in November 2021 and is priced at LIBOR plus 3.25%.

56



Payment Obligations Related to DebtCapital Expenditures
AsCapital expenditures primarily include costs for equipment purchased and software development services provided by subsidiaries of September 30, 2017, totalAltice Europe.
39

ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Aggregate amounts payable by us in connection with our outstanding obligations (giving effect to the Extension Amendment discussed below), including related interest, as well as notes payablethat were due from and due to affiliates and related parties capital lease obligations, notes payable,are summarized below:
Altice USACSC HoldingsAltice USA and CSC Holdings
June 30,
2020		June 30,
2020		December 31, 2019
Due from:
Altice Europe$432  $302  $4,076  
Other affiliates and related parties3,020  3,020  2,698  
$3,452  $3,322  $6,774  
Due to:
Altice Europe$5,722  $5,722  $7,456  
$5,722  $5,722  $7,456  

Amounts due from affiliates presented in the table above represent amounts paid by the Company on behalf of or for services provided to the respective related party. Amounts due to affiliates relate to the purchase of equipment and advertising services, as well as reimbursement for payments made on our behalf.
In June 2020, pursuant to the Company's share repurchase program, the Company purchased 3,582,525 Altice USA Class A common stock held by Altice Europe for a total consideration of $84,906. See further information regarding the Company's share repurchase program in Note 1.
CSC Holdings
CSC Holdings made cash equity distribution payments to its parent aggregating $652,383, and $1,372,733, respectively, during the three and six months ended June 30, 2020. The distributions for the three months ended June 30, 2020 were recorded as a decrease in retained earnings of $105,980, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $546,403. The distributions for the six months ended June 30, 2020 were recorded as a decrease in retained earnings of $130,297, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $1,242,436.
CSC Holdings made cash equity distribution payments to its parent aggregating $635,028 and $1,229,490, respectively, during the three and six months ended June 30, 2019. The distributions for the three months ended June 30, 2019 were recorded as a decrease in retained earnings of $90,324, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $544,704. The distributions for the six months ended June 30, 2019 were recorded as a decrease in retained earnings of $633,541, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $595,949.
For the three and six months ended June 30, 2020, CSC Holdings recorded net non-cash equity contributions (distributions) of $35,415 and $(115,187), respectively, which represent the non-cash settlement of intercompany balances with Altice USA. These balances primarily include amounts due to/ due from Altice USA pursuant to a historical tax allocation policy and tax sharing agreements between the entities.
NOTE 16. COMMITMENTS AND CONTINGENCIES
Legal Matters
In the latter half of 2018, eight named plaintiffs, each on behalf of a putative class of stockholders who purchased Company common stock in Altice USA's IPO pursuant to the Registration Statement and Prospectus, filed complaints (seven in New York State Supreme Court, one in United States District Court for the Eastern District of New York). The lawsuits name as defendants Altice USA, Altice Europe, and Altice USA's directors, among others, and assert that all defendants violated Sections 11 and 12 of the Securities Act of 1933 (the "Securities Act") and that the individual defendants violated Section 15 of the Securities Act as control persons. In a consolidated amended complaint filed in the lawsuit in the Eastern District of New York, plaintiff also asserts violations of Section 10(b) of the Securities Act of 1934 ("34 Act"), Rule 10b-5 promulgated thereunder, and Section 20 of the 34 Act against Altice USA, Altice Europe, and certain individual directors. The facts underlying each case are substantively similar, with plaintiffs alleging that the Registration Statement and Prospectus misrepresented or omitted material facts
40

ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)


relating to the negative performance of Altice France and Altice Portugal, the disclosure of which in November 2017 negatively impacted the value of Altice USA’s stock. In June of 2019, plaintiffs in the New York State action filed a consolidated amended complaint, which the Company moved to dismiss in July of 2019. The Company moved to dismiss the complaint in the Eastern District of New York in October 2019. On June 26, 2020, the state Court granted the Company’s motion to dismiss. Plaintiffs in the New York State action filed a notice of appeal on July 21, 2020.
On June 23, 2020, a purported stockholder of the Company filed a complaint in the Court of Chancery of the State of Delaware, derivatively on behalf of the Company, against Patrick Drahi, Next Alt S.A.R.L., and those directors of the Company who are members of the Compensation Committee (collectively, the “Director Defendants”).The Company is also named as a nominal defendant in the complaint.The complaint alleges that the Director Defendants breached their fiduciary duties to the Company’s stockholders, and wasted corporate assets, by approving certain equity grants for Patrick Drahi.The complaint seeks rescission of the equity awards, monetary damages, and costs and disbursements for the plaintiff.
The Company intends to vigorously defend these lawsuits. Although the outcome of the matter cannot be predicted and the impact of the final resolution of these matters on the Company’s results of operations in any particular subsequent reporting period is not known at this time, management does not believe that the ultimate resolution of these matters will have a material adverse effect on the operations or financial position of the Company or the ability of the Company to meet its financial obligations as they become due.
On November 6, 2018, Sprint Communications Company L.P ("Sprint") filed a complaint in the U.S. District Court for the District of Delaware alleging that the Company infringes Sprint’s patents purportedly by providing Voice over Internet Protocol ("VoIP") services. On December 3, 2018, Sprint filed a second complaint alleging that the Company infringes Sprint’s patents purportedly by providing certain VOD related services. The lawsuits are part of a pattern of litigation that was initiated as far back as 2005 by Sprint against numerous broadband and telecommunications providers, which has resulted in judgments and settlements of significant value deliverablefor Sprint. The Company intends to vigorously defend the lawsuits. Although the outcome of the matter cannot be predicted and the impact of the final resolution of this matter on the Company’s results of operations in any particular subsequent reporting period is not known at maturity under monetization contractsthis time, management does not believe that the ultimate resolution of the matter will have a material adverse effect on the operations or financial position of the Company or the ability of the Company to meet its financial obligations as they become due, but it could be material to the Company’s consolidated results of operations or cash flows for any one period.
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.
In the event that the Company is found to infringe on any patent rights, the Company may be subject to substantial damages and/or an injunction that could require the Company or its vendors to modify certain products and services the Company offers to its subscribers, as follows:well as enter into royalty or license agreements with respect to the patents at issue. The Company believes that the claims are without merit, 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, disputes and investigations, some of which may involve claims for substantial damages, fines or penalties. 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.
 Cablevision (a) Cequel Total
      
2017$217,983
 $89,865
 $307,848
20182,607,892
 379,744
 2,987,636
20191,468,595
 377,393
 1,845,988
20201,393,295
 1,427,053
 2,820,348
20214,494,253
 1,560,775
 6,055,028
Thereafter12,189,577
 5,259,730
 17,449,307
Total$22,371,595
 $9,094,560
 $31,466,155
41

ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 17. SUBSEQUENT EVENTS
On July 14, 2020, the Company completed its acquisition of certain cable assets in New Jersey for approximately $150,000, subject to certain closing adjustments as set forth in the asset purchase agreement.
In July 2020, the Company entered into an agreement to sell 49.99% of its Lightpath fiber enterprise business for an implied enterprise value of $3,200,000. The Company will receive total gross cash proceeds of approximately $2,300,000 from the sale and related financing activity and will record a gain upon closing. Approximately $1,100,000 of the net proceeds after tax are expected to be used by the Company to repay debt such that the transaction is at least leverage-neutral to CSC Holdings. The Company will retain a 50.01% interest in Lightpath and maintain control. Accordingly, the Company will continue to consolidate the operating results of the Lightpath business. The transaction is currently expected to close in the fourth quarter of 2020 following the satisfaction of closing conditions, including receipt of necessary regulatory approvals. Upon closing, Lightpath will be financed independently outside of the CSC Holdings restricted group.

42

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
All dollar amounts and customer metrics, except per customer and per share data, included in the following discussion, are presented in thousands.
The preparation of our consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses. For a complete discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our consolidated financial statements, please refer to our Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019.
Overview
Our Business
We principally provide broadband communications and video services in the United States and market our services primarily under two brands: Optimum, in the New York metropolitan area, and Suddenlink, principally in markets in the south-central United States. We deliver broadband, video, and telephony services to more than 4.9 million residential and business customers. Our footprint extends across 21 states through a fiber-rich broadband network with approximately 8.9 million homes passed as of June 30, 2020. Additionally, we offer news programming and content, and advertising services. In September 2019, the Company launched Altice Mobile, a full service mobile offering, to consumers across its footprint.
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 in our Annual Report on Form 10-K for the year ended December 31, 2019.
In March 2020, the United States declared a national emergency concerning the outbreak of the coronavirus ("COVID-19"). There have also been extraordinary and wide-ranging actions taken by federal, state and local governmental authorities to contain and combat the outbreak and spread of the virus. We have continued to provide our telecommunications services to our customers during this pandemic. We expect that our future results may be impacted, including if residential or business customers discontinue their service or are unable to pay for our products and services, or if advertising revenue continues to decline. Additionally, in order to prioritize the demands of the business, we may continue to delay certain capital investments. Due to the uncertainty surrounding the magnitude and duration of business and economic impacts relating to COVID-19, including the effort to contain and combat the spread of the virus, and business impacts of government actions, we currently cannot reasonably estimate the ultimate impact of COVID-19 on our business. See "Risk Factors - Our business, financial condition and results of operations may be adversely affected by the recent COVID-19 pandemic."
We derive revenue principally through monthly charges to residential customers of our broadband, video, and telephony services. We also derive revenue from digital video recorder ("DVR"), video-on-demand ("VOD"), pay-per-view, installation and home shopping commissions. Our residential broadband, video, and telephony services accounted for approximately 37%, 39%, and 5%, respectively, of our consolidated revenue for the six months ended June 30, 2020. We also derive revenue from the sale of a wide and growing variety of products and services to both large enterprise and SMB customers, including broadband, telephony, networking and video services. For the six months ended June 30, 2020, 15% of our consolidated revenue was derived from these business services. In addition, we derive revenues from the sale of advertising time available on the programming carried on our cable television systems, digital advertising and data analytics, and affiliation fees for news programming, which accounted for approximately 4% of our consolidated revenue for the six months ended June 30, 2020. Our mobile and other revenue for the six months ended June 30, 2020 accounted for approximately 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 video customers, speed tier changes by our broadband customers, and acquisitions and construction 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.
43

We operate in a highly competitive consumer-driven industry and we compete against a variety of broadband, video 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, CenturyLink, DISH, 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 in our Annual Report on Form 10-K for the year ended December 31, 2019.
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. 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 are constructing a FTTH network, which will enable us to deliver more than 10 Gbps broadband speeds in areas where FTTH is deployed. In addition, we launched Altice Mobile to consumers across our footprint in September 2019. We may incur greater than anticipated capital expenditures in connection with these initiatives, fail to realize anticipated benefits, experience delays and business disruptions or encounter other challenges to executing them as planned. See "Liquidity and Capital Resources" for additional information regarding our capital expenditures.
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 June 2019, the Company completed the acquisition of Cheddar Inc., a digital-first news company and the operating results of Cheddar were consolidated as of June 1, 2019.
Non-GAAP Financial Measures
We define Adjusted EBITDA, which is a non-GAAP financial measure, as net income (loss) excluding income taxes, 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 and sale of affiliate interests, 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.
We also use Operating Free Cash Flow (defined as Adjusted EBITDA less cash capital expenditures), and Free Cash Flow (defined as net cash flows from operating activities less cash capital expenditures) as indicators of the Company’s financial performance. We believe these measures are one of several benchmarks used by investors, analysts and peers for comparison of performance in the Company’s industry, although they may not be directly comparable to similar measures reported by other companies.
44

Results of Operations - Altice USA
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenue:
Residential:
Broadband$920,363  $806,250  $1,805,892  $1,581,823  
Video952,526  1,018,426  1,899,587  2,035,756  
Telephony117,322  150,232  242,352  304,696  
Business services and wholesale365,564  357,806  730,094  708,495  
News and advertising96,631  114,450  202,171  209,188  
Mobile19,866  —  38,222  —  
Other2,707  3,917  6,917  7,690  
Total revenue2,474,979  2,451,081  4,925,235  4,847,648  
Operating expenses:
Programming and other direct costs860,875  818,994  1,725,389  1,631,979  
Other operating expenses542,637  569,459  1,124,946  1,133,891  
Restructuring and other expense40,966  11,465  48,260  26,709  
Depreciation and amortization (including impairments)521,794  568,620  1,069,363  1,130,048  
Operating income508,707  482,543  957,277  925,021  
Other income (expense):
Interest expense, net(350,874) (380,613) (714,426) (767,077) 
Gain (loss) on investments and sale of affiliate interests, net197,597  103,146  (257,876) 357,871  
Gain (loss) on derivative contracts, net(152,061) (49,624) 287,800  (226,653) 
Loss on interest rate swap contracts, net(33,735) (26,900) (88,567) (50,572) 
Loss on extinguishment of debt and write-off of deferred financing costs—  (1,194) —  (159,096) 
Other income, net669  212  1,592  292  
Income before income taxes170,303  127,570  185,800  79,786  
Income tax expense(58,826) (41,160) (75,861) (18,574) 
Net income111,477  86,410  109,939  61,212  
Net loss (income) attributable to noncontrolling interests(213) (43) 467  156  
Net income attributable to Altice USA, Inc. stockholders$111,264  $86,367  $110,406  $61,368  
45

