10-Q 1 chtr3312019-10q.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
______________
(Mark One)
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
 
 
For the quarterly period ended March 31, 2019
or
 
 
 
o
 
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
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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 Number)
 
 
 
400 Atlantic Street
Stamford, Connecticut 06901
 
(203) 905-7801
(Address of principal executive offices including zip code)
 
(Registrant’s telephone number, including area code)

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 and posted on their corporate website, if any, 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 o    Emerging growth company o

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 o No x

Number of shares of Class A common stock outstanding as of March 31, 2019: 223,408,074

Number of shares of Class B common stock outstanding as of March 31, 2019: 1







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CHARTER COMMUNICATIONS, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED
MARCH 31, 2019

TABLE OF CONTENTS
 
 
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

This quarterly report on Form 10-Q is for the three months ended March 31, 2019. 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” 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:

our ability to sustain and grow revenues and cash flow from operations by offering video, Internet, 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, video provided over the Internet by (i) market participants that have not historically competed in the multichannel video business, (ii) traditional multichannel video distributors, and (iii) content providers that have historically licensed cable networks to multichannel video distributors, and providers of advertising over the Internet;
our ability to efficiently and effectively integrate acquired operations;
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, unemployment levels and the level of activity in the housing sector;
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 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)
 
March 31,
2019
 
December 31,
2018
 
(unaudited)
 
 
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
1,451

 
$
551

Accounts receivable, less allowance for doubtful accounts of
 
 
 
$144 and $129, respectively
1,578

 
1,733

Prepaid expenses and other current assets
722

 
446

Total current assets
3,751

 
2,730

 
 
 
 
RESTRICTED CASH
175

 
214

 
 
 
 
INVESTMENT IN CABLE PROPERTIES:
 
 
 
Property, plant and equipment, net of accumulated
 
 
 
depreciation of $24,609 and $23,075, respectively
34,859

 
35,126

Customer relationships, net
8,997

 
9,565

Franchises
67,319

 
67,319

Goodwill
29,554

 
29,554

Total investment in cable properties, net
140,729

 
141,564

 
 
 
 
OPERATING LEASE RIGHT-OF-USE ASSETS
1,101

 

OTHER NONCURRENT ASSETS
1,501

 
1,622

 
 
 
 
Total assets
$
147,257

 
$
146,130

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable and accrued liabilities
$
8,213

 
$
8,805

Operating lease liabilities
205

 

Current portion of long-term debt
3,532

 
3,290

Total current liabilities
11,950

 
12,095

 
 
 
 
LONG-TERM DEBT
70,567

 
69,537

DEFERRED INCOME TAXES
17,473

 
17,389

LONG-TERM OPERATING LEASE LIABILITIES
981

 

OTHER LONG-TERM LIABILITIES
2,643

 
2,837

 
 
 
 
SHAREHOLDERS’ EQUITY:
 
 
 
Class A common stock; $.001 par value; 900 million shares authorized;
 
 
 
226,332,625 and 225,353,807 shares issued, respectively

 

Class B common stock; $.001 par value; 1,000 shares authorized;
 
 
 
1 share issued and outstanding

 

Preferred stock; $.001 par value; 250 million shares authorized;
 
 
 
no shares issued and outstanding

 

Additional paid-in capital
33,643

 
33,507

Retained earnings
3,033

 
2,780

Treasury stock at cost; 2,924,551 and no shares, respectively
(940
)
 

Accumulated other comprehensive loss
(2
)
 
(2
)
Total Charter shareholders’ equity
35,734

 
36,285

Noncontrolling interests
7,909

 
7,987

Total shareholders’ equity
43,643

 
44,272

 
 
 
 
Total liabilities and shareholders’ equity
$
147,257

 
$
146,130


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 March 31,
 
2019
 
2018
REVENUES
$
11,206

 
$
10,657

 
 
 
 
COSTS AND EXPENSES:
 
 
 
Operating costs and expenses (exclusive of items shown separately below)
7,236

 
6,836

Depreciation and amortization
2,550

 
2,710

Other operating (income) expenses, net
(5
)
 
69

 
9,781

 
9,615

Income from operations
1,425

 
1,042

 
 
 
 
OTHER INCOME (EXPENSES):
 
 
 
Interest expense, net
(925
)
 
(851
)
Gain on financial instruments, net
37

 
63

Other pension benefits, net
9

 
20

Other expense, net
(110
)
 
(23
)
 
(989
)
 
(791
)
 
 
 
 
Income before income taxes
436

 
251

Income tax expense
(119
)
 
(28
)
Consolidated net income
317

 
223

Less: Net income attributable to noncontrolling interests
(64
)
 
(55
)
Net income attributable to Charter shareholders
$
253

 
$
168

 
 
 
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
 
 
 
Basic
$
1.13

 
$
0.71

Diluted
$
1.11

 
$
0.70

 
 
 
 
Weighted average common shares outstanding, basic
224,630,122

 
237,762,295

Weighted average common shares outstanding, diluted
227,595,365

 
241,420,722




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, 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


 
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, 2017
$

$

$
35,253

$
3,832

$

$
(1
)
$
39,084

$
8,447

$
47,531

Consolidated net income



168



168

55

223

Stock compensation expense


72




72


72

Accelerated vesting of equity awards


5




5


5

Exercise of stock options


36




36


36

Cumulative effect of accounting changes



34



34

4

38

Purchases of treasury stock




(617
)

