ALTICE USA, INC. All dollar amounts, except per customer and per share data, included in the following discussion, are presented in thousands.
This Annual Report contains statements that constitute forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Securities Act of 1934, as amended. In this Form 10-K there are statements concerning our future operating results and future financial performance. Words such as "expects", "anticipates", "believes", "estimates", "may", "will", "should", "could", "potential", "continue", "intends", "plans" and similar words and terms used in the discussion of future operating results, future financial performance and future events identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. We operate in a highly competitive, consumer and technology driven and rapidly changing business that is affected by government regulation and economic, strategic, technological, political and social conditions. Various factors could adversely affect our operations, business or financial results in the future and cause our actual results to differ materially from those contained in the forward-looking statements. In addition, important factors that could cause our actual results to differ materially from those in our forward-looking statements include:
•competition for broadband, video and telephony customers from existing competitors (such as broadband communications companies, direct broadcast satellite ("DBS") providers, wireless data and telephony providers, and Internet-based providers) and new fiber-based competitors entering our footprint;
•changes in consumer preferences, laws and regulations or technology that may cause us to change our operational strategies;
•increased difficulty negotiating programming agreements on favorable terms, if at all, resulting in increased costs to us and/or the loss of popular programming;
•increasing programming costs and delivery expenses related to our products and services;
•our ability to achieve anticipated customer and revenue growth, to successfully introduce new products and services and to implement our growth strategy;
•our ability to complete our capital investment plans on time and on budget, including our plan to build a parallel FTTH network, and deployAltice One , our home communications platform;
•our ability to develop mobile voice and data services and our ability to attract customers to these services;
•the effects of economic conditions or other factors which may negatively affect our customers' demand for our current and future products and services;
•the effects of industry conditions;
•demand for digital and linear advertising products and services;
•our substantial indebtedness and debt service obligations;
•adverse changes in the credit market;
•changes as a result of any tax reforms that may affect our business;
•financial community and rating agency perceptions of our business, operations, financial condition and the industries in which we operate;
•the restrictions contained in our financing agreements;
•our ability to generate sufficient cash flow to meet our debt service obligations;
•fluctuations in interest rates which may cause our interest expense to vary from quarter to quarter;
•technical failures, equipment defects, physical or electronic break-ins to our services, computer viruses and similar problems;
•cybersecurity incidents as a result of hacking, phishing, denial of service attacks, dissemination of computer viruses, ransomware and other malicious software, misappropriation of data, and other malicious attempts;
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•disruptions to our networks, infrastructure and facilities as a result of
natural disasters, power outages, accidents, maintenance failures,
telecommunications failures, degradation of plant assets, terrorist attacks and
similar events;
•labor shortages and supply chain disruptions;
•the impact from the COVID-19 pandemic;
•our ability to obtain necessary hardware, software, communications equipment and services and other items from our vendors at reasonable costs;
•our ability to effectively integrate acquisitions and to maximize expected operating efficiencies from our acquisitions or as a result of the transactions, if any;
•significant unanticipated increases in the use of bandwidth-intensive Internet-based services;
•the outcome of litigation, government investigations and other proceedings; and
•other risks and uncertainties inherent in our cable and other broadband communications businesses and our other businesses, including those listed under the caption "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained 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-looking statements. Other unknown or unpredictable factors could cause our actual results to differ materially from those expressed in any of our forward-looking statements. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements are made only as of the date of this Annual Report. Except to the extent required by law, we do not undertake, and specifically decline any obligation, to update any forward-looking statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data. You should read this Annual Report with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. We qualify all forward-looking statements by these cautionary statements. Certain numerical figures included in this Annual 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.Organization of Information Management's Discussion and Analysis provides a narrative on the Company's financial performance and condition that should be read in conjunction with the accompanying financial statements and accompanying notes thereto. It includes the following sections: •Our Business
•Key Factors Impacting Operating Results and Financial Condition
•Consolidated Results of Operations
•Non-GAAP Financial Measures
•Reconciliation of CSC Holdings Results of Operations to
•Liquidity and Capital Resources
•Critical Accounting Policies and Estimates
In this Item 7, we discuss the results of operations for the years endedDecember 31, 2021 and 2020 and comparisons of the 2021 results to the 2020 results. Discussions of the results of operations for the year endedDecember 31, 2019 and comparisons of the 2020 results to the 2019 results can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 as filed onFebruary 12, 2021 . 47 --------------------------------------------------------------------------------
Our Business
We principally provide broadband communications and video services inthe United States and market our services primarily under two brands: Optimum, primarily in theNew York metropolitan area, andSuddenlink , principally in markets in the south-centralUnited States . We deliver broadband, video, telephony, and mobile services to more than five million residential and business customers. Our footprint extends across 21 states through a fiber-rich hybrid-fiber coaxial ("HFC") broadband network and a FTTH network with approximately 9.3 million total passings as ofDecember 31, 2021 . Additionally, we offer news programming and content, advertising services, as well as a full service mobile offering, to consumers across our 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 herein. InMarch 2020 ,the United States declared a national emergency concerning the outbreak of COVID-19. Since then, there have 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 and new variants, including lockdowns, social distancing directives and testing and vaccine mandates. While certain government regulations and mandates have eased and COVID-19 vaccines have become broadly available in certain areas, governmental authorities are continuing to monitor the situation and take carious actions in an effort to slow or prevent an increase in the spread of COVID-19. The COVID-19 pandemic significantly impacted our business, including how our customers use our products and services and how our employees provide services to our customers. Although the ultimate impact of the pandemic on our business cannot be predicted, and we cannot predict how our future results may be impacted if the pandemic continues, we have and will continue to provide our telecommunications services to our customers and work to adapt the environment in which we operate. 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 DVR, VOD, pay-per-view, installation and home shopping commissions. Our residential broadband, video, and telephony services accounted for approximately 39%, 35%, and 4%, respectively, of our consolidated revenue for the year endedDecember 31, 2021 . 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 year endedDecember 31, 2021 , 16% 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, branded content, affiliation fees for news programming, and data analytics, which accounted for approximately 5% of our consolidated revenue for the year endedDecember 31, 2021 . Our mobile and other revenue for the year endedDecember 31, 2021 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.