The following is a reconciliation of net income to Adjusted EBITDA:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net income$111,477  $86,410  $109,939  $61,212  
Income tax expense58,826  41,160  75,861  18,574  
Other income, net(669) (212) (1,592) (292) 
Loss on interest rate swap contracts, net33,735  26,900  88,567  50,572  
Loss (gain) on derivative contracts, net152,061  49,624  (287,800) 226,653  
Loss (gain) on investments and sales of affiliate interests, net(197,597) (103,146) 257,876  (357,871) 
Loss on extinguishment of debt and write-off of deferred financing costs—  1,194  —  159,096  
Interest expense, net350,874  380,613  714,426  767,077  
Depreciation and amortization521,794  568,620  1,069,363  1,130,048  
Restructuring and other expense40,966  11,465  48,260  26,709  
Share-based compensation34,318  16,535  62,264  30,325  
Adjusted EBITDA1,105,785  1,079,163  2,137,164  2,112,103  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Operating Free Cash Flow$877,062  $762,296  $1,609,359  $1,454,850  
Net cash flows from operating activities$935,976  $788,970  $1,529,541  $1,292,964  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Free Cash Flow$707,253  $472,103  $1,001,736  $635,711  

The following table sets forth certain customer metrics, excluding Altice Mobile customers, for the Company:
June 30,March 31,June 30,
2020 (f)2020 (f)2019 (g)
Homes passed (a)8,880.1  8,834.8  8,750.4  
Total customer relationships (b)(c)4,997.1  4,950.1  4,923.2  
Residential4,621.4  4,568.4  4,538.9  
SMB375.7  381.7  384.4  
Residential customers:
Broadband4,307.8  4,237.4  4,165.4  
Video3,102.9  3,137.5  3,255.3  
Telephony2,337.1  2,359.8  2,485.8  
Penetration of homes passed (d)56.3 %56.0 %56.3 %
ARPU(e)$144.38  $143.39  $145.02  
(a)Represents the estimated number of single residence homes, apartments and condominium units passed by the broadband network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our broadband network. Broadband services were not available to approximately 30 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 fixed-line 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.  With the exception of free Altice Advantage 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
46

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 total customer relationships divided by homes passed.
(e)Calculated by dividing the average monthly revenue for the respective quarter (fourth quarter for annual periods) derived from the sale of broadband, video and telephony services to residential customers for the quarter by the average number of total residential customers for the same period.
(4)Customer metrics for the 2020 periods include customers that have not been disconnected pursuant to the Keep Americans Connected pledge ("Pledge") that the Company made in response to the COVID-19 pandemic and customers that have not been disconnected pursuant to the New Jersey Executive Order No. 126 ("NJ Order") enacted in April 2020 that protects New Jersey residents from disconnection of internet and voice services for non-payment. However, the metrics exclude new customers with students in the household that are receiving broadband services for free until the end of the 2019-20 school year ("Altice Advantage"). The following table provides details of these COVID-19 related offers and programs:
June 30, 2020March 31, 2020
Pledge and NJ Order (i)Altice Advantage CustomersPledgeAltice Advantage Customers
Included(Excluded)Included(Excluded)
Total customer relationships18.7  (17.8) 0.0(9.3) 
Residential18.1  (17.8) 0.0(9.3) 
SMB0.6  —  —  —  
Residential customers:
Broadband17.9  (17.8) 0.0(9.3) 
Video8.0  —  0.0—  
Telephony8.9  —  0.0—  
(i)Represent customers who would have been disconnected as a result of non-payment under our normal policies, but were not disconnected pursuant to the Pledge and the NJ Order. As of June 30, 2020, an aggregate of 56.1 thousand customers (54.8 thousand residential and 1.3 thousand SMB) with past-due account balances requested protection pursuant to the Pledge or are protected pursuant to the NJ Order.
(f)Customer metrics for prior periods have been adjusted to conform definitions between Suddenlink and Optimum in connection with the migration of Suddenlink customers to the Optimum billing system in 2019. The following table summarizes the adjustments made to previously reported amounts.
(a)Includes $1,583,479 related to the Company's obligations (including related interest) in connection with monetization contracts it has entered into.  This indebtedness is collateralized by sharesAs 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 below.
June 30, 2019
Homes passed(38.2)
Total customer relationships(19.0)
Residential(23.7)
SMB4.8 
Residential customers:
Broadband(2.7)
Video(21.2)
Telephony(1.0)
ARPU$0.75 
CSC Holdings Restricted Group
CSC Holdings
Altice USA- Comparison of Results for the Three and thoseSix Months Ended June 30, 2020 compared to the Three and Six Months Ended June 30, 2019
Broadband Revenue
Broadband revenue for the three and six months ended June 30, 2020 was $920,363 and $1,805,892, respectively, while broadband revenue for the three and six months ended June 30, 2019 was $806,250 and $1,581,823,
47

respectively. Broadband revenue is derived principally through monthly charges to residential subscribers of its subsidiaries which conduct our broadband pay televisionservices. 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. Additionally, revenue is impacted by changes in the standalone selling price of each performance obligation within our promotional bundled offers.
Broadband revenue increased $114,113 (14%) and $224,069 (14%) for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019. 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.
Video Revenue
Video revenue for the three and six months ended June 30, 2020 was $952,526 and $1,899,587, respectively. Video revenue for the three and six months ended June 30, 2019 was $1,018,426 and $2,035,756, respectively. Video revenue is derived principally through monthly charges to residential customers of our video 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. Additionally, revenue is impacted by changes in the standalone selling price of each performance obligation within our promotional bundled offers.
Video revenue decreased $65,900 (6%) and $136,169 (7%) for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019. The decrease was due primarily to a decline in video customers and lower average revenue per video customer.
Telephony Revenue
Telephony revenue for the three and six months ended June 30, 2020 was $117,322 and $242,352, respectively. Telephony revenue for the three and six months ended June 30, 2019 was $150,232 and $304,696, respectively. Telephony revenue is derived principally through monthly charges to residential customers of our telephony services. Revenue is impacted by changes in rates for services, operations, as well as Lightpath, which provides Ethernet-based data, Internet, voicechanges in the number of customers, and video transportadditional services sold to our existing customers. Additionally, revenue is impacted by changes in the standalone selling price of each performance obligation within our promotional bundled offers.
Telephony revenue decreased $32,910 (22%) and managed$62,344 (20%) for the three and six months ended June 30, 2020 compared to the three months ended June 30, 2019, respectively. The decrease was due 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 three and six months ended June 30, 2020 was $365,564 and $730,094, respectively. Business services and wholesale revenue for the three and six months ended June 30, 2019 was $357,806 and $708,495, respectively. Business services and wholesale revenue is derived primarily from the sale of fiber based telecommunications services to the business market, compriseand the "Restricted Group" as they are subjectsale of broadband, video and telephony services to SMB customers.
Business services and wholesale revenue increased $7,758 (2%) and $21,599 (3%) for the three and six months ended June 30, 2020 compared to the covenantsthree and restrictionssix months ended June 30, 2019, respectively. The increase was primarily due to higher average recurring broadband revenue per SMB customer, primarily driven by certain rate increases and service level changes and an increase in revenue related to an indefeasible right of use contract recorded in the second quarter of 2020, partially offset by a decrease in SMB customers.
News and Advertising Revenue
News and advertising revenue for the three and six months ended June 30, 2020 was $96,631 and $202,171, respectively. News and advertising revenue for the three and six months ended June 30, 2019 was $114,450 and $209,188, respectively. News and advertising revenue is primarily derived from the sale of (i) advertising inventory available on the programming carried on our cable television systems, (ii) advertising on over the top ("OTT") platforms, (iii) digital advertising, and (iv) data analytics. News and advertising revenue also includes affiliation fees for news programming.
News and advertising revenue decreased $17,819 (16%) and $7,017 (3%) for the three and six months ended June 30, 2020, respectively, compared to the three and six months ended June 30, 2019. The decrease was primarily due to a decline in advertising spending, partially offset by growth in national and political sales and higher affiliate revenue for News 12.
48

Mobile Revenue
Mobile revenue for the three and six months ended June 30, 2020 was $19,866 and $38,222, respectively, and relates to sales of devices and mobile services. Our mobile service launched to consumers in September 2019. As of June 30, 2020, we had approximately 144,000 mobile lines.
Other Revenue
Other revenue for the three and six months ended June 30, 2020 and 2019 was $2,707 and $6,917, respectively. Other revenue for the three and six months ended June 30, 2019 was $3,917 and $7,690, respectively. Other revenue includes revenue from other miscellaneous revenue streams.
Programming and Other Direct Costs
Programming and other direct costs for the three and six months ended June 30, 2020 amounted to $860,875 and $1,725,389, respectively. Programming and other direct costs for the three and six months ended June 30, 2019 amounted to $818,994 and $1,631,979, respectively. 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 video 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. Additionally, these costs include the costs of mobile devices sold to our customers and direct costs of providing mobile services.
The increases of $41,881 (5%) and $93,410 (6%) for the three and six months ended June 30, 2020, as compared to the three and six months ended June 30, 2019 are primarily attributable to the following:
Three MonthsSix Months
Increase in programming costs due primarily to net contractual rate increases, partially offset by lower video customers$19,718  $47,899  
Costs of mobile devices14,581  25,646  
Increase in call completion and transfer costs primarily related to our mobile business ($6,358 and $13,199 for the three and six months) and an increase in call activity8,132  13,724  
Increase (decrease) primarily relating to costs of digital media and linear advertising spots for resale(828) 6,759  
Other net increase (decrease)278  (618) 
 $41,881  $93,410  
Programming costs
Programming costs aggregated $702,674 and $1,413,264 for the three and six months ended June 30, 2020 and $682,956 and $1,365,365 for the three and six months ended June 30, 2019, respectively. Our programming costs in 2020 will continue to be impacted by changes in programming rates, which we expect to increase, and by changes in the number of video customers.
Other Operating Expenses
Other operating expenses for the three and six months ended June 30, 2020 amounted to $542,637 and $1,124,946, respectively. Other operating expenses for the three and six months ended June 30, 2019 amounted to $569,459 and $1,133,891, respectively. Other operating expenses include staff costs and employee benefits including salaries of company employees and related taxes, benefits and other employee related expenses, as well as third-party labor costs. 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 network 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
49

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, video and telephony services are capitalized (asset-based). The redeployment of customer premise equipment is expensed as incurred.
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 decreases in other operating expenses of $26,822 and $8,945, offset by an increase of $12,365 and $25,100 relating to our mobile service, for the three and six months ended June 30, 2020, respectively, as compared to the three and six months ended June 30, 2019 was attributable to the following:
Three MonthsSix Months
Net decrease in labor costs and benefits (offset by an increase in costs related to Cheddar of $3,402 and $10,565 for the three and six months, which was acquired in June 2019), offset by a decrease in capitalizable activity$(33,584) $(42,286) 
Decrease in sales and marketing(14,455) (13,148) 
Decrease in billing costs, primarily due to systems integration(3,160) (8,810) 
Increase in share-based compensation17,783  31,939  
Increase in bad debt expense2,254  7,043  
Increase in rent and property taxes3,100  7,520  
Other net increases1,240  8,797  
$(26,822) $(8,945) 
Restructuring and Other Expense
Restructuring and other expense for the three and six months ended June 30, 2020 amounted to $40,966 and $48,260, as compared to $11,465 and $26,709 for the three and six months ended June 30, 2019. Restructuring and other expense for the 2020 periods primarily includes $40,128 related to contractual payments for terminated employees. The amounts for the three and six months ended June 30, 2019 primarily related to severance and other employee related costs resulting from headcount reductions, facility realignment costs and impairments of certain ROU assets, related to initiatives which commenced in 2016 and 2019 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 and make modifications to our organizational structure.
Depreciation and Amortization
Depreciation and amortization for the three and six months ended June 30, 2020 amounted to $521,794 and $1,069,363, respectively. Depreciation and amortization for the three and six months ended June 30, 2019 amounted to $568,620 and $1,130,048, respectively.
The decreases in depreciation and amortization of $46,826 (8%) and $60,685 (5%) for the three and six months ended June 30, 2020, respectively, as compared to the three and six months ended June 30, 2019 are due to certain fixed assets and intangible assets becoming fully depreciated or amortized, partially offset by the acceleration of amortization expense related to certain customer relationship intangible assets and an increase in depreciation as a result of asset additions.