(617
)

(617
)
Purchase of noncontrolling interest, net of tax


(28
)



(28
)
(90
)
(118
)
Change in noncontrolling interest ownership, net of tax


14




14

(20
)
(6
)
Distributions to noncontrolling interest







(39
)
(39
)
BALANCE, March 31, 2018
$

$

$
35,352

$
4,034

$
(617
)
$
(1
)
$
38,768

$
8,357

$
47,125



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
 
Three Months Ended March 31,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Consolidated net income
$
317

 
$
223

Adjustments to reconcile consolidated net income to net cash flows from operating activities:
 
 
 
Depreciation and amortization
2,550

 
2,710

Stock compensation expense
85

 
72

Accelerated vesting of equity awards

 
5

Noncash interest income, net
(55
)
 
(89
)
Other pension benefits, net
(9
)
 
(20
)
Gain on financial instruments, net
(37
)
 
(63
)
Deferred income taxes
81

 
28

Other, net
98

 
38

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
155

 
226

Prepaid expenses and other assets
(300
)
 
(131
)
Accounts payable, accrued liabilities and other
(199
)
 
(300
)
Net cash flows from operating activities
2,686

 
2,699

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of property, plant and equipment
(1,665
)
 
(2,183
)
Change in accrued expenses related to capital expenditures
(376
)
 
(565
)
Real estate investments through variable interest entities
(39
)
 

Other, net

 
10

Net cash flows from investing activities
(2,080
)
 
(2,738
)
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Borrowings of long-term debt
6,884

 
2,929

Repayments of long-term debt
(5,572
)
 
(2,185
)
Payments for debt issuance costs
(25
)
 

Purchase of treasury stock
(940
)
 
(617
)
Proceeds from exercise of stock options
44

 
36

Purchase of noncontrolling interest
(93
)
 
(127
)
Distributions to noncontrolling interest
(39
)
 
(39
)
Other, net
(4
)
 
(3
)
Net cash flows from financing activities
255

 
(6
)
 
 
 
 
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
861

 
(45
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period
765

 
621

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
$
1,626

 
$
576

 
 
 
 
CASH PAID FOR INTEREST
$
966

 
$
1,007

CASH PAID FOR TAXES
$
4

 
$
1



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 the second largest cable operator in the United States and a leading broadband communications company providing video, Internet and voice services to residential and business customers. The Company also recently launched its mobile service to residential customers. In addition, the Company sells video and online advertising inventory to local, regional and national advertising customers and fiber-delivered communications and managed information technology solutions to larger enterprise customers. The Company also owns and operates regional sports networks and local sports, news and community channels.

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; depreciation and amortization costs; impairments of property, plant and equipment, intangibles and goodwill; pension benefits; income taxes; contingencies and programming expense. Actual results could differ from those estimates.

Certain prior period amounts have been reclassified to conform with the 2019 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 March 31, 2019 and December 31, 2018:

 
 
March 31, 2019
 
December 31, 2018
 
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
Franchises
 
$
67,319

 
$

 
$
67,319

 
$
67,319

 
$

 
$
67,319

Goodwill
 
29,554

 

 
29,554

 
29,554

 

 
29,554

Trademarks
 
159

 

 
159

 
159

 

 
159

 
 
$
97,032

 
$

 
$
97,032

 
$
97,032

 
$

 
$
97,032

 
 
 
 
 
 
 
 
 
 
 
 
 
Finite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
 
$
18,229

 
$
(9,232
)
 
$
8,997

 
$
18,229

 
$
(8,664
)
 
$
9,565

Other intangible assets
 
409

 
(103
)
 
306

 
409

 
(92
)
 
317

 
 
$
18,638

 
$
(9,335
)
 
$
9,303

 
$
18,638

 
$
(8,756
)
 
$
9,882


Amortization expense related to customer relationships and other intangible assets for the three months ended March 31, 2019 and 2018 was $578 million and $645 million, respectively.
    
The Company expects amortization expense on its finite-lived intangible assets will be as follows:

Nine months ended December 31, 2019
 
$
1,576

2020
 
1,873

2021
 
1,597

2022
 
1,327

2023
 
1,070

Thereafter
 
1,860

 
 
$
9,303


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.



6


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


3.    Investments

Real Estate Investments through Variable Interest Entities

In July 2018, the Company's build-to-suit lease arrangement with a single-asset special purpose entity ("SPE") to build a new Charter headquarters in Stamford, Connecticut obtained all approvals and was made effective. The SPE 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. As the Company has determined the SPE is a variable interest entity ("VIE") of which it became the primary beneficiary upon the effectiveness of the arrangement, the Company has consolidated the assets and liabilities of the SPE in its consolidated balance sheet as of March 31, 2019 and December 31, 2018 as follows.

 
March 31, 2019
 
December 31, 2018
Assets
 
 
 
Current assets
$
2

 
$
2

Restricted cash
$
175

 
$
214

Property, plant and equipment
$
173

 
$
130

Liabilities
 
 
 
Current liabilities
$
2

 
$

Other long-term liabilities
$
348

 
$
346


Property, plant and equipment includes land, a parking garage and building construction costs, including the capitalization of qualifying interest. As of March 31, 2019 and December 31, 2018, other long-term liabilities include $342 million in VIE's mortgage note liability and $6 million and $4 million, respectively, in liability-classified noncontrolling interest representing the residual initial fair value upon consolidation, along with accretion towards settlement of the put/call option in the lease.

