UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
______________
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20202021
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
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Charter Communications, Inc.
(Exact name of registrant as specified in its charter)

Delaware84-1496755
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
400 Atlantic StreetWashington Blvd.StamfordConnecticut0690106902
(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 every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes x No o

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

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

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

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

Number of shares of Class A common stock outstanding as of June 30, 2020: 204,899,1762021: 183,822,205

Number of shares of Class B common stock outstanding as of June 30, 2020:2021: 1



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CHARTER COMMUNICATIONS, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 20202021

TABLE OF CONTENTS
Page No.
1
for the three and six months ended June 30, 20202021 and 20192020
2
for the three and six months ended June 30, 20202021 and 20192020
3
4
5
2822
4235
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4337
4337
4337
37
4438
S-1
E-1

This quarterly report on Form 10-Q is for the three and six months ended June 30, 2020.2021. 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;
•general business conditions, unemployment levels and the level of activity in the housing sector and economic uncertainty or downturn, including the impacts of the Novel Coronavirus (“COVID-19”) pandemic to our customers, our vendors and local, state and federal governmental responses to the pandemic;
•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)consents and distribution requirements);
•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 subsidies to consumers, subsidies and incentives for competitors, 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;us;
•the ability to retainhire and hireretain key personnel;
•our ability to procure necessary services and equipment from our vendors at reasonable costs;
•the availability and access, in general, of funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets; and
•our ability to comply with all covenants in our indentures and credit facilities, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions.

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

ii

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)
June 30,
2020		December 31,
2019
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$2,097  $3,483  
Accounts receivable, less allowance for doubtful accounts of $218 and $151, respectively1,994  2,227  
Prepaid expenses and other current assets674  761  
Total current assets4,765  6,471  
RESTRICTED CASH5  66  
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net of accumulated depreciation of $29,138 and $27,656, respectively34,074  34,591  
Customer relationships, net6,486  7,453  
Franchises67,322  67,322  
Goodwill29,554  29,554  
Total investment in cable properties, net137,436  138,920  
OTHER NONCURRENT ASSETS2,930  2,731  
Total assets$145,136  $148,188  
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities$8,436  $8,885  
Current portion of long-term debt706  3,500  
Total current liabilities9,142  12,385  
LONG-TERM DEBT77,663  75,578  
DEFERRED INCOME TAXES17,789  17,711  
OTHER LONG-TERM LIABILITIES4,141  3,703  
SHAREHOLDERS’ EQUITY:
Class A common stock; $0.001 par value; 900 million shares authorized;
212,393,939 and 209,975,963 shares issued, respectively—  —  
Class B common stock; $0.001 par value; 1,000 shares authorized;
1 share issued and outstanding—  —  
Preferred stock; $0.001 par value; 250 million shares authorized;
0 shares issued and outstanding
—  —  
Additional paid-in capital31,661  31,405  
Retained earnings1,202  40  
Treasury stock at cost; 7,494,763 and 0 shares, respectively(3,507) —  
Accumulated other comprehensive loss—  —  
Total Charter shareholders’ equity29,356  31,445  
Noncontrolling interests7,045  7,366  
Total shareholders’ equity36,401  38,811  
Total liabilities and shareholders’ equity$145,136  $148,188  

June 30,
2021		December 31,
2020
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$1,711 $1,001 
Accounts receivable, less allowance for doubtful accounts of $193 and $217, respectively2,583 2,539 
Prepaid expenses and other current assets388 369 
Total current assets4,682 3,909 
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net of accumulated depreciation of $32,520 and $31,639, respectively34,206 34,357 
Customer relationships, net4,787 5,615 
Franchises67,322 67,322 
Goodwill29,554 29,554 
Total investment in cable properties, net135,869 136,848 
OTHER NONCURRENT ASSETS3,475 3,449 
Total assets$144,026 $144,206 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities$9,036 $8,867 
Current portion of long-term debt1,002 1,008 
Total current liabilities10,038 9,875 
LONG-TERM DEBT86,962 81,744 
DEFERRED INCOME TAXES18,678 18,108 
OTHER LONG-TERM LIABILITIES4,262 4,198 
SHAREHOLDERS’ EQUITY:
Class A common stock; $0.001 par value; 900 million shares authorized;
195,489,213 and 193,730,992 shares issued, respectively0 0 
Class B common stock; $0.001 par value; 1,000 shares authorized;
1 share issued and outstanding0 0 
Preferred stock; $0.001 par value; 250 million shares authorized;
0 shares issued and outstanding
0 0 
Additional paid-in capital29,878 29,000 
Retained earnings(3,368)(5,195)
Treasury stock at cost; 11,667,008 and 0 shares, respectively(7,168)0 
Total Charter shareholders’ equity19,342 23,805 
Noncontrolling interests4,744 6,476 
Total shareholders’ equity24,086 30,281 
Total liabilities and shareholders’ equity$144,026 $144,206 