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, fiber-based service 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, Lumen, 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 herein.
Our programming costs, which are the most significant component of our operating
expenses, have increased and are expected to continue to increase primarily as a
result of contractual rate increases. See "Results of Operations" below for more
information regarding the key factors impacting our revenues and operating
expenses.
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-------------------------------------------------------------------------------- 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 we may continue to do so in the future. Our ongoing FTTH network build, with planned upgrades, will enable us to deliver Multi-Gig broadband speeds to meet the growing data needs of residential and business customers. In addition, we launched our full service mobile offering to consumers across our footprint. 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-Capital Expenditures" for additional information regarding our capital expenditures.
Certain Transactions
The following transactions had an impact in the periods covered by this Management's Discussion and Analysis of Financial Condition and Results of Operations:
InJune 2021 , Lightpath completed an acquisition for a net purchase price of approximately$28,260 and the operating results of the acquired business were consolidated as of the acquisition date. InApril 2021 , the Company completed its acquisition of the cable assets ofMorris Broadband, LLC ("Morris Broadband") inNorth Carolina for approximately$312,184 and the operating results of the acquired business were consolidated as of the acquisition date. InDecember 2020 , the Company completed the sale of a 49.99% interest in its Lightpath fiber enterprise business based on an implied enterprise value of$3,200,000 . The Company retained a 50.01% interest in the Lightpath business and maintained control of Lightpath, the entity holding the interest in the Lightpath business. Accordingly, the Company continues to consolidate the operating results of the Lightpath business.
On
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 two 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.
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Results of Operations
Altice USA
Years Ended December 31, Favorable
2021 2020 (Unfavorable)
Revenue:
Residential:
Broadband $ 3,925,089 $ 3,689,159 $ 235,930
Video 3,526,205 3,670,859 (144,654)
Telephony 404,813 468,777 (63,964)
Business services and wholesale 1,586,044 1,454,532 131,512
News and advertising 550,667 519,205 31,462
Mobile 84,194 78,127 6,067
Other 13,837 13,983 (146)
Total revenue 10,090,849 9,894,642 196,207
Operating expenses:
Programming and other direct costs 3,382,129 3,340,442 (41,687)
Other operating expenses 2,379,765 2,264,473 (115,292)
Restructuring and other expense 17,176 91,073 73,897
Depreciation and amortization (including impairments) 1,787,152
2,083,365 296,213
Operating income 2,524,627 2,115,289 409,338
Other income (expense):
Interest expense, net (1,266,591) (1,350,341) 83,750
Gain (loss) on investments and sale of affiliate
interests, net (88,898) 320,061 (408,959)
Gain (loss) on derivative contracts, net 85,911 (178,264) 264,175
Gain (loss) on interest rate swap contracts 92,735 (78,606) 171,341
Loss on extinguishment of debt and write-off of deferred
financing costs (51,712) (250,489) 198,777
Other income, net 9,835 5,577 4,258
Income before income taxes 1,305,907 583,227 722,680
Income tax expense (294,975) (139,748) (155,227)
Net income 1,010,932 443,479 567,453
Net income attributable to noncontrolling interests (20,621) (7,296) (13,325)
Net income attributable to
$ 436,183 $ 554,128 50
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The following is a reconciliation of net income to Adjusted EBITDA and Operating
Free Cash Flow:
Altice USA
Years Ended December 31,
2021 2020
Net income $ 1,010,932 $ 443,479
Income tax expense 294,975 139,748
Other income, net (9,835) (5,577)
Loss (gain) on interest rate swap contracts (92,735) 78,606
Loss (gain) on derivative contracts, net (85,911) 178,264
Loss (gain) on investments and sales of affiliate interests, net 88,898 (320,061)
Loss on extinguishment of debt and write-off of deferred financing costs
51,712 250,489
Interest expense, net 1,266,591 1,350,341
Depreciation and amortization 1,787,152 2,083,365
Restructuring and other expense 17,176 91,073
Share-based compensation 98,296 125,087
Adjusted EBITDA 4,427,251 4,414,814
Capital Expenditures (cash) 1,231,715 1,073,955
Operating Free Cash Flow $
3,195,536
The following is a reconciliation of net cash flow from operating activities to
Free Cash Flow:
Altice USA
Years Ended December 31,
2021 2020
Net cash flows from operating activities
1,231,715 1,073,955
Free Cash Flow $ 1,622,363 $ 1,906,209
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The following table sets forth certain customer metrics for the Company
(unaudited):
December 31, Increase
2021 (f) 2020 (f) (Decrease)
Total passings (a) 9,263.3 9,034.1 229.2Total customer relationships (b)(c)(g) 5,014.7 5,024.6
(9.9) Residential (g) 4,632.8 4,648.4 (15.6) SMB (g) 381.9 376.1 5.8 Residential customers: Broadband (g) 4,386.2 4,359.2 27.0 Video (g) 2,732.3 2,961.0 (228.7) Telephony (g) 2,005.2 2,214.0 (208.8) Penetration of total passings (d) 54.1 % 55.6 % (1.5) % ARPU(e)(h)$ 137.79 $ 140.09 $ (2.30) FTTH total passings (i) 1,171.0 900.1 270.9 FTTH customer relationships (j)(k) 69.7 26.1 43.6 FTTH Residential 69.3 26.1 43.2 FTTH SMB 0.3 - 0.3
Penetration of FTTH total passings (l) 5.9 % 2.9 %
3.0 % (a)Represents the estimated number of single residence homes, apartments and condominium units passed by our HFC and FTTH network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our HFC and FTTH network. Broadband services were not available to approximately 30 thousand passings and telephony services were not available to approximately 500 thousand passings. Amounts as ofDecember 31, 2021 include approximately 89 thousand total passings that were acquired from Morris Broadband inApril 2021 .