The consolidated statement of cash flows for the three months ended March 31, 2019 includes a decrease to restricted cash of $39 million primarily related to building construction costs.

Equity-Method Investments

During the three months ended March 31, 2019, the Company recorded an impairment on equity-method investments of approximately $110 million which was 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 March 31, 2019 and December 31, 2018:

 
March 31, 2019
 
December 31, 2018
Accounts payable – trade
$
661

 
$
758

Deferred revenue
487

 
494

Accrued liabilities:
 
 
 
Programming costs
2,147

 
2,044

Labor
864

 
1,052

Capital expenditures
1,066

 
1,472

Interest
1,088

 
1,045

Taxes and regulatory fees
490

 
526

Property and casualty
446

 
424

Other
964

 
990

 
$
8,213

 
$
8,805



7


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)



5.    Leases

The primary leased asset classes of the Company include real estate, dark fiber, colocation facilities and other equipment. The lease agreements include both lease and non-lease components, which the Company accounts for separately depending on the election made for each leased asset class. For real estate and dark fiber leased asset classes, the Company accounts for lease and non-lease components as a single lease component and includes all fixed payments in the measurement of lease liabilities and lease assets. For colocation facilities leased asset class, the Company accounts for lease and non-lease components separately including only the fixed lease payment component in the measurement of lease liabilities and lease assets.

In addition to fixed lease payments, certain of the Company’s lease agreements include variable lease payments which are tied to an index or rate such as the change in the Consumer Price Index. These variable payments are not included in the measurement of the lease liabilities and lease assets.

Lease assets and lease liabilities are initially recognized based on the present value of the future lease payments over the expected lease term. As for most leases the implicit rate is not readily determinable, the Company uses a discount rate in determining the present value of future payments based on the yield-to-maturity of the Company’s secured publicly traded USD denominated debt instruments interpolating the duration of the debt to the term of the executed lease.

The Company’s leases have base rent periods and some with optional renewal periods. Leases with base rent periods of less than 12 months are not recorded on the balance sheet. For purposes of measurement of lease liabilities, the expected lease terms may include renewal options when it is reasonably certain that the Company will exercise such options. Based on conditions of the Company's existing leases and its overall business strategies, the majority of the Company's renewal options are not reasonably certain in determining the expected lease term. The Company will periodically reassess expected lease terms (and purchase options, if applicable) based on significant triggering events or compelling economic reasons to exercise such options.

The Company’s primary lease income represents sublease income on certain real estate leases. Sublease income is included in other revenue and presented gross from rent expense. For customer premise equipment ("CPE") where such CPE would qualify as a lease, the Company applies the practical expedient to combine the operating lease with the subscription service revenue as a single performance obligation in accordance with revenue recognition accounting guidance as the subscription service is the predominant component.

The components of lease related expenses, net are as follows.

 
Three Months Ended March 31, 2019
Operating lease expense (a)
$
107

 
 
Finance lease expense:
 
Amortization of right-of-use assets
20

Interest on lease liabilities
1

Total finance lease expense
21

 
 
Sublease income
(7
)
Total lease related expenses, net
$
121


(a) 
Includes short-term leases and variable leases costs of $39 million.



8


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


Supplemental cash flow information related to leases is as follows.

 
Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
71

Operating cash flows from finance leases
$
1

Financing cash flows from finance leases
$
3

 
 
Right-of-use assets obtained in exchange for lease obligations:
 
Operating leases
$
56

Finance leases
$
25


Supplemental balance sheet information related to leases is as follows.

 
March 31, 2019
Operating leases:
 
Operating lease right-of-use assets
$
1,101

 
 
Current operating lease liabilities
$
205

Long-term operating lease liabilities
981

Total operating lease liabilities
$
1,186

 
 
Finance leases:
 
Finance lease right-of-use assets (included within property, plant and equipment, net)
$
204

 
 
Current finance lease liabilities (included within accounts payable and accrued liabilities)
$
6

Long-term finance lease liabilities (included within other long-term liabilities)
98

Total finance lease liabilities
$
104

 
 
Weighted average remaining lease term
 
Operating leases
6.9 years

Finance leases
13.5 years

 
 
Weighted average discount rate
 
Operating leases
4.5
%
Finance leases
5.6
%



9


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


Maturities of lease liabilities are as follows.

 
Operating leases
 
Finance leases
Nine months ended December 31, 2019
$
215

 
$
8

2020
263

 
11

2021
220

 
12

2022
184

 
12

2023
155

 
12

Thereafter
463

 
95

Undiscounted lease cash flow commitments
1,500

 
150

Reconciling impact from discounting
(314
)
 
(46
)
Lease liabilities on consolidated balance sheet as of March 31, 2019
$
1,186

 
$
104


The following table presents the Company’s unadjusted lease commitments as of December 31, 2018 as a required disclosure for companies adopting the lease standard prospectively without revising comparative period information.