50

Adjusted EBITDA
Adjusted EBITDA amounted to $1,105,785 and $2,137,164 for the three and six months ended June 30, 2020, respectively as compared to $1,079,163 and $2,112,103 for the three and six months ended June 30, 2019, respectively.
Adjusted EBITDA is a non-GAAP measure that is defined as net income (loss) excluding income taxes, income (loss) from discontinued operations, 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 and sale of affiliate interests, interest expense, interest income, depreciation and amortization (including impairments), share-based compensation expense or benefit, restructuring expense or credits and transaction expenses. See reconciliation of net income to adjusted EBITDA above.
The increase in adjusted EBITDA for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019 was due to an increase in revenue and a net decrease in operating expenses (excluding depreciation and amortization, restructuring and other expense and share-based compensation), as discussed above.
The increase in adjusted EBITDA for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 was due to an increase in revenue, partially offset by a net increase in operating expenses (excluding depreciation and amortization, restructuring and other expense and share-based compensation), as discussed above.
Operating Free Cash Flow
Operating free cash flow was $877,062 and $1,609,359 for the three and six months ended June 30, 2020, respectively, and $762,296 and $1,454,850 for the three and six months ended June 30, 2019, respectively. The increase in operating free cash flow in the 2020 periods as compared to 2019 is due to an increase in adjusted EBITDA and a decrease in capital expenditures.
Operating Free Cash Flow is a non-GAAP measure that is defined as Adjusted EBITDA less cash capital expenditures. See discussion above under "Non-GAAP Financial Measures" for further information.
Free Cash Flow
Free cash flow was $707,253 and $1,001,736 for the three and six months ended June 30, 2020, respectively, and $472,103 and $635,711 for the three and six months ended June 30, 2019, respectively. The increase in free cash flow in the 2020 periods as compared to the 2019 periods is due to an increase in cash flows from operating activities and a decrease in capital expenditures.
Free Cash Flow is a non-GAAP measure that is defined as net cash flows from operating activities less cash capital expenditures. See discussion above under "Non-GAAP Financial Measures" for further information.
Interest expense
Interest expense, net was $350,874 and $714,426 for the three and six months ended June 30, 2020, respectively, and $380,613 and $767,077 for the three and six months ended June 30, 2019, respectively. The decreases of $29,739 and $52,651 for the three and six months ended June 30, 2020, respectively, as compared to the three and six months ended June 30, 2019 are attributable to the following:
Three MonthsSix Months
Decrease due to changes in average debt balances and interest rates on our indebtedness, including our collateralized debt$(28,782) $(48,129) 
Lower interest income454  614  
Other net decreases, primarily amortization of deferred financing costs and original issue discounts(1,411) (5,136) 
$(29,739) $(52,651) 
Gain (Loss) on Investments and Sale of Affiliate Interests, net
Gain (loss) on investments, net for the three and six months ended June 30, 2020, of $197,597 and $(257,876), respectively and $103,146 and $357,871, 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 (losses) are partially offset by the losses (gains) on the related equity derivative contracts, net described below.
51

Gain (Loss) on Derivative Contracts, net
Gain (loss) on derivative contracts, net for the three and six months ended June 30, 2020 amounted to $(152,061) and $287,800, respectively, and $(49,624) and $(226,653) for the three and six months ended June 30, 2019, respectively, and includes realized and unrealized gains or losses 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 (losses) are offset by losses (gains) on investment securities pledged as collateral, which are included in gain (loss) on investments, net discussed above.
Loss on Interest Rate Swap Contracts, net
Loss on interest rate swap contracts, net was $33,735 and $88,567 for the three and six months ended June 30, 2020, respectively, and $26,900 and $50,572 for the three and six months ended June 30, 2019, respectively. These amounts represent the increase or decrease in the fair value of interest rate swap contracts. For the six months ended June 30, 2020, the loss is net of a gain recognized in connection with the early termination of two interest rate swap contracts. 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 $1,194 and $159,096 for the three and six months ended June 30, 2019.
The following table provides a summary of the loss on extinguishment of debt and the write-off of deferred financing costs recorded by the Company upon the redemption of senior notes and the refinancing of credit facilities:
Three months ended June 30, 2019Six months ended June 30, 2019
CSC Holdings 10.125% Senior Notes due 2023$—  $154,666  
Refinancing and subsequent amendment to CSC Holdings credit facility1,194  4,430  
$1,194  $159,096  
Other Income, Net
Other income, net amounted to $669 and $1,592 for the three and six months ended June 30, 2020, respectively, compared to $212 and $292 for the three and six months ended June 30, 2019, respectively.
Income Tax Expense
For the three and six months ended June 30, 2020, Altice USA recorded a tax expense of $58,826 and $75,861 on pre-tax income of $170,303 and $185,800, respectively, resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was due to the impact of certain non-deductible expenses and certain state tax expense adjustments, partially offset by a benefit resulting from the recently enacted Coronavirus Aid, Relief and Economic Security ("CARES Act"). See further details related to the CARES Act in Note 13 of the consolidated financial statements.
For the three and six months ended June 30, 2019, Altice USA recorded a tax expense of $41,160 and $18,574 on pre-tax income of $127,570 and $79,786, respectively, resulting in an effective tax rate that was higher than the U.S. federal statutory tax rate. The primary differences between the effective tax rate and the statutory tax rate are due to a revaluation of state deferred taxes primarily due to certain changes to the state tax rates used to measure the Company’s deferred tax liabilities and certain non-deductible expenses.
52

CSC HOLDINGS, LLC
The consolidated statements of operations of CSC Holdings are essentially identical to the consolidated statements of operations of Altice USA, except for the following:
 Three months ended June 30,Six months ended June 30,
2020201920202019
(in thousands)(in thousands)
Net income attributable to Altice USA shareholders$111,264  $86,367  $110,406  $61,368  
Less: items included in Altice USA's consolidated statements of operations:
Income tax expense (benefit)2,197  (6,668) 14,203  (13,578) 
Interest expense relating to Cablevision senior notes—  24,400  —  48,644  
Gain on investments and sale of affiliate interest recorded by Altice USA(1) —  (347) —  
Net income attributable to CSC Holdings' sole member$113,460  $104,099  $124,262  $96,434  
Refer to Altice USA's Management's Discussion and Analysis of Financial Condition and Results of Operations herein.
The following is a reconciliation of CSC Holdings' net income to Adjusted EBITDA:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net income$113,673  $104,142  $123,795  $96,278  
Income tax expense56,629  47,828  61,658  32,152  
Other income, net(669) (212) (1,592) (292) 
Loss on interest rate swap contracts, net33,735  26,900  88,567  50,572  
Loss (gain) on derivative contracts, net152,061  49,624  (287,800) 226,653  
Loss (gain) on investments and sales of affiliate interests, net(197,596) (103,146) 258,223  (357,871) 
Loss on extinguishment of debt and write-off of deferred financing costs—  1,194  —  159,096  
Interest expense, net350,874  356,213  714,426  718,433  
Depreciation and amortization521,794  568,620  1,069,363  1,130,048  
Restructuring and other expense40,966  11,465  48,260  26,709  
Share-based compensation34,318  16,535  62,264  30,325  
Adjusted EBITDA1,105,785  1,079,163  2,137,164  2,112,103  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Operating Free Cash Flow$877,062  $762,296  $1,609,359  $1,454,850  
Net cash flows from operating activities$932,069  $809,873  $1,529,178  $1,321,776  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Free Cash Flow$703,346  $493,006  $1,001,373  $664,523  
LIQUIDITY AND CAPITAL RESOURCES
Altice USA has no operations independent of its subsidiaries. Funding for our subsidiaries has generally been provided by cash flow from their respective operations, cash on hand and borrowings under the revolving 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.
Sources of cash for the Restricted Group include primarily cash flowproceeds from the operations of the businesses in the Restricted Group, borrowings under its credit facility and 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 facility or accessing the capital markets contributions from its parent,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 facility, debt securities and syndicated term loans. We target a year-end leverage ratio 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).
53

We expect to utilize free cash flow and availability under the CSC Holdings revolving credit facility, 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, distributionsdepending 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 loansredemptions.
We believe existing cash balances, operating cash flows and availability under the CSC Holdings revolving credit facility 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. 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 amounts available under the CSC Holdings revolving credit facility 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 facility 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 its subsidiaries.  The Restricted Group's principaloperations 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 stock repurchases and discretionary uses of cash.
Debt Outstanding
The following tables summarize the carrying value of our outstanding debt, net of unamortized deferred financing costs, discounts and premiums (excluding accrued interest), as well as interest expense.
As of June 30, 2020
Debt outstanding:
Credit facility debt$7,122,458 
Senior guaranteed notes8,701,902 
Senior notes8,516,513 
Subtotal24,340,873 
Finance lease obligations136,049 
Notes payable and supply chain financing107,658 
Subtotal24,584,580 
Collateralized indebtedness relating to stock monetizations (a)1,601,107 
Total debt$26,185,687 
Interest expense:
Credit facility debt, senior notes, finance leases, notes payable and supply chain financing$680,112 
Collateralized indebtedness relating to stock monetizations (a)36,124 
Total interest expense$716,236 
(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, or (ii) delivering cash include:  capital spending, in particular,from the capital requirements associated with the upgradenet proceeds from new monetization contracts.
54

The following table provides details of its digital broadband, pay television and telephony services, including costs to build a FTTH network and enhancements to its service offerings such as a broadband wireless network (WiFi); 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 securedour outstanding credit facility which currently provides U.S. dollar term loans currently indebt, net of unamortized discounts and deferred financing costs as of June 30, 2020: 
Maturity DateInterest RatePrincipalCarrying Value
Revolving Credit Facility (a)(b)—%$—  $—  
Term Loan BJuly 17, 20252.43%2,910,000  2,897,887  
Incremental Term Loan B-3January 15, 20262.43%1,259,063  1,254,243  
Incremental Term Loan B-5April 15, 20272.68%2,992,500  2,970,328  
$7,161,563  $7,122,458  
(a)At June 30, 2020, $141,949 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $2,333,051 of the facility was undrawn and available, subject to covenant limitations.
(b)The revolving credit facility of an aggregate principal amount of $3,000,000 ($2,992,500 outstanding$2,275,000 matures in January 2024 and is priced at September 30,2017) (the “CVC Term Loan Facility”, and the term loans extended under the CVC Term Loan Facility, the “CVC Term Loans”) and U.S. dollarLIBOR plus 2.25%. The remaining revolving loan commitments incredit facility of an aggregate principal amount of $2,300,000 (the “CVC Revolving Credit Facility”$200,000 matures in November 2021 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”)is priced at LIBOR plus 3.25%.
During the nine months ended September 30, 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



57



$350,256 with cash on hand. In October 2017, CSC Holdings made a voluntary repayment under its revolving credit facility of $50,000. This amount was reclassified from long term debt to current debt on the consolidated balance sheet as of September 30, 2017.
On October 31, 2017, CSC Holdings made a voluntary repayment under its revolving credit facility of $500,000.
The Company was in compliance with all of its financial covenants under the CVC Credit Facilities Agreement as of September 30, 2017.
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 ($1,261,838 outstanding at September 30, 2017) (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 (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 administrative agent and security agent (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 Company was in compliance with all of its financial covenants under the Cequel Credit Facilities Agreement as of September 30, 2017.
See Note 9 to our consolidated financial statements for further information regarding the Cequel Credit Facilities Agreement.
Senior Notes
In September, the Company repaid the remaining $400,000 of 8.625% Senior Notes due September 2017 from borrowings under its revolving credit facility.
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 senior notes that mature in 2025 issued by CSC Holdings, a wholly-owned subsidiary of the Company, and the related call premium of approximately $34,341. See Note 9 of our consolidated financial statements for further details.
In April 2017, the Company redeemed $500,000 of the 8.625% Senior Notes due September 2017 issued by Cablevision from proceeds of the CSC Holdings Term Loan pursuant to the March 15, 2017 amendment.
In April 2017, the Company redeemed $450,000 of the 6.375% Senior Notes due September 15, 2020 issued by Cequel and Cequel Capital from proceeds of the Cequel Term Loan pursuant to the March 15, 2017 amendment.



