CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share data)
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
REVENUES
|
$
|
11,696
|
|
|
$
|
11,347
|
|
|
$
|
23,434
|
|
|
$
|
22,553
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
Operating costs and expenses (exclusive of items shown separately below)
|
7,297
|
|
|
7,244
|
|
|
14,729
|
|
|
14,480
|
|
|
Depreciation and amortization
|
2,428
|
|
|
2,500
|
|
|
4,925
|
|
|
5,050
|
|
|
Other operating expenses, net
|
2
|
|
|
62
|
|
|
9
|
|
|
57
|
|
|
|
9,727
|
|
|
9,806
|
|
|
19,663
|
|
|
19,587
|
|
|
Income from operations
|
1,969
|
|
|
1,541
|
|
|
3,771
|
|
|
2,966
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES):
|
|
|
|
|
|
|
|
|
Interest expense, net
|
(957)
|
|
|
(945)
|
|
|
(1,937)
|
|
|
(1,870)
|
|
|
Loss on extinguishment of debt
|
(36)
|
|
|
—
|
|
|
(63)
|
|
|
—
|
|
|
Gain (loss) on financial instruments, net
|
64
|
|
|
(119)
|
|
|
(254)
|
|
|
(82)
|
|
|
Other pension benefits, net
|
11
|
|
|
9
|
|
|
21
|
|
|
18
|
|
|
Other expense, net
|
(9)
|
|
|
(16)
|
|
|
—
|
|
|
(126)
|
|
|
|
(927)
|
|
|
(1,071)
|
|
|
(2,233)
|
|
|
(2,060)
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
1,042
|
|
|
470
|
|
|
1,538
|
|
|
906
|
|
|
Income tax expense
|
(166)
|
|
|
(84)
|
|
|
(195)
|
|
|
(203)
|
|
|
Consolidated net income
|
876
|
|
|
386
|
|
|
1,343
|
|
|
703
|
|
|
Less: Net income attributable to noncontrolling interests
|
(110)
|
|
|
(72)
|
|
|
(181)
|
|
|
(136)
|
|
|
Net income attributable to Charter shareholders
|
$
|
766
|
|
|
$
|
314
|
|
|
$
|
1,162
|
|
|
$
|
567
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
3.72
|
|
|
$
|
1.41
|
|
|
$
|
5.62
|
|
|
$
|
2.54
|
|
|
Diluted
|
$
|
3.63
|
|
|
$
|
1.39
|
|
|
$
|
5.48
|
|
|
$
|
2.50
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic
|
205,777,438
|
|
|
222,392,274
|
|
|
206,804,371
|
|
|
223,505,016
|
|
|
Weighted average common shares outstanding, diluted
|
210,906,946
|
|
|
225,942,172
|
|
|
212,158,218
|
|
|
226,889,745
|
|
The accompanying notes are an integral part of these consolidated financial statements.
2
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(dollars in millions)
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock
|
Class B Common Stock
|
Additional Paid-in Capital
|
Retained Earnings
|
Treasury Stock
|
Accumulated Other Comprehensive Loss
|
Total Charter Shareholders’ Equity
|
Non-controlling Interests
|
Total Shareholders’ Equity
|
|
BALANCE, December 31, 2019
|
$
|
—
|
|
$
|
—
|
|
$
|
31,405
|
|
$
|
40
|
|
$
|
—
|
|
$
|
—
|
|
$
|
31,445
|
|
$
|
7,366
|
|
$
|
38,811
|
|
|
Consolidated net income
|
—
|
|
—
|
|
—
|
|
396
|
|
—
|
|
—
|
|
396
|
|
71
|
|
467
|
|
|
Stock compensation expense
|
—
|
|
—
|
|
90
|
|
—
|
|
—
|
|
—
|
|
90
|
|
—
|
|
90
|
|
|
Exercise of stock options
|
—
|
|
—
|
|
93
|
|
—
|
|
—
|
|
—
|
|
93
|
|
—
|
|
93
|
|
|
Issuance of equity
|
—
|
|
—
|
|
23
|
|
—
|
|
—
|
|
—
|
|
23
|
|
—
|
|
23
|
|
|
Purchases of treasury stock
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,352)
|
|
—
|
|
(2,352)
|
|
—
|
|
(2,352)
|
|
|
Purchase of noncontrolling interest, net of tax
|
—
|
|
—
|
|
(149)
|
|
—
|
|
—
|
|
—
|
|
(149)
|
|
(195)
|
|
(344)
|
|
|
Change in noncontrolling interest ownership, net of tax
|
—
|
|
—
|
|
82
|
|
—
|
|
—
|
|
—
|
|
82
|
|
(109)
|
|
(27)
|
|
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(39)
|
|
(39)
|
|
|
BALANCE, March 31, 2020
|
—
|
|
—
|
|
31,544
|
|
436
|
|
(2,352)
|
|
—
|
|
29,628
|
|
7,094
|
|
36,722
|
|
|
Consolidated net income
|
—
|
|
—
|
|
—
|
|
766
|
|
—
|
|
—
|
|
766
|
|
110
|
|
876
|
|
|
Stock compensation expense
|
—
|
|
—
|
|
90
|
|
—
|
|
—
|
|
—
|
|
90
|
|
—
|
|
90
|
|
|
Exercise of stock options
|
—
|
|
—
|
|
28
|
|
—
|
|
—
|
|
—
|
|
28
|
|
—
|
|
28
|
|
|
Purchases of treasury stock
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,155)
|
|
—
|
|
(1,155)
|
|
—
|
|
(1,155)
|
|
|
Purchase of noncontrolling interest, net of tax
|
—
|
|
—
|
|
(42)
|
|
—
|
|
—
|
|
—
|
|
(42)
|
|
(69)
|
|
(111)
|
|
|
Change in noncontrolling interest ownership, net of tax
|
—
|
|
—
|
|
41
|
|
—
|
|
—
|
|
—
|
|
41
|
|
(52)
|
|
(11)
|
|
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(38)
|
|
(38)
|
|
|
BALANCE, June 30, 2020
|
$
|
—
|
|
$
|
—
|
|
$
|
31,661
|
|
$
|
1,202
|
|
$
|
(3,507)
|
|
$
|
—
|
|
$
|
29,356
|
|
$
|
7,045
|
|
$
|
36,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock
|
Class B Common Stock
|
Additional Paid-in Capital
|
Retained Earnings
|
Treasury Stock
|
Accumulated Other Comprehensive Loss
|
Total Charter Shareholders’ Equity
|
Non-controlling Interests
|
Total Shareholders’ Equity
|
|
BALANCE, December 31, 2018
|
$
|
—
|
|
$
|
—
|
|
$
|
33,507
|
|
$
|
2,780
|
|
$
|
—
|
|
$
|
(2)
|
|
$
|
36,285
|
|
$
|
7,987
|
|
$
|
44,272
|
|
|
Consolidated net income
|
—
|
|
—
|
|
—
|
|
253
|
|
—
|
|
—
|
|
253
|
|
64
|
|
317
|
|
|
Stock compensation expense
|
—
|
|
—
|
|
85
|
|
—
|
|
—
|
|
—
|
|
85
|
|
—
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
—
|
|
—
|
|
44
|
|
—
|
|
—
|
|
—
|
|
44
|
|
—
|
|
44
|
|
|
Purchases of treasury stock
|
—
|
|
—
|
|
—
|
|
—
|
|
(940)
|
|
—
|
|
(940)
|
|
—
|
|
(940)
|
|
|
Purchase of noncontrolling interest, net of tax
|
—
|
|
—
|
|
(15)
|
|
—
|
|
—
|
|
—
|
|
(15)
|
|
(74)
|
|
(89)
|
|
|
Change in noncontrolling interest ownership, net of tax
|
—
|
|
—
|
|
22
|
|
—
|
|
—
|
|
—
|
|
22
|
|
(29)
|
|
(7)
|
|
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(39)
|
|
(39)
|
|
|
BALANCE, March 31, 2019
|
—
|
|
—
|
|
33,643
|
|
3,033
|
|
(940)
|
|
(2)
|
|
35,734
|
|
7,909
|
|
43,643
|
|
|
Consolidated net income
|
—
|
|
—
|
|
—
|
|
314
|
|
—
|
|
—
|
|
314
|
|
72
|
|
386
|
|
|
Stock compensation expense
|
—
|
|
—
|
|
82
|
|
—
|
|
—
|
|
—
|
|
82
|
|
—
|
|
82
|
|
|
Exercise of stock options
|
—
|
|
—
|
|
37
|
|
—
|
|
—
|
|
—
|
|
37
|
|
—
|
|
37
|
|
|
Purchases of treasury stock
|
—
|
|
—
|
|
—
|
|
—
|
|
(861)
|
|
—
|
|
(861)
|
|
—
|
|
(861)
|
|
|
Purchase of noncontrolling interest, net of tax
|
—
|
|
—
|
|
(37)
|
|
—
|
|
—
|
|
—
|
|
(37)
|
|
(111)
|
|
(148)
|
|
|
Change in noncontrolling interest ownership, net of tax
|
—
|
|
—
|
|
17
|
|
—
|
|
—
|
|
—
|
|
17
|
|
(23)
|
|
(6)
|
|
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(39)
|
|
(39)
|
|
|
BALANCE, June 30, 2019
|
$
|
—
|
|
$
|
—
|
|
$
|
33,742
|
|
$
|
3,347
|
|
$
|
(1,801)
|
|
$
|
(2)
|
|
$
|
35,286
|
|
$
|
7,808
|
|
$
|
43,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
3
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Consolidated net income
|
$
|
1,343
|
|
|
$
|
703
|
|
|
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
|
|
|
|
|
Depreciation and amortization
|
4,925
|
|
|
5,050
|
|
|
Stock compensation expense
|
180
|
|
|
167
|
|
|
Noncash interest income, net
|
(21)
|
|
|
(72)
|
|
|
Other pension benefits, net
|
(21)
|
|
|
(18)
|
|
|
Loss on extinguishment of debt
|
63
|
|
|
—
|
|
|
Loss on financial instruments, net
|
254
|
|
|
82
|
|
|
Deferred income taxes
|
101
|
|
|
137
|
|
|
Other, net
|
(17)
|
|
|
151
|
|
|
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
|
|
|
|
|
Accounts receivable
|
233
|
|
|
(337)
|
|
|
Prepaid expenses and other assets
|
(164)
|
|
|
(176)
|
|
|
Accounts payable, accrued liabilities and other
|
(127)
|
|
|
(240)
|
|
|
Net cash flows from operating activities
|
6,749
|
|
|
5,447
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Purchases of property, plant and equipment
|
(3,338)
|
|
|
(3,262)
|
|
|
Change in accrued expenses related to capital expenditures
|
(174)
|
|
|
(428)
|
|
|
Real estate investments through variable interest entities
|
(81)
|
|
|
(64)
|
|
|
Other, net
|
(8)
|
|
|
8
|
|
|
Net cash flows from investing activities
|
(3,601)
|
|
|
(3,746)
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Borrowings of long-term debt
|
7,322
|
|
|
10,714
|
|
|
Repayments of long-term debt
|
(7,892)
|
|
|
(10,123)
|
|
|
Payments for debt issuance costs
|
(62)
|
|
|
(32)
|
|
|
Issuance of equity
|
23
|
|
|
—
|
|
|
Purchase of treasury stock
|
(3,507)
|
|
|
(1,801)
|
|
|
Proceeds from exercise of stock options
|
121
|
|
|
81
|
|
|
Purchase of noncontrolling interest
|
(518)
|
|
|
(254)
|
|
|
Distributions to noncontrolling interest
|
(77)
|
|
|
(78)
|
|
|
Borrowings for real estate investments through variable interest entities
|
24
|
|
|
—
|
|
|
Distributions to variable interest entities noncontrolling interest
|
(4)
|
|
|
—
|
|
|
Other, net
|
(25)
|
|
|
(127)
|
|
|
Net cash flows from financing activities
|
(4,595)
|
|
|
(1,620)
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
(1,447)
|
|
|
81
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period
|
3,549
|
|
|
765
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
|
$
|
2,102
|
|
|
$
|
846
|
|
|
|
|
|
|
|
CASH PAID FOR INTEREST
|
$
|
1,985
|
|
|
$
|
2,017
|
|
|
CASH PAID FOR TAXES
|
$
|
50
|
|
|
$
|
43
|
|
The accompanying notes are an integral part of these consolidated financial statements.