(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 on our HFC and FTTH network. 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. Amounts as ofDecember 31, 2021 include 37.3 thousand customer relationships (35.1 thousand residential and 2.2 thousand SMB) that were acquired from Morris Broadband inApril 2021 .
(d)Represents the number of total customer relationships divided by total passings.
(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 by the average number of total residential customers for the same period.
(f)Customer metrics do not include mobile customers.
(g)Customer metrics as ofDecember 31, 2020 include certain customers impacted by storms inLouisiana that had not yet been disconnected for non-payment (see table below). 52
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Total customer relationships 10.3 Residential 9.2 SMB 1.1 Residential customers: Broadband 8.7 Video 4.8 Telephony 2.0 (h)ARPU for theDecember 31, 2020 period reflects a reduction of$1.26 due to credits that we anticipated to be issued to video customers as a result of credits the Company expected to receive from certain sports programming networks whereby the minimum number of events were not delivered pursuant to the contractual agreements with the networks and related franchise fees. (i)Represents the estimated number of single residence homes, apartments and condominium units passed by the FTTH network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our FTTH network.
(j)Represents number of households/businesses that receive at least one of the Company's fixed-line services on our FTTH network.
(k)FTTH 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 on our FTTH network. 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.
(l)Represents the number of total FTTH customer relationships divided by FTTH total passings.
Comparison of Results for the Year Ended
Broadband Revenue
Broadband revenue for the years endedDecember 31, 2021 and 2020 was$3,925,089 and$3,689,159 , 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, the allocation of revenue between the residential offerings is impacted by changes in the standalone selling price of each performance obligation within our promotional bundled offers. Broadband revenue increased$235,930 (6%) for the year endedDecember 31, 2021 compared to the year endedDecember 31, 2020 . 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, as well as customer credits issued in 2020 for service outages following certain storms that occurred in 2020.
Video Revenue
Video revenue for the years endedDecember 31, 2021 and 2020 was$3,526,205 and$3,670,859 , 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, the allocation of revenue between the residential offerings is impacted by changes in the standalone selling price of each performance obligation within our promotional bundled offers. Video revenue for the year endedDecember 31, 2020 included estimated credits of approximately$94,300 expected to be issued to customers as a result of$90,100 of credits the Company expected to receive from certain sports programming networks whereby the minimum number of events were not delivered pursuant to the contractual agreements with the networks and related franchise fees ("RSN Credits").
Video revenue decreased
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video-on-demand revenue. The decrease in video revenue was partially offset by
the RSN Credits recorded in 2020, higher average recurring video revenue per
video customer, primarily driven by certain rate increases, and customer credits
issued in 2020 for service outages following certain storms that occurred in
2020.
Telephony Revenue
Telephony revenue for the years ended December 31, 2021 and 2020 was $404,813 ,
and $468,777 , 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, the
allocation of revenue between the residential offerings is impacted by changes
in the standalone selling price of each performance obligation within our
promotional bundled offers.
Telephony revenue decreased $63,964 (14%) for the year ended December 31, 2021
compared to the year ended December 31, 2020 . The decrease was due to a decline
in telephony customers and lower average recurring telephony revenue per
telephony customer, partially offset by customer credits issued in 2020 for
service outages following certain storms that occurred in 2020.
Business Services and Wholesale Revenue
Business services and wholesale revenue for the years endedDecember 31, 2021 and 2020 was$1,586,044 and$1,454,532 , 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 for the year endedDecember 31, 2020 included estimated RSN Credits of approximately$2,900 expected to be issued to customers. Business services and wholesale revenue increased$131,512 (9%) for the year endedDecember 31, 2021 compared to the year endedDecember 31, 2020 . Approximately$100,100 of the increase in 2021 was due to an early termination of a backhaul contract for air strands that resulted in the recognition of deferred revenue and termination fees over the amended term. The increase was also attributable to higher average recurring broadband revenue per SMB customer, primarily driven by certain rate increases and service level changes, and customer credits issued in 2020 for service outages following certain storms that occurred in 2020 and the RSN customer credits recorded in 2020. The increase in revenue was partially offset by a decrease resulting from lower average recurring telephony revenue per SMB customer and revenue related to an indefeasible right of use contract recorded in the second quarter of 2020.
