CHANGE IN ACCOUNTING POLICIES AND ATS ACQUISITION

Adoption of ASC 606 - Revenue from Contracts with Customers

On January 1, 2018, the Company adopted the guidance pursuant to ASC 606. The Company elected to apply the guidance on a full retrospective basis, which required the Company to reflect the impact of the updated guidance for all periods presented. The adoption of the guidance resulted in the deferral of certain installation revenue, the deferral of certain commission expenses, and a reduction of revenue due to the reclassification of certain third party giveaways and incentives from operating expense. Additionally, the Company made changes in the composition of revenue resulting from the allocation of value related to bundled services sold to residential customers at a discount.

Installation Services Revenue

Pursuant to ASC 606, the Company's installation services revenue is deferred and recognized over the benefit period. For residential customers, the benefit period is less than one year. For business and wholesale customers, the benefit period is the contract term. Prior to the adoption of ASC 606, the Company recognized installation services revenue for residential and small and medium-sized business ("SMB") customers when installations were completed. As a result of the deferral of installation services revenue for residential and SMB customers, the Company recognized contract liabilities of $6,978 and recorded a cumulative effect adjustment of $5,093 (net of tax of $1,885) to retained earnings. The accounting for installation services revenue related to business and wholesale customers has not changed.

Commission Expenses

Pursuant to ASC 606, the Company defers commission expenses related to obtaining a contract with a customer when the expected period of benefit is greater than one year and amortizes these costs over the average contract term. For commission expenses related to customer contracts with a term of one year or less, the Company is utilizing the practical expedient and is recognizing the costs when incurred. Prior to the adoption of ASC 606, the Company recognized commission expenses related to the sale of its services when incurred. As a result of the change in the timing of recognition of these commission expenses, the Company recognized contract assets of $24,329 and recorded a cumulative effect adjustment of $17,759 (net of tax of $6,570) to retained earnings.

Third Party Product Giveaways and Incentives

When the Company acts as the agent in providing certain product giveaways or incentives, revenue is recorded net of the costs of the giveaways and incentives. For the three and six months ended June 30, 2017, costs of $5,979 and $9,396, respectively for the giveaways and incentives recorded in other operating expense have been reclassified to revenue.

Bundled Services

The Company provides bundled services at a discounted rate to its customers. Under ASC 606, revenue should be allocated to separate performance obligations within a bundled offering based on the relative stand-alone selling price of each service within the bundle. In connection with the adoption of ASC 606, the Company revised the amounts allocated to each performance obligation within its bundled offerings which reduced previously reported revenue for telephony services and increased previously reported revenue allocated to pay television and broadband services.

Adoption of ASU No. 2017-07 - Compensation-Retirement Benefits (Topic 715)

On January 1, 2018, the Company adopted the guidance pursuant to ASU No. 2017‑07. ASU No. 2017‑07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. In connection with the adoption of ASU No. 2017‑07, the Company retroactively reclassified certain pension costs from other operating expenses to other income (expense), net. The adoption of ASU No. 2017-07 had no impact on the Company's condensed consolidated balance sheet.

Acquisition of ATS

As discussed in Note 1, the Company completed the ATS Acquisition in the first quarter of 2018. ATS was previously owned by Altice N.V. and a member of ATS's management through a holding company. As the acquisition is a combination of businesses under common control, the Company combined the results of operations and related assets and liabilities of ATS for all periods since the formation of ATS, including goodwill of $23,101, representing the amount previously transferred to ATS.

The following table summarizes the impact of adopting ASC 606 and the impact of the ATS Acquisition on the Company's condensed consolidated balance sheet:



	December 31, 2017
	As Reported		Impact of ASC 606		Impact of ATS Acquisition			As Adjusted
Cash and cash equivalents	$	273,329	$	—	$	56,519		$	329,848
Other current assets	580,231		14,068		(20,548		)	573,751
Property, plant and equipment, net	6,063,829		—		(40,003		)	6,023,826
Goodwill	7,996,760		—		23,101			8,019,861
Other assets, long-term	19,861,076		10,261		(6,541		)	19,864,796
Total assets	$	34,775,225	$	24,329	$	12,528		$	34,812,082
Current liabilities	$	2,492,983	$	6,978	$	20,401		$	2,520,362
Deferred tax liability, long-term	4,775,115		4,685		(10,514		)	4,769,286
Liabilities, long-term	21,779,997		—		6,394			21,786,391
Total liabilities	29,048,095		11,663		16,281			29,076,039
Redeemable equity	231,290		—		—			231,290
Paid-in capital	4,642,128		—		23,101			4,665,229
Retained earnings	854,824		12,666		(26,854		)	840,636
Total stockholders' equity	5,495,840		12,666		(3,753		)	5,504,753
Total liabilities and stockholders' equity	$	34,775,225	$	24,329	$	12,528		$	34,812,082

The following table summarizes the impact of adopting ASC 606 and ASU No. 2017-07 and the impact of the ATS Acquisition on the Company's condensed consolidated statements of operations:



	Three Months Ended June 30, 2017
	As Reported			Impact of ASC 606			Impact of ASU No. 2017-07			Impact of ATS Acquisition			As Adjusted
Residential:
Pay TV	$	1,059,857		$	11,306		$	—		$	—		$	1,071,163
Broadband	629,416			13,204			—			—			642,620
Telephony	208,451			(30,190		)	—			—			178,261
Business services and wholesale	323,940			(299		)	—			—			323,641
Advertising	97,501			—			—			—			97,501
Other	9,176			—			—			—			9,176
Total revenue	2,328,341			(5,979		)	—			—			2,322,362

Programming and other direct costs	758,694			—			—			—			758,694
Other operating expenses	593,690			(5,979		)	(5,055		)	8,566			591,222
Restructuring and other expense	12,388			—			—			—			12,388
Depreciation and amortization	706,787			—			—			3			706,790
Operating income	256,782			—			5,055			(8,569		)	253,268
Other expense, net	(980,640		)	—			(5,055		)	1			(985,694		)
Loss before income taxes	(723,858		)	—			—			(8,568		)	(732,426		)
Income tax benefit	249,068			—			—			3,419			252,487
Net loss	$	(474,790	)	$	—		$	—		$	(5,149	)	$	(479,939	)



	Six Months Ended June 30, 2017
	As Reported			Impact of ASC 606			Impact of ASU No. 2017-07			Impact of ATS Acquisition			As Adjusted
Residential:
Pay TV	$	2,131,218		$	23,823		$	—		$	—		$	2,155,041
Broadband	1,241,185			27,353			—			—			1,268,538
Telephony	419,324			(60,102		)	—			—			359,222
Business services and wholesale	643,531			(470		)	—			—			643,061
Advertising	180,862			—			—			—			180,862
Other	17,897			—			—			—			17,897
Total revenue	4,634,017			(9,396		)	—			—			4,624,621

Programming and other direct costs	1,517,046			—			—			—			1,517,046
Other operating expenses	1,207,127			(9,396		)	(6,931		)	8,566			1,199,366
Restructuring and other expense	89,317			—			—			—			89,317
Depreciation and amortization	1,315,511			—			—			3			1,315,514
Operating income	505,016			—			6,931			(8,569		)	503,378
Other expense, net	(1,350,970		)	—			(6,931		)	1			(1,357,900		)
Loss before income taxes	(845,954		)	—			—			(8,568		)	(854,522		)
Income tax benefit	294,976			—			—			3,419			298,395
Net loss	$	(550,978	)	$	—		$	—		$	(5,149	)	$	(556,127	)