4
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
1. Organization and Basis of Presentation
Organization
Charter Communications, Inc. (together with its controlled subsidiaries, “Charter,” or the “Company”) is a leading broadband connectivity company and cable operator. Over an advanced communications network, the Company offers a full range of state-of-the-art residential and business services including Spectrum Internet, TV, Mobile and Voice. For small and medium-sized companies, Spectrum Business® delivers the same suite of broadband products and services coupled with special features and applications to enhance productivity, while for larger businesses and government entities, Spectrum Enterprise provides highly customized, fiber-based solutions. Spectrum Reach® delivers tailored advertising and production for the modern media landscape. The Company also distributes award-winning news coverage, sports and high-quality original programming to its customers through Spectrum Networks and Spectrum Originals.
Charter is a holding company whose principal asset is a controlling equity interest in Charter Communications Holdings, LLC (“Charter Holdings”), an indirect owner of Charter Communications Operating, LLC (“Charter Operating”) under which substantially all of the operations reside. All significant intercompany accounts and transactions among consolidated entities have been eliminated.
The Company’s operations are managed and reported to its Chairman and Chief Executive Officer (“CEO”), the Company’s chief operating decision maker, on a consolidated basis. The CEO assesses performance and allocates resources based on the consolidated results of operations. Under this organizational and reporting structure, the Company has one reportable segment, cable services.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures typically included in Charter’s Annual Report on Form 10-K have been condensed or omitted for this quarterly report. The accompanying consolidated financial statements are unaudited and are subject to review by regulatory authorities. However, in the opinion of management, such financial statements include all adjustments, which consist of only normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. Interim results are not necessarily indicative of results for a full year.
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 assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant judgments and estimates include capitalization of labor and overhead costs, impairments of franchises and goodwill, pension benefits and income taxes. Actual results could differ from those estimates.
Certain prior period amounts have been reclassified to conform with the 2020 presentation.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
2. Franchises, Goodwill and Other Intangible Assets
Indefinite-lived and finite-lived intangible assets consist of the following as of June 30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchises
|
|
$
|
67,322
|
|
|
$
|
—
|
|
|
$
|
67,322
|
|
|
$
|
67,322
|
|
|
$
|
—
|
|
|
$
|
67,322
|
|
|
Goodwill
|
|
29,554
|
|
|
—
|
|
|
29,554
|
|
|
29,554
|
|
|
—
|
|
|
29,554
|
|
|
Trademarks
|
|
159
|
|
|
—
|
|
|
159
|
|
|
159
|
|
|
—
|
|
|
159
|
|
|
|
|
$
|
97,035
|
|
|
$
|
—
|
|
|
$
|
97,035
|
|
|
$
|
97,035
|
|
|
$
|
—
|
|
|
$
|
97,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
18,230
|
|
|
$
|
(11,744)
|
|
|
$
|
6,486
|
|
|
$
|
18,230
|
|
|
$
|
(10,777)
|
|
|
$
|
7,453
|
|
|
Other intangible assets
|
|
405
|
|
|
(141)
|
|
|
264
|
|
|
405
|
|
|
(122)
|
|
|
283
|
|
|
|
|
$
|
18,635
|
|
|
$
|
(11,885)
|
|
|
$
|
6,750
|
|
|
$
|
18,635
|
|
|
$
|
(10,899)
|
|
|
$
|
7,736
|
|
Amortization expense related to customer relationships and other intangible assets for the three and six months ended June 30, 2020 was $478 million and $986 million, respectively, and $548 million and $1.1 billion for the three and six months ended June 30, 2019, respectively.
The Company expects amortization expense on its finite-lived intangible assets will be as follows:
|
|
|
|
|
|
|
|
|
|
|
Six months ended December 31, 2020
|
|
$
|
889
|
|
|
2021
|
|
1,599
|
|
|
2022
|
|
1,329
|
|
|
2023
|
|
1,072
|
|
|
2024
|
|
821
|
|
|
Thereafter
|
|
1,040
|
|
|
|
|
$
|
6,750
|
|
Actual amortization expense in future periods will differ from these estimates as a result of new intangible asset acquisitions or divestitures, changes in useful lives, impairments and other relevant factors.
3. Investments
Real Estate Investments through Variable Interest Entities
In July 2018, the Company entered into a build-to-suit lease arrangement with a single-asset special purpose entity ("SPE Building 1") to build the first building in the building complex for the new Charter headquarters in Stamford, Connecticut. The SPE Building 1 obtained a first-lien mortgage note to finance the construction with fixed monthly payments through July 15, 2035 with a 5.612% coupon interest rate. All payments of the mortgage note are guaranteed by Charter. The initial term of the lease is 15 years commencing August 1, 2020, with no termination options. At the end of the lease term there is a mirrored put option for the SPE to sell the property to Charter and call option for Charter to purchase the property for a fixed purchase price.
In April 2020, the Company entered into a build-to-suit lease agreement with a second special purpose entity (“SPE Building 2”) to build the adjoining building and atrium, in the building complex for the new Charter headquarters in Stamford, Connecticut. As of June 30, 2020, Charter does not guarantee the financing for SPE Building 2. The initial term of the lease is 15 years commencing February 26, 2022, with no termination options. At the end of the lease term there is a put option for the SPE Building 2 to sell the property to Charter for a fixed price. If SPE Building 2 does not exercise the put option and Company exercises its first renewal term there is call option for Charter to purchase property for a fixed purchase price in year 3 of the first renewal term.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
As the Company has determined that SPE Building 1 and SPE Building 2 (collectively, the "SPEs") are variable interest entities ("VIEs") of which the Company became the primary beneficiary upon the effectiveness of the arrangements in July 2018 and April 2020, respectively, the Company has consolidated the assets and liabilities of the SPEs in its consolidated balance sheets as of June 30, 2020 and December 31, 2019 as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
December 31, 2019
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
$
|
5
|
|
|
$
|
66
|
|
|
Property, plant and equipment
|
$
|
389
|
|
|
$
|
295
|
|
|
Liabilities
|
|
|
|
|
Current liabilities
|
$
|
24
|
|
|
$
|
11
|
|
|
Other long-term liabilities
|
$
|
371
|
|
|
$
|
350
|
|
Property, plant and equipment includes land, a parking garage and building construction costs, including the capitalization of qualifying interest. Other long-term liabilities includes mortgage note liabilities and liability-classified noncontrolling interests for the SPEs recorded at amortized cost with accretion towards settlement of the put/call option in the leases. As of June 30, 2020 and December 31, 2019, other long-term liabilities include $335 million and $339 million, respectively, in SPE Building 1 mortgage note liability.
The consolidated statement of cash flows for the six months ended June 30, 2020 includes a decrease to restricted cash of $61 million related to $81 million in building construction costs for the SPEs and $4 million in distributions to noncontrolling interests for SPE Building 1 offset by $24 million in borrowings for real estate investments for SPE Building 2. The consolidated statement of cash flows for the six months ended June 30, 2019 includes a decrease to restricted cash of $64 million related to building construction costs for SPE Building 1.
Equity Investments
The Company recorded impairments on equity investments of approximately $11 million and $121 million during the three and six months ended June 30, 2019 which were recorded in other expense, net in the consolidated statements of operations.
4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following as of June 30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
December 31, 2019
|
|
Accounts payable – trade
|
$
|
667
|
|
|
$
|
786
|
|
|
Deferred revenue
|
471
|
|
|
460
|
|
|
Accrued liabilities:
|
|
|
|
|
Programming costs
|
2,033
|
|
|
2,042
|
|
|
Labor
|
919
|
|
|
1,028
|
|
|
Capital expenditures
|
1,211
|
|
|
1,441
|
|
|
Interest
|
1,040
|
|
|
1,052
|
|
|
Taxes and regulatory fees
|
582
|
|
|
537
|
|
|
Property and casualty
|
472
|
|
|
458
|
|
|
Operating lease liabilities
|
223
|
|
|
214
|
|
|
Other
|
818
|
|
|
867
|
|
|
|
$
|
8,436
|
|
|
$
|
8,885
|
|
5. Leases
Operating lease expenses were $108 million and $216 million for the three and six months ended June 30, 2020, respectively, and $109 million and $216 million for the three and six months ended June 30, 2019, respectively, inclusive of $32 million and
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
$67 million for the three and six months ended June 30, 2020, respectively, and $30 million and $65 million for the three and six months ended June 30, 2019, respectively, of both short-term lease costs and variable lease costs that were not included in the measurement of operating lease liabilities.
Cash paid for amounts included in the measurement of operating lease liabilities, recorded as operating cash flows in the statements of cash flows, were $147 million for both the six months ended June 30, 2020 and 2019. Operating lease right-of-use assets obtained in exchange for operating lease obligations were $164 million and $161 million for the six months ended June 30, 2020 and 2019, respectively.
Supplemental balance sheet information related to leases is as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
December 31, 2019
|
|
|
|
|
|
|
Operating lease right-of-use assets:
|
|
|
|
|
Included within other noncurrent assets
|
$
|
1,132
|
|
|
$
|
1,092
|
|
|
|
|
|
|
|
Operating lease liabilities:
|
|
|
|
|
Current portion included within accounts payable and accrued liabilities
|
$
|
223
|
|
|
$
|
214
|
|
|
Long-term portion included within other long-term liabilities
|
1,022
|
|
|
979
|
|
|
|
$
|
1,245
|
|
|
$
|
1,193
|
|
|
|
|
|
|
|
Weighted average remaining lease term for operating leases
|
6.4 years
|
|
6.6 years
|
|
Weighted average discount rate for operating leases
|
4.2
|
%
|
|
4.4
|
%
|
Maturities of lease liabilities are as follows.