 
Operating leases
 
Finance leases
2019
$
286

 
$
10

2020
254

 
9

2021
207

 
9

2022
170

 
9

2023
143

 
10

Thereafter
440

 
64

 
$
1,500

 
$
111


6.    Long-Term Debt

Long-term debt consists of the following as of March 31, 2019 and December 31, 2018:

 
March 31, 2019
 
December 31, 2018
 
Principal Amount
 
Accreted Value
 
Principal Amount
 
Accreted Value
CCO Holdings, LLC:
 
 
 
 
 
 
 
5.250% senior notes due March 15, 2021
$
500

 
$
498

 
$
500

 
$
498

5.250% senior notes due September 30, 2022
1,250

 
1,238

 
1,250

 
1,238

5.125% senior notes due February 15, 2023
1,000

 
994

 
1,000

 
994

4.000% senior notes due March 1, 2023
500

 
497

 
500

 
496

5.125% senior notes due May 1, 2023
1,150

 
1,144

 
1,150

 
1,144

5.750% senior notes due September 1, 2023
500

 
497

 
500

 
497

5.750% senior notes due January 15, 2024
1,000

 
994

 
1,000

 
993

5.875% senior notes due April 1, 2024
1,700

 
1,689

 
1,700

 
1,688

5.375% senior notes due May 1, 2025
750

 
746

 
750

 
745

5.750% senior notes due February 15, 2026
2,500

 
2,468

 
2,500

 
2,467

5.500% senior notes due May 1, 2026
1,500

 
1,490

 
1,500

 
1,490

5.875% senior notes due May 1, 2027
800

 
795

 
800

 
795

5.125% senior notes due May 1, 2027
3,250

 
3,220

 
3,250

 
3,219

5.000% senior notes due February 1, 2028
2,500

 
2,466

 
2,500

 
2,466



10


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


Charter Communications Operating, LLC:
 
 
 
 
 
 
 
3.579% senior notes due July 23, 2020
2,000

 
1,994

 
2,000

 
1,992

4.464% senior notes due July 23, 2022
3,000

 
2,983

 
3,000

 
2,982

Senior floating rate notes due February 1, 2024
900

 
902

 
900

 
903

4.500% senior notes due February 1, 2024
1,100

 
1,092

 
1,100

 
1,091

4.908% senior notes due July 23, 2025
4,500

 
4,467

 
4,500

 
4,466

3.750% senior notes due February 15, 2028
1,000

 
986

 
1,000

 
986

4.200% senior notes due March 15, 2028
1,250

 
1,240

 
1,250

 
1,240

5.050% senior notes due March 30, 2029
1,250

 
1,240

 

 

6.384% senior notes due October 23, 2035
2,000

 
1,982

 
2,000

 
1,982

5.375% senior notes due April 1, 2038
800

 
786

 
800

 
785

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

 
2,390

 
1,700

 
1,683

6.834% senior notes due October 23, 2055
500

 
495

 
500

 
495

Credit facilities
10,639

 
10,557

 
10,038

 
9,959

Time Warner Cable, LLC:
 
 
 
 
 
 
 
8.750% senior notes due February 14, 2019

 

 
1,250

 
1,260

8.250% senior notes due April 1, 2019
2,000

 
2,000

 
2,000

 
2,030

5.000% senior notes due February 1, 2020
1,500

 
1,532

 
1,500

 
1,541

4.125% senior notes due February 15, 2021
700

 
719

 
700

 
721

4.000% senior notes due September 1, 2021
1,000

 
1,030

 
1,000

 
1,033

5.750% sterling senior notes due June 2, 2031 (a)
815

 
875

 
796

 
855

6.550% senior debentures due May 1, 2037
1,500

 
1,679

 
1,500

 
1,680

7.300% senior debentures due July 1, 2038
1,500

 
1,778

 
1,500

 
1,780

6.750% senior debentures due June 15, 2039
1,500

 
1,717

 
1,500

 
1,719

5.875% senior debentures due November 15, 2040
1,200

 
1,256

 
1,200

 
1,256

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)
847

 
817

 
827

 
798

4.500% senior debentures due September 15, 2042
1,250

 
1,140

 
1,250

 
1,140

Time Warner Cable Enterprises LLC:
 
 
 
 
 
 
 
8.375% senior debentures due March 15, 2023
1,000

 
1,180

 
1,000

 
1,191

8.375% senior debentures due July 15, 2033
1,000

 
1,295

 
1,000

 
1,298

Total debt
73,351

 
74,099

 
71,961

 
72,827

Less current portion:
 
 
 
 
 
 
 
8.750% senior notes due February 14, 2019

 

 
(1,250
)
 
(1,260
)
8.250% senior notes due April 1, 2019
(2,000
)
 
(2,000
)
 
(2,000
)
 
(2,030
)
5.000% senior notes due February 1, 2020
(1,500
)
 
(1,532
)
 

 

Long-term debt
$
69,851

 
$
70,567

 
$
68,711

 
$
69,537


(a) 
Principal amount includes £625 million remeasured at $815 million and $796 million as of March 31, 2019 and December 31, 2018, respectively, using the exchange rate at the respective dates.
(b) 
Principal amount includes £650 million remeasured at $847 million and $827 million as of March 31, 2019 and December 31, 2018, respectively, using the exchange rate at the respective dates.