58



Capital Expenditures
Capital expenditures primarily include costs for equipment purchased and software development services provided by subsidiaries of Altice Europe.
39

ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Aggregate amounts that were due from and due to affiliates and related parties are summarized below:
Altice USACSC HoldingsAltice USA and CSC Holdings
June 30,
2020		June 30,
2020		December 31, 2019
Due from:
Altice Europe$432  $302  $4,076  
Other affiliates and related parties3,020  3,020  2,698  
$3,452  $3,322  $6,774  
Due to:
Altice Europe$5,722  $5,722  $7,456  
$5,722  $5,722  $7,456  

Amounts due from affiliates presented in the table above represent amounts paid by the Company on behalf of or for services provided to the respective related party. Amounts due to affiliates relate to the purchase of equipment and advertising services, as well as reimbursement for payments made on our behalf.
In June 2020, pursuant to the Company's share repurchase program, the Company purchased 3,582,525 Altice USA Class A common stock held by Altice Europe for a total consideration of $84,906. See further information regarding the Company's share repurchase program in Note 1.
CSC Holdings
CSC Holdings made cash equity distribution payments to its parent aggregating $652,383, and $1,372,733, respectively, during the three and six months ended June 30, 2020. The distributions for the three months ended June 30, 2020 were recorded as a decrease in retained earnings of $105,980, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $546,403. The distributions for the six months ended June 30, 2020 were recorded as a decrease in retained earnings of $130,297, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $1,242,436.
CSC Holdings made cash equity distribution payments to its parent aggregating $635,028 and $1,229,490, respectively, during the three and six months ended June 30, 2019. The distributions for the three months ended June 30, 2019 were recorded as a decrease in retained earnings of $90,324, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $544,704. The distributions for the six months ended June 30, 2019 were recorded as a decrease in retained earnings of $633,541, representing the cumulative earnings through the distribution dates, and a decrease in other member's equity of $595,949.
For the three and six months ended June 30, 2020, CSC Holdings recorded net non-cash equity contributions (distributions) of $35,415 and $(115,187), respectively, which represent the non-cash settlement of intercompany balances with Altice USA. These balances primarily include amounts due to/ due from Altice USA pursuant to a historical tax allocation policy and tax sharing agreements between the entities.
NOTE 16. COMMITMENTS AND CONTINGENCIES
Legal Matters
In the latter half of 2018, eight named plaintiffs, each on behalf of a putative class of stockholders who purchased Company common stock in Altice USA's IPO pursuant to the Registration Statement and Prospectus, filed complaints (seven in New York State Supreme Court, one in United States District Court for the Eastern District of New York). The lawsuits name as defendants Altice USA, Altice Europe, and Altice USA's directors, among others, and assert that all defendants violated Sections 11 and 12 of the Securities Act of 1933 (the "Securities Act") and that the individual defendants violated Section 15 of the Securities Act as control persons. In a consolidated amended complaint filed in the lawsuit in the Eastern District of New York, plaintiff also asserts violations of Section 10(b) of the Securities Act of 1934 ("34 Act"), Rule 10b-5 promulgated thereunder, and Section 20 of the 34 Act against Altice USA, Altice Europe, and certain individual directors. The facts underlying each case are substantively similar, with plaintiffs alleging that the Registration Statement and Prospectus misrepresented or omitted material facts
40

ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)


relating to the negative performance of Altice France and Altice Portugal, the disclosure of which in November 2017 negatively impacted the value of Altice USA’s stock. In June of 2019, plaintiffs in the New York State action filed a consolidated amended complaint, which the Company moved to dismiss in July of 2019. The Company moved to dismiss the complaint in the Eastern District of New York in October 2019. On June 26, 2020, the state Court granted the Company’s motion to dismiss. Plaintiffs in the New York State action filed a notice of appeal on July 21, 2020.
On June 23, 2020, a purported stockholder of the Company filed a complaint in the Court of Chancery of the State of Delaware, derivatively on behalf of the Company, against Patrick Drahi, Next Alt S.A.R.L., and those directors of the Company who are members of the Compensation Committee (collectively, the “Director Defendants”).The Company is also named as a nominal defendant in the complaint.The complaint alleges that the Director Defendants breached their fiduciary duties to the Company’s stockholders, and wasted corporate assets, by approving certain equity grants for Patrick Drahi.The complaint seeks rescission of the equity awards, monetary damages, and costs and disbursements for the plaintiff.
The Company intends to vigorously defend these lawsuits. Although the outcome of the matter cannot be predicted and the impact of the final resolution of these matters on the Company’s results of operations in any particular subsequent reporting period is not known at this time, management does not believe that the ultimate resolution of these matters will have a material adverse effect on the operations or financial position of the Company or the ability of the Company to meet its financial obligations as they become due.
On November 6, 2018, Sprint Communications Company L.P ("Sprint") filed a complaint in the U.S. District Court for the District of Delaware alleging that the Company infringes Sprint’s patents purportedly by providing Voice over Internet Protocol ("VoIP") services. On December 3, 2018, Sprint filed a second complaint alleging that the Company infringes Sprint’s patents purportedly by providing certain VOD related services. The lawsuits are part of a pattern of litigation that was initiated as far back as 2005 by Sprint against numerous broadband and telecommunications providers, which has resulted in judgments and settlements of significant value for Sprint. The Company intends to vigorously defend the lawsuits. Although the outcome of the matter cannot be predicted and the impact of the final resolution of this matter on the Company’s results of operations in any particular subsequent reporting period is not known at this time, management does not believe that the ultimate resolution of the matter will have a material adverse effect on the operations or financial position of the Company or the ability of the Company to meet its financial obligations as they become due, but it could be material to the Company’s consolidated results of operations or cash flows for any one period.
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.
In the event that the Company is found to infringe on any patent rights, the Company may be subject to substantial damages and/or an injunction that could require the Company or its vendors to modify certain products and services the Company offers to its subscribers, as well as enter into royalty or license agreements with respect to the patents at issue. The Company believes that the claims are without merit, 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, disputes and investigations, some of which may involve claims for substantial damages, fines or penalties. 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.
41

ALTICE USA, INC. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 17. SUBSEQUENT EVENTS
On July 14, 2020, the Company completed its acquisition of certain cable assets in New Jersey for approximately $150,000, subject to certain closing adjustments as set forth in the asset purchase agreement.
In July 2020, the Company entered into an agreement to sell 49.99% of its Lightpath fiber enterprise business for an implied enterprise value of $3,200,000. The Company will receive total gross cash proceeds of approximately $2,300,000 from the sale and related financing activity and will record a gain upon closing. Approximately $1,100,000 of the net proceeds after tax are expected to be used by the Company to repay debt such that the transaction is at least leverage-neutral to CSC Holdings. The Company will retain a 50.01% interest in Lightpath and maintain control. Accordingly, the Company will continue to consolidate the operating results of the Lightpath business. The transaction is currently expected to close in the fourth quarter of 2020 following the satisfaction of closing conditions, including receipt of necessary regulatory approvals. Upon closing, Lightpath will be financed independently outside of the CSC Holdings restricted group.

42

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
All dollar amounts and customer metrics, except per customer and per share data, included in the following discussion, are presented in thousands.
The preparation of our consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses. For a complete discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our consolidated financial statements, please refer to our Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019.
Overview
Our Business
We principally provide broadband communications and video services in the United States and market our services primarily under two brands: Optimum, in the New York metropolitan area, and Suddenlink, principally in markets in the south-central United States. We deliver broadband, video, and telephony services to more than 4.9 million residential and business customers. Our footprint extends across 21 states through a fiber-rich broadband network with approximately 8.9 million homes passed as of June 30, 2020. Additionally, we offer news programming and content, and advertising services. In September 2019, the Company launched Altice Mobile, a full service mobile offering, to consumers across its footprint.
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 in our Annual Report on Form 10-K for the year ended December 31, 2019.
In March 2020, the United States declared a national emergency concerning the outbreak of the coronavirus ("COVID-19"). There have also been extraordinary and wide-ranging actions taken by federal, state and local governmental authorities to contain and combat the outbreak and spread of the virus. We have continued to provide our telecommunications services to our customers during this pandemic. We expect that our future results may be impacted, including if residential or business customers discontinue their service or are unable to pay for our products and services, or if advertising revenue continues to decline. Additionally, in order to prioritize the demands of the business, we may continue to delay certain capital investments. Due to the uncertainty surrounding the magnitude and duration of business and economic impacts relating to COVID-19, including the effort to contain and combat the spread of the virus, and business impacts of government actions, we currently cannot reasonably estimate the ultimate impact of COVID-19 on our business. See "Risk Factors - Our business, financial condition and results of operations may be adversely affected by the recent COVID-19 pandemic."
We derive revenue principally through monthly charges to residential customers of our broadband, video, and telephony services. We also derive revenue from digital video recorder ("DVR"), video-on-demand ("VOD"), pay-per-view, installation and home shopping commissions. Our residential broadband, video, and telephony services accounted for approximately 37%, 39%, and 5%, respectively, of our consolidated revenue for the six months ended June 30, 2020. We also derive revenue from the sale of a wide and growing variety of products and services to both large enterprise and SMB customers, including broadband, telephony, networking and video services. For the six months ended June 30, 2020, 15% of our consolidated revenue was derived from these business services. In addition, we derive revenues from the sale of advertising time available on the programming carried on our cable television systems, digital advertising and data analytics, and affiliation fees for news programming, which accounted for approximately 4% of our consolidated revenue for the six months ended June 30, 2020. Our mobile and other revenue for the six months ended June 30, 2020 accounted for approximately 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 video customers, speed tier changes by our broadband customers, and acquisitions and construction 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.
43

We operate in a highly competitive consumer-driven industry and we compete against a variety of broadband, video 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, CenturyLink, DISH, 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 in our Annual Report on Form 10-K for the year ended December 31, 2019.
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. 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 are constructing a FTTH network, which will enable us to deliver more than 10 Gbps broadband speeds in areas where FTTH is deployed. In addition, we launched Altice Mobile to consumers across our footprint in September 2019. We may incur greater than anticipated capital expenditures in connection with these initiatives, fail to realize anticipated benefits, experience delays and business disruptions or encounter other challenges to executing them as planned. See "Liquidity and Capital Resources" for additional information regarding our capital expenditures.
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 June 2019, the Company completed the acquisition of Cheddar Inc., a digital-first news company and the operating results of Cheddar were consolidated as of June 1, 2019.
Non-GAAP Financial Measures
We define Adjusted EBITDA, which is a non-GAAP financial measure, as net income (loss) excluding income taxes, 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 and sale of affiliate interests, 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.
We also use Operating Free Cash Flow (defined as Adjusted EBITDA less cash capital expenditures), and Free Cash Flow (defined as net cash flows from operating activities less cash capital expenditures) as indicators of the Company’s financial performance. We believe these measures are one of several benchmarks used by investors, analysts and peers for comparison of performance in the Company’s industry, although they may not be directly comparable to similar measures reported by other companies.
44

Results of Operations - Altice USA
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenue:
Residential:
Broadband$920,363  $806,250  $1,805,892  $1,581,823  
Video952,526  1,018,426  1,899,587  2,035,756  
Telephony117,322  150,232  242,352  304,696  
Business services and wholesale365,564  357,806  730,094  708,495  
News and advertising96,631  114,450  202,171  209,188  
Mobile19,866  —  38,222  —  
Other2,707  3,917  6,917  7,690  
Total revenue2,474,979  2,451,081  4,925,235  4,847,648  
Operating expenses:
Programming and other direct costs860,875  818,994  1,725,389  1,631,979  
Other operating expenses542,637  569,459  1,124,946  1,133,891  
Restructuring and other expense40,966  11,465  48,260  26,709  
Depreciation and amortization (including impairments)521,794  568,620  1,069,363  1,130,048  
Operating income508,707  482,543  957,277  925,021  
Other income (expense):
Interest expense, net(350,874) (380,613) (714,426) (767,077) 
Gain (loss) on investments and sale of affiliate interests, net197,597  103,146  (257,876) 357,871  
Gain (loss) on derivative contracts, net(152,061) (49,624) 287,800  (226,653) 
Loss on interest rate swap contracts, net(33,735) (26,900) (88,567) (50,572) 
Loss on extinguishment of debt and write-off of deferred financing costs—  (1,194) —  (159,096) 
Other income, net669  212  1,592  292  
Income before income taxes170,303  127,570  185,800  79,786  
Income tax expense(58,826) (41,160) (75,861) (18,574) 
Net income111,477  86,410  109,939  61,212  
Net loss (income) attributable to noncontrolling interests(213) (43) 467  156  
Net income attributable to Altice USA, Inc. stockholders$111,264  $86,367  $110,406  $61,368  
45

The following is a reconciliation of net income to Adjusted EBITDA:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net income$111,477  $86,410  $109,939  $61,212  
Income tax expense58,826  41,160  75,861  18,574  
Other income, net(669) (212) (1,592) (292) 
Loss on interest rate swap contracts, net33,735  26,900  88,567  50,572  
Loss (gain) on derivative contracts, net152,061  49,624  (287,800) 226,653  
Loss (gain) on investments and sales of affiliate interests, net(197,597) (103,146) 257,876  (357,871) 
Loss on extinguishment of debt and write-off of deferred financing costs—  1,194  —  159,096  
Interest expense, net350,874  380,613  714,426  767,077  
Depreciation and amortization521,794  568,620  1,069,363  1,130,048  
Restructuring and other expense40,966  11,465  48,260  26,709  
Share-based compensation34,318  16,535  62,264  30,325  
Adjusted EBITDA1,105,785  1,079,163  2,137,164  2,112,103  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Operating Free Cash Flow$877,062  $762,296  $1,609,359  $1,454,850  
Net cash flows from operating activities$935,976  $788,970  $1,529,541  $1,292,964  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Free Cash Flow$707,253  $472,103  $1,001,736  $635,711  

The following table sets forth certain customer metrics, excluding Altice Mobile customers, for the Company:
June 30,March 31,June 30,
2020 (f)2020 (f)2019 (g)
Homes passed (a)8,880.1  8,834.8  8,750.4  
Total customer relationships (b)(c)4,997.1  4,950.1  4,923.2  
Residential4,621.4  4,568.4  4,538.9  
SMB375.7  381.7  384.4  
Residential customers:
Broadband4,307.8  4,237.4  4,165.4  
Video3,102.9  3,137.5  3,255.3  
Telephony2,337.1  2,359.8  2,485.8  
Penetration of homes passed (d)56.3 %56.0 %56.3 %
ARPU(e)$144.38  $143.39  $145.02  
(a)Represents the estimated number of single residence homes, apartments and condominium units passed by the broadband network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our broadband network. Broadband services were not available to approximately 30 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 fixed-line 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.  With the exception of free Altice Advantage 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
46