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
|
Six months ended December 31, 2020
|
$
|
149
|
|
|
|
|
2021
|
282
|
|
|
|
|
2022
|
245
|
|
|
|
|
2023
|
216
|
|
|
|
|
2024
|
178
|
|
|
|
|
Thereafter
|
441
|
|
|
|
|
Undiscounted lease cash flow commitments
|
1,511
|
|
|
|
|
Reconciling impact from discounting
|
(266)
|
|
|
|
|
Lease liabilities on consolidated balance sheet as of June 30, 2020
|
$
|
1,245
|
|
|
|
The Company has $61 million and $62 million of finance lease liabilities recognized in the consolidated balance sheets as of June 30, 2020 and December 31, 2019, respectively, included within accounts payable and accrued liabilities and other long-term liabilities. The related finance lease right-of-use assets are recorded in property, plant and equipment, net. The Company’s finance leases were not considered material for further supplemental lease disclosures.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
6. Long-Term Debt
Long-term debt consists of the following as of June 30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
December 31, 2019
|
|
|
|
|
Principal Amount
|
|
Accreted Value
|
|
Principal Amount
|
|
Accreted Value
|
|
CCO Holdings, LLC:
|
|
|
|
|
|
|
|
|
5.250% senior notes due September 30, 2022
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,250
|
|
|
$
|
1,241
|
|
|
5.125% senior notes due February 15, 2023
|
—
|
|
|
—
|
|
|
1,000
|
|
|
995
|
|
|
4.000% senior notes due March 1, 2023
|
500
|
|
|
498
|
|
|
500
|
|
|
497
|
|
|
5.125% senior notes due May 1, 2023
|
—
|
|
|
—
|
|
|
1,150
|
|
|
1,145
|
|
|
5.750% senior notes due September 1, 2023
|
—
|
|
|
—
|
|
|
500
|
|
|
497
|
|
|
5.750% senior notes due January 15, 2024
|
—
|
|
|
—
|
|
|
150
|
|
|
149
|
|
|
5.875% senior notes due April 1, 2024
|
1,700
|
|
|
1,691
|
|
|
1,700
|
|
|
1,690
|
|
|
5.375% senior notes due May 1, 2025
|
750
|
|
|
746
|
|
|
750
|
|
|
746
|
|
|
5.750% senior notes due February 15, 2026
|
2,500
|
|
|
2,473
|
|
|
2,500
|
|
|
2,471
|
|
|
5.500% senior notes due May 1, 2026
|
1,500
|
|
|
1,492
|
|
|
1,500
|
|
|
1,491
|
|
|
5.875% senior notes due May 1, 2027
|
800
|
|
|
796
|
|
|
800
|
|
|
796
|
|
|
5.125% senior notes due May 1, 2027
|
3,250
|
|
|
3,224
|
|
|
3,250
|
|
|
3,222
|
|
|
5.000% senior notes due February 1, 2028
|
2,500
|
|
|
2,470
|
|
|
2,500
|
|
|
2,469
|
|
|
5.375% senior notes due June 1, 2029
|
1,500
|
|
|
1,501
|
|
|
1,500
|
|
|
1,501
|
|
|
4.750% senior notes due March 1, 2030
|
3,050
|
|
|
3,041
|
|
|
3,050
|
|
|
3,041
|
|
|
4.500% senior notes due August 15, 2030
|
2,750
|
|
|
2,750
|
|
|
—
|
|
|
—
|
|
|
4.500% senior notes due May 1, 2032
|
1,400
|
|
|
1,387
|
|
|
—
|
|
|
—
|
|
|
Charter Communications Operating, LLC:
|
|
|
|
|
|
|
|
|
3.579% senior notes due July 23, 2020
|
—
|
|
|
—
|
|
|
2,000
|
|
|
1,997
|
|
|
4.464% senior notes due July 23, 2022
|
3,000
|
|
|
2,989
|
|
|
3,000
|
|
|
2,987
|
|
|
Senior floating rate notes due February 1, 2024
|
900
|
|
|
902
|
|
|
900
|
|
|
902
|
|
|
4.500% senior notes due February 1, 2024
|
1,100
|
|
|
1,094
|
|
|
1,100
|
|
|
1,093
|
|
|
4.908% senior notes due July 23, 2025
|
4,500
|
|
|
4,473
|
|
|
4,500
|
|
|
4,471
|
|
|
3.750% senior notes due February 15, 2028
|
1,000
|
|
|
988
|
|
|
1,000
|
|
|
987
|
|
|
4.200% senior notes due March 15, 2028
|
1,250
|
|
|
1,241
|
|
|
1,250
|
|
|
1,240
|
|
|
5.050% senior notes due March 30, 2029
|
1,250
|
|
|
1,241
|
|
|
1,250
|
|
|
1,241
|
|
|
2.800% senior notes due April 1, 2031
|
1,600
|
|
|
1,582
|
|
|
—
|
|
|
—
|
|
|
6.384% senior notes due October 23, 2035
|
2,000
|
|
|
1,983
|
|
|
2,000
|
|
|
1,982
|
|
|
5.375% senior notes due April 1, 2038
|
800
|
|
|
786
|
|
|
800
|
|
|
786
|
|
|
6.484% senior notes due October 23, 2045
|
3,500
|
|
|
3,467
|
|
|
3,500
|
|
|
3,467
|
|
|
5.375% senior notes due May 1, 2047
|
2,500
|
|
|
2,506
|
|
|
2,500
|
|
|
2,506
|
|
|
5.750% senior notes due April 1, 2048
|
2,450
|
|
|
2,391
|
|
|
2,450
|
|
|
2,391
|
|
|
5.125% senior notes due July 1, 2049
|
1,250
|
|
|
1,240
|
|
|
1,250
|
|
|
1,240
|
|
|
4.800% senior notes due March 1, 2050
|
2,800
|
|
|
2,797
|
|
|
2,800
|
|
|
2,798
|
|
|
3.700% senior notes due April 1, 2051
|
1,400
|
|
|
1,379
|
|
|
—
|
|
|
—
|
|
|
6.834% senior notes due October 23, 2055
|
500
|
|
|
495
|
|
|
500
|
|
|
495
|
|
|
Credit facilities
|
10,288
|
|
|
10,213
|
|
|
10,427
|
|
|
10,345
|
|
|
Time Warner Cable, LLC:
|
|
|
|
|
|
|
|
|
5.000% senior notes due February 1, 2020
|
—
|
|
|
—
|
|
|
1,500
|
|
|
1,503
|
|
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.125% senior notes due February 15, 2021
|
700
|
|
|
706
|
|
|
700
|
|
|
711
|
|
|
4.000% senior notes due September 1, 2021
|
1,000
|
|
|
1,015
|
|
|
1,000
|
|
|
1,021
|
|
|
5.750% sterling senior notes due June 2, 2031 (a)
|
775
|
|
|
827
|
|
|
828
|
|
|
886
|
|
|
6.550% senior debentures due May 1, 2037
|
1,500
|
|
|
1,672
|
|
|
1,500
|
|
|
1,675
|
|
|
7.300% senior debentures due July 1, 2038
|
1,500
|
|
|
1,768
|
|
|
1,500
|
|
|
1,772
|
|
|
6.750% senior debentures due June 15, 2039
|
1,500
|
|
|
1,709
|
|
|
1,500
|
|
|
1,713
|
|
|
5.875% senior debentures due November 15, 2040
|
1,200
|
|
|
1,254
|
|
|
1,200
|
|
|
1,255
|
|
|
5.500% senior debentures due September 1, 2041
|
1,250
|
|
|
1,258
|
|
|
1,250
|
|
|
1,258
|
|
|
5.250% sterling senior notes due July 15, 2042 (b)
|
805
|
|
|
778
|
|
|
861
|
|
|
831
|
|
|
4.500% senior debentures due September 15, 2042
|
1,250
|
|
|
1,143
|
|
|
1,250
|
|
|
1,142
|
|
|
Time Warner Cable Enterprises LLC:
|
|
|
|
|
|
|
|
|
8.375% senior debentures due March 15, 2023
|
1,000
|
|
|
1,126
|
|
|
1,000
|
|
|
1,148
|
|
|
8.375% senior debentures due July 15, 2033
|
1,000
|
|
|
1,277
|
|
|
1,000
|
|
|
1,284
|
|
|
Total debt
|
77,768
|
|
|
78,369
|
|
|
78,416
|
|
|
79,078
|
|
|
Less current portion:
|
|
|
|
|
|
|
|
|
5.000% senior notes due February 1, 2020
|
—
|
|
|
—
|
|
|
(1,500)
|
|
|
(1,503)
|
|
|
3.579% senior notes due July 23, 2020
|
—
|
|
|
—
|
|
|
(2,000)
|
|
|
(1,997)
|
|
|
4.125% senior notes due February 15, 2021
|
(700)
|
|
|
(706)
|
|
|
—
|
|
|
—
|
|
|
Long-term debt
|
$
|
77,068
|
|
|
$
|
77,663
|
|
|
$
|
74,916
|
|
|
$
|
75,578
|
|
(a)Principal amount includes £625 million remeasured at $775 million and $828 million as of June 30, 2020 and December 31, 2019, respectively, using the exchange rate at the respective dates.
(b)Principal amount includes £650 million remeasured at $805 million and $861 million as of June 30, 2020 and December 31, 2019, respectively, using the exchange rate at the respective dates.
The accreted values presented in the table above represent the principal amount of the debt adjusted for original issue discount or premium at the time of sale, deferred financing costs, and, in regards to debt assumed in acquisitions, fair value premium adjustments as a result of applying acquisition accounting plus the accretion of those amounts to the balance sheet date. However, the amount that is currently payable if the debt becomes immediately due is equal to the principal amount of the debt. In regards to the fixed-rate British pound sterling denominated notes (the “Sterling Notes”), the principal amount of the debt and any premium or discount is remeasured into US dollars as of each balance sheet date. See Note 9. The Company has availability under the Charter Operating credit facilities of approximately $4.7 billion as of June 30, 2020.
In February 2020, CCO Holdings, LLC ("CCO Holdings") and CCO Holdings Capital Corp. jointly issued $1.65 billion aggregate principal amount of 4.500% senior unsecured notes due 2030 at par and in March 2020, an additional $1.1 billion of the same series of notes were issued at a price of 102.5% of the aggregate principal amount. Also in March 2020, CCO Holdings and CCO Holdings Capital Corp. issued $1.4 billion aggregate principal amount of 4.500% senior unsecured notes due 2032 at par. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.250% senior notes due September 30, 2022, 5.125% senior notes due February 15, 2023, 5.125% senior notes due May 1, 2023, 5.750% senior notes due September 1, 2023 and 5.750% senior notes due January 15, 2024, as well as funding buybacks of Charter Class A common stock and Charter Holdings common units. The Company recorded a loss on extinguishment of debt of $36 million and $63 million during the three and six months ended June 30, 2020, respectively, related to these transactions.
In July 2020, CCO Holdings and CCO Holdings Capital Corp. jointly issued $1.5 billion aggregate principal amount of 4.250% senior unsecured notes due 2031 at par and later in July 2020, an additional $1.5 billion of the same series of notes were issued at a price of 102%. The net proceeds will be used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.875% senior notes due April 1, 2024, as well as funding buybacks of Charter Class A common stock and Charter Holdings common units.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
The CCO Holdings notes are senior debt obligations of CCO Holdings and CCO Holdings Capital Corp. and rank equally with all other current and future unsecured, unsubordinated obligations of CCO Holdings and CCO Holdings Capital Corp. They are structurally subordinated to all obligations of subsidiaries of CCO Holdings.