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

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share data)
Unaudited
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
REVENUES$11,696  $11,347  $23,434  $22,553  
COSTS AND EXPENSES:
Operating costs and expenses (exclusive of items shown separately below)7,297  7,244  14,729  14,480  
Depreciation and amortization2,428  2,500  4,925  5,050  
Other operating expenses, net2  62  9  57  
9,727  9,806  19,663  19,587  
Income from operations1,969  1,541  3,771  2,966  
OTHER INCOME (EXPENSES):
Interest expense, net(957) (945) (1,937) (1,870) 
Loss on extinguishment of debt(36) —  (63) —  
Gain (loss) on financial instruments, net64  (119) (254) (82) 
Other pension benefits, net11  9  21  18  
Other expense, net(9) (16) —  (126) 
(927) (1,071) (2,233) (2,060) 
Income before income taxes1,042  470  1,538  906  
Income tax expense(166) (84) (195) (203) 
Consolidated net income876  386  1,343  703  
Less: Net income attributable to noncontrolling interests(110) (72) (181) (136) 
Net income attributable to Charter shareholders$766  $314  $1,162  $567  
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
Basic$3.72  $1.41  $5.62  $2.54  
Diluted$3.63  $1.39  $5.48  $2.50  
Weighted average common shares outstanding, basic205,777,438  222,392,274  206,804,371  223,505,016  
Weighted average common shares outstanding, diluted210,906,946  225,942,172  212,158,218  226,889,745  

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
REVENUES$12,802 $11,696 $25,324 $23,434 
COSTS AND EXPENSES:
Operating costs and expenses (exclusive of items shown separately below)7,882 7,297 15,593 14,729 
Depreciation and amortization2,354 2,428 4,795 4,925 
Other operating (income) expenses, net(9)2 293 9 
10,227 9,727 20,681 19,663 
Income from operations2,575 1,969 4,643 3,771 
OTHER INCOME (EXPENSES):
Interest expense, net(1,004)(957)(1,987)(1,937)
Other income (expenses), net(132)30 (80)(296)
(1,136)(927)(2,067)(2,233)
Income before income taxes1,439 1,042 2,576 1,538 
Income tax expense(281)(166)(497)(195)
Consolidated net income1,158 876 2,079 1,343 
Less: Net income attributable to noncontrolling interests(138)(110)(252)(181)
Net income attributable to Charter shareholders$1,020 $766 $1,827 $1,162 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
Basic$5.48 $3.72 $9.69 $5.62 
Diluted$5.29 $3.63 $9.37 $5.48 
Weighted average common shares outstanding, basic185,916,505 205,777,438 188,645,356 206,804,371 
Weighted average common shares outstanding, diluted199,077,390 210,906,946 202,458,265 212,158,218 


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 EarningsTreasury StockAccumulated Other Comprehensive LossTotal Charter Shareholders’ EquityNon-controlling InterestsTotal Shareholders’ Equity
BALANCE, December 31, 2019$—  $—  $31,405  $40  $—  $—  $31,445  $7,366  $38,811  
Consolidated net income—  —  —  396  —  —  396  71  467  
Stock compensation expense—  —  90  —  —  —  90  —  90  
Exercise of stock options—  —  93  —  —  —  93  —  93  
Issuance of equity—  —  23  —  —  —  23  —  23  
Purchases of treasury stock—  —  —  —  (2,352) —  (2,352) —  (2,352) 
Purchase of noncontrolling interest, net of tax—  —  (149) —  —  —  (149) (195) (344) 
Change in noncontrolling interest ownership, net of tax—  —  82  —  —  —  82  (109) (27) 
Distributions to noncontrolling interest—  —  —  —  —  —  —  (39) (39) 
BALANCE, March 31, 2020—  —  31,544  436  (2,352) —  29,628  7,094  36,722  
Consolidated net income—  —  —  766  —  —  766  110  876  
Stock compensation expense—  —  90  —  —  —  90  —  90  
Exercise of stock options—  —  28  —  —  —  28  —  28  
Purchases of treasury stock—  —  —  —  (1,155) —  (1,155) —  (1,155) 
Purchase of noncontrolling interest, net of tax—  —  (42) —  —  —  (42) (69) (111) 
Change in noncontrolling interest ownership, net of tax—  —  41  —  —  —  41  (52) (11) 
Distributions to noncontrolling interest—  —  —  —  —  —  —  (38) (38) 
BALANCE, June 30, 2020$—  $—  $31,661  $1,202  $(3,507) $—  $29,356  $7,045  $36,401  

Class A Common StockClass B Common StockAdditional Paid-in CapitalRetained EarningsTreasury StockTotal Charter Shareholders’ EquityNon-controlling InterestsTotal Shareholders’ Equity
BALANCE, December 31, 2020$0 $0 $29,000 $(5,195)$0 $23,805 $6,476 $30,281 
Consolidated net income0 0 0 807 0 807 114 921 
Stock compensation expense0 0 134 0 0 134 0 134 
Exercise of stock options0 0 9 0 0 9 0 9 
Purchases of treasury stock0 0 0 0 (3,652)(3,652)0 (3,652)
Purchase of noncontrolling interest, net of tax0 0 (237)0 0 (237)(192)(429)
Change in noncontrolling interest ownership, net of tax0 0 131 0 0 131 (175)(44)
Distributions to noncontrolling interest0 0 0 0 0 0 (39)(39)
BALANCE, March 31, 20210 0 29,037 (4,388)(3,652)20,997 6,184 27,181 
Consolidated net income0 0 0 1,020 0 1,020 138 1,158 
Stock compensation expense0 0 100 0 0 100 0 100 
Exercise of stock options0 0 17 0 0 17 0 17 
Purchases of treasury stock0 0 0 0 (3,516)(3,516)0 (3,516)
Purchase of noncontrolling interest, net of tax0 0 (279)0 0 (279)(213)(492)
Preferred unit conversion and change in noncontrolling interest ownership, net of tax0 0 1,003 0 0 1,003 (1,333)(330)
Distributions to noncontrolling interest0 0 0 0 0 0 (32)(32)
BALANCE, June 30, 2021$0 $0 $29,878 $(3,368)$(7,168)$19,342 $4,744 $24,086 