The accreted values presented in the table above represent the principal amount of the debt less the original issue discount at the time of sale, deferred financing costs, and, in regards to Time Warner Cable, LLC and Time Warner Cable Enterprises LLC debt assumed, fair value premium adjustments as a result of applying acquisition accounting plus the accretion of those amounts to the


11


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


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 U.S. dollars as of each balance sheet date. See Note 9. The Company has availability under the Charter Operating credit facilities of approximately $4.6 billion as of March 31, 2019.

In January 2019, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.25 billion aggregate principal amount of 5.050% senior notes due 2029 at a price of 99.935% of the aggregate principal amount and an additional $750 million aggregate principal amount of 5.750% senior notes due 2048 at a price of 94.970% of the aggregate principal amount. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including funding buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness, including repaying at maturity Time Warner Cable, LLC's 8.750% senior notes due 2019.

In January 2019, Charter Operating entered into an amendment to its Credit Agreement raising $1.7 billion of new term loan A-3 and increasing revolving loan capacity to $4.75 billion. In addition, the majority of term loan A-2 holders converted to term loan A-3 and essentially all revolver commitments were extended to 2024. Pricing on the new term loan A-3 is LIBOR plus 1.50%. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including funding buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness, including repaying at maturity Time Warner Cable, LLC's 8.250% senior notes due 2019.

The Charter Operating notes are guaranteed by CCO Holdings, LLC (“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 months ended March 31, 2019 and 2018.

 
Three Months Ended March 31,
 
2019
 
2018
 
Shares
 
$
 
Shares
 
$
Share buybacks
2,615,717

 
$
870

 
1,593,046

 
$
556

Income tax withholding
214,615

 
70

 
173,046

 
61

Exercise cost
94,219

 
 
 
4,663

 
 
 
2,924,551

 
$
940

 
1,770,755

 
$
617


As of March 31, 2019, Charter had remaining board authority to purchase an additional $461 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 2018, Charter’s board of directors approved the retirement of the then currently held treasury stock and those shares were retired as of December 31, 2018. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of total shareholders’ equity.



12


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


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 Advance/Newhouse Partnership's (“A/N”) 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% during 2019 and 9% during 2018, and was $26 million and $17 million for the three months ended March 31, 2019 and 2018, 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 $38 million for each of the three months ended March 31, 2019 and 2018.

The following table represents Charter Holdings' purchase of Charter Holdings common units from A/N pursuant to the Letter Agreement (see Note 17) and the effect on total shareholders' equity during the three months ended March 31, 2019 and 2018.

 
Three Months Ended March 31,
 
2019
 
2018
Number of units purchased
302,942

 
369,475

Average price per unit
$
308.42

 
$
343.88

Amount of units purchased
$
93

 
$
127

Decrease in noncontrolling interest based on carrying value
$
(74
)
 
$
(90
)
Decrease in additional paid-in-capital, net of tax
$
(15
)
 
$
(28
)

Total shareholders' equity was also adjusted during the three months ended March 31, 2019 and 2018 due to the changes in Charter Holdings' ownership as follows.

 
Three Months Ended March 31,
 
2019
 
2018
Decrease in noncontrolling interest
$
(29
)
 
$
(20
)
Increase in additional paid-in-capital, net of tax
$
22

 
$
14


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 May 2016, the Company entered into a collateral holiday agreement for 80% of both the 2031 and 2042 cross-currency swaps, which eliminates the requirement to post collateral for three years. The fair value of the Company's cross-currency derivatives on its consolidated balance sheets was $160 million and $237 million included in other long-term liabilities as of March 31, 2019 and December 31, 2018, 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.


13


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)



The effect of financial instruments on the consolidated statements of operations is presented in the table below.
 
Three Months Ended March 31,
 
2019
 
2018
Gain on Financial Instruments, Net:
 
 
 
Change in fair value of cross-currency derivative instruments
$
77

 
$
128

Foreign currency remeasurement of Sterling Notes to U.S. dollars
(40
)
 
(65
)
 
$
37

 
$
63


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 March 31, 2019 and December 31, 2018 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 $160 million and $237 million as of March 31, 2019 and December 31, 2018, respectively.

The estimated fair value of the Company’s senior notes and debentures as of March 31, 2019 and December 31, 2018 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.

A summary of the carrying value and fair value of debt as of March 31, 2019 and December 31, 2018 is as follows:

 
 
March 31, 2019
 
December 31, 2018
 
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Senior notes and debentures
 
$
63,542

 
$
65,304

 
$
62,868

 
$
61,087

Credit facilities
 
$
10,557

 
$
10,564

 
$
9,959

 
$
9,608


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


14


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


circumstances, such as when there is evidence that an impairment may exist.  No material impairments were recorded during the three months ended March 31, 2019 and 2018.

11.     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 March 31,
 
2019
 
2018
Programming
$
2,865

 
$
2,752

Regulatory, connectivity and produced content
561

 
533

Costs to service customers
1,822

 
1,854

Marketing
735

 
751

Mobile
260

 
8

Other
993

 
938

 
$
7,236

 
$
6,836


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 video, Internet 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 applicable season. 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.
 