CCO Holdings may redeem some or all of the notes at any time at a premium. Beginning in 2028 and 2029, the optional redemption price declines to 100% of the principal amount, plus accrued and unpaid interest, if any.
In addition, at any time prior to varying dates in 2023, CCO Holdings may redeem up to 40% of the aggregate principal amount of the notes at a premium plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more equity offerings (as defined in the indenture); provided that certain conditions are met. In the event of specified change of control events, CCO Holdings must offer to purchase the outstanding notes from the holders at a purchase price equal to 101% of the total principal amount of the notes, plus any accrued and unpaid interest.
In April 2020, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.6 billion aggregate principal amount of 2.800% senior secured notes due April 2031 at a price of 99.561% of the aggregate principal amount and $1.4 billion aggregate principal amount of 3.700% senior secured notes due April 2051 at a price of 99.217% of the aggregate principal amount. The net proceeds were used to pay related fees and expenses and for general corporate purposes.
In June 2020, Charter Operating and Charter Communications Operating Capital Corp. redeemed all of their 3.579% senior secured notes due July 2020.
The Charter Operating notes are guaranteed by CCO Holdings and substantially all of the operating subsidiaries of Charter Operating. In addition, the Charter Operating notes are secured by a perfected first priority security interest in substantially all of the assets of Charter Operating to the extent such liens can be perfected under the Uniform Commercial Code by the filing of a financing statement and the liens rank equally with the liens on the collateral securing obligations under the Charter Operating credit facilities. Charter Operating may redeem some or all of the Charter Operating notes at any time at a premium.
The Charter Operating notes are subject to the terms and conditions of the indenture governing the Charter Operating notes. The Charter Operating notes contain customary representations and warranties and affirmative covenants with limited negative covenants. The Charter Operating indenture also contains customary events of default.
7. Common Stock
The following represents the Company's purchase of Charter Class A common stock and the effect on the consolidated statements of cash flows during the three and six months ended June 30, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
Shares
|
|
$
|
|
Shares
|
|
$
|
|
Shares
|
|
$
|
|
Shares
|
|
$
|
|
Share buybacks
|
2,028,234
|
|
|
$
|
1,026
|
|
|
2,247,279
|
|
|
$
|
837
|
|
|
6,480,783
|
|
|
$
|
3,202
|
|
|
4,862,996
|
|
|
$
|
1,707
|
|
|
Income tax withholding
|
247,651
|
|
|
129
|
|
|
63,425
|
|
|
24
|
|
|
583,305
|
|
|
305
|
|
|
278,040
|
|
|
94
|
|
|
Exercise cost
|
188,923
|
|
|
|
|
90,951
|
|
|
|
|
430,675
|
|
|
|
|
185,170
|
|
|
|
|
|
2,464,808
|
|
|
$
|
1,155
|
|
|
2,401,655
|
|
|
$
|
861
|
|
|
7,494,763
|
|
|
$
|
3,507
|
|
|
5,326,206
|
|
|
$
|
1,801
|
|
As of June 30, 2020, Charter had remaining board authority to purchase an additional $837 million of Charter’s Class A common stock and/or Charter Holdings common units. The Company also withholds shares of its Class A common stock in payment of income tax withholding owed by employees upon vesting of equity awards as well as exercise costs owed by employees upon exercise of stock options.
In 2019, Charter’s board of directors approved the retirement of the then currently held treasury stock and those shares were retired as of December 31, 2019. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of total shareholders’ equity.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
In March 2020, pursuant to the terms of the Amended and Restated Stockholders Agreement with Liberty Broadband Corporation (“Liberty Broadband”), Advance/Newhouse Partnership (“A/N”) and Charter, dated May 23, 2015, Charter, Liberty and A/N closed on transactions in which Liberty Broadband and A/N exercised their preemptive right to purchase 35,112 and 20,182 shares, respectively, of Charter Class A common stock for a total purchase price of approximately $23 million.
8. Noncontrolling Interests
Noncontrolling interests represents consolidated subsidiaries of which the Company owns less than 100%. The Company is a holding company whose principal asset is a controlling equity interest in Charter Holdings, the indirect owner of the Company’s cable systems. Noncontrolling interests on the Company’s balance sheet consist primarily of A/N's equity interests in Charter Holdings, which is comprised of a common ownership interest and a convertible preferred ownership interest.
Net income of Charter Holdings attributable to A/N’s common noncontrolling interest for financial reporting purposes is based on the effective common ownership interest of approximately 8%, and was $72 million and $105 million for the three and six months ended June 30, 2020, respectively, and $34 million and $60 million or the three and six months ended June 30, 2019, respectively. Net income of Charter Holdings attributable to A/N's preferred noncontrolling interest for financial reporting purposes is based on the preferred dividend which was $37 million and $75 million for each of the three and six months ended June 30, 2020 and 2019, respectively.
The following table represents Charter Holdings' purchase of Charter Holdings common units from A/N pursuant to the Letter Agreement (see Note 18) and the effect on total shareholders' equity during the three and six months ended June 30, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Number of units purchased
|
280,069
|
|
|
447,793
|
|
|
1,075,676
|
|
|
750,735
|
|
|
Average price per unit
|
$
|
445.15
|
|
|
$
|
358.21
|
|
|
$
|
481.68
|
|
|
$
|
338.12
|
|
|
Amount of units purchased
|
$
|
125
|
|
|
$
|
161
|
|
|
$
|
518
|
|
|
$
|
254
|
|
|
Decrease in noncontrolling interest based on carrying value
|
$
|
(69)
|
|
|
$
|
(111)
|
|
|
$
|
(264)
|
|
|
$
|
(185)
|
|
|
Decrease in additional paid-in-capital, net of tax
|
$
|
(42)
|
|
|
$
|
(37)
|
|
|
$
|
(191)
|
|
|
$
|
(52)
|
|
Total shareholders' equity was also adjusted during the three and six months ended June 30, 2020 and 2019 due to the changes in Charter Holdings' ownership as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Decrease in noncontrolling interest
|
$
|
(52)
|
|
|
$
|
(23)
|
|
|
$
|
(161)
|
|
|
$
|
(52)
|
|
|
Increase in additional paid-in-capital, net of tax
|
$
|
41
|
|
|
$
|
17
|
|
|
$
|
123
|
|
|
$
|
39
|
|
9. Accounting for Derivative Instruments and Hedging Activities
The Company uses derivative instruments to manage foreign exchange risk on the Sterling Notes, and does not hold or issue derivative instruments for speculative trading purposes.
Cross-currency derivative instruments are used to effectively convert £1.275 billion aggregate principal amount of fixed-rate British pound sterling denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt. The cross-currency swaps have maturities of June 2031 and July 2042. The Company is required to post collateral on the cross-currency derivative instruments when the derivative contracts are in a liability position. In April 2019, the Company entered into a collateral holiday agreement for 60% of both the 2031 and 2042 cross-currency swaps, which eliminates the requirement to post collateral for three years, as well as a ten year collateral cap on the remaining 40% of the cross-currency swaps which limits the required collateral posting on that 40% of the cross-currency swaps to $150
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
million. The fair value of the Company's cross-currency derivatives was $589 million and $224 million and is included in other long-term liabilities on its consolidated balance sheets as of June 30, 2020 and December 31, 2019, respectively.
The Company’s derivative instruments are not designated as hedges and are marked to fair value each period, with the impact recorded as a gain or loss on financial instruments, net in the consolidated statements of operations. While these derivative instruments are not designated as hedges for accounting purposes, management continues to believe such instruments are closely correlated with the respective debt, thus managing associated risk.
The effect of financial instruments on the consolidated statements of operations is presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Gain (Loss) on Financial Instruments, Net:
|
|
|
|
|
|
|
|
|
Change in fair value of cross-currency derivative instruments
|
$
|
61
|
|
|
$
|
(163)
|
|
|
$
|
(365)
|
|
|
$
|
(86)
|
|
|
Foreign currency remeasurement of Sterling Notes to U.S. dollars
|
3
|
|
|
44
|
|
|
111
|
|
|
4
|
|
|
|
$
|
64
|
|
|
$
|
(119)
|
|
|
$
|
(254)
|
|
|
$
|
(82)
|
|
10. Fair Value Measurements
Accounting guidance establishes a three-level hierarchy for disclosure of fair value measurements, based on the transparency of inputs to the valuation of an asset or liability as of the measurement date, as follows:
•Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
•Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Financial Assets and Liabilities
The Company has estimated the fair value of its financial instruments as of June 30, 2020 and December 31, 2019 using available market information or other appropriate valuation methodologies. Considerable judgment, however, is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented in the accompanying consolidated financial statements are not necessarily indicative of the amounts the Company would realize in a current market exchange.
The carrying amounts of cash and cash equivalents, restricted cash, receivables, payables and other current assets and liabilities approximate fair value because of the short maturity of those instruments.
Financial instruments accounted for at fair value on a recurring basis and classified within Level 2 of the valuation hierarchy include the Company's cross-currency derivative instruments and were valued at $589 million and $224 million as of June 30, 2020 and December 31, 2019, respectively.
The estimated fair value of the Company’s senior notes and debentures as of June 30, 2020 and December 31, 2019 is based on quoted market prices in active markets and is classified within Level 1 of the valuation hierarchy, while the estimated fair value of the Company’s credit facilities is based on quoted market prices in inactive markets and is classified within Level 2. The carrying amount of the consolidated variable interest entity's mortgage note liability approximates fair value.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
A summary of the carrying value and fair value of debt as of June 30, 2020 and December 31, 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
December 31, 2019
|
|
|
|
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
Senior notes and debentures
|
|
$
|
68,156
|
|
|
$
|
74,279
|
|
|
$
|
68,733
|
|
|
$
|
74,938
|
|
|
Credit facilities
|
|
$
|
10,213
|
|
|
$
|
9,926
|
|
|
$
|
10,345
|
|
|
$
|
10,448
|
|
Nonfinancial Assets and Liabilities
The Company’s nonfinancial assets such as equity-method investments, franchises, property, plant, and equipment, and other intangible assets are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist. When such impairments are recorded, fair values are generally classified within Level 3 of the valuation hierarchy.
