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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
______________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From             to             

Commission File Number: 001-33664
CHTR-20200630_G1.JPG
Charter Communications, Inc.
(Exact name of registrant as specified in its charter)

Delaware
84-1496755
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
400 Atlantic Street
Stamford
Connecticut
06901
(Address of Principal Executive Offices)
(Zip Code)
(203) 905-7801
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A Common Stock $.001 Par Value CHTR NASDAQ Global Select Market

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

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company ☐  Emerging growth company ☐ 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐  No x

Number of shares of Class A common stock outstanding as of June 30, 2020: 204,899,176

Number of shares of Class B common stock outstanding as of June 30, 2020: 1




CHTR-20200630_G1.JPG
CHARTER COMMUNICATIONS, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2020

TABLE OF CONTENTS
Page No.
1
2
3
4
5

This quarterly report on Form 10-Q is for the three and six months ended June 30, 2020. The United States Securities and Exchange Commission (“SEC”) allows us to “incorporate by reference” information that we file with the SEC, which means that we can disclose important information to you by referring you directly to those documents. In this quarterly report, “Charter,” “we,” “us” and “our” refer to Charter Communications, Inc. and its subsidiaries.

i


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding, among other things, our plans, strategies and prospects, both business and financial including, without limitation, the forward-looking statements set forth in the “Results of Operations” and “Liquidity and Capital Resources” sections under Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this quarterly report. Although we believe that our plans, intentions and expectations as reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions including, without limitation, the factors described under “Risk Factors” under Part I, Item 1A of our most recent Form 10-K filed with the SEC. Many of the forward-looking statements contained in this quarterly report may be identified by the use of forward-looking words such as “believe,” “expect,” “anticipate,” “should,” “planned,” “will,” “may,” “intend,” “estimated,” “aim,” “on track,” “target,” “opportunity,” “tentative,” “positioning,” “designed,” “create,” “predict,” “project,” “initiatives,” “seek,” “would,” “could,” “continue,” “ongoing,” “upside,” “increases,” “focused on” and “potential,” among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this quarterly report are set forth in this quarterly report on Form 10-Q, in our annual report on Form 10-K, and in other reports or documents that we file from time to time with the SEC, and include, but are not limited to:

the impact of the COVID-19 pandemic on the economy, our customers, our vendors, local, state and federal governmental responses to the pandemic and our businesses generally;
our ability to sustain and grow revenues and cash flow from operations by offering Internet, video, voice, mobile, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in our service areas and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures;
the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite ("DBS") operators, wireless broadband and telephone providers, digital subscriber line (“DSL”) providers, fiber to the home providers and providers of video content over broadband Internet connections;
our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);
our ability to develop and deploy new products and technologies including mobile products and any other consumer services and service platforms;
any events that disrupt our networks, information systems or properties and impair our operating activities or our reputation;
the effects of governmental regulation on our business including costs, disruptions and possible limitations on operating flexibility related to, and our ability to comply with, regulatory conditions applicable to us as a result of the Time Warner Cable Inc. and Bright House Networks, LLC transactions;
general business conditions, economic uncertainty or downturn, including the impacts of the COVID-19 pandemic to unemployment levels and the level of activity in the housing sector;
the ability to retain and hire key personnel;
the availability and access, in general, of funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets; and
our ability to comply with all covenants in our indentures and credit facilities, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions.

All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. We are under no duty or obligation to update any of the forward-looking statements after the date of this quarterly report.

ii


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)
June 30,
2020
December 31,
2019
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,097    $ 3,483   
Accounts receivable, less allowance for doubtful accounts of $218 and $151, respectively
1,994    2,227   
Prepaid expenses and other current assets 674    761   
Total current assets 4,765    6,471   
RESTRICTED CASH   66   
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net of accumulated depreciation of $29,138 and $27,656, respectively
34,074    34,591   
Customer relationships, net 6,486    7,453   
Franchises 67,322    67,322   
Goodwill 29,554    29,554   
Total investment in cable properties, net 137,436    138,920   
OTHER NONCURRENT ASSETS 2,930    2,731   
Total assets $ 145,136    $ 148,188   
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 8,436    $ 8,885   
Current portion of long-term debt 706    3,500   
Total current liabilities 9,142    12,385   
LONG-TERM DEBT 77,663    75,578   
DEFERRED INCOME TAXES 17,789    17,711   
OTHER LONG-TERM LIABILITIES 4,141    3,703   
SHAREHOLDERS’ EQUITY:
Class A common stock; $0.001 par value; 900 million shares authorized;
212,393,939 and 209,975,963 shares issued, respectively
—    —   
Class B common stock; $0.001 par value; 1,000 shares authorized;
1 share issued and outstanding
—    —   
Preferred stock; $0.001 par value; 250 million shares authorized;
no shares issued and outstanding
—    —   
Additional paid-in capital 31,661    31,405   
Retained earnings 1,202    40   
Treasury stock at cost; 7,494,763 and no shares, respectively
(3,507)   —   
Accumulated other comprehensive loss —    —   
Total Charter shareholders’ equity 29,356    31,445   
Noncontrolling interests 7,045    7,366   
Total shareholders’ equity 36,401    38,811   
Total liabilities and shareholders’ equity $ 145,136    $ 148,188   

The accompanying notes are an integral part of these consolidated financial statements.
1


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   62      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      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)    
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.


5


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.

6


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 $   $ 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

7


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.



8


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   

9


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.


10


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.


11


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

12


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