Class A Common StockClass B Common StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive LossTotal Charter Shareholders’ EquityNon-controlling InterestsTotal Shareholders’ EquityClass A Common StockClass B Common StockAdditional Paid-in CapitalRetained EarningsTreasury StockTotal Charter Shareholders’ EquityNon-controlling InterestsTotal Shareholders’ Equity
BALANCE, December 31, 2018$—  $—  $33,507  $2,780  $—  $(2) $36,285  $7,987  $44,272  
BALANCE, December 31, 2019BALANCE, December 31, 2019$0 $0 $31,405 $40 $0 $31,445 $7,366 $38,811 
Consolidated net incomeConsolidated net income—  —  —  253  —  —  253  64  317  Consolidated net income0 0 0 396 0 396 71 467 
Stock compensation expenseStock compensation expense—  —  85  —  —  —  85  —  85  Stock compensation expense0 0 90 0 0 90 0 90 
Exercise of stock optionsExercise of stock options—  —  44  —  —  —  44  —  44  Exercise of stock options0 0 93 0 0 93 0 93 
Issuance of equityIssuance of equity0 0 23 0 0 23 0 23 
Purchases of treasury stockPurchases of treasury stock—  —  —  —  (940) —  (940) —  (940) Purchases of treasury stock0 0 0 0 (2,352)(2,352)0 (2,352)
Purchase of noncontrolling interest, net of taxPurchase of noncontrolling interest, net of tax—  —  (15) —  —  —  (15) (74) (89) Purchase of noncontrolling interest, net of tax0 0 (149)0 0 (149)(195)(344)
Change in noncontrolling interest ownership, net of taxChange in noncontrolling interest ownership, net of tax—  —  22  —  —  —  22  (29) (7) Change in noncontrolling interest ownership, net of tax0 0 82 0 0 82 (109)(27)
Distributions to noncontrolling interestDistributions to noncontrolling interest—  —  —  —  —  —  —  (39) (39) Distributions to noncontrolling interest0 0 0 0 0 0 (39)(39)
BALANCE, March 31, 2019—  —  33,643  3,033  (940) (2) 35,734  7,909  43,643  
BALANCE, March 31, 2020BALANCE, March 31, 20200 0 31,544 436 (2,352)29,628 7,094 36,722 
Consolidated net incomeConsolidated net income—  —  —  314  —  —  314  72  386  Consolidated net income0 0 0 766 0 766 110 876 
Stock compensation expenseStock compensation expense—  —  82  —  —  —  82  —  82  Stock compensation expense0 0 90 0 0 90 0 90 
Exercise of stock optionsExercise of stock options—  —  37  —  —  —  37  —  37  Exercise of stock options0 0 28 0 0 28 0 28 
Purchases of treasury stockPurchases of treasury stock—  —  —  —  (861) —  (861) —  (861) Purchases of treasury stock0 0 0 0 (1,155)(1,155)0 (1,155)
Purchase of noncontrolling interest, net of taxPurchase of noncontrolling interest, net of tax—  —  (37) —  —  —  (37) (111) (148) Purchase of noncontrolling interest, net of tax0 0 (42)0 0 (42)(69)(111)
Change in noncontrolling interest ownership, net of taxChange in noncontrolling interest ownership, net of tax—  —  17  —  —  —  17  (23) (6) Change in noncontrolling interest ownership, net of tax0 0 41 0 0 41 (52)(11)
Distributions to noncontrolling interestDistributions to noncontrolling interest—  —  —  —  —  —  —  (39) (39) Distributions to noncontrolling interest0 0 0 0 0 0 (38)(38)
BALANCE, June 30, 2019$—  $—  $33,742  $3,347  $(1,801) $(2) $35,286  $7,808  $43,094  
BALANCE, June 30, 2020BALANCE, June 30, 2020$0 $0 $31,661 $1,202 $(3,507)$29,356 $7,045 $36,401 

The accompanying notes are an integral part of these consolidated financial statements.
3