11. Revenues
The Company’s revenues by product line are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Internet
|
$
|
4,530
|
|
|
$
|
4,103
|
|
|
$
|
8,937
|
|
|
$
|
8,127
|
|
|
Video
|
4,371
|
|
|
4,391
|
|
|
8,793
|
|
|
8,775
|
|
|
Voice
|
451
|
|
|
489
|
|
|
908
|
|
|
993
|
|
|
Residential revenue
|
9,352
|
|
|
8,983
|
|
|
18,638
|
|
|
17,895
|
|
|
|
|
|
|
|
|
|
|
|
Small and medium business
|
983
|
|
|
963
|
|
|
1,979
|
|
|
1,908
|
|
|
Enterprise
|
606
|
|
|
652
|
|
|
1,228
|
|
|
1,295
|
|
|
Commercial revenue
|
1,589
|
|
|
1,615
|
|
|
3,207
|
|
|
3,203
|
|
|
|
|
|
|
|
|
|
|
|
Advertising sales
|
249
|
|
|
395
|
|
|
614
|
|
|
740
|
|
|
Mobile
|
310
|
|
|
158
|
|
|
568
|
|
|
298
|
|
|
Other
|
196
|
|
|
196
|
|
|
407
|
|
|
417
|
|
|
|
$
|
11,696
|
|
|
$
|
11,347
|
|
|
$
|
23,434
|
|
|
$
|
22,553
|
|
12. Operating Costs and Expenses
Operating costs and expenses, exclusive of items shown separately in the consolidated statements of operations, consist of the following for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Programming
|
$
|
2,873
|
|
|
$
|
2,827
|
|
|
$
|
5,765
|
|
|
$
|
5,692
|
|
|
Regulatory, connectivity and produced content
|
488
|
|
|
597
|
|
|
1,039
|
|
|
1,158
|
|
|
Costs to service customers
|
1,848
|
|
|
1,767
|
|
|
3,696
|
|
|
3,589
|
|
|
Marketing
|
719
|
|
|
768
|
|
|
1,485
|
|
|
1,503
|
|
|
Mobile
|
413
|
|
|
277
|
|
|
787
|
|
|
537
|
|
|
Other
|
956
|
|
|
1,008
|
|
|
1,957
|
|
|
2,001
|
|
|
|
$
|
7,297
|
|
|
$
|
7,244
|
|
|
$
|
14,729
|
|
|
$
|
14,480
|
|
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
Programming costs consist primarily of costs paid to programmers for basic, premium, digital, video on demand and pay-per-view programming. Regulatory, connectivity and produced content costs represent payments to franchise and regulatory authorities, costs directly related to providing Internet, video and voice services as well as payments for sports, local and news content produced by the Company. Included in regulatory, connectivity and produced content costs is content acquisition costs for the Los Angeles Lakers’ basketball games and Los Angeles Dodgers’ baseball games, which are recorded as games are exhibited over the contract period. Costs to service customers include costs related to field operations, network operations and customer care for the Company’s residential and small and medium business customers, including internal and third-party labor for the non-capitalizable portion of installations, service and repairs, maintenance, bad debt expense, billing and collection, occupancy and vehicle costs. Marketing costs represent the costs of marketing to current and potential commercial and residential customers including labor costs. Mobile costs represent costs associated with the Company's mobile service such as device and service costs, marketing, sales and commissions, retail stores, personnel costs and taxes, among others. Other includes corporate overhead, advertising sales expenses, indirect costs associated with the Company’s enterprise business customers and regional sports and news networks, property tax and insurance expense and stock compensation expense, among others.
13. Other Operating Expenses, Net
Other operating expenses, net consist of the following for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Special charges, net
|
$
|
6
|
|
|
$
|
23
|
|
|
$
|
22
|
|
|
19
|
|
|
(Gain) loss on sale of assets, net
|
(4)
|
|
|
39
|
|
|
(13)
|
|
|
38
|
|
|
|
$
|
2
|
|
|
$
|
62
|
|
|
$
|
9
|
|
|
$
|
57
|
|
Special charges, net
Special charges, net primarily includes employee termination costs and net amounts of litigation settlements.
(Gain) loss on sale of assets, net
(Gain) loss on sale of assets, net represents the net (gain) loss recognized on the sales and disposals of fixed assets and cable systems. The three and six months ended June 30, 2019 includes a $41 million impairment of non-strategic assets.
14. Stock Compensation Plans
Charter’s stock incentive plans provide for grants of nonqualified stock options, incentive stock options, stock appreciation rights, dividend equivalent rights, performance units and performance shares, share awards, phantom stock, restricted stock units and restricted stock. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting services for the Company, are eligible for grants under the stock incentive plans.
Charter granted the following equity awards for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Stock options
|
11,600
|
|
|
31,500
|
|
|
1,265,300
|
|
|
1,782,400
|
|
|
Restricted stock
|
6,000
|
|
|
8,100
|
|
|
6,000
|
|
|
8,100
|
|
|
Restricted stock units
|
7,600
|
|
|
13,200
|
|
|
415,900
|
|
|
686,900
|
|
Charter stock options and restricted stock units generally cliff vest three years from the date of grant. Certain stock options and restricted stock units vest based on achievement of stock price hurdles. Stock options generally expire ten years from the grant date and restricted stock units have no voting rights. Restricted stock generally vests one year from the date of grant.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
As of June 30, 2020, total unrecognized compensation remaining to be recognized in future periods totaled $263 million for stock options, $3 million for restricted stock and $309 million for restricted stock units and the weighted average period over which they are expected to be recognized is two years for stock options, ten months for restricted stock and two years for restricted stock units.
The Company recorded stock compensation expense of $90 million and $180 million for the three and six months ended June 30, 2020, respectively, and $82 million and $167 million for the three and six months ended June 30, 2019, respectively, which is included in operating costs and expenses.
15. Income Taxes
Substantially all of the Company’s operations are held through Charter Holdings and its direct and indirect subsidiaries. Charter Holdings and the majority of its subsidiaries are limited liability companies that are generally not subject to income tax. However, certain of these limited liability companies are subject to state income tax. In addition, the subsidiaries that are corporations are subject to income tax. Generally, the taxable income, gains, losses, deductions and credits of Charter Holdings are passed through to its members, Charter and A/N. Charter is responsible for its share of taxable income or loss of Charter Holdings allocated to it in accordance with the Charter Holdings Limited Liability Company Agreement (“LLC Agreement”) and partnership tax rules and regulations. As a result, Charter's primary deferred tax component recorded in the consolidated balance sheets relates to its excess financial reporting outside basis, excluding amounts attributable to nondeductible goodwill, over Charter's tax basis in the investment in Charter Holdings.
The Company recorded income tax expense of $166 million and $195 million for the three and six months ended June 30, 2020, respectively, and $84 million and $203 million for the three and six months ended June 30, 2019, respectively. Income tax expense increased during the three months ended June 30, 2020 compared to the corresponding period in 2019 primarily as a result of higher pretax income offset by increased recognition of excess tax benefits resulting from share-based compensation during 2020. Income tax expense decreased during the six months ended June 30, 2020 compared to the corresponding period in 2019 primarily as a result of increased recognition of excess tax benefits resulting from share-based compensation during 2020 and an internal entity simplification that increased expense in 2019 offset by higher pretax income in 2020.
On March 18, 2020, the Families First Coronavirus Response Act ("FFCR Act"), and on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") were each enacted in response to the COVID-19 pandemic. The FFCR Act and the CARES Act contain numerous tax provisions, such as deferring payroll payments, establishing a credit for the retention of certain employees, relaxing limitations on the deductibility of interest, and updating the definition of qualified improvement property. This legislation currently has no material impact to the Company’s financial statements.
Charter Holdings, the indirect owner of the Company’s cable systems, generally allocates its taxable income, gains, losses, deductions and credits proportionately according to the members’ respective ownership interests, except for special allocations required under Section 704(c) of the Internal Revenue Code and the Treasury Regulations (“Section 704(c)”). Pursuant to Section 704(c) and the LLC Agreement, each item of income, gain, loss and deduction with respect to any property contributed to the capital of the partnership shall, solely for tax purposes, be allocated among the members so as to take into account any variation between the adjusted basis of such property to the partnership for U.S. federal income tax purposes and its initial gross asset value using the “traditional method” as described in the Treasury Regulations.
In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain tax positions unless such positions are determined to be “more likely than not” of being sustained upon examination, based on their technical merits. There is considerable judgment involved in making such a determination. The Company has recorded unrecognized tax benefits totaling approximately $252 million and $230 million, excluding interest and penalties, as of June 30, 2020 and December 31, 2019, respectively. The Company does not currently anticipate that its reserve for uncertain tax positions will significantly increase or decrease during 2020; however, various events could cause the Company’s current expectations to change in the future. These uncertain tax positions, if ever recognized in the financial statements, would be recorded in the consolidated statements of operations as part of the income tax provision.
No tax years for Charter are currently under examination by the Internal Revenue Service ("IRS") for income tax purposes. Charter's 2016 through 2019 tax years remain open for examination and assessment. Charter’s short period return dated May 17, 2016 (prior to the Time Warner Cable Inc. ("TWC") and Bright House Networks, LLC ("Bright House")
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
transactions) and prior years remain open solely for purposes of examination of Charter’s loss and credit carryforwards. The IRS is currently examining Charter Holdings’ income tax return for 2016. Charter Holdings’ 2017 through 2019 tax years remain open for examination and assessment. The IRS is currently examining TWC’s income tax returns for 2011 through 2014. TWC’s tax year 2015 remains subject to examination and assessment. Prior to TWC’s separation from Time Warner Inc. (“Time Warner”) in March 2009, TWC was included in the consolidated U.S. federal and certain state income tax returns of Time Warner. The IRS has examined Time Warner’s 2008 through 2010 income tax returns and the results are under appeal. The Company does not anticipate that these examinations will have a material impact on the Company’s consolidated financial position or results of operations. In addition, the Company is also subject to ongoing examinations of the Company’s tax returns by state and local tax authorities for various periods. Activity related to these state and local examinations did not have a material impact on the Company’s consolidated financial position or results of operations during the three and six months ended June 30, 2020, nor does the Company anticipate a material impact in the future.
16. Earnings Per Share
Basic earnings per common share is computed by dividing net income attributable to Charter shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share considers the impact of potentially dilutive securities using the treasury stock and if-converted methods and is based on the weighted average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options, restricted stock, restricted stock units, equity awards with market conditions and Charter Holdings convertible preferred units and common units. Charter Holdings common and convertible preferred units of 26 million for each of the three and six months ended June 30, 2020, respectively, and 29 million for each of the three and six months ended June 30, 2019 were not included in the computation of diluted earnings per share as their effect would have been antidilutive. The following is the computation of diluted earnings per common share for the three and six months ended June 30, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income attributable to Charter shareholders
|
$
|
766
|
|
|
$
|
314
|
|
|
$
|
1,162
|
|
|
$
|
567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic
|
205,777,438
|
|
|
222,392,274
|
|
|
206,804,371
|
|
|
223,505,016
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Assumed exercise or issuance of shares relating to stock plans
|
5,129,508
|
|
|
3,549,898
|
|
|
5,353,847
|
|
|
3,384,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, diluted
|
210,906,946
|
|
|
225,942,172
|
|
|
212,158,218
|
|
|
226,889,745
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share attributable to Charter shareholders
|
$
|
3.72
|
|
|
$
|
1.41
|
|
|
$
|
5.62
|
|
|
$
|
2.54
|
|
|
Diluted earnings per common share attributable to Charter shareholders
|
$
|
3.63
|
|
|
$
|
1.39
|
|
|
$
|
5.48
|
|
|
$
|
2.50
|
|
17. Comprehensive Income
Comprehensive income equaled net income attributable to Charter shareholders for each of the three and six months ended June 30, 2020 and 2019.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
18. Related Party Transactions
The following sets forth certain transactions in which the Company and the directors, executive officers, and affiliates of the Company are involved.