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 total customer relationships divided by homes passed.
(e)Calculated by dividing the average monthly revenue for the respective quarter (fourth quarter for annual periods) derived from the sale of broadband, video and telephony services to residential customers for the quarter by the average number of total residential customers for the same period.
(4)Customer metrics for the 2020 periods include customers that have not been disconnected pursuant to the Keep Americans Connected pledge ("Pledge") that the Company made in response to the COVID-19 pandemic and customers that have not been disconnected pursuant to the New Jersey Executive Order No. 126 ("NJ Order") enacted in April 2020 that protects New Jersey residents from disconnection of internet and voice services for non-payment. However, the metrics exclude new customers with students in the household that are receiving broadband services for free until the end of the 2019-20 school year ("Altice Advantage"). The following table provides details of these COVID-19 related offers and programs:
June 30, 2020March 31, 2020
Pledge and NJ Order (i)Altice Advantage CustomersPledgeAltice Advantage Customers
Included(Excluded)Included(Excluded)
Total customer relationships18.7  (17.8) 0.0(9.3) 
Residential18.1  (17.8) 0.0(9.3) 
SMB0.6  —  —  —  
Residential customers:
Broadband17.9  (17.8) 0.0(9.3) 
Video8.0  —  0.0—  
Telephony8.9  —  0.0—  
(i)Represent customers who would have been disconnected as a result of non-payment under our normal policies, but were not disconnected pursuant to the Pledge and the NJ Order. As of June 30, 2020, an aggregate of 56.1 thousand customers (54.8 thousand residential and 1.3 thousand SMB) with past-due account balances requested protection pursuant to the Pledge or are protected pursuant to the NJ Order.
(f)Customer metrics for prior periods have been adjusted to conform definitions between Suddenlink and Optimum in connection with the migration of Suddenlink customers to the Optimum billing system in 2019. The following table summarizes the adjustments made to previously reported amounts.
As of
June 30, 2019
Homes passed(38.2)
Total customer relationships(19.0)
Residential(23.7)
SMB4.8 
Residential customers:
Broadband(2.7)
Video(21.2)
Telephony(1.0)
ARPU$0.75 

Altice USA- Comparison of Results for the Three and Six Months Ended June 30, 2020 compared to the Three and Six Months Ended June 30, 2019
Broadband Revenue
Broadband revenue for the three and six months ended June 30, 2020 was $920,363 and $1,805,892, respectively, while broadband revenue for the three and six months ended June 30, 2019 was $806,250 and $1,581,823,
47

respectively. 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. Additionally, revenue is impacted by changes in the standalone selling price of each performance obligation within our promotional bundled offers.
Broadband revenue increased $114,113 (14%) and $224,069 (14%) for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019. 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.
Video Revenue
Video revenue for the three and six months ended June 30, 2020 was $952,526 and $1,899,587, respectively. Video revenue for the three and six months ended June 30, 2019 was $1,018,426 and $2,035,756, respectively. Video revenue is derived principally through monthly charges to residential customers of our video 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. Additionally, revenue is impacted by changes in the standalone selling price of each performance obligation within our promotional bundled offers.
Video revenue decreased $65,900 (6%) and $136,169 (7%) for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019. The decrease was due primarily to a decline in video customers and lower average revenue per video customer.
Telephony Revenue
Telephony revenue for the three and six months ended June 30, 2020 was $117,322 and $242,352, respectively. Telephony revenue for the three and six months ended June 30, 2019 was $150,232 and $304,696, respectively. 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. Additionally, revenue is impacted by changes in the standalone selling price of each performance obligation within our promotional bundled offers.
Telephony revenue decreased $32,910 (22%) and $62,344 (20%) for the three and six months ended June 30, 2020 compared to the three months ended June 30, 2019, respectively. The decrease was due 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 three and six months ended June 30, 2020 was $365,564 and $730,094, respectively. Business services and wholesale revenue for the three and six months ended June 30, 2019 was $357,806 and $708,495, respectively. 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, video and telephony services to SMB customers.
Business services and wholesale revenue increased $7,758 (2%) and $21,599 (3%) for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019, respectively. The increase was primarily due to higher average recurring broadband revenue per SMB customer, primarily driven by certain rate increases and service level changes and an increase in revenue related to an indefeasible right of use contract recorded in the second quarter of 2020, partially offset by a decrease in SMB customers.
News and Advertising Revenue
News and advertising revenue for the three and six months ended June 30, 2020 was $96,631 and $202,171, respectively. News and advertising revenue for the three and six months ended June 30, 2019 was $114,450 and $209,188, respectively. News and advertising revenue is primarily derived from the sale of (i) advertising inventory available on the programming carried on our cable television systems, (ii) advertising on over the top ("OTT") platforms, (iii) digital advertising, and (iv) data analytics. News and advertising revenue also includes affiliation fees for news programming.
News and advertising revenue decreased $17,819 (16%) and $7,017 (3%) for the three and six months ended June 30, 2020, respectively, compared to the three and six months ended June 30, 2019. The decrease was primarily due to a decline in advertising spending, partially offset by growth in national and political sales and higher affiliate revenue for News 12.
48

Mobile Revenue
Mobile revenue for the three and six months ended June 30, 2020 was $19,866 and $38,222, respectively, and relates to sales of devices and mobile services. Our mobile service launched to consumers in September 2019. As of June 30, 2020, we had approximately 144,000 mobile lines.
Other Revenue
Other revenue for the three and six months ended June 30, 2020 and 2019 was $2,707 and $6,917, respectively. Other revenue for the three and six months ended June 30, 2019 was $3,917 and $7,690, respectively. Other revenue includes revenue from other miscellaneous revenue streams.
Programming and Other Direct Costs
Programming and other direct costs for the three and six months ended June 30, 2020 amounted to $860,875 and $1,725,389, respectively. Programming and other direct costs for the three and six months ended June 30, 2019 amounted to $818,994 and $1,631,979, respectively. 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 video 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. Additionally, these costs include the costs of mobile devices sold to our customers and direct costs of providing mobile services.
The increases of $41,881 (5%) and $93,410 (6%) for the three and six months ended June 30, 2020, as compared to the three and six months ended June 30, 2019 are primarily attributable to the following:
Three MonthsSix Months
Increase in programming costs due primarily to net contractual rate increases, partially offset by lower video customers$19,718  $47,899  
Costs of mobile devices14,581  25,646  
Increase in call completion and transfer costs primarily related to our mobile business ($6,358 and $13,199 for the three and six months) and an increase in call activity8,132  13,724  
Increase (decrease) primarily relating to costs of digital media and linear advertising spots for resale(828) 6,759  
Other net increase (decrease)278  (618) 
 $41,881  $93,410  
Programming costs
Programming costs aggregated $702,674 and $1,413,264 for the three and six months ended June 30, 2020 and $682,956 and $1,365,365 for the three and six months ended June 30, 2019, respectively. Our programming costs in 2020 will continue to be impacted by changes in programming rates, which we expect to increase, and by changes in the number of video customers.
Other Operating Expenses
Other operating expenses for the three and six months ended June 30, 2020 amounted to $542,637 and $1,124,946, respectively. Other operating expenses for the three and six months ended June 30, 2019 amounted to $569,459 and $1,133,891, respectively. Other operating expenses include staff costs and employee benefits including salaries of company employees and related taxes, benefits and other employee related expenses, as well as third-party labor costs. 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 network 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
49

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, video and telephony services are capitalized (asset-based). The redeployment of customer premise equipment is expensed as incurred.
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 decreases in other operating expenses of $26,822 and $8,945, offset by an increase of $12,365 and $25,100 relating to our mobile service, for the three and six months ended June 30, 2020, respectively, as compared to the three and six months ended June 30, 2019 was attributable to the following:
Three MonthsSix Months
Net decrease in labor costs and benefits (offset by an increase in costs related to Cheddar of $3,402 and $10,565 for the three and six months, which was acquired in June 2019), offset by a decrease in capitalizable activity$(33,584) $(42,286) 
Decrease in sales and marketing(14,455) (13,148) 
Decrease in billing costs, primarily due to systems integration(3,160) (8,810) 
Increase in share-based compensation17,783  31,939  
Increase in bad debt expense2,254  7,043  
Increase in rent and property taxes3,100  7,520  
Other net increases1,240  8,797  
$(26,822) $(8,945) 
Restructuring and Other Expense
Restructuring and other expense for the three and six months ended June 30, 2020 amounted to $40,966 and $48,260, as compared to $11,465 and $26,709 for the three and six months ended June 30, 2019. Restructuring and other expense for the 2020 periods primarily includes $40,128 related to contractual payments for terminated employees. The amounts for the three and six months ended June 30, 2019 primarily related to severance and other employee related costs resulting from headcount reductions, facility realignment costs and impairments of certain ROU assets, related to initiatives which commenced in 2016 and 2019 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 and make modifications to our organizational structure.
Depreciation and Amortization
Depreciation and amortization for the three and six months ended June 30, 2020 amounted to $521,794 and $1,069,363, respectively. Depreciation and amortization for the three and six months ended June 30, 2019 amounted to $568,620 and $1,130,048, respectively.
The decreases in depreciation and amortization of $46,826 (8%) and $60,685 (5%) for the three and six months ended June 30, 2020, respectively, as compared to the three and six months ended June 30, 2019 are due to certain fixed assets and intangible assets becoming fully depreciated or amortized, partially offset by the acceleration of amortization expense related to certain customer relationship intangible assets and an increase in depreciation as a result of asset additions.

50

Adjusted EBITDA
Adjusted EBITDA amounted to $1,105,785 and $2,137,164 for the three and six months ended June 30, 2020, respectively as compared to $1,079,163 and $2,112,103 for the three and six months ended June 30, 2019, respectively.
Adjusted EBITDA is a non-GAAP measure that is defined as net income (loss) excluding income taxes, income (loss) from discontinued operations, 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 and sale of affiliate interests, interest expense, interest income, depreciation and amortization (including impairments), share-based compensation expense or benefit, restructuring expense or credits and transaction expenses. See reconciliation of net income to adjusted EBITDA above.
The increase in adjusted EBITDA for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019 was due to an increase in revenue and a net decrease in operating expenses (excluding depreciation and amortization, restructuring and other expense and share-based compensation), as discussed above.
The increase in adjusted EBITDA for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 was due to an increase in revenue, partially offset by a net increase in operating expenses (excluding depreciation and amortization, restructuring and other expense and share-based compensation), as discussed above.
Operating Free Cash Flow
Operating free cash flow was $877,062 and $1,609,359 for the three and six months ended June 30, 2020, respectively, and $762,296 and $1,454,850 for the three and six months ended June 30, 2019, respectively. The increase in operating free cash flow in the 2020 periods as compared to 2019 is due to an increase in adjusted EBITDA and a decrease in capital expenditures.
Operating Free Cash Flow is a non-GAAP measure that is defined as Adjusted EBITDA less cash capital expenditures. See discussion above under "Non-GAAP Financial Measures" for further information.
Free Cash Flow
Free cash flow was $707,253 and $1,001,736 for the three and six months ended June 30, 2020, respectively, and $472,103 and $635,711 for the three and six months ended June 30, 2019, respectively. The increase in free cash flow in the 2020 periods as compared to the 2019 periods is due to an increase in cash flows from operating activities and a decrease in capital expenditures.
Free Cash Flow is a non-GAAP measure that is defined as net cash flows from operating activities less cash capital expenditures. See discussion above under "Non-GAAP Financial Measures" for further information.
Interest expense
Interest expense, net was $350,874 and $714,426 for the three and six months ended June 30, 2020, respectively, and $380,613 and $767,077 for the three and six months ended June 30, 2019, respectively. The decreases of $29,739 and $52,651 for the three and six months ended June 30, 2020, respectively, as compared to the three and six months ended June 30, 2019 are attributable to the following:
Three MonthsSix Months
Decrease due to changes in average debt balances and interest rates on our indebtedness, including our collateralized debt$(28,782) $(48,129) 
Lower interest income454  614  
Other net decreases, primarily amortization of deferred financing costs and original issue discounts(1,411) (5,136) 
$(29,739) $(52,651) 
Gain (Loss) on Investments and Sale of Affiliate Interests, net
Gain (loss) on investments, net for the three and six months ended June 30, 2020, of $197,597 and $(257,876), respectively and $103,146 and $357,871, 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 (losses) are partially offset by the losses (gains) on the related equity derivative contracts, net described below.
51