News and Advertising Revenue
News and advertising revenue for the years endedDecember 31, 2021 and 2020 was$550,667 and$519,205 , 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) digital advertising, (iii) branded content, and (iv) data analytics. News and advertising revenue also includes affiliation fees for news programming. News and advertising revenue increased$31,462 (6%) for the year endedDecember 31, 2021 compared to the year endedDecember 31, 2020 . The increase was primarily due to an increase in advertising revenue from non-political linear and non-political digital advertising, partially offset by a decrease in political advertising spending.
Mobile Revenue
Mobile revenue for the years endedDecember 31, 2021 and 2020 was$84,194 and$78,127 , respectively, and relates to sales of devices and mobile services. As ofDecember 31, 2021 , we had approximately 186 thousand mobile lines as compared to 169 thousand lines as ofDecember 31, 2020 .
Other Revenue
Other revenue for the years endedDecember 31, 2021 and 2020 was$13,837 and$13,983 , respectively. Other revenue includes revenue from other miscellaneous revenue streams.
Programming and Other Direct Costs
Programming and other direct costs for the years endedDecember 31, 2021 and 2020 amounted to$3,382,129 and$3,340,442 , 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 54
-------------------------------------------------------------------------------- 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 increase of
Increase in programming costs primarily due to$93,000 in estimated RSN Credits recorded in 2020 (see discussion below) and net contractual rate increases, partially offset by decreases due to lower video customers, lower pay-per-view costs and video-on-demand costs
Decrease in costs of mobile devices
(9,755)
Other net increases, net of costs related to an indefeasible right of use contract recorded in the second quarter of 2020
7,958
$ 41,687
Programming costs
Programming costs aggregated $2,744,629 and $2,701,145 for the years ended
December 31, 2021 and 2020, respectively. Programming costs for the year ended
December 31, 2020 included estimated credits of approximately $93,000 that the
Company expected to receive from certain sports programming networks whereby the
minimum number of events were not delivered pursuant to the contractual
agreements with the networks. Our programming costs in 2022 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 years endedDecember 31, 2021 and 2020 amounted to$2,379,765 and$2,264,473 , respectively. Other operating expenses include staff costs and employee benefits including salaries of company employees and related taxes, benefits and other employee related expenses, as well as third-party labor costs. Other operating expenses also include network management and field service costs, which represent costs associated with the maintenance of our broadband network, including costs of certain customer connections and other costs associated with providing and maintaining services to our customers. Customer installation and network repair and maintenance costs may fluctuate as a result of changes in the level of activities and the utilization of contractors as compared to employees. Also, customer installation costs fluctuate as the portion of our expenses that are capitalized changes. Costs associated with the initial deployment of new customer premise equipment necessary to provide broadband, video and telephony services are capitalized (asset-based). The redeployment of customer premise equipment is expensed as incurred. Other operating expenses also include costs related to our customer care operations that handle customer inquiries and billing and collection activities, and sales and marketing costs, which include advertising production and placement costs associated with acquiring and retaining customers. These costs vary period to period and certain of these costs, such as sales and marketing, may increase with intense competition. Additionally, other operating expenses include various other administrative costs.
The increase in other operating expenses of
Increase in marketing costs$ 62,636 Increase in repairs and maintenance
40,299
Increase in utility costs, including costs related to winter storm Uri in the first quarter of 2021
20,092
Decrease in share-based compensation (26,791)
Other net increases 19,056
$ 115,292
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Restructuring and Other Expense
Restructuring and other expense for the year endedDecember 31, 2021 amounted to$17,176 , as compared to$91,073 for the year endedDecember 31, 2020 . These amounts primarily related to severance and other employee related costs resulting from headcount reductions, facility realignment costs and impairments of certain ROU assets. We may incur additional restructuring expenses in the future as we continue to analyze our organizational structure.
Depreciation and Amortization
Depreciation and amortization for the years ended
The decrease in depreciation and amortization of$296,213 (14%) for the year endedDecember 31, 2021 as compared to the prior year is due to certain fixed assets and intangible assets becoming fully depreciated or amortized and a decrease in the acceleration of amortization expense related to certain customer relationship intangible assets, partially offset by an increase in depreciation as a result of asset additions.
Adjusted EBITDA
Adjusted EBITDA amounted to
Adjusted EBITDA is a non-GAAP measure that is defined 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. See reconciliation of net income (loss) to adjusted EBITDA above. The increase in adjusted EBITDA for the year endedDecember 31, 2021 as compared to the prior year was due to the increase in revenue, partially offset by an increase in operating expenses for 2021 (excluding depreciation and amortization, restructuring and other expense and share-based compensation), as discussed above. Operating Free Cash Flow
Operating free cash flow was
Free Cash Flow
Free cash flow was$1,622,363 and$1,906,209 for the years endedDecember 31, 2021 and 2020, respectively. The decrease in free cash flow in 2021 as compared to 2020 is primarily due to an increase in cash capital expenditures and a decrease in cash from operating activities.