Liberty Broadband and A/N
Under the terms of the Amended and Restated Stockholders Agreement with Liberty Broadband, A/N and Charter, dated May 23, 2015, the number of Charter’s directors is fixed at 13, and includes its CEO. Two designees selected by A/N are members of the board of directors of Charter and three designees selected by Liberty Broadband are members of the board of directors of Charter. The remaining eight directors are not affiliated with either A/N or Liberty Broadband. Each of A/N and Liberty Broadband is entitled to nominate at least one director to each of the committees of Charter’s board of directors, subject to applicable stock exchange listing rules and certain specified voting or equity ownership thresholds for each of A/N and Liberty Broadband, and provided that the Nominating and Corporate Governance Committee and the Compensation and Benefit Committee each have at least a majority of directors independent from A/N, Liberty Broadband and Charter (referred to as the “unaffiliated directors”). Each of the Nominating and Corporate Governance Committee and the Compensation and Benefits Committee is currently comprised of three unaffiliated directors and one designee of each of A/N and Liberty Broadband. A/N and Liberty Broadband also have certain other committee designation and other governance rights. Mr. Thomas Rutledge, the Company’s CEO, is the chairman of the board of Charter.
In December 2017, Charter and A/N entered into an amendment to the letter agreement (the “Letter Agreement”) that requires A/N to sell to Charter or to Charter Holdings, on a monthly basis, a number of shares of Charter Class A common stock or Charter Holdings common units that represents a pro rata participation by A/N and its affiliates in any repurchases of shares of Charter Class A common stock from persons other than A/N effected by Charter during the immediately preceding calendar month, at a purchase price equal to the average price paid by Charter for the shares repurchased from persons other than A/N during such immediately preceding calendar month. A/N and Charter both have the right to terminate or suspend the pro rata repurchase arrangement on a prospective basis.
The Company is aware that Dr. John Malone, a director emeritus of Charter and Chairman of the board of directors and holder of 48.8% of voting interest in Liberty Broadband, may be deemed to have a 40.9% voting interest in Qurate Retail, Inc. ("Qurate") and is on the board of directors of Qurate. Qurate wholly owns HSN, Inc. (“HSN”) and QVC, Inc. (“QVC”). The Company has programming relationships with HSN and QVC. For each of the three and six months ended June 30, 2020 and 2019, the Company recorded revenue in aggregate of approximately $12 million and $24 million, respectively, from HSN and QVC as part of channel carriage fees and revenue sharing arrangements for home shopping sales made to customers in the Company’s footprint.
Dr. Malone and Mr. Steven Miron, a member of Charter’s board of directors, also serve on the board of directors of Discovery, Inc., (“Discovery”). The Company is aware that Dr. Malone owns 1.2% of the series A common stock, 93.6% of the series B common stock and 3.6% of the series C common stock of Discovery and has a 27.9% voting interest in Discovery for the election of directors. The Company is aware that Advance/Newhouse Programming Partnership (“A/N PP”), an affiliate of A/N and of which Mr. Miron is the CEO, owns 100% of the Series A-1 preferred stock of Discovery and 100% of the Series C-1 preferred stock of Discovery and has a 23.9% voting interest for matters other than the election of directors. A/N PP also has the right to appoint three directors out of a total of twelve directors to Discovery’s board. The Company purchases programming from Discovery. Based on publicly available information, the Company does not believe that Discovery would currently be considered a related party. The amount paid in the aggregate to Discovery represents less than 2% of total operating costs and expenses for the three and six months ended June 30, 2020 and 2019.
Equity Investments
The Company has agreements with certain equity investees pursuant to which the Company has made or received related party transaction payments. The Company recorded payments to equity investees totaling $54 million and $117 million during the three and six months ended June 30, 2020, respectively, and $81 million and $167 million during the three and six months ended June 30, 2019, respectively.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
19. Contingencies
In August 2015, a purported stockholder of Charter, Matthew Sciabacucchi, filed a lawsuit in the Delaware Court of Chancery, on behalf of a putative class of Charter stockholders, challenging the transactions involving Charter, TWC, A/N, and Liberty Broadband announced by Charter on May 26, 2015. The lawsuit, which named as defendants Charter and its board of directors, alleged that the transactions resulted from breaches of fiduciary duty by Charter’s directors and that Liberty Broadband improperly benefited from the challenged transactions at the expense of other Charter stockholders. The lawsuit has proceeded to the discovery phase. Charter denies any liability, believes that it has substantial defenses, and is vigorously defending this lawsuit. Although Charter is unable to predict the outcome of this lawsuit, it does not expect the outcome will have a material effect on its operations, financial condition or cash flows.
The California Attorney General and the Alameda County, California District Attorney are investigating whether certain of Charter’s waste disposal policies, procedures and practices are in violation of the California Business and Professions Code and the California Health and Safety Code. That investigation was commenced in January 2014. A similar investigation involving TWC was initiated in February 2012. Charter is cooperating with these investigations. While the Company is unable to predict the outcome of these investigations, it does not expect that the outcome will have a material effect on its operations, financial condition, or cash flows.
On December 19, 2011, Sprint Communications Company L.P. (“Sprint”) filed a complaint in the United States District Court for the District of Kansas alleging that TWC infringed certain U.S. patents purportedly relating to Voice over Internet Protocol (“VoIP”) services. At the trial, the jury returned a verdict of $140 million against TWC and further concluded that TWC had willfully infringed Sprint’s patents. The court subsequently declined to enhance the damage award as a result of the purported willful infringement and awarded Sprint an additional $6 million, representing pre-judgment interest on the damages award. The Company has now paid the verdict, interest and costs in full. The Company continues to pursue indemnity from one of its vendors and has brought a patent suit against Sprint (TC Tech, LLC v. Sprint) in the United States District Court for the District of Delaware implicating Sprint's LTE technology. The ultimate outcomes of the pursuit of indemnity against the Company’s vendor and the TC Tech litigation cannot be predicted. The Company does not expect the outcome of its indemnity claim nor the outcome of the TC Tech litigation will have a material adverse effect on its operations or financial condition.
Sprint filed a second patent suit against Charter and Bright House Networks, LLC on December 2, 2017 in the United States District Court for the District of Delaware. This suit alleges infringement of 11 patents related to the Company's provision of VoIP services (ten of which were asserted against Legacy TWC in the matter described above).
On February 18, 2020 Sprint filed a lawsuit against Charter, Bright House, and TWC in the District Court for Johnson County, Kansas. Sprint alleges that Charter misappropriated trade secrets from Sprint years ago through employees hired by Bright House. Sprint asserts that the alleged trade secrets relate to the VoIP business of Charter and Bright House. Charter has removed this case to the United States District Court for the District of Kansas.
Sprint filed a third patent suit against Charter on May 17, 2018 in the United States District Court for the Eastern District of Virginia. This suit alleges infringement of two patents related to the Company's video on demand services. The court transferred this case to the United States District Court for the District of Delaware on December 20, 2018 pursuant to an agreement between the parties.
While the Company is vigorously defending these suits and is unable to predict the outcome of the Sprint lawsuits, the Company does not expect that the litigation will have a material effect on its operations, financial condition, or cash flows.
In addition to the Sprint litigation described above, the Company is a defendant or co-defendant in several additional lawsuits involving alleged infringement of various intellectual property relating to various aspects of its businesses. Other industry participants are also defendants in certain of these cases or related cases. In the event that a court ultimately determines that the Company infringes on any intellectual property, 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 negotiate royalty or license agreements with respect to the intellectual property at issue. While the Company believes the lawsuits are without merit and intends to defend the actions vigorously, no assurance can be given that any adverse outcome would not be material to the Company’s consolidated financial condition, results of operations, or liquidity. The Company cannot predict the outcome of any such claims nor can it reasonably estimate a range of possible loss.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
The Company is party to other lawsuits, claims and regulatory inquiries that arise in the ordinary course of conducting its business. The ultimate outcome of these other legal matters pending against the Company cannot be predicted, and although such lawsuits and claims are not expected individually to have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity, such lawsuits could have, in the aggregate, a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity. Whether or not the Company ultimately prevails in any particular lawsuit or claim, litigation can be time consuming and costly and injure the Company’s reputation.
20. Employee Benefit Plans
The Company sponsors three qualified defined benefit pension plans and one nonqualified defined benefit pension plan that provide pension benefits to a majority of employees who were employed by TWC before the merger with TWC.
Pension benefits are based on formulas that reflect the employees’ years of service and compensation during their employment period. Actuarial gains or losses are changes in the amount of either the benefit obligation or the fair value of plan assets resulting from experience different from that assumed or from changes in assumptions. The Company has elected to follow a mark-to-market pension accounting policy for recording the actuarial gains or losses annually during the fourth quarter, or earlier if a remeasurement event occurs during an interim period. No future compensation increases or future service will be credited to participants of the pension plans given the frozen nature of the plans.
The components of net periodic pension benefit (costs) for the three and six months ended June 30, 2020 and 2019 are recorded in other pension benefits, net in the consolidated statements of operations and consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Interest cost
|
$
|
(28)
|
|
|
$
|
(32)
|
|
|
$
|
(56)
|
|
|
$
|
(64)
|
|
|
Expected return on plan assets
|
39
|
|
|
41
|
|
|
77
|
|
|
82
|
|
|
Net periodic pension benefits
|
$
|
11
|
|
|
$
|
9
|
|
|
$
|
21
|
|
|
$
|
18
|
|
The Company made no cash contributions to the qualified pension plans during the three and six months ended June 30, 2020 and 2019; however, the Company may make discretionary cash contributions to the qualified pension plans in the future. Such contributions will be dependent on a variety of factors, including current and expected interest rates, asset performance, the funded status of the qualified pension plans and management’s judgment. For the nonqualified unfunded pension plan, the Company will continue to make contributions during 2020 to the extent benefits are paid.
21. Recently Issued Accounting Standards
Accounting Standards Adopted January 1, 2020
ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”)
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, which requires a financial asset (or a group of financial assets) measured at amortized cost basis 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. The primary financial assets of the Company in scope of ASU 2016-13 include accounts receivables and equipment installment plan notes receivables. The Company adopted ASU 2016-13 on January 1, 2020. The adoption of ASU 2016-13 did not have a material impact to the Company'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
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. The Company adopted ASU 2018-15 on January 1, 2020. The adoption of ASU 2018-15 did not have a material impact to the Company's consolidated financial statements.
ASU No. 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials ("ASU 2019-02")
In March 2019, the FASB issued ASU 2019-02 which aligns the accounting for production costs of an episodic television series with the accounting for production costs of films regarding cost capitalization, amortization, impairment, presentation and disclosure. The Company adopted ASU 2019-02 on January 1, 2020. The adoption of ASU 2019-02 did not have a material impact to the Company's consolidated financial statements.
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”)
In December 2019, the FASB issued ASU 2019-12, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020. Early adoption is permitted. The Company elected to early adopt ASU 2019-12 on January 1, 2020. The adoption of ASU 2019-12 did not have a material impact on the Company's consolidated financial statements.
22. Consolidating Schedules
Each of Charter Operating, TWC, LLC, TWCE, CCO Holdings and certain subsidiaries jointly, severally, fully and unconditionally guarantee the outstanding debt securities of the others (other than the CCO Holdings notes) on an unsecured senior basis and the condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. Certain Charter Operating subsidiaries that are regulated entities only become guarantor subsidiaries upon approval by regulators. This information is not intended to present the financial position, results of operations and cash flows of the individual companies or groups of companies in accordance with generally accepted accounting principles.