Gain (Loss) on Derivative Contracts, net
Gain (loss) on derivative contracts, net for the three and six months ended June 30, 2020 amounted to $(152,061) and $287,800, respectively, and $(49,624) and $(226,653) for the three and six months ended June 30, 2019, respectively, and includes realized and unrealized gains or losses 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 (losses) are offset by losses (gains) on investment securities pledged as collateral, which are included in gain (loss) on investments, net discussed above.
Loss on Interest Rate Swap Contracts, net
Loss on interest rate swap contracts, net was $33,735 and $88,567 for the three and six months ended June 30, 2020, respectively, and $26,900 and $50,572 for the three and six months ended June 30, 2019, respectively. These amounts represent the increase or decrease in the fair value of interest rate swap contracts. For the six months ended June 30, 2020, the loss is net of a gain recognized in connection with the early termination of two interest rate swap contracts. 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 $1,194 and $159,096 for the three and six months ended June 30, 2019.
The following table provides a summary of the loss on extinguishment of debt and the write-off of deferred financing costs recorded by the Company upon the redemption of senior notes and the refinancing of credit facilities:
Three months ended June 30, 2019Six months ended June 30, 2019
CSC Holdings 10.125% Senior Notes due 2023$—  $154,666  
Refinancing and subsequent amendment to CSC Holdings credit facility1,194  4,430  
$1,194  $159,096  
Other Income, Net
Other income, net amounted to $669 and $1,592 for the three and six months ended June 30, 2020, respectively, compared to $212 and $292 for the three and six months ended June 30, 2019, respectively.
Income Tax Expense
For the three and six months ended June 30, 2020, Altice USA recorded a tax expense of $58,826 and $75,861 on pre-tax income of $170,303 and $185,800, respectively, resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was due to the impact of certain non-deductible expenses and certain state tax expense adjustments, partially offset by a benefit resulting from the recently enacted Coronavirus Aid, Relief and Economic Security ("CARES Act"). See further details related to the CARES Act in Note 13 of the consolidated financial statements.
For the three and six months ended June 30, 2019, Altice USA recorded a tax expense of $41,160 and $18,574 on pre-tax income of $127,570 and $79,786, respectively, resulting in an effective tax rate that was higher than the U.S. federal statutory tax rate. The primary differences between the effective tax rate and the statutory tax rate are due to a revaluation of state deferred taxes primarily due to certain changes to the state tax rates used to measure the Company’s deferred tax liabilities and certain non-deductible expenses.
52

CSC HOLDINGS, LLC
The consolidated statements of operations of CSC Holdings are essentially identical to the consolidated statements of operations of Altice USA, except for the following:
 Three months ended June 30,Six months ended June 30,
2020201920202019
(in thousands)(in thousands)
Net income attributable to Altice USA shareholders$111,264  $86,367  $110,406  $61,368  
Less: items included in Altice USA's consolidated statements of operations:
Income tax expense (benefit)2,197  (6,668) 14,203  (13,578) 
Interest expense relating to Cablevision senior notes—  24,400  —  48,644  
Gain on investments and sale of affiliate interest recorded by Altice USA(1) —  (347) —  
Net income attributable to CSC Holdings' sole member$113,460  $104,099  $124,262  $96,434  
Refer to Altice USA's Management's Discussion and Analysis of Financial Condition and Results of Operations herein.
The following is a reconciliation of CSC Holdings' net income to Adjusted EBITDA:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net income$113,673  $104,142  $123,795  $96,278  
Income tax expense56,629  47,828  61,658  32,152  
Other income, net(669) (212) (1,592) (292) 
Loss on interest rate swap contracts, net33,735  26,900  88,567  50,572  
Loss (gain) on derivative contracts, net152,061  49,624  (287,800) 226,653  
Loss (gain) on investments and sales of affiliate interests, net(197,596) (103,146) 258,223  (357,871) 
Loss on extinguishment of debt and write-off of deferred financing costs—  1,194  —  159,096  
Interest expense, net350,874  356,213  714,426  718,433  
Depreciation and amortization521,794  568,620  1,069,363  1,130,048  
Restructuring and other expense40,966  11,465  48,260  26,709  
Share-based compensation34,318  16,535  62,264  30,325  
Adjusted EBITDA1,105,785  1,079,163  2,137,164  2,112,103  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Operating Free Cash Flow$877,062  $762,296  $1,609,359  $1,454,850  
Net cash flows from operating activities$932,069  $809,873  $1,529,178  $1,321,776  
Capital expenditures (cash)228,723  316,867  527,805  657,253  
Free Cash Flow$703,346  $493,006  $1,001,373  $664,523  
LIQUIDITY AND CAPITAL RESOURCES
Altice USA has no operations independent of its subsidiaries. Funding for our subsidiaries has generally been provided by cash flow from their respective operations, cash on hand and borrowings under the revolving credit facility 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 facility 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 facility, debt securities and syndicated term loans. We target a year-end leverage ratio 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).
53

We expect to utilize free cash flow and availability under the CSC Holdings revolving credit facility, 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 the CSC Holdings revolving credit facility 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. 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 amounts available under the CSC Holdings revolving credit facility 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 facility 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 stock repurchases and discretionary uses of cash.
Debt Outstanding
The following tables summarize the carrying value of our outstanding debt, net of unamortized deferred financing costs, discounts and premiums (excluding accrued interest), as well as interest expense.
As of June 30, 2020
Debt outstanding:
Credit facility debt$7,122,458 
Senior guaranteed notes8,701,902 
Senior notes8,516,513 
Subtotal24,340,873 
Finance lease obligations136,049 
Notes payable and supply chain financing107,658 
Subtotal24,584,580 
Collateralized indebtedness relating to stock monetizations (a)1,601,107 
Total debt$26,185,687 
Interest expense:
Credit facility debt, senior notes, finance leases, notes payable and supply chain financing$680,112 
Collateralized indebtedness relating to stock monetizations (a)36,124 
Total interest expense$716,236 
(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, or (ii) delivering cash from the net proceeds from new monetization contracts.
54

The following table provides details of our outstanding credit facility debt, net of unamortized discounts and deferred financing costs as of June 30, 2020: 
Maturity DateInterest RatePrincipalCarrying Value
Revolving Credit Facility (a)(b)—%$—  $—  
Term Loan BJuly 17, 20252.43%2,910,000  2,897,887  
Incremental Term Loan B-3January 15, 20262.43%1,259,063  1,254,243  
Incremental Term Loan B-5April 15, 20272.68%2,992,500  2,970,328  
$7,161,563  $7,122,458  
(a)At June 30, 2020, $141,949 of the revolving credit facility was restricted for certain letters of credit issued on behalf of the Company and $2,333,051 of the facility was undrawn and available, subject to covenant limitations.
(b)The revolving credit facility of an aggregate principal amount of $2,275,000 matures in January 2024 and is priced at LIBOR plus 2.25%. The remaining revolving credit facility of an aggregate principal amount of $200,000 matures in November 2021 and is priced at LIBOR plus 3.25%.
Payment Obligations Related to Debt
As of June 30, 2020, total amounts payable by us in connection with our outstanding obligations, including related interest, as well as notes payable and supply chain financing, and the value deliverable at maturity under monetization contracts, but excluding finance lease obligations (see Note 8 to our consolidated financial statements) are as follows:
2020 (excluding the six months ended June 30, 2020)$2,473,003  
20212,361,262  
20221,916,841  
2023 (a)2,971,720  
20241,918,533  
Thereafter23,208,032  
Total$34,849,391  
(a)Includes $1,776,378 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 or (ii) delivering cash from the net proceeds on new monetization contracts.
CSC Holdings Restricted Group
For financing purposes, the Company is structured as a restricted group (the "Restricted Group") and an unrestricted group, which includes certain designated subsidiaries and investments (the "Unrestricted Group"). The Restricted Group is comprised of CSC Holdings and substantially all of its wholly-owned operating subsidiaries. These subsidiaries are subject to the covenants and restrictions of the credit facility and indentures governing the notes issued by CSC Holdings. 
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, video and telephony services, including costs to build a FTTH network and enhancements to its service offerings such as WiFi; debt service; distributions made to its parent to fund share repurchases; other corporate expenses and changes in working capital; and investments that it may fund from time to time.
CSC Holdings Credit Facility
In October 2015, a wholly-owned subsidiary of Altice USA, 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 ($2,910,000 outstanding at June 30, 2020) (the "CSC Term Loan Facility", and the term loans extended under the CSC Term Loan Facility, the "CSC Term Loans") and U.S. dollar revolving
55

loan commitments in an aggregate principal amount of $2,475,000 at June 30, 2020 (the "CSC Revolving Credit Facility" and, together with the CSC Term Loan Facility, the "CSC 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, March 15, 2017, January 12, 2018, October 15, 2018, January 24, 2019, February 7, 2019, May 14, 2019, and October 3, 2019, respectively, and as further amended, restated, supplemented or otherwise modified from time to time, the "CSC Credit Facilities Agreement").
The Company was in compliance with all of its financial covenants under the CSC Credit Facilities Agreement as of June 30, 2020.
See Note 10 to our consolidated financial statements for further information regarding the CSC Credit Facilities Agreement.
Senior Guaranteed Notes and Senior Notes
In June 2020, CSC Holdings issued $1,100,000 in aggregate principal amount of senior guaranteed notes that bear interest at a rate of 4.125% and mature on December 1, 2030, and $625,000 in aggregate principal amount of senior notes that bear interest at a rate of 4.625% and mature on December 1, 2030. The net proceeds from the sale of the these notes was used in July 2020 to early redeem the $1,095,825 aggregate principal amount of CSC Holdings' 5.375% senior notes due July 15, 2023, the $617,881 and the $1,740 aggregate principal amount of CSC Holdings' 7.750% senior notes due July 15, 2025, plus pay accrued interest and the associated premiums related to the early redemption of these notes. In connection with the early redemptions, the Company will recognize a loss on the extinguishment of debt aggregating $62,096, reflecting the early redemption premiums and the write-off of outstanding deferred financing costs on these notes.
As of June 30, 2020, the Company was in compliance with all of its financial covenants under the indentures under which our senior guaranteed notes and senior notes were issued.
See Note 10 of our consolidated financial statements for further details of the Company’s outstanding senior guaranteed notes and senior notes.
Interest Rate Swap Contracts
In March 2020, the Company terminated two swap agreements whereby the Company was paying a floating rate of interest and receiving a fixed rate of interest on an aggregate notional value of $1,500,000. These contracts were due to mature in May 2026. In connection with the early termination, the Company received cash of $74,835 which has been recorded in gain (loss) on interest swap contracts in our consolidated statement of operations and presented in operating activities in our consolidated statement of cash flows.
In addition, in March 2020, the Company executed amendments to two interest swap contracts that reduced the fixed rate of interest that the Company was paying on an aggregate notional value of $1,000,000 and extended the maturity date of the contracts to January 15, 2025 from January 15, 2022. The difference in the fair value of the amended contracts and the original contracts on the date of the transaction of $5,689 (an increase in the liability) is being amortized to loss on derivative contracts over the remaining term of the contracts.
During the six months ended June 30, 2020, the Company entered into three new interest rate swap contracts on an aggregate notional value of $3,850,000.
56



Capital Expenditures
The following tables provide details oftable presents the Company's capital expenditures:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Customer premise equipment$45,848  $102,890  $109,183  $177,827  
Network infrastructure115,139  138,548  255,202  278,526  
Support and other39,226  29,256  99,852  123,033  
Business services28,510  46,173  63,568  77,867  
Capital purchases (cash basis)$228,723  $316,867  $527,805  $657,253  
Capital purchases (including accrued not paid and financed capital)$279,878  $406,065  $652,846  $711,715  
 Three Months Ended September 30,
 2017 2016
 Cablevision Cequel Total Cablevision Cequel Total
Customer premise equipment$61,272
 $26,552
 $87,824
 $38,236
 $42,999
 $81,235
Network infrastructure99,414
 21,391
 120,805
 51,768
 26,278
 78,046
Support and other35,255
 17,810
 53,065
 39,257
 15,227
 54,484
Business services32,653
 9,289
 41,942
 21,554
 12,837
 34,391
Capital purchases (cash basis)$228,594
 $75,042
 $303,636
 $150,815
 $97,341
 $248,156
Capital purchases (including accrued not paid) (a)$199,662
 $90,656
 $290,318
 $134,177
 $82,550
 $216,727
(a)The Cablevision 2017 amount excludes advance payments aggregating $41,036 made to ATS for the FTTH project.
 Nine Months Ended September 30,
 2017 2016 Pro forma 2016 (a)
 Cablevision Cequel Total Cablevision Cequel Total Cablevision Cequel Total
Customer premise equipment$160,242
 $78,885
 $239,127
 $38,276
 $121,007
 $159,283
 $106,694
 $121,007
 $227,701
Network infra-structure210,312
 67,375
 277,687
 51,872
 44,700
 96,572
 201,124
 44,700
 245,824
Support and other102,031
 39,882
 141,913
 39,257
 28,451
 67,708
 107,581
 28,451
 136,032
Business services77,646
 26,925
 104,571
 21,560
 32,603
 54,163
 65,697
 32,603
 98,300
Capital purchases (cash basis)$550,231
 $213,067
 $763,298
 $150,965
 $226,761
 $377,726
 $481,096
 $226,761
 $707,857
Capital purchases (including accrued not paid) (b)$470,103
 $211,230
 $681,333
 $144,425
 $236,338
 $380,763
 $479,288
 $236,338
 $715,626
(a)Reflects capital expenditures on a pro forma basis as if the Cablevision Acquisition had occurred on January 1, 2016.
(b)The Cablevision 2017 amount excludes advance payments aggregating $41,036 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 customer installation costs.costs for placing assets into service. Network infrastructure includes: (i) scalable infrastructure, such as headend equipment, (ii) line extensions, such as FTTH and 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 software systems, vehicles, facilities and office equipment, buildings and vehicles.equipment. Business services



