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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 March 31, 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-20200331_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 classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock $.001 Par ValueCHTRNASDAQ 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 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   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 March 31, 2020: 206,457,540

Number of shares of Class B common stock outstanding as of March 31, 2020: 1




chtr-20200331_g2.jpg
CHARTER COMMUNICATIONS, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2020

TABLE OF CONTENTS
Page No.

This quarterly report on Form 10-Q is for the three months ended March 31, 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)
March 31,
2020
December 31,
2019
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$2,908  $3,483  
Accounts receivable, less allowance for doubtful accounts of $175 and $151, respectively
2,091  2,227  
Prepaid expenses and other current assets760  761  
Total current assets5,759  6,471  
RESTRICTED CASH28  66  
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net of accumulated depreciation of $29,038 and $27,656, respectively
34,096  34,591  
Customer relationships, net6,955  7,453  
Franchises67,322  67,322  
Goodwill29,554  29,554  
Total investment in cable properties, net137,927  138,920  
OTHER NONCURRENT ASSETS2,838  2,731  
Total assets$146,552  $148,188  
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities$8,310  $8,885  
Current portion of long-term debt4,905  3,500  
Total current liabilities13,215  12,385  
LONG-TERM DEBT74,787  75,578  
DEFERRED INCOME TAXES17,665  17,711  
OTHER LONG-TERM LIABILITIES4,163  3,703  
SHAREHOLDERS’ EQUITY:
Class A common stock; $0.001 par value; 900 million shares authorized;
211,487,495 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 capital31,544  31,405  
Retained earnings 436  40  
Treasury stock at cost; 5,029,955 and no shares, respectively
(2,352)   
Accumulated other comprehensive loss    
Total Charter shareholders’ equity 29,628  31,445  
Noncontrolling interests7,094  7,366  
Total shareholders’ equity36,722  38,811  
Total liabilities and shareholders’ equity$146,552  $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 March 31,
20202019
REVENUES$11,738  $11,206  
COSTS AND EXPENSES:
Operating costs and expenses (exclusive of items shown separately below)
7,432  7,236  
Depreciation and amortization2,497  2,550  
Other operating (income) expenses, net7  (5) 
9,936  9,781  
Income from operations1,802  1,425  
OTHER INCOME (EXPENSES):
Interest expense, net
(980) (925) 
Loss on extinguishment of debt(27)   
Gain (loss) on financial instruments, net
(318) 37  
Other pension benefits, net10  9  
Other income (expense), net9  (110) 
(1,306) (989) 
Income before income taxes496  436  
Income tax expense
(29) (119) 
Consolidated net income467  317  
Less: Net income attributable to noncontrolling interests(71) (64) 
Net income attributable to Charter shareholders$396  $253  
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
Basic$1.91  $1.13  
Diluted$1.86  $1.11  
Weighted average common shares outstanding, basic
207,831,305  224,630,122  
Weighted average common shares outstanding, diluted
212,810,613  227,595,365  


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 StockClass B Common StockAdditional Paid-in CapitalRetained Earnings Treasury StockAccumulated Other Comprehensive LossTotal Charter Shareholders’ EquityNon-controlling InterestsTotal 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  

Class A Common StockClass B Common StockAdditional Paid-in CapitalRetained Earnings Treasury StockAccumulated Other Comprehensive LossTotal Charter Shareholders’ EquityNon-controlling InterestsTotal 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  

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,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income $467  $317  
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
Depreciation and amortization2,497  2,550  
Stock compensation expense90  85  
Noncash interest income, net(12) (55) 
Other pension benefits, net(10) (9) 
Loss on extinguishment of debt27    
(Gain) loss on financial instruments, net318  (37) 
Deferred income taxes(14) 81  
Other, net(20) 98  
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable136  155  
Prepaid expenses and other assets(104) (300) 
Accounts payable, accrued liabilities and other(155) (199) 
Net cash flows from operating activities3,220  2,686  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment(1,461) (1,665) 
Change in accrued expenses related to capital expenditures(388) (376) 
Real estate investments through variable interest entities(38) (39) 
Other, net37    
Net cash flows from investing activities(1,850) (2,080) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt4,339  6,884  
Repayments of long-term debt(3,589) (5,572) 
Payments for debt issuance costs(41) (25) 
Issuance of equity23    
Purchase of treasury stock(2,352) (940) 
Proceeds from exercise of stock options93  44  
Purchase of noncontrolling interest(393) (93) 
Distributions to noncontrolling interest(39) (39) 
Other, net(24) (4) 
Net cash flows from financing activities(1,983) 255  
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(613) 861  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period3,549  765  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period$2,936  $1,626  
CASH PAID FOR INTEREST$1,050  $966  
CASH PAID FOR TAXES$19  $4  