The "Intermediate Holding Companies" column includes the assets and liabilities of the captive insurance company, a company wholly-owned by Charter outside of Charter Holdings and which does not, directly or indirectly, own any interest in Charter Holdings. The “Charter Operating and Restricted Subsidiaries” column is presented to comply with the terms of the Credit Agreement.
Comprehensive income equaled net income attributable to Charter shareholders for the six months ended June 30, 2020 and 2019. Condensed consolidating financial statements as of June 30, 2020 and December 31, 2019 and for the six months ended June 30, 2020 and 2019 follow.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charter Communications, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Guarantor Subsidiaries
|
|
|
|
Guarantor Subsidiaries
|
|
|
|
|
|
|
|
|
Charter
|
|
Intermediate Holding Companies
|
|
CCO Holdings
|
|
Charter Operating and Restricted Subsidiaries
|
|
Eliminations
|
|
Charter Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
239
|
|
|
$
|
200
|
|
|
$
|
1,658
|
|
|
$
|
—
|
|
|
$
|
2,097
|
|
|
Accounts receivable, net
|
—
|
|
|
33
|
|
|
—
|
|
|
1,961
|
|
|
—
|
|
|
1,994
|
|
|
Receivables from related party
|
31
|
|
|
107
|
|
|
43
|
|
|
—
|
|
|
(181)
|
|
|
—
|
|
|
Prepaid expenses and other current assets
|
4
|
|
|
45
|
|
|
—
|
|
|
625
|
|
|
—
|
|
|
674
|
|
|
Total current assets
|
35
|
|
|
424
|
|
|
243
|
|
|
4,244
|
|
|
(181)
|
|
|
4,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RESTRICTED CASH
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT IN CABLE PROPERTIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
—
|
|
|
770
|
|
|
—
|
|
|
33,304
|
|
|
—
|
|
|
34,074
|
|
|
Customer relationships, net
|
—
|
|
|
—
|
|
|
—
|
|
|
6,486
|
|
|
—
|
|
|
6,486
|
|
|
Franchises
|
—
|
|
|
—
|
|
|
—
|
|
|
67,322
|
|
|
—
|
|
|
67,322
|
|
|
Goodwill
|
—
|
|
|
—
|
|
|
—
|
|
|
29,554
|
|
|
—
|
|
|
29,554
|
|
|
Total investment in cable properties, net
|
—
|
|
|
770
|
|
|
—
|
|
|
136,666
|
|
|
—
|
|
|
137,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT IN SUBSIDIARIES
|
47,040
|
|
|
52,975
|
|
|
74,548
|
|
|
—
|
|
|
(174,563)
|
|
|
—
|
|
|
LOANS RECEIVABLE – RELATED PARTY
|
297
|
|
|
727
|
|
|
567
|
|
|
—
|
|
|
(1,591)
|
|
|
—
|
|
|
OTHER NONCURRENT ASSETS
|
2
|
|
|
364
|
|
|
—
|
|
|
2,564
|
|
|
—
|
|
|
2,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
47,374
|
|
|
$
|
55,265
|
|
|
$
|
75,358
|
|
|
$
|
143,474
|
|
|
$
|
(176,335)
|
|
|
$
|
145,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’/MEMBER’S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
51
|
|
|
$
|
628
|
|
|
$
|
314
|
|
|
$
|
7,443
|
|
|
$
|
—
|
|
|
$
|
8,436
|
|
|
Payables to related party
|
—
|
|
|
—
|
|
|
—
|
|
|
181
|
|
|
(181)
|
|
|
—
|
|
|
Current portion of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
706
|
|
|
—
|
|
|
706
|
|
|
Total current liabilities
|
51
|
|
|
628
|
|
|
314
|
|
|
8,330
|
|
|
(181)
|
|
|
9,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT
|
—
|
|
|
—
|
|
|
22,069
|
|
|
55,594
|
|
|
—
|
|
|
77,663
|
|
|
LOANS PAYABLE – RELATED PARTY
|
—
|
|
|
—
|
|
|
—
|
|
|
1,591
|
|
|
(1,591)
|
|
|
—
|
|
|
DEFERRED INCOME TAXES
|
17,717
|
|
|
17
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
17,789
|
|
|
OTHER LONG-TERM LIABILITIES
|
250
|
|
|
558
|
|
|
—
|
|
|
3,333
|
|
|
—
|
|
|
4,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’/MEMBER’S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlling interest
|
29,356
|
|
|
47,040
|
|
|
52,975
|
|
|
74,548
|
|
|
(174,563)
|
|
|
29,356
|
|
|
Noncontrolling interests
|
—
|
|
|
7,022
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
7,045
|
|
|
Total shareholders’/member’s equity
|
29,356
|
|
|
54,062
|
|
|
52,975
|
|
|
74,571
|
|
|
(174,563)
|
|
|
36,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’/member’s equity
|
$
|
47,374
|
|
|
$
|
55,265
|
|
|
$
|
75,358
|
|
|
$
|
143,474
|
|
|
$
|
(176,335)
|
|
|
$
|
145,136
|
|
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charter Communications, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Guarantor Subsidiaries
|
|
|
|
Guarantor Subsidiaries
|
|
|
|
|
|
|
|
|
Charter
|
|
Intermediate Holding Companies
|
|
CCO Holdings
|
|
Charter Operating and Restricted Subsidiaries
|
|
Eliminations
|
|
Charter Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
234
|
|
|
$
|
500
|
|
|
$
|
2,749
|
|
|
$
|
—
|
|
|
$
|
3,483
|
|
|
Accounts receivable, net
|
1
|
|
|
31
|
|
|
—
|
|
|
2,195
|
|
|
—
|
|
|
2,227
|
|
|
Receivables from related party
|
34
|
|
|
264
|
|
|
59
|
|
|
—
|
|
|
(357)
|
|
|
—
|
|
|
Prepaid expenses and other current assets
|
10
|
|
|
40
|
|
|
—
|
|
|
711
|
|
|
—
|
|
|
761
|
|
|
Total current assets
|
45
|
|
|
569
|
|
|
559
|
|
|
5,655
|
|
|
(357)
|
|
|
6,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RESTRICTED CASH
|
—
|
|
|
66
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT IN CABLE PROPERTIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
—
|
|
|
683
|
|
|
—
|
|
|
33,908
|
|
|
—
|
|
|
34,591
|
|
|
Customer relationships, net
|
—
|
|
|
—
|
|
|
—
|
|
|
7,453
|
|
|
—
|
|
|
7,453
|
|
|
Franchises
|
—
|
|
|
—
|
|
|
—
|
|
|
67,322
|
|
|
—
|
|
|
67,322
|
|
|
Goodwill
|
—
|
|
|
—
|
|
|
—
|
|
|
29,554
|
|
|
—
|
|
|
29,554
|
|
|
Total investment in cable properties, net
|
—
|
|
|
683
|
|
|
—
|
|
|
138,237
|
|
|
—
|
|
|
138,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT IN SUBSIDIARIES
|
49,024
|
|
|
55,266
|
|
|
76,409
|
|
|
—
|
|
|
(180,699)
|
|
|
—
|
|
|
LOANS RECEIVABLE – RELATED PARTY
|
260
|
|
|
699
|
|
|
545
|
|
|
—
|
|
|
(1,504)
|
|
|
—
|
|
|
OTHER NONCURRENT ASSETS
|
2
|
|
|
378
|
|
|
—
|
|
|
2,351
|
|
|
—
|
|
|
2,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
49,331
|
|
|
$
|
57,661
|
|
|
$
|
77,513
|
|
|
$
|
146,243
|
|
|
$
|
(182,560)
|
|
|
$
|
148,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’/MEMBER’S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
18
|
|
|
$
|
725
|
|
|
$
|
296
|
|
|
$
|
7,846
|
|
|
$
|
—
|
|
|
$
|
8,885
|
|
|
Payables to related party
|
—
|
|
|
—
|
|
|
—
|
|
|
357
|
|
|
(357)
|
|
|
—
|
|
|
Current portion of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
3,500
|
|
|
—
|
|
|
3,500
|
|
|
Total current liabilities
|
18
|
|
|
725
|
|
|
296
|
|
|
11,703
|
|
|
(357)
|
|
|
12,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT
|
—
|
|
|
—
|
|
|
21,951
|
|
|
53,627
|
|
|
—
|
|
|
75,578
|
|
|
LOANS PAYABLE – RELATED PARTY
|
—
|
|
|
—
|
|
|
—
|
|
|
1,504
|
|
|
(1,504)
|
|
|
—
|
|
|
DEFERRED INCOME TAXES
|
17,641
|
|
|
15
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
17,711
|
|
|
OTHER LONG-TERM LIABILITIES
|
227
|
|
|
554
|
|
|
—
|
|
|
2,922
|
|
|
—
|
|
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’/MEMBER’S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlling interest
|
31,445
|
|
|
49,024
|
|
|
55,266
|
|
|
76,409
|
|
|
(180,699)
|
|
|
31,445
|
|
|
Noncontrolling interests
|
—
|
|
|
7,343
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
7,366
|
|
|
Total shareholders’/member’s equity
|
31,445
|
|
|
56,367
|
|
|
55,266
|
|
|
76,432
|
|
|
(180,699)
|
|
|
38,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’/member’s equity
|
$
|
49,331
|
|
|
$
|
57,661
|
|
|
$
|
77,513
|
|
|
$
|
146,243
|
|
|
$
|
(182,560)
|
|
|
$
|
148,188
|
|
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charter Communications, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Guarantor Subsidiaries
|
|
|
|
Guarantor Subsidiaries
|
|
|
|
|
|
|
|
|
Charter
|
|
Intermediate Holding Companies
|
|
CCO Holdings
|
|
Charter Operating and Restricted Subsidiaries
|
|
Eliminations
|
|
Charter Consolidated
|
|
REVENUES
|
$
|
29
|
|
|
$
|
597
|
|
|
$
|
—
|
|
|
$
|
23,430
|
|
|
$
|
(622)
|
|
|
$
|
23,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses (exclusive of items shown separately below)
|
29
|
|
|
545
|
|
|
—
|
|
|
14,774
|
|
|
(619)
|
|
|
14,729
|
|
|
Depreciation and amortization
|
—
|
|
|
8
|
|
|
—
|
|
|
4,917
|
|
|
—
|
|
|
4,925
|
|
|
Other operating expense, net
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
(3)
|
|
|
9
|
|
|
|
29
|
|
|
553
|
|
|
—
|
|
|
19,703
|
|
|
(622)
|
|
|
19,663
|
|
|
Income from operations
|
—
|
|
|
44
|
|
|
—
|
|
|
3,727
|
|
|
—
|
|
|
3,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net
|
8
|
|
|
12
|
|
|
(587)
|
|
|
(1,370)
|
|
|
—
|
|
|
(1,937)
|
|
|
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
(63)
|
|
|
—
|
|
|
—
|
|
|
(63)
|
|
|
Loss on financial instruments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(254)
|
|
|
—
|
|
|
(254)
|
|
|
Other pension benefits, net
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
21
|
|
|
Other income (expense), net
|
—