59



capital expenditures include primarily equipment, installation, support, and other costs related to our fiber based telecommunications business.business serving, primary enterprise customers.
Other Transactions
On July 14, 2020, the Company completed its acquisition of certain cable assets in New Jersey for approximately $150,000, subject to certain closing adjustments as set forth in the asset purchase agreement.
In July 2020, the Company entered into an agreement to sell 49.99% of its Lightpath fiber enterprise business for an implied enterprise value of $3,200,000. The Company will receive total gross cash proceeds of approximately $2,300,000 from the sale and related financing activity and will record a gain upon closing. Approximately $1,100,000 of the net proceeds after tax are expected to be used by the Company to repay debt such that the transaction is at least leverage-neutral to CSC Holdings. The Company will retain a 50.01% interest in Lightpath and maintain control. Accordingly, the Company will continue to consolidate the operating results of the Lightpath business. The transaction is currently expected to close in the fourth quarter of 2020 following the satisfaction of closing conditions, including receipt of necessary regulatory approvals. Upon closing, Lightpath will be financed independently outside of the CSC Holdings restricted group.
Cash Flow Discussion
Continuing Operations - Altice USA
Operating Activities
Net cash provided by operating activities amounted to $1,216,993$1,529,541 for the ninesix months ended SeptemberJune 30, 20172020 compared to $530,928$1,292,964 for the ninesix months ended SeptemberJune 30, 2016.  2019. 
The 20172020 cash provided by operating activities resulted from $1,652,776$1,377,837 of income before depreciation and amortization and non-cash items, increases in liabilities related to interest rate swap contracts of $148,013, a decrease in accounts receivable of $27,522, an increase in accounts payable of $10,256, and a net decrease in amounts due from affiliates of $1,588, partially offset by a decrease in deferred revenue of $17,302, a decrease in accrued expenses of $12,796, and an increase in prepaid expenses and other assets of $5,577.
The 2019 cash provided by operating activities resulted from $1,390,998 of income before depreciation and amortization and non-cash items, an increase in liabilities related to interest rate swap contracts of $41,322, an increase in deferred revenue of $9,382,$12,022, a decrease in other receivables of $2,740, and a decrease in accounts receivable of $1,804, partially offset by a decrease in accounts payable and accrued expenses of $273,888,$80,002, an increase in prepaid expenses and other assets of $72,638, and a net decrease in amounts due to affiliates of $97,440, a net increase in current and other assets of $64,285 and a decrease in liability related to interest rate swap contracts of $9,552.$3,282.
The 2016 cash provided by operating activities resulted from $408,397 of income before depreciation and amortization and non-cash items and an increase in accounts payable, accrued expenses and deferred revenue aggregating $150,430, partially offset by an increase of $3,519 in other assets and a decrease in liability related to interest rate swap contracts of $24,380.
57



Investing Activities
Net cash used in investing activities for the ninesix months ended SeptemberJune 30, 20172020 was $834,047$525,880 compared to $9,353,957$829,881 for the ninesix months ended SeptemberJune 30, 2016.2019. The 20172020 investing activities consisted primarily of capital expenditures of $763,298, payments$527,805. The 2019 investing activities consisted primarily of capital expenditures of $657,253 and payment for acquisitions, net of cash acquired of $43,608, and $27,141 in other net cash payments.
The 2016 investing activities consisted primarily of payments for the Cablevision Acquisition of $8,988,774, capital expenditures of $377,726 and an increase in other investments of $2,866, partially offset by net proceeds from the sale of affiliate interests and from the disposal of assets of $13,825 and $1,584, respectively.$172,659.
Financing Activities
Net cash provided by financing activities amounted to $247,525 for the six months ended June 30, 2020, compared to net cash used in financing activities amounted to $290,703of $622,566 for the ninesix months ended SeptemberJune 30, 2017 compared to net cash provided by financing activities of $2,005,411 for the nine months ended September 30, 2016.2019. In 2017,2020, the Company's financing activities consisted primarily of repaymentsproceeds from the issuance of senior notes of $1,725,000, proceeds from credit facility debt of $200,000, and proceeds from stock option exercises of $3,650, partially offset by repurchase of common stock pursuant to a share repurchase program of $1,381,235, the repayment of credit facility debt of $3,684,668,$228,875, repayment of notes payable of $48,239, principal payments on finance lease obligations of $11,935, and other net cash payments of $10,841.
In 2019, the Company's financing activities consisted primarily of the redemption and repurchase of senior notes, including premiums and fees of $1,729,400, dividend distributions$2,462,692, the repurchase of common stock pursuant to stockholdersa share repurchase program of $839,700, payments$1,199,953, repayments of collateralized indebtedness and related derivative contractscredit facility debt of $654,989, principal payments on capital lease obligations$602,830, repayment of $11,518,notes payable of $74,061, additions to deferred financing costs of $9,486$12,488, principal payments on finance lease obligations of $3,273 and distributions to noncontrolling interestsother net cash payments of $335,$1,500, partially offset by proceeds from credit facility debt of $5,602,425, proceeds from collateralized indebtedness of $662,724, net$1,940,000, proceeds from the Company's IPOissuance of $348,460,senior notes, including premiums of $1,754,375, and proceeds from notes payable of $24,649,$39,856.
CSC Holdings
Operating Activities
Net cash provided by operating activities amounted to $1,529,178 for the six months ended June 30, 2020 compared to $1,321,776 for the six months ended June 30, 2019. The 2020 cash provided by operating activities resulted from $1,497,012 of income before depreciation and contributionsamortization and non-cash items, increases in liabilities related to interest rate swap contracts of $148,013, a decrease in accounts receivable of $27,522, and an increase in accounts payable of $10,256, partially offset by a net increase in amounts due from stockholdersaffiliates of $1,135.$114,290, a decrease in deferred revenue of $17,302, a decrease in accrued expenses of $12,794, and an increase in prepaid expenses and other assets of $9,239.
The 2019 cash provided by operating activities resulted from $1,430,518 of income before depreciation and amortization and non-cash items, an increase in liabilities related to interest rate swap contracts and derivative contracts of $41,322, an increase in deferred revenue of $12,022, a decrease in other receivables of $2,740 and a decrease in accounts receivable of $1,804, partially offset by a decrease in accounts payable and accrued expenses of $80,324, an increase in prepaid expenses and other assets of $72,638, and a net decrease in amounts due to affiliates of $13,668.
Investing Activities
Net cash used in investing activities for the six months ended June 30, 2020 was $526,226 compared to $829,881 for the six months ended June 30, 2019. The 2020 investing activities consisted primarily of capital expenditures of $527,805. The 2019 investing activities consisted primarily of capital expenditures of $657,253 and payment for acquisitions, net of cash acquired of $172,659.
Financing Activities
Net cash provided by financing activities amounted to $252,377 for the six months ended June 30, 2020 compared to net cash used in financing activities of $652,102 for the six months ended June 30, 2019. In 2016,2020, the Company's financing activities consisted primarily of issuance of senior notes of $1,725,000 and proceeds from credit facility debt of $2,195,256, proceeds from notes payable to affiliates and related parties of $1,750,000, issuance of senior notes and debentures of $1,310,000, proceeds from collateralized indebtedness of $179,388, and contribution from stockholders of $1,246,498,$200,000, partially offset by repaymentsdistributions to its parent of $1,372,733, the repayment of credit facility debt of $4,327,466,$228,875, repayment of notes payable of $48,239, principal payments of finance lease obligations of $11,935, and other net cash payments of $10,841.
In 2019, the Company's financing activities consisted primarily of redemption of senior notes, including premiums and fees of $2,462,692, distributions to parent of $1,229,489, repayments of credit facility debt of $602,830, repayment of notes payable of $74,061, additions to deferred financing costs of $193,705, repayment of collateralized indebtedness and related derivative contracts of $143,102,$12,488, principal payments on capitalfinance lease obligations of $11,376$3,273 and excess tax benefit on share based awardsother net cash payments of $82.

$1,500, partially offset by proceeds from credit

58


60




Settlementsfacility debt of Collateralized Indebtedness
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 nine months ended September 30, 2017: 
Number of shares (a)21,477,618
Collateralized indebtedness settled$(617,151)
Derivative contracts settled(37,838)
 (654,989)
Proceeds from new monetization contracts662,724
Net cash payment$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$1,940,000, proceeds from the issuance of senior notes, including premiums of $1,754,375, and 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 $64,793 (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 $46,864.$39,856.
Commitments and Contingencies
As of SeptemberJune 30, 2017,2020, the Company's commitments and contingencies for continuing operations not reflected in the Company's balance sheet increaseddecreased to approximately $8,313,000$6,956,000 as compared to approximately $7,733,000$8,454,000 at December 31, 2016.2019. This increasedecrease relates primarily to payments made pursuant to programming commitments, partially offset by renewed multi-year programming agreements entered into during the ninesix months ended SeptemberJune 30, 2017, net2020.
Share Repurchase Program
In June 2018, the Board of payments made pursuantDirectors of Altice USA authorized a share repurchase program of $2.0 billion, and on July 30, 2019, the Board of Directors authorized a new incremental three-year share repurchase program of $5.0 billion that took effect following the completion in August 2019 of the $2.0 billion repurchase program. Under these repurchase programs, shares of Altice USA Class A common stock may be purchased from time to programming commitments.time in the open market and may include trading plans entered into with one or more brokerage firms in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. Size and timing of these purchases will be determined based on market conditions and other factors.  Funding for the repurchase program will be met with cash on hand and/or borrowings under the Company's revolving credit facilities.
Other Events
Dividends and Distributions
The Company made cash distributions of $839,700 duringDuring the ninesix months ended SeptemberJune 30, 2017, $500,0002020, the Company repurchased 56,956,374 shares for a total purchase price of which were funded with proceeds from borrowings under CSC Holdings' revolving credit facility.approximately $1,381,235. From the inception of the repurchase program, the Company acquired 157,653,766 for a total purchase price of approximately $3,568,109. These acquired shares have been retired and the associated cost was recorded in paid-in capital in the Company’s consolidated balance sheet.
Recently Issued But Not Yet Adopted Accounting Pronouncements
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 changesSee Note 3 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 becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied prospectively.
In March 2017, the FASB issued ASU No. 2017‑07 Compensation-Retirement Benefits (Topic 715). ASU No. 2017‑07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. It also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and what component of net benefit cost is eligible for capitalization. ASU No. 2017‑07 becomes effective for the Company on January 1, 2018 with early adoption permitted and will be applied retrospectively. The



61



Company has not yet completed the evaluation of the effect that ASU No. 2017‑07 will have on its consolidated financial statements.
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 becomes effective for the Company on January 1, 2018 with early adoption permitted 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 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 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.  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 becomes effective for the Company on January 1, 2018.  The Company has not yet completed the evaluation of the effect that ASU No. 2016-01 will have on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and allows the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14 that approved deferring the effective date by one year so that ASU No. 2014-09 would become effective for the Company on January 1, 2018. The FASB also approved, in July 2015, permitting the early adoption of ASU No. 2014-09, but not before the original effective date for the Company of January 1, 2017.
In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in order to clarify the Codification and to correct any unintended application of the guidance. These items are not expected to have a significant effect on the current accounting standard. The amendments in this update affect the guidance in ASU No. 2014-09, which is not yet effective. ASU No. 2014-09 will be effective January 1, 2018 for the Company, reflecting the one-year deferral.  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 itsaccompanying consolidated financial statements contained in "Part I" for a discussion of recently issued accounting standards.
Item 3.  Quantitative and selecting the method of transition to the new standard. The Company currently expects the adoption to impact the timing of the recognition of residential installation revenue and the recognition of commission expenses.Qualitative Disclosures About Market Risk



62



Item 3.Quantitative and Qualitative Disclosures About Market Risk
All dollar amounts, except per share data, included in the following discussion are presented in thousands.
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 SeptemberJune 30, 2017,2020, 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 onin our consolidated balance sheet and the collateralized indebtedness is carried at its principal value, net of the unamortized fair value adjustment for contracts that existed at the date of the Cablevision Acquisition.discounts. The fair value adjustment isdiscounts are being amortized over the term of the related indebtedness.  The carrying value of our collateralized indebtedness amounted to $1,314,788$1,601,107 at SeptemberJune 30, 2017.2020.  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 SeptemberJune 30, 2017,2020, the fair value and the carrying value of our holdings of Comcast common stock aggregated $1,652,917.$1,674,395.  Assuming a 10% change in price, the potential change in the fair value of these investments would be approximately $165,292.$167,440.  As of SeptemberJune 30, 2017,2020, 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 $52,488,$218,212, a net liabilityasset position.  For the three and ninesix months ended SeptemberJune 30, 2017,2020, we recorded a net gain (loss) of $55,602 and $(81,905), respectively,$287,800 related to our outstanding equity derivative contracts and recorded an unrealized gain (loss)loss of $(18,900) and $169,888, respectively,$257,302 related to the Comcast common stock that we held.
59



Fair Value of Equity Derivative Contracts 
  
Fair value as of December 31, 2016, net liability position$(2,202)
Fair value of new equity derivative contracts31,619
Change in fair value, net(81,905)
Fair value as of September 30, 2017, net liability position$(52,488)
Fair Value of Equity Derivative Contracts
Fair value as of December 31, 2019, net liability position$(69,588)
Change in fair value, net287,800 
Fair value as of June 30, 2020, net asset position$218,212 
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:
Hedge PriceCap Price (b)
# of Shares DeliverableMaturityper Share (a)LowHigh
42,955,2362023$40.95$49.55  $49.55  
    Hedge Price Cap Price (b)
# of Shares Deliverable (a) Maturity per Share (a) Low High
         
5,337,750 2017 $29.52 $35.42
 $35.42
16,139,868 2018 $30.84-$33.61 $37.00
 $40.33
21,477,618 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.