Interest expense, net
Interest expense, net was
Decrease due to changes in average debt balances and interest rates on our indebtedness and collateralized debt
$ (87,953) Lower interest income
2,034
Other net increases due to amortization of deferred financing costs, premiums
and original issue discounts 2,169
$ (83,750) Gain (Loss) on Investments and Sale of Affiliate Interests, net
Gain (loss) on investments, net for the years endedDecember 31, 2021 and 2020 of$(88,898) and$320,061 consists primarily of the increase (decrease) in the fair value of the Comcast common stock owned by the Company. The effects of these gains (losses) are partially offset by the losses and gains on the related equity derivative contracts, net described below. 56 --------------------------------------------------------------------------------
Gain (Loss) on Derivative Contracts, net
Gain (loss) on derivative contracts, net amounted to$85,911 and$(178,264) for the years endedDecember 31, 2021 and 2020, 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 and sale of affiliate interest, net discussed above.
Gain (Loss) on Interest Rate Swap Contracts
Gain (loss) on interest rate swap contracts amounted to$92,735 and$(78,606) for the years endedDecember 31, 2021 and 2020, respectively. These amounts represent the change in the fair value of 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
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 guaranteed notes and senior notes:
Years
ended
2021 2020
CSC Holdings 5.500% Senior Guaranteed Notes due 2026 $ 51,712 $ -
CSC Holdings 5.375% Senior Guaranteed Notes due 2023 - 26,721
CSC Holdings 7.75% Senior Notes due 2025 - 35,375
CSC Holdings 10.875% Senior Notes due 2025 - 136,249
CSC Holdings 6.625% Senior Guaranteed Notes due 2025 - 52,144
$ 51,712 $ 250,489
Other Income, Net
Other income, net amounted to $9,835 and $5,577 for the years ended December 31,
2021 and 2020, respectively. These amounts include the non-service benefit
(cost) components of the Company's pension plans of $3,860 and $(1,012) , for the
years ended December 31, 2021 and 2020, respectively, and dividends received on
Comcast common stock owned by the Company.
Income Tax Expense
The Company recorded income tax expense of$294,975 for the year endedDecember 31, 2021 , resulting in an effective tax rate of 23% which is higher than theU.S. federal statutory tax rate of 21%. The primary difference between the effective tax rate and the statutory tax rate is due to nondeductible officer's and share-based compensation expense, state income taxes, net of the federal benefit, 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, a tax benefit associated with internal restructuring and opportunity zone related investments, and certain other non-deductible expenses. The Company recorded income tax expense of$139,748 for the year endedDecember 31, 2020 , resulting in an effective tax rate of 24% which is higher than theU.S. federal statutory tax rate of 21%. The primary difference between the effective tax rate and the statutory tax rate is due to nondeductible officer's and share-based compensation expense, state income taxes, net of the federal benefit, a revaluation of state deferred taxes primarily due to certain changes to the state tax rates used to measure the Company's deferred tax liabilities, a tax benefit associated with claiming additional current year and prior year research and development tax credits, and certain other non-deductible expenses. Due to the taxable gain resulting from the Lightpath Transaction discussed in
Note 1 to the consolidated financial statements, the Company recognized the benefit of fully utilizing its federal net operating loss carryforwards ("NOLs"), capital loss carryover, research and development tax credits, and general business credits in 2020.
57
--------------------------------------------------------------------------------The consolidated statements of operations of CSC Holdings are essentially identical to the consolidated statements of operations ofAltice USA , except for the following: CSC Holdings Years ended December 31, 2021 2020 (in thousands) Net income attributable to Altice USA stockholders$ 990,311 $ 436,183
Less: items included in
(2,135) 12,905
Loss on investments and sale of affiliate interests, net - (546)
Net income attributable to CSC Holdings' sole member $ 988,176 $ 448,542 Refer to
The following is a reconciliation of CSC Holdings' net income to Adjusted EBITDA
and Operating Free Cash Flow:
CSC Holdings
Years ended December 31,
2021 2020
Net income $ 1,008,797 $ 455,838
Income tax expense 297,110 126,843
Other income, net (9,835) (5,577)
Loss (gain) on interest rate swap contracts, net (92,735) 78,606
Loss (gain) on derivative contracts, net (85,911) 178,264
Loss (gain) on investments and sales of affiliate interests, net
88,898 (319,515)
Loss on extinguishment of debt and write-off of deferred financing costs
51,712 250,489
Interest expense, net 1,266,591 1,350,341
Depreciation and amortization 1,787,152 2,083,365
Restructuring and other expense 17,176 91,073
Share-based compensation 98,296 125,087
Adjusted EBITDA 4,427,251 4,414,814
Capital expenditures (cash) 1,231,715 1,073,955
Operating Free Cash Flow $ 3,195,536 $ 3,340,859
The following is a reconciliation of net cash flow from operating activities to
Free Cash Flow:
CSC Holdings
Years ended December 31,
2021 2020
Net cash flows from operating activities $ 2,823,934 $ 2,980,422
Capital expenditures (cash) 1,231,715 1,073,955
Free Cash Flow $ 1,592,219 $ 1,906,467 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 CSC Holdings 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 58
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target a year-end leverage ratio of 4.5x to 5.0x for CSC Holdings over time. We
calculate our CSC Holdings net leverage ratio as net debt to L2QA EBITDA
(Adjusted EBITDA for the two most recent consecutive fiscal quarters multiplied
by 2.0).