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
Unaudited
Six Months Ended June 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income$1,343  $703  
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
Depreciation and amortization4,925  5,050  
Stock compensation expense180  167  
Noncash interest income, net(21) (72) 
Other pension benefits, net(21) (18) 
Loss on extinguishment of debt63  —  
Loss on financial instruments, net254  82  
Deferred income taxes101  137  
Other, net(17) 151  
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable233  (337) 
Prepaid expenses and other assets(164) (176) 
Accounts payable, accrued liabilities and other(127) (240) 
Net cash flows from operating activities6,749  5,447  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment(3,338) (3,262) 
Change in accrued expenses related to capital expenditures(174) (428) 
Real estate investments through variable interest entities(81) (64) 
Other, net(8) 8  
Net cash flows from investing activities(3,601) (3,746) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt7,322  10,714  
Repayments of long-term debt(7,892) (10,123) 
Payments for debt issuance costs(62) (32) 
Issuance of equity23  —  
Purchase of treasury stock(3,507) (1,801) 
Proceeds from exercise of stock options121  81  
Purchase of noncontrolling interest(518) (254) 
Distributions to noncontrolling interest(77) (78) 
Borrowings for real estate investments through variable interest entities24  —  
Distributions to variable interest entities noncontrolling interest(4) —  
Other, net(25) (127) 
Net cash flows from financing activities(4,595) (1,620) 
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(1,447) 81  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period3,549  765  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period$2,102  $846  
CASH PAID FOR INTEREST$1,985  $2,017  
CASH PAID FOR TAXES$50  $43  
Six Months Ended June 30,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income$2,079 $1,343 
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
Depreciation and amortization4,795 4,925 
Stock compensation expense234 180 
Noncash interest income, net(15)(21)
Deferred income taxes371 101 
Other, net124 279 
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable(44)170 
Prepaid expenses and other assets(113)(101)
Accounts payable, accrued liabilities and other319 (127)
Net cash flows from operating activities7,750 6,749 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment(3,702)(3,338)
Change in accrued expenses related to capital expenditures(125)(174)
Real estate investments through variable interest entities(123)(81)
Other, net(22)(8)
Net cash flows from investing activities(3,972)(3,601)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt10,958 7,322 
Repayments of long-term debt(5,759)(7,892)
Payments for debt issuance costs(58)(62)
Issuance of equity0 23 
Purchase of treasury stock(7,168)(3,507)
Proceeds from exercise of stock options26 121 
Purchase of noncontrolling interest(1,090)(518)
Distributions to noncontrolling interest(71)(77)
Borrowings for real estate investments through variable interest entities123 20 
Other, net(29)(25)
Net cash flows from financing activities(3,068)(4,595)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS710 (1,447)
CASH AND CASH EQUIVALENTS, beginning of period1,001 3,549 
CASH AND CASH EQUIVALENTS, end of period$1,711 $2,102 
CASH PAID FOR INTEREST$1,996 $1,985 
CASH PAID FOR TAXES$69 $50 

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 communicationshigh-capacity, two-way telecommunications 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 1 reportable segment, cable services.segment.

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’sthe Company'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 20202021 presentation.


5

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

2.    Franchises, Goodwill and Other Intangible Assets

Indefinite-lived and finite-lived intangible assets consist of the following as of June 30, 20202021 and December 31, 2019:2020:

June 30, 2020December 31, 2019June 30, 2021December 31, 2020
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Indefinite-lived intangible assets:Indefinite-lived intangible assets:Indefinite-lived intangible assets:
FranchisesFranchises$67,322  $—  $67,322  $67,322  $—  $67,322  Franchises$67,322 $— $67,322 $67,322 $— $67,322 
GoodwillGoodwill29,554  —  29,554  29,554  —  29,554  Goodwill29,554 — 29,554 29,554 — 29,554 
Wireless spectrum licensesWireless spectrum licenses464 — 464 464 — 464 
TrademarksTrademarks159  —  159  159  —  159  Trademarks159 — 159 159 — 159 
$97,035  $—  $97,035  $97,035  $—  $97,035  $97,499 $— $97,499 $97,499 $— $97,499 
Finite-lived intangible assets:Finite-lived intangible assets:Finite-lived intangible assets:
Customer relationshipsCustomer relationships$18,230  $(11,744) $6,486  $18,230  $(10,777) $7,453  Customer relationships$18,232 $(13,445)$4,787 $18,230 $(12,615)$5,615 
Other intangible assetsOther intangible assets405  (141) 264  405  (122) 283  Other intangible assets420 (178)242 420 (159)261 
$18,635  $(11,885) $6,750  $18,635  $(10,899) $7,736  $18,652 $(13,623)$5,029 $18,650 $(12,774)$5,876 

Amortization expense related to customer relationships and other intangible assets for the three and six months ended June 30, 20202021 was $410 million and $850 million, respectively, and $478 million and $986 million respectively, and $548 million and $1.1 billion for the three and six months ended June 30, 2019,2020, respectively.

The Company expects amortization expense on its finite-lived intangible assets will be as follows:

Six months ended December 31, 2020$889  
20211,599  
Six months ended December 31, 2021Six months ended December 31, 2021$753 
202220221,329  20221,332 
202320231,072  20231,075 
20242024821  2024824 
20252025576 
ThereafterThereafter1,040  Thereafter469 
$6,750  $5,029 

Actual amortization expense in future periods willcould differ from these estimates as a result of new intangible asset acquisitions or divestitures, changes in useful lives, impairments, adoption of new accounting standards and other relevant factors.

3.    Investments

Real Estate Investments through Variable Interest Entities

In July 2018, the Company entered into a build-to-suit lease arrangement with a single-asset special purpose entity ("SPE Building 1") to build the first building in the building complex for the new Charter headquarters in Stamford, Connecticut. The SPE Building 1 obtained a first-lien mortgage note to finance the construction with fixed monthly payments through July 15, 2035 with a 5.612% coupon interest rate. All payments of the mortgage note are guaranteed by Charter. The initial term of the lease is 15 years commencing August 1, 2020, with no termination options. At the end of the lease term there is a mirrored put option for the SPE to sell the property to Charter and call option for Charter to purchase the property for a fixed purchase price.