12.     Other Operating (Income) Expenses, Net

Other operating (income) expenses, net consist of the following for the periods presented:

 
Three Months Ended March 31,
 
2019
 
2018
Special charges, net
$
(4
)
 
$
76

Gain on sale of assets, net
(1
)
 
(7
)
 
$
(5
)
 
$
69


Special charges, net

Special charges, net primarily includes employee termination costs and net amounts of litigation settlements. The three months ended March 31, 2018 includes $43 million of merger and restructuring costs as well as a $22 million charge related to the Company's withdrawal liability from a multiemployer pension plan.

Gain on sale of assets, net

Gain on sale of assets, net represents the net gain recognized on the sales and disposals of fixed assets and cable systems.


15


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)



13.     Stock Compensation Plans

Charter’s 2009 Stock Incentive Plan provides 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 2009 Stock Incentive Plan.

Charter granted the following equity awards for the periods presented.

 
Three Months Ended March 31,
 
2019
 
2018
Stock options
1,750,900

 
1,429,800

Restricted stock units
673,700

 
483,700


Charter stock options and restricted stock units generally cliff vest upon the three year anniversary of each 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. Time Warner Cable Inc. ("TWC") restricted stock units that were converted into Charter restricted stock units generally vest 50% on each of the third and fourth anniversary of the grant date.

As of March 31, 2019, total unrecognized compensation remaining to be recognized in future periods totaled $298 million for stock options, $0.2 million for restricted stock and $336 million for restricted stock units and the weighted average period over which they are expected to be recognized is two years for stock options, one month for restricted stock and two years for restricted stock units.

The Company recorded $85 million and $72 million of stock compensation expense for the three months ended March 31, 2019 and 2018, respectively, which is included in operating costs and expenses. The Company also recorded $5 million of expense related to accelerated vesting of equity awards of terminated employees, which is recorded in other operating expenses, net in the consolidated statements of operations for the three months ended March 31, 2018.

14.    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 $119 million and $28 million for the three months ended March 31, 2019 and 2018, respectively. Income tax expense increased year over year primarily as a result of higher pretax income.

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.



16


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


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 $181 million and $180 million, excluding interest and penalties, as of March 31, 2019 and December 31, 2018, respectively. The Company does not currently anticipate that its reserve for uncertain tax positions will significantly increase or decrease during 2019; 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 or Charter Communications Holding Company, LLC for income tax purposes, are currently under examination by the Internal Revenue Service ("IRS"). Charter's 2016 through 2018 tax years remain open for examination and assessment. Charter’s tax years ending 2015 through the short period return dated May 17, 2016 (prior to the acquisition of TWC and Bright House Networks, LLC) remain subject to examination and assessment. Years prior to 2015 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 and 2018 tax years remains 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 months ended March 31, 2019, nor does the Company anticipate a material impact in the future.

15.    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 29 million and 31 million for the three months ended March 31, 2019 and 2018, respectively, 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 months ended March 31, 2019 and 2018.

 
Three Months Ended March 31,
 
2019
 
2018
Numerator:
 
 
 
Net income attributable to Charter shareholders
$
253

 
$
168

 
 
 
 
Denominator:
 
 
 
Weighted average common shares outstanding, basic
224,630,122

 
237,762,295

Effect of dilutive securities:
 
 
 
Assumed exercise or issuance of shares relating to stock plans
2,965,243

 
3,658,427

Weighted average common shares outstanding, diluted
227,595,365

 
241,420,722

 
 
 
 
Basic earnings per common share attributable to Charter shareholders
$
1.13

 
$
0.71

Diluted earnings per common share attributable to Charter shareholders
$
1.11

 
$
0.70


16.     Comprehensive Income

Comprehensive income equaled consolidated net income for both the three months ended March 31, 2019 and 2018.



17


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


17.     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 Corporation (“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 49.0% of voting interest in Liberty Broadband, may be deemed to have a 39.9% 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 the three months ended March 31, 2019 and 2018, the Company recorded revenue in aggregate of approximately $12 million and $16 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 Communications, 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 2.6% of the series C common stock of Discovery and has a 28.2% 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 24.1% voting interest for the election of directors. A/N PP has the right to appoint three directors out of a total of eleven directors to Discovery’s board to be elected by the holders of Discovery’s Series A-1 preferred stock. The Company purchases programming from Discovery pursuant to agreements entered into prior to Dr. Malone and Mr. Miron joining Charter’s board of directors. 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 months ended March 31, 2019 and 2018.

Equity Investments

The Company has agreements with certain equity-method investees pursuant to which the Company has made or received related party transaction payments. The Company recorded payments to equity-method investees totaling $86 million and $63 million during the three months ended March 31, 2019 and 2018, respectively.



18


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


18.     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 intends to vigorously defend 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 U.S. 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 appealed the case to the United States Court of Appeals for the Federal Circuit where the Company lost the appeal. The Company expects to petition the Supreme Court as the Company continues to pursue its appeal rights. In addition to its appeal, 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 U.S. District Court for the District of Delaware implicating Sprint's LTE technology.  The impact of the Sprint verdict was reflected in the measurement period adjustments to net current liabilities. The Company does not expect that the outcome of this litigation will have a material adverse effect on its operations or financial condition.  The ultimate outcomes of the appeal of the Sprint Kansas case, the pursuit of indemnity against the Company’s vendor and the TC Tech litigation cannot be predicted.
 