We expect to utilize free cash flow and availability under the 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.
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Debt Outstanding
The following table summarizes the carrying value of our outstanding debt, net of unamortized deferred financing costs, discounts and premiums (excluding accrued interest) as ofDecember 31, 2021 , as well as interest expense for the year endedDecember 31, 2021 . Other CSC Holdings Unrestricted Altice USA/CSC Restricted Group Lightpath Entities Holdings
Debt outstanding: Credit facility debt$ 7,916,492 $ 579,119 $ -$ 8,495,611 Senior guaranteed notes 7,635,633 - - 7,635,633 Senior secured notes - 441,739 - 441,739 Senior notes 7,543,137 407,104 - 7,950,241 Subtotal 23,095,262 1,427,962 - 24,523,224 Finance lease obligations 218,735 - - 218,735 Notes payable and supply chain financing 97,804 - - 97,804 Subtotal 23,411,801 1,427,962 - 24,839,763 Collateralized indebtedness relating to stock monetizations (a) - - 1,706,997 1,706,997 Total debt$ 23,411,801 $ 1,427,962 $ 1,706,997 $ 26,546,760 Interest expense: Credit facility debt, senior notes, finance leases, notes payable and supply chain financing$ 1,121,482 $ 68,839 $ -$ 1,190,321 Collateralized indebtedness relating to stock monetizations (a) - - 76,430 76,430 Total interest expense$ 1,121,482 $ 68,839 $ 76,430 $ 1,266,751 (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.
See Note 11 to our consolidated financial statements for further information regarding our outstanding debt.
Payment Obligations Related to Debt
As ofDecember 31, 2021 , 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 are as follows (see Note 9 to our consolidated financial statements): Other CSC Holdings Unrestricted Altice USA/ Restricted Group Lightpath Entities (a) CSC Holdings 2022$ 1,880,898 $ 68,973 $ 33,886 $ 1,983,757 2023 1,104,556 69,358 1,776,378 2,950,292 2024 2,705,866 68,038 - 2,773,904 2025 3,745,474 68,596 - 3,814,070 2026 2,066,085 66,532 - 2,132,617 Thereafter 18,818,754 1,503,803 - 20,322,557 Total$ 30,321,633 $ 1,845,300 $ 1,810,264 $ 33,977,197 (a)Includes$1,810,264 related to the Company's collateralized indebtedness and 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. 60 --------------------------------------------------------------------------------
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 CSC Holdings Restricted Group is comprised of CSC Holdings and substantially all of its wholly-owned operating subsidiaries, excluding Lightpath which became an unrestricted subsidiary inSeptember 2020 . 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 theRestricted Group include primarily cash flow from the operations of the businesses in theRestricted 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 our FTTH network; 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
InOctober 2015 , a wholly-owned subsidiary ofAltice USA , which merged with and into CSC Holdings onJune 21, 2016 , entered into a senior secured credit facility, which currently providesU.S. dollar term loans currently in an aggregate principal amount of$3,000,000 ($2,865,000 outstanding atDecember 31, 2021 ) (the "CSC Term Loan Facility", and the term loans extended under the CSC Term Loan Facility, the "CSC Term Loans") andU.S. dollar revolving loan commitments in an aggregate principal amount of$2,475,000 ($900,000 outstanding atDecember 31, 2021 ) (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 andJPMorgan Chase Bank, N.A . as administrative agent and security agent (as amended, restated, supplemented or otherwise modified onJune 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 , andOctober 3, 2019 , respectively, and as further amended, restated, supplemented or otherwise modified from time to time, the "CSC Credit Facilities Agreement"). InOctober 2018 , CSC Holdings entered into a$1,275,000 ($1,239,938 outstanding atDecember 31, 2021 ) incremental term loan facility (the "Incremental Term Loan B-3") and inOctober 2019 , CSC Holdings entered into a$3,000,000 ($2,947,500 outstanding atDecember 31, 2021 ) incremental term loan facility ("Incremental Term Loan B-5") under its existing credit facilities agreement. During the year endedDecember 31, 2021 , CSC Holdings borrowed$2,410,000 under its revolving credit facility and repaid$2,135,000 of amounts outstanding under the revolving credit facility.
The Company was in compliance with all of its financial covenants under the CSC
Credit Facilities Agreement as of
See Note 11 to our consolidated financial statements for further information regarding the CSC Credit Facilities Agreement.
Senior Guaranteed Notes and Senior Notes
InMay 2021 , CSC Holdings issued$1,500,000 in aggregate principal amount of senior guaranteed notes that bear interest at a rate of 4.500% and mature onNovember 15, 2031 and$500,000 in aggregate principal amount of senior notes that bear interest at a rate of 5.000% which also mature onNovember 15, 2031 . The net proceeds from the sale of these notes were used to early redeem the$1,498,806 aggregate principal amount of CSC Holdings' 5.500% senior guaranteed notes dueMay 15, 2026 , plus pay accrued interest and the associated premium related to the early redemption of these notes. The remaining proceeds were used for general corporate purposes, including repayment of borrowings under the CSC Holdings revolving credit facility and share repurchases. In connection with the early redemptions, the Company recognized a loss on the extinguishment of debt aggregating$51,712 , reflecting the early redemption premium and the write-off of unamortized deferred financing costs on these notes.