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 March 31, 2020 and December 31, 2019:

March 31, 2020December 31, 2019
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Indefinite-lived intangible assets:
Franchises$67,322  $—  $67,322  $67,322  $—  $67,322  
Goodwill29,554  —  29,554  29,554  —  29,554  
Trademarks159  —  159  159  —  159  
$97,035  $—  $97,035  $97,035  $—  $97,035  
Finite-lived intangible assets:
Customer relationships$18,230  $(11,275) $6,955  $18,230  $(10,777) $7,453  
Other intangible assets405  (132) 273  405  (122) 283  
$18,635  $(11,407) $7,228  $18,635  $(10,899) $7,736  

Amortization expense related to customer relationships and other intangible assets for the three months ended March 31, 2020 and 2019 was $508 million and $578 million, respectively.
The Company expects amortization expense on its finite-lived intangible assets will be as follows:

Nine months ended December 31, 2020$1,366  
20211,599  
20221,329  
20231,072  
2024821  
Thereafter1,041  
$7,228  

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'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

6


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

the arrangement, the Company has consolidated the assets and liabilities of the SPE in its consolidated balance sheets as of March 31, 2020 and December 31, 2019 as follows.

March 31, 2020December 31, 2019
Assets
Restricted cash$28  $66  
Property, plant and equipment$335  $295  
Liabilities
Current liabilities$13  $11  
Other long-term liabilities$350  $350  

Property, plant and equipment includes land, a parking garage and building construction costs, including the capitalization of qualifying interest. As of March 31, 2020 and December 31, 2019, other long-term liabilities include $337 million and $339 million, respectively, in VIE's mortgage note liability and $13 million and $11 million, respectively, in liability-classified noncontrolling interest recorded at amortized cost with accretion towards settlement of the put/call option in the lease.

The consolidated statements of cash flows for the three months ended March 31, 2020 and 2019 includes a decrease to restricted cash of $38 million and $39 million, respectively, primarily related to building construction costs.

Equity Investments

The Company recorded impairments on equity investments of approximately $110 million during the three months ended March 31, 2019 which were recorded in other income (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, 2020 and December 31, 2019:

March 31, 2020December 31, 2019
Accounts payable – trade$733  $786  
Deferred revenue477  460  
Accrued liabilities:
Programming costs2,133  2,042  
Labor869  1,028  
Capital expenditures1,029  1,441  
Interest1,005  1,052  
Taxes and regulatory fees511  537  
Property and casualty468  458  
Operating lease liabilities218  214  
Other867  867  
$8,310  $8,885  

5. Leases

Operating lease expenses were $108 million and $107 million for the three months ended March 31, 2020 and 2019, respectively, inclusive of $35 million and $36 million for the three months ended March 31, 2020 and 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 $73 million and $71 million, for the three months ended March 31, 2020 and 2019, respectively. Operating lease right-of-use assets obtained in exchange for operating lease obligations were $65 million and $56 million for the three months ended March 31, 2020 and 2019, respectively.


7


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

Supplemental balance sheet information related to leases is as follows.

March 31, 2020December 31, 2019
Operating lease right-of-use assets:  
Included within other noncurrent assets  $1,096  $1,092  
Operating lease liabilities:  
Current portion included within accounts payable and accrued liabilities  $218  $214  
Long-term portion included within other long-term liabilities  984  979  
$1,202  $1,193  
Weighted average remaining lease term for operating leases  6.6 years6.6 years
Weighted average discount rate for operating leases  4.3 %4.4 %

Maturities of lease liabilities are as follows.

Operating leases
Nine months ended December 31, 2020$195  
2021267  
2022229  
2023201  
2024164  
Thereafter412  
Undiscounted lease cash flow commitments
1,468  
Reconciling impact from discounting(266) 
Lease liabilities on consolidated balance sheet as of March 31, 2020
$1,202  

The Company has $60 million and $62 million of finance lease liabilities recognized in the consolidated balance sheets as of March 31, 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 March 31, 2020 and December 31, 2019:

March 31, 2020December 31, 2019
Principal AmountAccreted ValuePrincipal AmountAccreted Value
CCO Holdings, LLC:
5.250% senior notes due September 30, 2022
1,105  1,097  1,250  1,241  
5.125% senior notes due February 15, 2023
    1,000  995  
4.000% senior notes due March 1, 2023
500  497  500  497  
5.125% senior notes due May 1, 2023
1,105  1,101  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