Sprint filed a second suit against Charter on December 2, 2017 in the United States District Court for the District of Delaware. This suit alleges infringement of 15 patents related to the Company's provision of VoIP services (ten of which were asserted against Legacy TWC in the matter described above). Charter will vigorously defend this case. While the Company is unable to predict the outcome of this Sprint suit, it does not expect that this litigation will have a material effect on its operations, financial condition, or cash flows.

Sprint filed a third suit against Charter on May 17, 2018 in the United States District Court for the Eastern District of Virginia. This suit alleges infringement of three patents related to the Company's video on demand services. The Company will vigorously defend this case. The parties recently agreed to transfer this case to the United States District Court for the District of Delaware. While the Company is unable to predict the outcome of this litigation, it does not expect that this litigation will have a material effect on its operations, financial condition, or cash flows.

The New York Public Service Commission (the “PSC”), the regulator for the cable and telecommunication industries in New York (whose Chair directs and operates as the Chief Executive Officer of the New York State Department of Public Service (“DPS”)), issued multiple orders against Charter including two orders on July 27, 2018 relating to the agreement by which the PSC approved Charter’s merger with TWC. One order determined that Charter had failed to satisfy one of its merger conditions by not extending its high speed broadband network according to the PSC’s interpretation of which homes and businesses Charter built to should count. The order further directed the initiation of a court action to impose financial and other penalties on Charter. The second order purported to rescind the PSC’s January 2016 approval of Charter’s merger with TWC’s New York operations and directs Charter to submit a plan to effect an orderly transition to a successor provider or providers and for Charter to cease operations in New York within six months of the order.  As the DPS and Charter entered into discussions about the possibility of resolving the PSC related matters, the PSC extended such deadline. On July 30, 2018, the PSC filed a petition in the Supreme Court of the State of New York seeking penalties of $100,000 per day from June 18, 2018 until Charter complies with the PSC’s interpretation of the merger conditions. The petition also seeks injunctive relief to enjoin failure to comply with the New York State Public


19


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


Service Laws or any regulation or order of the DPS. The petition has been stayed while the Company and the PSC have been engaged in negotiation.

On April 19, 2019, DPS and Charter jointly presented to the PSC a proposed settlement to resolve these disputes, subject to final approval by the PSC. If approved by the PSC, the settlement will resolve all outstanding matters regarding these disputes. No penalties or forfeiture will be assessed as a result of the agreement, and the agreement specifically provides that the Company has not been found to have committed, nor has it admitted to any violation. The incremental operating and capital expenditures to be incurred by the Company to meet the buildout and other requirements of the settlement agreement will not have a material impact on the Company’s consolidated financial condition, results of operations or liquidity.

The agreement has been made public and will be published for public comment and review under the New York State Administrative Procedure Act. Following publication, the agreement is subject to a 60-day public comment period. Should the PSC not approve the settlement agreement, or should it choose to modify the settlement such that the Company does not accept such modified settlement terms, the Company would defend itself against the actions brought by the PSC. The Company cannot predict whether the PSC will approve the proposed settlement following the comment period nor can it preclude the potential for future negotiations with DPS and a further approval process with the PSC. Should the settlement not be approved and the pending actions proceed, and although the Company believes any such actions by the PSC would be without merit and does not believe that the results of the proceedings would have a material adverse effect on the Company, the Company cannot predict the outcome of the PSC claims. No assurance can be given that should an adverse outcome result, that it would not be material to the Company’s consolidated financial condition, results of operations or liquidity. Likewise, the Company cannot reasonably estimate a range of possible losses in the event of an adverse result.

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. 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.

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.

19.     Employee Benefit Plans

The Company sponsors two qualified defined benefit pension plans, the TWC Pension Plan and the TWC Union Pension Plan, that provide pension benefits to a majority of employees who were employed by TWC before the acquisition of TWC. The Company also provides a nonqualified defined benefit pension plan for certain employees under the TWC Excess Pension Plan.
 
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.



20


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


The components of net periodic pension benefit (costs) for the three months ended March 31, 2019 and 2018 are recorded in other pension benefits, net in the consolidated statements of operations and consisted of the following:

 
Three Months Ended March 31,
 
2019
 
2018
Interest cost
$
(32
)
 
$
(32
)
Expected return on plan assets
41

 
52

Net periodic pension benefits
$
9

 
$
20


The Company made no cash contributions to the qualified pension plans during the three months ended March 31, 2019 and 2018; 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 2019 to the extent benefits are paid.

20.     Recently Issued Accounting Standards

Accounting Standards Adopted January 1, 2018

ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”)

Upon adoption of ASU 2014-09, the Company recorded a cumulative-effect adjustment which included an increase to total shareholders’ equity of $38 million.

Accounting Standards Adopted January 1, 2019

ASU No. 2016-02, Leases (“ASU 2016-02”)

In February 2016, the FASB issued ASU 2016-02 which requires lessees to recognize almost all leases on their balance sheet as a lease asset and a lease liability.  For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification is based on criteria largely similar to the criteria applied under legacy lease accounting, but without explicit bright lines.  