|
|
|
(5)
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
Equity in income of subsidiaries
|
1,313
|
|
|
1,465
|
|
|
2,115
|
|
|
—
|
|
|
(4,893)
|
|
|
—
|
|
|
|
1,321
|
|
|
1,472
|
|
|
1,465
|
|
|
(1,598)
|
|
|
(4,893)
|
|
|
(2,233)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
1,321
|
|
|
1,516
|
|
|
1,465
|
|
|
2,129
|
|
|
(4,893)
|
|
|
1,538
|
|
|
Income tax expense
|
(159)
|
|
|
(23)
|
|
|
—
|
|
|
(13)
|
|
|
—
|
|
|
(195)
|
|
|
Consolidated net income
|
1,162
|
|
|
1,493
|
|
|
1,465
|
|
|
2,116
|
|
|
(4,893)
|
|
|
1,343
|
|
|
Less: Net income attributable to noncontrolling interests
|
—
|
|
|
(180)
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(181)
|
|
|
Net income
|
$
|
1,162
|
|
|
$
|
1,313
|
|
|
$
|
1,465
|
|
|
$
|
2,115
|
|
|
$
|
(4,893)
|
|
|
$
|
1,162
|
|
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charter Communications, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Guarantor Subsidiaries
|
|
|
|
Guarantor Subsidiaries
|
|
|
|
|
|
|
|
|
Charter
|
|
Intermediate Holding Companies
|
|
CCO Holdings
|
|
Charter Operating and Restricted Subsidiaries
|
|
Eliminations
|
|
Charter Consolidated
|
|
REVENUES
|
$
|
23
|
|
|
$
|
575
|
|
|
$
|
—
|
|
|
$
|
22,548
|
|
|
$
|
(593)
|
|
|
$
|
22,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses (exclusive of items shown separately below)
|
23
|
|
|
556
|
|
|
—
|
|
|
14,500
|
|
|
(599)
|
|
|
14,480
|
|
|
Depreciation and amortization
|
—
|
|
|
8
|
|
|
—
|
|
|
5,042
|
|
|
—
|
|
|
5,050
|
|
|
Other operating expense (income), net
|
—
|
|
|
(8)
|
|
|
—
|
|
|
59
|
|
|
6
|
|
|
57
|
|
|
|
23
|
|
|
556
|
|
|
—
|
|
|
19,601
|
|
|
(593)
|
|
|
19,587
|
|
|
Income from operations
|
—
|
|
|
19
|
|
|
—
|
|
|
2,947
|
|
|
—
|
|
|
2,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net
|
5
|
|
|
17
|
|
|
(511)
|
|
|
(1,381)
|
|
|
—
|
|
|
(1,870)
|
|
|
Loss on financial instruments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(82)
|
|
|
—
|
|
|
(82)
|
|
|
Other pension benefits, net
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
|
Other expense, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(126)
|
|
|
—
|
|
|
(126)
|
|
|
Equity in income of subsidiaries
|
685
|
|
|
788
|
|
|
1,299
|
|
|
—
|
|
|
(2,772)
|
|
|
—
|
|
|
|
690
|
|
|
805
|
|
|
788
|
|
|
(1,571)
|
|
|
(2,772)
|
|
|
(2,060)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
690
|
|
|
824
|
|
|
788
|
|
|
1,376
|
|
|
(2,772)
|
|
|
906
|
|
|
Income tax expense
|
(123)
|
|
|
(4)
|
|
|
—
|
|
|
(76)
|
|
|
—
|
|
|
(203)
|
|
|
Consolidated net income
|
567
|
|
|
820
|
|
|
788
|
|
|
1,300
|
|
|
(2,772)
|
|
|
703
|
|
|
Less: Net income attributable to noncontrolling interests
|
—
|
|
|
(135)
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(136)
|
|
|
Net income
|
$
|
567
|
|
|
$
|
685
|
|
|
$
|
788
|
|
|
$
|
1,299
|
|
|
$
|
(2,772)
|
|
|
$
|
567
|
|
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charter Communications, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Guarantor Subsidiaries
|
|
|
|
Guarantor Subsidiaries
|
|
|
|
|
|
|
|
|
Charter
|
|
Intermediate Holding Companies
|
|
CCO Holdings
|
|
Charter Operating and Restricted Subsidiaries
|
|
Eliminations
|
|
Charter Consolidated
|
|
NET CASH FLOWS FROM OPERATING ACTIVITIES
|
$
|
3
|
|
|
$
|
51
|
|
|
$
|
(565)
|
|
|
$
|
7,260
|
|
|
$
|
—
|
|
|
$
|
6,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,338)
|
|
|
—
|
|
|
(3,338)
|
|
|
Change in accrued expenses related to capital expenditures
|
—
|
|
|
—
|
|
|
—
|
|
|
(174)
|
|
|
—
|
|
|
(174)
|
|
|
Real estate investments through variable interest entities
|
—
|
|
|
(81)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(81)
|
|
|
Contributions to subsidiaries
|
(145)
|
|
|
(39)
|
|
|
(4,385)
|
|
|
—
|
|
|
4,569
|
|
|
—
|
|
|
Distributions from subsidiaries
|
3,530
|
|
|
3,975
|
|
|
8,541
|
|
|
—
|
|
|
(16,046)
|
|
|
—
|
|
|
Other, net
|
—
|
|
|
(3)
|
|
|
—
|
|
|
(5)
|
|
|
—
|
|
|
(8)
|
|
|
Net cash flows from investing activities
|
3,385
|
|
|
3,852
|
|
|
4,156
|
|
|
(3,517)
|
|
|
(11,477)
|
|
|
(3,601)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of long-term debt
|
—
|
|
|
—
|
|
|
4,178
|
|
|
3,144
|
|
|
—
|
|
|
7,322
|
|
|
Repayments of long-term debt
|
—
|
|
|
—
|
|
|
(4,092)
|
|
|
(3,800)
|
|
|
—
|
|
|
(7,892)
|
|
|
Borrowings (repayments) of loans payable - related parties
|
(25)
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
Payments for debt issuance costs
|
—
|
|
|
—
|
|
|
(41)
|
|
|
(21)
|
|
|
—
|
|
|
(62)
|
|
|
Issuance of equity
|
23
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
Purchase of treasury stock
|
(3,507)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,507)
|
|
|
Proceeds from exercise of stock options
|
121
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
121
|
|
|
Purchase of noncontrolling interest
|
—
|
|
|
(518)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(518)
|
|
|
Distributions to noncontrolling interest
|
—
|
|
|
(76)
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(77)
|
|
|
Contributions from parent
|
—
|
|
|
145
|
|
|
39
|
|
|
4,385
|
|
|
(4,569)
|
|
|
—
|
|
|
Distributions to parent
|
—
|
|
|
(3,530)
|
|
|
(3,975)
|
|
|
(8,541)
|
|
|
16,046
|
|
|
—
|
|
|
Borrowings for real estate investments through variable interest entities
|
—
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
Distributions to variable interest entities noncontrolling interest
|
—
|
|
|
(4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(25)
|
|
|
—
|
|
|
(25)
|
|
|
Net cash flows from financing activities
|
(3,388)
|
|
|
(3,959)
|
|
|
(3,891)
|
|
|
(4,834)
|
|
|
11,477
|
|
|
(4,595)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
—
|
|
|
(56)
|
|
|
(300)
|
|
|
(1,091)
|
|
|
—
|
|
|
(1,447)
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period
|
—
|
|
|
300
|
|
|
500
|
|
|
2,749
|
|
|
—
|
|
|
3,549
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
|
$
|
—
|
|
|
$
|
244
|
|
|
$
|
200
|
|
|
$
|
1,658
|
|
|
$
|
—
|
|
|
$
|
2,102
|
|
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charter Communications, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Guarantor Subsidiaries
|
|
|
|
Guarantor Subsidiaries
|
|
|
|
|
|
|
|
|
Charter
|
|
Intermediate Holding Companies
|
|
CCO Holdings
|
|
Charter Operating and Restricted Subsidiaries
|
|
Eliminations
|
|
Charter Consolidated
|
|
NET CASH FLOWS FROM OPERATING ACTIVITIES
|
$
|
(18)
|
|
|
$
|
55
|
|
|
$
|
(509)
|
|
|
$
|
5,919
|
|
|
$
|
—
|
|
|
$
|
5,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
—
|
|
|
(67)
|
|
|
—
|
|
|
(3,262)
|
|
|
67
|
|
|
(3,262)
|
|
|
Change in accrued expenses related to capital expenditures
|
—
|
|
|
—
|
|
|
—
|
|
|
(428)
|
|
|
—
|
|
|
(428)
|
|
|
Real estate investments through variable interest entities
|
—
|
|
|
(64)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(64)
|
|
|
Contribution to subsidiaries
|
(91)
|
|
|
(51)
|
|
|
(792)
|
|
|
—
|
|
|
934
|
|
|
—
|
|
|
Distributions from subsidiaries
|
1,829
|
|
|
2,084
|
|
|
2,591
|
|
|
—
|
|
|
(6,504)
|
|
|
—
|
|
|
Other, net
|
—
|
|
|
(5)
|
|
|
—
|
|
|
80
|
|
|
(67)
|
|
|
8
|
|
|
Net cash flows from investing activities
|
1,738
|
|
|
1,897
|
|
|
1,799
|
|
|
(3,610)
|
|
|
(5,570)
|
|
|
(3,746)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of long-term debt
|
—
|
|
|
—
|
|
|
750
|
|
|
9,964
|
|
|
—
|
|
|
10,714
|
|
|
Repayments of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,123)
|
|
|
—
|
|
|
(10,123)
|
|
|
Payments for debt issuance costs
|
—
|
|
|
—
|
|
|
(7)
|
|
|
(25)
|
|
|
—
|
|
|
(32)
|
|
|
Purchase of treasury stock
|
(1,801)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,801)
|
|
|
Proceeds from exercise of stock options
|
81
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
81
|
|
|
Purchase of noncontrolling interest
|
—
|
|
|
(254)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(254)
|
|
|
Distributions to noncontrolling interest
|
—
|
|
|
(77)
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(78)
|
|
|
Contributions from parent
|
—
|
|
|
91
|
|
|
51
|
|
|
792
|
|
|
(934)
|
|
|
—
|
|
|
Distributions to parent
|
—
|
|
|
(1,829)
|
|
|
(2,084)
|
|
|
(2,591)
|
|
|
6,504
|
|
|
—
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(127)
|
|
|
—
|
|
|
(127)
|
|
|
Net cash flows from financing activities
|
(1,720)
|
|
|
(2,069)
|
|
|
(1,290)
|
|
|
(2,111)
|
|
|
5,570
|
|
|
(1,620)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
—
|
|
|
(117)
|
|
|
—
|
|
|
198
|
|
|
—
|
|
|
81
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period
|
—
|
|
|
465
|
|
|
—
|
|
|
300
|
|
|
—
|
|
|
765
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
|
$
|
—
|
|
|
$
|
348
|
|
|
$
|
—
|
|
|
$
|
498
|
|
|
$
|
—
|
|
|
$
|
846
|
|