In April 2020, the Company entered into a build-to-suit lease agreement with a second special purpose entity (“SPE Building 2”) to build the adjoining building and atrium, in the building complex for the new Charter headquarters in Stamford, Connecticut.headquarters. As of June 30, 2020,2021, Charter does not guarantee the financing for SPE Building 2. The initial term of the lease is 15 years commencing February 26, 2022, with no termination options. At the end of the lease term, there is a put option for the SPE Building 2 to sell the property to Charter for a fixed price. If SPE Building 2 does not exercise the put option and Company exercises its first renewal term there is call option for Charter to purchase property for a fixed purchase price in year 3 of the first renewal term.

6

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

to Charter for a fixed price. If SPE Building 2 does not exercise the put option and the Company exercises its first renewal term, there is a call option for Charter to purchase the property for a fixed purchase price in year 3 of the first renewal term.

As the Company has determined that SPE Building 1 and SPE Building 2 (collectively, the "SPEs") are variable interest entities ("VIEs") of which the Company became the primary beneficiary upon the effectiveness of the arrangements in July 2018 and April 2020, respectively, the Company has consolidated the assets and liabilities of the SPEs in its consolidated balance sheets as of June 30, 20202021 and December 31, 20192020 as follows.

June 30, 2020December 31, 2019June 30, 2021December 31, 2020
AssetsAssetsAssets
Restricted cash$5  $66  
Current assetsCurrent assets$5 $3 
Property, plant and equipmentProperty, plant and equipment$389  $295  Property, plant and equipment$633 $490 
LiabilitiesLiabilitiesLiabilities
Current liabilitiesCurrent liabilities$24  $11  Current liabilities$48 $28 
Other long-term liabilitiesOther long-term liabilities$371  $350  Other long-term liabilities$597 $470 

Property, plant and equipment includes land, a parking garage and building construction costs, including the capitalization of qualifying interest. Other long-term liabilities includes mortgage note liabilities and liability-classified noncontrolling interests for the SPEs recorded at amortized cost with accretion towards settlement of the put/call option in the leases. As of June 30, 20202021 and December 31, 2019,2020, other long-term liabilities include $335$515 million and $339$400 million respectively, in SPE Building 1 mortgage note liability.liability, respectively.     

The consolidated statement of cash flows forEquity-Method Investments

During the three and six months ended June 30, 2020 includes a decrease to restricted cash of $61 million related to $81 million in building construction costs for2021, the SPEs and $4 million in distributions to noncontrolling interests for SPE Building 1 offset by $24 million in borrowings for real estate investments for SPE Building 2. The consolidated statement of cash flows for the six months ended June 30, 2019 includes a decrease to restricted cash of $64 million related to building construction costs for SPE Building 1.

Equity Investments

The Company recorded impairments on equity investments of approximately $11$165 million and $121 million during the three and six months ended June 30, 2019 which werewas recorded in other expense,income (expenses), net in the consolidated statements of operations.

4.    Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following as of June 30, 20202021 and December 31, 2019:2020:

June 30, 2020December 31, 2019June 30, 2021December 31, 2020
Accounts payable – tradeAccounts payable – trade$667  $786  Accounts payable – trade$704 $763 
Deferred revenueDeferred revenue471  460  Deferred revenue501 436 
Accrued liabilities:Accrued liabilities:Accrued liabilities:
Programming costsProgramming costs2,033  2,042  Programming costs2,123 1,940 
LaborLabor919  1,028  Labor1,166 1,374 
Capital expendituresCapital expenditures1,211  1,441  Capital expenditures1,059 1,227 
InterestInterest1,040  1,052  Interest1,090 1,083 
Taxes and regulatory feesTaxes and regulatory fees582  537  Taxes and regulatory fees614 555 
Property and casualtyProperty and casualty472  458  Property and casualty486 462 
Operating lease liabilitiesOperating lease liabilities223  214  Operating lease liabilities258 235 
OtherOther818  867  Other1,035 792 
$8,436  $8,885  $9,036 $8,867 

5.    Leases

Operating lease expenses were $115 million and $230 million for the three and six months ended June 30, 2021, respectively, and $108 million and $216 million for the three and six months ended June 30, 2020, respectively, and $109inclusive of $35 million and $216$70 million for the three and six months ended June 30, 2019,2021, respectively, inclusive ofand $32 million and $67 million for the three and six months ended June 30, 2020, respectively, of both short-term lease costs and variable lease costs that were not included in the measurement of operating lease liabilities.


7

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

$67 million for the three and six months ended June 30, 2020, respectively, and $30 million and $65 million for the three and six months ended June 30, 2019, respectively, of both short-term lease costs and variable lease costs that were not included in the measurement of operating lease liabilities.

Cash paid for amounts included in the measurement of operating lease liabilities, recorded as operating cash flows in the statements of cash flows, were $162 million and $147 million for both the six months ended June 30, 2021 and 2020, and 2019.respectively. Operating lease right-of-use assets obtained in exchange for operating lease obligations were $164$209 million and $161$164 million for the six months ended June 30, 20202021 and 2019,2020, respectively.

Supplemental balance sheet information related to leases is as follows.