See Note 11 of our consolidated financial statements for further details of the Company's outstanding senior guaranteed notes and senior notes.
61
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As of
Lightpath Debt Financing Lightpath was financed independently outside of theRestricted Group . InSeptember 2020 , Lightpath issued$450,000 in aggregate principal amount of senior secured notes and$415,000 in aggregate principal amount of senior notes. Also, inNovember 2020 , Lightpath entered into a credit agreement which provides a term loan in an aggregate principal amount of$600,000 ($594,000 outstanding atDecember 31, 2021 ) and revolving loan commitments in an aggregate principal amount of$100,000 . As ofDecember 31, 2021 , there were no borrowings outstanding under the Lightpath revolving credit facility. See Note 1 1 to our consolidated financial statements for further information regarding the Lightpath credit agreement and the Lightpath senior and senior secured notes. As ofDecember 31, 2021 , Lightpath was in compliance with applicable financial covenants under its credit agreement and with applicable financial covenants under each respective indenture by which the senior secured notes and senior notes were issued. Capital Expenditures
The following table presents the Company's capital expenditures:
Years Ended December 31,
2021 2020
Customer premise equipment $ 227,280 $ 177,049
Network infrastructure 642,545 573,842
Support and other 235,314 204,212
Business services 126,576 118,852
Capital purchases (cash basis) 1,231,715 1,073,955
Right-of-use assets acquired in exchange for finance lease obligations
145,047 133,300
Notes payable issued to vendor for the purchase of equipment and other assets
89,898 106,925
Change in accrued and unpaid purchases and other 129,020 31,304
Capital purchases (accrual basis) $
1,595,680
Customer premise equipment includes expenditures for set-top boxes, cable modems, routers and other equipment that is placed in a customer's home, as well as installation costs for placing 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. Business services capital expenditures include primarily equipment, installation, support, and other costs related to our fiber based telecommunications business serving, primarily enterprise customers. For the year endedDecember 31, 2020 , network infrastructure includes the costs of rebuilding certain systems damaged by storms aggregating$160,975 on a cash basis and$163,142 , including accrued and unpaid capital.
Other Transactions
In
InJune 2021 , Lightpath completed an acquisition for an aggregate cash purchase price of approximately$28,260 , subject to certain closing adjustments as set forth in the asset purchase agreement. 62 --------------------------------------------------------------------------------
Cash Flow DiscussionAltice USA Operating Activities
Net cash provided by operating activities amounted to
The decrease in cash provided by operating activities of$126,086 in 2021 as compared to 2020 resulted from a decrease of$253,348 due to changes in working capital (including a decrease in interest payments of$228,737 and an increase in tax payments of$183,174 ), as well as the timing of payments and collections of accounts receivable, among other items, partially offset by an increase in net income before depreciation and amortization and other non-cash items of$127,262 .
Investing Activities
Net cash used in investing activities for the years ended
The 2021 investing activities consisted primarily of capital expenditures of
The 2020 investing activities consisted primarily of capital expenditures of
Financing Activities
Net cash used in financing activities amounted to
In 2021, the Company's financing activities consisted primarily of the repayment of long-term debt of$4,870,108 , the purchase of common stock pursuant to a share repurchase program of$804,928 , principal payments on finance lease obligations of$85,949 , repayment of collateralized indebtedness and related derivative contracts, net of$185,105 and other net cash payments of$11,539 , partially offset by net proceeds from long-term debt of$4,410,000 and proceeds from collateralized indebtedness and related derivative contracts, net of$185,105 . In 2020, the Company's financing activities consisted primarily of the repayment of long-term debt of$6,194,804 , the purchase of common stock pursuant to a share repurchase program and tender offer of$4,816,379 , principal payments on finance lease obligations of$43,083 , and other net cash payments of$26,624 , partially offset by net proceeds from long-term debt of$8,019,648 , proceeds from the sale of a minority interest in Lightpath, net of expenses, of$880,197 . CSC Holdings Operating Activities
Net cash provided by operating activities amounted to
The decrease in cash provided by operating activities of$156,488 in 2021 as compared to 2020 resulted from a decrease of$234,505 due to changes in working capital (including a decrease in interest payments of$228,737 and an increase in tax payments of$183,174 ), as well as the timing of payments and collections of accounts receivable, among other items, partially offset by an increase in income from continuing operations before depreciation and amortization and other non-cash items of$78,017 . Investing Activities
Net cash used in investing activities for the years ended
The 2021 investing activities consisted primarily of capital expenditures of
The 2020 investing activities consisted primarily of capital expenditures of
63
--------------------------------------------------------------------------------Financing Activities
Net cash used in financing activities amounted to
In 2021, the Company's financing activities consisted primarily of the repayment of long-term debt of$4,870,108 , distribution to parent of$763,435 , principal payments on finance lease obligations of$85,949 , repayment of collateralized indebtedness and related derivative contracts, net of$185,105 and other net cash payments of$24,961 , partially offset by net proceeds from long-term debt of$4,410,000 and proceeds from collateralized indebtedness and related derivative contracts, net of$185,105 . In 2020, the Company's financing activities consisted primarily of the repayment of long-term debt of$6,194,804 , distribution to parent of$4,794,408 , principal payments on finance lease obligations of$43,083 , and other net cash payments of$40,972 , partially offset by net proceeds from long-term debt of$8,019,648 , proceeds from the sale of a minority interest in Lightpath, net of expenses, of$880,197 .
