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 nine months ended September 30, 2017, costs of $4,094 and $13,490, 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 September 30, 2017
	As Reported			Impact of ASC 606			Impact of ASU No. 2017-07			Impact of ATS Acquisition			As Adjusted
Residential:
Pay TV	$	1,054,392		$	15,807		$	—		$	(253	)	$	1,069,946
Broadband	646,094			12,372			—			(188		)	658,278
Telephony	204,753			(32,155		)	—			(119		)	172,479
Business services and wholesale	324,760			(118		)	—			—			324,642
Advertising	89,292			—			—			—			89,292
Other	7,884			—			—			—			7,884
Total revenue	2,327,175			(4,094		)	—			(560		)	2,322,521

Programming and other direct costs	755,101			—			—			—			755,101
Other operating expenses	560,497			(4,094		)	(2,921		)	16,629			570,111
Restructuring and other expense	53,448			—			—			—			53,448
Depreciation and amortization	823,265			—			—			21			823,286
Operating income	134,864			—			2,921			(17,210		)	120,575
Other expense, net	(451,638		)	—			(2,921		)	—			(454,559		)
Loss before income taxes	(316,774		)	—			—			(17,210		)	(333,984		)
Income tax benefit	134,688			—			—			6,862			141,550
Net loss	$	(182,086	)	$	—		$	—		$	(10,348	)	$	(192,434	)



	Nine Months Ended September 30, 2017
	As Reported			Impact of ASC 606			Impact of ASU No. 2017-07			Impact of ATS Acquisition			As Adjusted
Residential:
Pay TV	$	3,185,610		$	39,630		$	—		$	(253	)	$	3,224,987
Broadband	1,887,279			39,725			—			(188		)	1,926,816
Telephony	624,077			(92,257		)	—			(119		)	531,701
Business services and wholesale	968,291			(588		)	—			—			967,703
Advertising	270,154			—			—			—			270,154
Other	25,781			—			—			—			25,781
Total revenue	6,961,192			(13,490		)	—			(560		)	6,947,142

Programming and other direct costs	2,272,147			—			—			—			2,272,147
Other operating expenses	1,767,624			(13,490		)	(9,852		)	25,195			1,769,477
Restructuring and other expense	142,765			—			—			—			142,765
Depreciation and amortization	2,138,776			—			—			24			2,138,800
Operating income	639,880			—			9,852			(25,779		)	623,953
Other expense, net	(1,802,608		)	—			(9,852		)	1			(1,812,459		)
Loss before income taxes	(1,162,728		)	—			—			(25,778		)	(1,188,506		)
Income tax benefit	429,664			—			—			10,281			439,945
Net loss	$	(733,064	)	$	—		$	—		$	(15,497	)	$	(748,561	)