(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.

63



(b)Represents the price up to which we receive the benefit of stock price appreciation.
Fair Value of Debt: 
At SeptemberJune 30, 2017,2020, the fair value of our fixed rate debt of $19,025,318$19,937,110 was higher than its carrying value of $17,247,487$18,927,180 by $1,777,831.$1,009,930.  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 SeptemberJune 30, 20172020 would increase the estimated fair value of our fixed rate debt by $365,429$647,347 to $19,390,747.$20,584,457.  This estimate is based on the assumption of an immediate and parallel shift in interest rates across all maturities.
Put/Call Options
In the third quarter of 2017, the Company entered into a put-call contract that expires in the third quarter of 2018 whereby the Company sold a put option and purchased a call option with the same strike price. In connection with this transaction, the Company provided cash collateral of approximately $45,000 at September 30, 2017, which reflects the aggregate difference between the strike price and the closing price of the underlying shares and is reflected as restricted cash in our consolidated balance sheet. The fair value of the put-call contract of $48,326 as of September 30, 2017 is reflected in liabilities under derivative contracts on the Company’s balance sheet. For the three months ended September 30, 2017, $72,365 was recorded in the statement of operations as a loss on derivative contracts which reflected a change in the fair value of the put-call contract of $48,326 and a realized loss on the settlement of certain put-call options of $24,039. In October 2017, the Company settled the remaining put-call options and recognized an incremental loss of approximately $25,000.
Interest Rate Risk
In June 2016, Altice US Finance I CorporationTo manage interest rate risk, we have from time to time entered into two fixed to floating interest rate swaps. One fixed to floating interest rate swap contracts to adjust the proportion of total debt that is converting $750,000 from asubject 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 of 1.6655%borrowings to six-month LIBORvariable 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 a second tranche of $750,000 from a fixedwe only enter into interest rate of 1.68% to six-month LIBOR. The objective of these swaps is to cover the exposure of the 2026 Senior Secured Notes toswap 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 marketconsolidated statement of operations.
The following is a summary of interest rate.rate swap contracts outstanding at June 30, 2020:
Trade DateMaturity DateNotional AmountCompany PaysCompany Receives
December 2018January 2025$500,000 Fixed rate of 1.53%Three-month LIBOR
December 2018January 2022500,000 Fixed rate of 2.733%Three-month LIBOR
December 2018January 2025500,000 Fixed rate of 1.625%Three-month LIBOR
December 2018December 2026750,000 Fixed rate of 2.9155%Three-month LIBOR
December 2018December 2026750,000 Fixed rate of 2.9025%Three-month LIBOR
March 2020January 2025500,000 Fixed rate of 1.458%Three-month LIBOR
March 2020January 2022500,000 Three-month LIBORFixed rate of 2.733%
April 2020April 20212,850,000 Six-month LIBOR minus 0.5185%One-month LIBOR
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 and ninesix months ended SeptemberJune 30, 2017,2020, the Company recorded a gainloss on interest rate swap contracts of $1,051$88,567.
The following represents the location of the assets and $12,539, respectively.liabilities associated with the Company's derivative instruments within the consolidated balance sheets:
60



Derivatives Not Designated as Hedging InstrumentsBalance Sheet LocationFair Value at
June 30, 2020
Asset Derivatives:
Interest rate swap contractsDerivative contracts, long-term$4,058 
Prepaid forward contractsDerivative contracts, long-term221,733 
225,791 
Liability Derivatives:
Interest rate swap contractsOther current liabilities(4,016)
Prepaid forward contractsLiabilities under derivative contracts, long-term(3,520)
Interest rate swap contractsLiabilities under derivative contracts, long-term(309,396)
$(316,932)
As of SeptemberJune 30, 2017, our outstanding interest rate swap contracts had an aggregate fair value and carrying value of $69,271 reflected in “liabilities under derivative contracts” on our consolidated balance sheet.
We do2020, we did not hold or issueand have not issued derivative instruments for trading or speculative purposes.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of Altice USA's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined under SEC rules).  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of SeptemberJune 30, 2017.2020.
Changes in Internal Control
During the ninesix months ended SeptemberJune 30, 2017,2020, there were no changes in the Company's internal control over financial reporting that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.
The Company plans to migrate Cequel’s customer billing system to the Cablevision billing system platform in 2018.




64




PART II. OTHER INFORMATION


Item 1.  Legal Proceedings
Refer to Note 1516 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of our legal proceedings.
Item 1A. Risk Factors
In our Annual Report on Form 10-K for the year ended December 31, 2019, we described material risk factors facing our business. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Except as set forth below, as of the date of this report, there have been no material changes to the risk factors described in our Annual Report on Form 10-K.
Our business, financial condition and results of operations may be adversely affected by the recent COVID-19 pandemic
The coronavirus pandemic ("COVID-19"), and measures to prevent its spread, may have a material adverse impact on our business, financial condition and results of operations. The severity and timing of the impact will depend on a number of factors, including the level and rapidity of infection, duration of containment measures, changes in consumer spending patterns, measures imposed or taken by governmental authorities in response to the pandemic, macroeconomic conditions in our markets, and negative effects on the financial condition of our customers.
Under difficult economic conditions, including prolonged unemployment and employment furloughs, demand for our products and services could decline and some customers may be unable or unwilling to pay for our products and services. Additionally, in order to prioritize the demands of the business, we may delay certain capital investments, such as FTTH or in other new initiatives, products or services, which may adversely affect our business in the future. If these events occur and were to continue, our revenue may be reduced materially which could result in reduced operating margins and a reduction in cash flows.
61



Governmental and non-governmental initiatives to reduce the transmission of COVID-19, such as the imposition of restrictions on work and public gatherings and the promotion of social distancing, along with new government service, collection, pricing or rebate mandates, such as New Jersey’s recent executive order to maintain broadband service for non-paying customers, have impacted and could continue to impact our operations and financial results. Our suppliers and vendors also may be affected by such measures in their ability to provide products and services to us and these measures could also make it more difficult for us to serve our customers.
In addition, the impact that the COVID-19 pandemic will have on our business, financial condition and results of operations could exacerbate the risks identified in "Item 1A. Risk Factors" in our Annual Report on Form 10-K.
Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price of our Class A common stock to decline.
The sale of substantial amounts of shares of our Class A common stock (including shares of Class A common stock issuable upon conversion of shares of our 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 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 June 30, 2020, we had a total of 393.6 million shares of Class A common stock outstanding and 186.2 million shares of Class B common stock outstanding.
Any shares held by our affiliates, as that term is defined under Rule 144 ("Rule 144") of the Securities Act of 1933, as amended (the "Securities Act"), including Next Alt and its affiliates, may be sold only in compliance with certain limitations.
Pursuant to a stockholders and registration rights agreement between the Company and Next Alt. S.a.r.l. ("Next Alt"), Altice Europe N.V. ("Altice Europe"), BC Partners LLP ("BCP") and entities affiliated with the Canada Pension Plan Investment Board ("CPPIB" and together with BCP, the "Sponsors"), the other parties thereto 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 upon conversion of shares of our 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. 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.
If these stockholders exercise their registration rights and sell shares of common stock, or if the market perceives that they intend to sell such shares, the market price of our Class A common stock could drop significantly.
In addition, if Next Alt’s lenders foreclose on the shares of Class A and Class B common stock it has pledged in connection with certain transactions, such lenders may have the right to acquire and sell such shares, which could cause the market price of our Class A common stock to drop significantly.

62



Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
(a) Sales of Unregistered Securities
Set forth below is information related to transactions under the Company's share repurchase program for the quarter ended June 30, 2020.
 (a)
Total Number of Shares (or Units) Purchased		(b)
Average Price Paid per Share (or Unit)		(c)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1)(2)		(d)
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1)
April 1- April 3011,731,882  $24.83  143,645,533  3,771,824,497  
May 1- May 315,974,344  23.94  149,619,877  3,628,791,681  
June 1 - June 308,033,889  24.51  157,653,766  3,431,890,638  

(a)Sales of Unregistered Securities
We had no unregistered sales(1)On June 8, 2018, the Company's Board of equity securities duringDirectors authorized the period covered by this report.repurchase of up to $2.0 billion of Altice USA Class A common stock. On July 30, 2019, the Board of Directors authorized a new incremental three-year share repurchase program of $5.0 billion, to take effect following the completion of the June 2018 repurchase program. Under these repurchase programs, shares of Altice USA Class A common stock may be purchased from time to time in the open market and may include trading plans entered into with one or more brokerage firms in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. The programs do not have an expiration date and may be suspended at any time at the discretion of the Board of Directors.
(2)This column reflects the cumulative number of shares acquired pursuant to the repurchase program at the end of the respective period.

63



Item 6.  Exhibits

(b)EXHIBIT NO.Use of Proceeds
On June 22, 2017, we completed our IPO, in which we sold 12,068,966 shares of Class A Common Stock and selling stockholders sold 51,874,063 shares of Class A Common Stock, at a price of $30.00 per share. Additionally, on June 22, 2017, the selling stockholders sold 7,781,110 shares of Class A Common Stock at a price of $30.00 per share pursuant to the exercise of an overallotment option granted to the underwriters in connection with the offering. The offer and sale of all of the shares of our Class A Common Stock were registered under the Securities Act, pursuant to a Registration Statement on Form S-1 (Registration No. 333-217240), which was declared effective by the SEC on June 21, 2017.
The managing underwriters of our IPO, which has now been completed, were J.P. Morgan, Morgan Stanley, Citigroup and Goldman Sachs & Co. The aggregate offering price for shares sold in the offering was approximately $2,151.7 million (including shares sold pursuant to the exercise of the overallotment option). We did not receive any proceeds from the sale of shares by the selling stockholders. We received approximately $348.5 million in net proceeds from the offering, after deducting underwriter discounts and commissions of approximately $11.9 million and other offering expenses of approximately $1.7 million.
There has been no material change in the use of proceeds from our IPO as described in the Prospectus. On July 10, 2017, the Company used approximately $350,120 of the proceeds to fund the redemption of $315,779 principal amount of 2025 Senior Notes issued by CSC Holdings, a wholly-owned subsidiary of the Company, and the related call premium of approximately $34,341. Prior to the redemption of the notes and the premium and interest paid, we invested the net proceeds in money market funds.
Item 6.        Exhibits

DESCRIPTION
EXHIBIT NO.DESCRIPTIONSenior Notes Indenture, dated as of June 16, 2020 between CSC Holdings, LLC, as Issuer, and Deutsche Bank Trust Company Americas, as Trustee (incorporated herein by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K (File No. 001-38126) filed on June 16, 2020).
Senior Guaranteed Notes Indenture, dated as of June 16, 2020 between, inter alios, CSC Holdings, LLC, as Issuer, the Guarantors set forth therein and Deutsche Bank Trust Company Americas, as Trustee (incorporated herein by reference to Exhibit 4.2 of the Company's Current Report on Form 8-K (File No. 001-38126) filed on June 16, 2020).
Section 302 Certification of the CEO.
Section 302 Certification of the CFO.
Section 906 Certifications of the CEO and CFO.
101
The following financial statements from Altice USA's Quarterly Report on Form 10-Q for the quarterly period ended SeptemberJune 30, 20172020 filed with the Securities and Exchange Commission on November 2, 2017,July 30, 2020 formatted in XBRL (eXtensible Business Reporting Language):  (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income (Loss);Income; (iv) the Consolidated Statement of Stockholders' Equity; (v) the Consolidated Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements.
104The cover page from this quarterly report on Form 10-Q formatted in Inline XBRL.



64


65





SIGNATURESSIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
ALTICE USA, INC.
Date:July 30, 2020/s/ Michael J. Grau
Date:November 3, 2017By:/s/ Charles Stewart
By:Charles Stewart as Co-President and
Michael J. Grau
Chief Financial Officer




65


66