Contractual Obligations and Off Balance Sheet Commitments
Our contractual obligations as ofDecember 31, 2021 consist primarily of our debt obligations, purchase obligations which primarily include contractual commitments with various programming vendors to provide video services to our customers and minimum purchase obligations to purchase goods or services, operating and finance lease obligations, outstanding letters of credit, and guarantees. Note 11 to our consolidated financial statements contains further information regarding our debt obligations, Note 17 contains information regarding our off-balance sheet obligations and Note 9 contains information regarding our leases.
Share Repurchase Program
InJune 2018 , the Board of Directors ofAltice USA authorized a share repurchase program of$2,000,000 , and onJuly 30, 2019 , the Board of Directors authorized a new incremental three-year share repurchase program of$5,000,000 that took effect following the completion inAugust 2019 of the$2,000,000 repurchase program. InNovember 2020 , the Board of Directors authorized an additional$2,000,000 of share repurchases, bringing the total amount of cumulative share repurchases authorized to$9,000,000 . Under these repurchase programs, shares of AlticeUSA Class A common stock may be purchased from time to time in the open market and may include trading plans entered into with one or more brokerage firms in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. Size and timing of these purchases will be determined based on market conditions and other factors. OnNovember 23, 2020 , the Company commenced a modified "Dutch auction" tender offer (the "Tender Offer") to purchase up to$2,500,000 in value of shares of its Class A Common Stock, at a price not greater than$36.00 per share nor less than$32.25 per share . The Tender Offer expired onDecember 21, 2020 . OnDecember 21, 2020 , the Company accepted for purchase 64,613,479 shares of its Class A Common Stock, at a price of$36.00 per share, plus related fees, for an aggregate purchase price of$2,326,949 . The aggregate purchase price of these shares (including the fees relating to the Tender Offer), is reflected in stockholders' equity (deficiency) in the consolidated balance sheet ofAltice USA as ofDecember 31, 2020 . For the year endedDecember 31, 2021 , 2020 and 2019,Altice USA repurchased an aggregate of 23,593,728, 161,216,653 and 72,668,712 shares, respectively, for a total purchase price of approximately$804,928 ,$4,816,895 , and$1,686,873 , respectively. These acquired shares were retired and the cost of these shares was recorded in stockholders' equity (deficiency) in the consolidated balance sheet ofAltice USA . From inception throughDecember 31, 2021 ,Altice USA repurchased an aggregate of 285,507,773 shares for a total purchase price of approximately$7,808,698 . As ofDecember 31, 2021 ,Altice USA had approximately$1,191,302 of availability remaining under the incremental share repurchase program and had 454,654,140 combined Class A and Class B shares outstanding.
See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for a discussion regarding interest rate risk and equity price risk.
Critical Accounting Policies and Estimates
In preparing its financial statements, the Company is required to make certain estimates, judgments and assumptions that it believes are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented.
We believe that the application of the following accounting policy requires significant estimates and is the most critical to aid in fully understanding and evaluating our reported financial results:
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--------------------------------------------------------------------------------Plant and Equipment
Costs incurred in the construction of the Company's cable systems, including
line extensions to, and upgrade of, the Company's HFC infrastructure and
construction of the parallel FTTH infrastructure, are capitalized. This includes
headend facilities and initial placement of the feeder cable to connect a
customer that had not been previously connected. These costs consist of
materials, subcontractor labor, direct consulting fees, and internal labor and
related costs associated with the construction activities. The internal costs
that are capitalized consist of salaries and benefits of the Company's employees
and the portion of facility costs, including rent, taxes, insurance and
utilities, that supports the construction activities. These costs are
depreciated over the estimated life of the plant (10 to 25 years) and headend
facilities (5 to 25 years). Costs of operating the plant and the technical
facilities, including repairs and maintenance, are expensed as incurred.
Costs associated with the initial deployment of new customer premise equipment
("CPE") necessary to provide broadband, video and telephony services are also
capitalized. These costs include materials, subcontractor labor, internal labor,
and other related costs associated with the connection activities. The
departmental activities supporting the connection process are tracked through
specific metrics, and the portion of departmental costs that is capitalized is
determined through a time weighted activity allocation of costs incurred based
on time studies used to estimate the average time spent on each activity. These
installation costs are amortized over the estimated useful lives of the CPE
necessary to provide broadband, video and telephony services. The portion of
departmental costs related to disconnecting services and removing CPE from a
customer, costs related to connecting CPE that has been previously connected to
the network, and repair and maintenance are expensed as incurred.
Refer to Note 2 to our consolidated financial statements for a discussion of our accounting policies.
Recently Issued Accounting Standards
See Note 3 to the accompanying consolidated financial statements contained in "Part II. Item 8. Financial Statements and Supplementary Data" for a discussion of recently issued accounting standards.
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