June 30, 2020December 31, 2019
June 30, 2021December 31, 2020
Operating lease right-of-use assets:Operating lease right-of-use assets:Operating lease right-of-use assets:
Included within other noncurrent assetsIncluded within other noncurrent assets$1,132  $1,092  Included within other noncurrent assets$1,288 $1,214 
Operating lease liabilities:Operating lease liabilities:Operating lease liabilities:
Current portion included within accounts payable and accrued liabilitiesCurrent portion included within accounts payable and accrued liabilities$223  $214  Current portion included within accounts payable and accrued liabilities$258 $235 
Long-term portion included within other long-term liabilitiesLong-term portion included within other long-term liabilities1,022  979  Long-term portion included within other long-term liabilities1,166 1,110 
$1,245  $1,193  $1,424 $1,345 
Weighted average remaining lease term for operating leasesWeighted average remaining lease term for operating leases6.4 years6.6 yearsWeighted average remaining lease term for operating leases6.0 years6.4 years
Weighted average discount rate for operating leasesWeighted average discount rate for operating leases4.2 %4.4 %Weighted average discount rate for operating leases3.6 %3.9 %

Maturities of operating lease liabilities as of June 30, 2021 are as follows.

Operating leases
Six months ended December 31, 2020$149  
2021282  
Six months ended December 31, 2021Six months ended December 31, 2021$165 
20222022245  2022320 
20232023216  2023299 
20242024178  2024250 
20252025199 
ThereafterThereafter441  Thereafter421 
Undiscounted lease cash flow commitmentsUndiscounted lease cash flow commitments1,511  Undiscounted lease cash flow commitments1,654 
Reconciling impact from discountingReconciling impact from discounting(266) Reconciling impact from discounting(230)
Lease liabilities on consolidated balance sheet as of June 30, 2020$1,245  
Lease liabilities on consolidated balance sheet as of June 30, 2021Lease liabilities on consolidated balance sheet as of June 30, 2021$1,424 

The Company has $61$64 million and $62$63 million of finance lease liabilities recognized in the consolidated balance sheets as of June 30, 20202021 and December 31, 2019,2020, 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.

6.    Long-Term Debt
Long-term debt consists of the following as of June 30, 2021 and December 31, 2020:

June 30, 2021December 31, 2020
Principal AmountAccreted ValuePrincipal AmountAccreted Value
CCO Holdings, LLC:
4.000% senior notes due March 1, 2023$500 $498 $500 $498 
5.750% senior notes due February 15, 20261,250 1,239 2,500 2,475 
5.500% senior notes due May 1, 20261,500 1,493 1,500 1,492 
5.875% senior notes due May 1, 20270 0 800 796 
5.125% senior notes due May 1, 20273,250 3,227 3,250 3,225 