The Company adopted ASU 2016-02 using the modified retrospective approach with a cumulative-effect adjustment recorded at the beginning of the period of adoption (January 1, 2019). Therefore, the Company recognized and measured operating leases on the consolidated balance sheet without revising comparative period information or disclosure. At transition, the Company elected the package of practical expedients permitted under the transition guidance within the standard, which eliminates the reassessment of past leases, classification and initial direct costs. The Company did not elect to use hindsight to reassess lease terms or impairment at the adoption date. The Company elected the land easements practical expedient which allows the Company not to retrospectively treat land easements as leases; however, must apply lease accounting prospectively to land easements if they meet the definition of a lease.

The Company implemented internal controls and key system functionality to enable the preparation of financial information on adoption. The new standard resulted in the recording of leased assets and lease liabilities for the Company’s operating leases of approximately $1.1 billion and $1.2 billion, respectively, as of January 1, 2019. The difference between the leased assets and lease liabilities primarily represents the existing deferred rent liabilities balance, resulting from historical straight-lining of operating leases, which was effectively reclassified upon adoption to reduce the measurement of the leased assets. The adoption of the standard did not have an impact on the Company’s shareholders equity and is not anticipated to have an impact on the Company’s results from operations and cash flows. The adoption of the new standard resulted in additional interim and annual lease disclosures. See Note 5 for interim lease disclosures for the three months ended March 31, 2019.



21


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


Accounting Standards Not Yet Adopted

ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”)

In June 2016, the FASB issued 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.  ASU 2016-13 will be effective for interim and annual periods beginning after December 15, 2019 (January 1, 2020 for the Company). Early adoption is permitted.  The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements.

ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”)

In January 2017, the FASB issued ASU 2017-04 which eliminates step two from the goodwill impairment test. Under the new standard, to the extent the carrying amount of a reporting unit exceeds the fair value, the Company will record an impairment charge equal to the difference. The impairment charge recognized should not exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 will be effective for interim and annual periods beginning after December 15, 2019 (January 1, 2020 for the Company). Early adoption is permitted. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its 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 arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. ASU 2018-15 will be effective for annual and interim periods beginning after December 15, 2019 (January 1, 2020 for the Company). Early adoption is permitted. The Company is currently in the process of evaluating the impact that the adoption of ASU 2018-15 will have on its consolidated financial statements.

21.     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 telephone 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 consolidated net income for both the three months ended March 31, 2019 and 2018. Condensed consolidating financial statements as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 follow.



22


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 March 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
$

 
$
187

 
$

 
$
1,264

 
$

 
$
1,451

Accounts receivable, net
1

 
32

 

 
1,545

 

 
1,578

Receivables from related party
23

 
384

 
44

 

 
(451
)
 

Prepaid expenses and other current assets
11

 
47

 

 
664

 

 
722

Total current assets
35

 
650

 
44

 
3,473

 
(451
)
 
3,751

 
 
 
 
 
 
 
 
 
 
 
 
RESTRICTED CASH

 
175

 

 

 

 
175

 
 
 
 
 
 
 
 
 
 
 
 
INVESTMENT IN CABLE PROPERTIES:
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net

 
573

 

 
34,286

 

 
34,859

Customer relationships, net

 

 

 
8,997

 

 
8,997

Franchises

 

 

 
67,319

 

 
67,319

Goodwill

 

 

 
29,554

 

 
29,554

Total investment in cable properties, net

 
573

 

 
140,156

 

 
140,729

 
 
 
 
 
 
 
 
 
 
 
 
INVESTMENT IN SUBSIDIARIES
53,091

 
59,934

 
78,391

 

 
(191,416
)
 

OPERATING LEASE RIGHT-OF-USE ASSETS

 
141

 

 
960

 

 
1,101

LOANS RECEIVABLE – RELATED PARTY
260

 
699

 
545

 

 
(1,504
)
 

OTHER NONCURRENT ASSETS

 
225

 

 
1,276

 

 
1,501

 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
53,386

 
$
62,397

 
$
78,980

 
$
145,865

 
$
(193,371
)
 
$
147,257

 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’/MEMBER’S EQUITY
 
 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
$
26

 
$
817

 
$
310

 
$
7,060

 
$

 
$
8,213

Operating lease liabilities

 
33

 

 
172

 

 
205

Payables to related party

 

 

 
451

 
(451
)
 

Current portion of long-term debt

 

 

 
3,532

 

 
3,532

Total current liabilities
26

 
850

 
310

 
11,215

 
(451
)
 
11,950

 
 
 
 
 
 
 
 
 
 
 
 
LONG-TERM DEBT

 

 
18,736

 
51,831

 

 
70,567

LOANS PAYABLE – RELATED PARTY

 

 

 
1,504

 
(1,504
)
 

DEFERRED INCOME TAXES
17,409

 
12

 

 
52

 

 
17,473

LONG-TERM OPERATING LEASE LIABILITIES

 
161

 

 
820

 

 
981

OTHER LONG-TERM LIABILITIES
217

 
397

 

 
2,029

 

 
2,643

 
 
 
 
 
 
 
 
 
 
 
 
SHAREHOLDERS’/MEMBER’S EQUITY
 
 
 
 
 
 
 
 
 
 
 
Controlling interest
35,734

 
53,091

 
59,934

 
78,391

 
(191,416
)
 
35,734

Noncontrolling interests

 
7,886

 

 
23

 

 
7,909

Total shareholders’/member’s equity
35,734