8

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

6. Long-Term Debt
Long-term debt consists of the following as of June 30, 2020 and December 31, 2019:

June 30, 2020December 31, 2019
Principal AmountAccreted ValuePrincipal AmountAccreted Value
CCO Holdings, LLC:
5.250% senior notes due September 30, 2022$—  $—  $1,250  $1,241  
5.125% senior notes due February 15, 2023—  —  1,000  995  
4.000% senior notes due March 1, 2023500  498  500  497  
5.125% senior notes due May 1, 2023—  —  1,150  1,145  
5.750% senior notes due September 1, 2023—  —  500  497  
5.750% senior notes due January 15, 2024—  —  150  149  
5.875% senior notes due April 1, 20241,700  1,691  1,700  1,690  
5.375% senior notes due May 1, 2025750  746  750  746  
5.750% senior notes due February 15, 20262,500  2,473  2,500  2,471  
5.500% senior notes due May 1, 20261,500  1,492  1,500  1,491  
5.875% senior notes due May 1, 2027800  796  800  796  
5.125% senior notes due May 1, 20273,250  3,224  3,250  3,222  
5.000% senior notes due February 1, 20285.000% senior notes due February 1, 20282,500  2,470  2,500  2,469  5.000% senior notes due February 1, 20282,500 2,474 2,500 2,472 
5.375% senior notes due June 1, 20295.375% senior notes due June 1, 20291,500  1,501  1,500  1,501  5.375% senior notes due June 1, 20291,500 1,501 1,500 1,501 
4.750% senior notes due March 1, 20304.750% senior notes due March 1, 20303,050  3,041  3,050  3,041  4.750% senior notes due March 1, 20303,050 3,042 3,050 3,042 
4.500% senior notes due August 15, 20304.500% senior notes due August 15, 20302,750  2,750  —  —  4.500% senior notes due August 15, 20302,750 2,750 2,750 2,750 
4.250% senior notes due February 1, 20314.250% senior notes due February 1, 20313,000 3,002 3,000 3,001 
4.500% senior notes due May 1, 20324.500% senior notes due May 1, 20321,400  1,387  —  —  4.500% senior notes due May 1, 20322,900 2,927 2,900 2,928 
4.500% senior notes due June 1, 20334.500% senior notes due June 1, 20331,750 1,728 0 0 
Charter Communications Operating, LLC:Charter Communications Operating, LLC:Charter Communications Operating, LLC:
3.579% senior notes due July 23, 2020—  —  2,000  1,997  
4.464% senior notes due July 23, 20224.464% senior notes due July 23, 20223,000  2,989  3,000  2,987  4.464% senior notes due July 23, 20223,000 2,994 3,000 2,992 
Senior floating rate notes due February 1, 2024Senior floating rate notes due February 1, 2024900  902  900  902  Senior floating rate notes due February 1, 2024900 901 900 902 
4.500% senior notes due February 1, 20244.500% senior notes due February 1, 20241,100  1,094  1,100  1,093  4.500% senior notes due February 1, 20241,100 1,095 1,100 1,094 
4.908% senior notes due July 23, 20254.908% senior notes due July 23, 20254,500  4,473  4,500  4,471  4.908% senior notes due July 23, 20254,500 4,478 4,500 4,475 
3.750% senior notes due February 15, 20283.750% senior notes due February 15, 20281,000  988  1,000  987  3.750% senior notes due February 15, 20281,000 989 1,000 989 
4.200% senior notes due March 15, 20284.200% senior notes due March 15, 20281,250  1,241  1,250  1,240  4.200% senior notes due March 15, 20281,250 1,242 1,250 1,241 
5.050% senior notes due March 30, 20295.050% senior notes due March 30, 20291,250  1,241  1,250  1,241  5.050% senior notes due March 30, 20291,250 1,242 1,250 1,242 
2.800% senior notes due April 1, 20312.800% senior notes due April 1, 20311,600  1,582  —  —  2.800% senior notes due April 1, 20311,600 1,584 1,600 1,583 
2.300% senior notes due February 1, 20322.300% senior notes due February 1, 20321,000 991 1,000 991 
6.384% senior notes due October 23, 20356.384% senior notes due October 23, 20352,000  1,983  2,000  1,982  6.384% senior notes due October 23, 20352,000 1,984 2,000 1,983 
5.375% senior notes due April 1, 20385.375% senior notes due April 1, 2038800  786  800  786  5.375% senior notes due April 1, 2038800 787 800 786 
3.500% senior notes due June 1, 20413.500% senior notes due June 1, 20411,500 1,482 0 0 
6.484% senior notes due October 23, 20456.484% senior notes due October 23, 20453,500  3,467  3,500  3,467  6.484% senior notes due October 23, 20453,500 3,468 3,500 3,468 
5.375% senior notes due May 1, 20475.375% senior notes due May 1, 20472,500  2,506  2,500  2,506  5.375% senior notes due May 1, 20472,500 2,506 2,500 2,506 
5.750% senior notes due April 1, 20485.750% senior notes due April 1, 20482,450  2,391  2,450  2,391  5.750% senior notes due April 1, 20482,450 2,392 2,450 2,392 
5.125% senior notes due July 1, 20495.125% senior notes due July 1, 20491,250  1,240  1,250  1,240  5.125% senior notes due July 1, 20491,250 1,240 1,250 1,240 
4.800% senior notes due March 1, 20504.800% senior notes due March 1, 20502,800  2,797  2,800  2,798  4.800% senior notes due March 1, 20502,800 2,797 2,800 2,797 
3.700% senior notes due April 1, 20513.700% senior notes due April 1, 20511,400  1,379  —  —  3.700% senior notes due April 1, 20512,050 2,031 2,050 2,030 
3.900% senior notes due June 1, 20523.900% senior notes due June 1, 20522,400 2,321 0 0 
6.834% senior notes due October 23, 20556.834% senior notes due October 23, 2055500  495  500  495  6.834% senior notes due October 23, 2055500 495 500 495 
3.850% senior notes due April 1, 20613.850% senior notes due April 1, 20611,850 1,809 1,350 1,339 
4.400% senior notes due December 1, 20614.400% senior notes due December 1, 20611,400 1,389 0 0 
Credit facilitiesCredit facilities10,288  10,213  10,427  10,345  Credit facilities10,012 9,949 10,150 10,081 
Time Warner Cable, LLC:Time Warner Cable, LLC:Time Warner Cable, LLC:
5.000% senior notes due February 1, 2020—  —  1,500  1,503  
4.000% senior notes due September 1, 20214.000% senior notes due September 1, 20211,000 1,002 1,000 1,008 
5.750% sterling senior notes due June 2, 2031 (a)
5.750% sterling senior notes due June 2, 2031 (a)
865 919 854 911 
6.550% senior debentures due May 1, 20376.550% senior debentures due May 1, 20371,500 1,665 1,500 1,668 
7.300% senior debentures due July 1, 20387.300% senior debentures due July 1, 20381,500 1,759 1,500 1,763 
6.750% senior debentures due June 15, 20396.750% senior debentures due June 15, 20391,500 1,703 1,500 1,706 
5.875% senior debentures due November 15, 20405.875% senior debentures due November 15, 20401,200 1,253 1,200 1,254 
5.500% senior debentures due September 1, 20415.500% senior debentures due September 1, 20411,250 1,258 1,250 1,258 
5.250% sterling senior notes due July 15, 2042 (b)
5.250% sterling senior notes due July 15, 2042 (b)
899 869 889 859 
4.500% senior debentures due September 15, 20424.500% senior debentures due September 15, 20421,250 1,146 1,250 1,145 
Time Warner Cable Enterprises LLC:Time Warner Cable Enterprises LLC:
8.375% senior debentures due March 15, 20238.375% senior debentures due March 15, 20231,000 1,081 1,000 1,104 
8.375% senior debentures due July 15, 20338.375% senior debentures due July 15, 20331,000 1,262 1,000 1,270 
Total debtTotal debt87,526 87,964 82,143 82,752 
Less current portion:Less current portion:

9

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

4.125% senior notes due February 15, 2021700  706  700  711  
4.000% senior notes due September 1, 20211,000  1,015  1,000  1,021  
5.750% sterling senior notes due June 2, 2031 (a)
775  827  828  886  
6.550% senior debentures due May 1, 20371,500  1,672  1,500  1,675  
7.300% senior debentures due July 1, 20381,500  1,768  1,500  1,772  
6.750% senior debentures due June 15, 20391,500  1,709  1,500  1,713  
5.875% senior debentures due November 15, 20401,200  1,254  1,200  1,255  
5.500% senior debentures due September 1, 20411,250  1,258  1,250  1,258  
5.250% sterling senior notes due July 15, 2042 (b)
805  778  861  831  
4.500% senior debentures due September 15, 20421,250  1,143  1,250  1,142  
Time Warner Cable Enterprises LLC:
8.375% senior debentures due March 15, 20231,000  1,126  1,000  1,148  
8.375% senior debentures due July 15, 20331,000  1,277  1,000  1,284  
Total debt77,768  78,369  78,416  79,078  
Less current portion:
5.000% senior notes due February 1, 2020—  —  (1,500) (1,503) 
3.579% senior notes due July 23, 2020—  —  (2,000) (1,997) 
4.125% senior notes due February 15, 2021(700) (706) —  —  
Long-term debt$77,068  $77,663  $74,916  $75,578  
4.000% senior notes due September 1, 2021(1,000)(1,002)(1,000)(1,008)
Long-term debt$86,526 $86,962 $81,143 $81,744 

(a)Principal amount includes £625 million remeasured at $775$865 million and $828$854 million as of June 30, 20202021 and December 31, 2019,2020, respectively, using the exchange rate at the respective dates.
(b)Principal amount includes £650 million remeasured at $805$899 million and $861$889 million as of June 30, 20202021 and December 31, 2019,2020, respectively, using the exchange rate at the respective dates.

The accreted values presented in the table above represent the principal amount of the debt adjusted for original issue discount or premium at the time of sale, deferred financing costs, and, in regards to debt assumed in acquisitions, fair value premium adjustments as a result of applying acquisition accounting plus the accretion of those amounts to the balance sheet date. However, the amount that is currently payable if the debt becomes immediately due is equal to the principal amount of the debt. In regards to the fixed-rate British pound sterling denominated notes (the “Sterling Notes”), the principal amount of the debt and any premium or discount is remeasured into US dollars as of each balance sheet date. See Note 9. The Company has availability under the Charter Operating credit facilities of approximately $4.7 billion as of June 30, 2020.2021.

In February 2020, CCO Holdings, LLC ("CCO Holdings") and CCO Holdings Capital Corp. jointly issued $1.65 billion aggregate principal amount of 4.500% senior unsecured notes due 2030 at par and in March 2020, an additional $1.1 billion of the same series of notes were issued at a price of 102.5% of the aggregate principal amount. Also in March 2020, CCO Holdings and CCO Holdings Capital Corp. issued $1.4 billion aggregate principal amount of 4.500% senior unsecured notes due 2032 at par. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.250% senior notes due September 30, 2022, 5.125% senior notes due February 15, 2023, 5.125% senior notes due May 1, 2023, 5.750% senior notes due September 1, 2023 and 5.750% senior notes due January 15, 2024, as well as funding buybacks of2021, Charter Class A common stockOperating and Charter Holdings common units. The Company recorded a loss on extinguishment of debt of $36 million and $63 million during the three and six months ended June 30, 2020, respectively, related to these transactions.

In July 2020, CCO Holdings and CCO HoldingsCommunications Operating Capital Corp. jointly issued $1.5 billion aggregate principal amount of 4.250%3.500% senior unsecuredsecured notes due 2031 at par and later in July 2020, an additional $1.5 billion of the same series of notes were issuedJune 2041 at a price of 102%. The net proceeds will be used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.875% senior notes due April 1, 2024, as well as funding buybacks of Charter Class A common stock and Charter Holdings common units.


10

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

The CCO Holdings notes are senior debt obligations of CCO Holdings and CCO Holdings Capital Corp. and rank equally with all other current and future unsecured, unsubordinated obligations of CCO Holdings and CCO Holdings Capital Corp. They are structurally subordinated to all obligations of subsidiaries of CCO Holdings.

CCO Holdings may redeem some or all of the notes at any time at a premium. Beginning in 2028 and 2029, the optional redemption price declines to 100% of the principal amount, plus accrued and unpaid interest, if any.

In addition, at any time prior to varying dates in 2023, CCO Holdings may redeem up to 40%99.544% of the aggregate principal amount, of the notes at a premium plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more equity offerings (as defined in the indenture); provided that certain conditions are met. In the event of specified change of control events, CCO Holdings must offer to purchase the outstanding notes from the holders at a purchase price equal to 101% of the total principal amount of the notes, plus any accrued and unpaid interest.

In April 2020, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.6$1.0 billion aggregate principal amount of 2.800%3.900% senior secured notes due April 2031June 2052 at a price of 99.561%99.951% of the aggregate principal amount and $1.4 billionan additional $500 million aggregate principal amount of 3.700%3.850% senior secured notes due April 20512061 at a price of 99.217%94.668% of the aggregate principal amount. The net proceeds were used to pay related fees and expenses and for general corporate purposes.purposes, including funding buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness, including $750 million of CCO Holdings, LLC's ("CCO Holdings") 5.750% notes due February 2026.

In June 2020,2021, Charter Operating and Charter Communications Operating Capital Corp. redeemed allissued an additional $1.4 billion of their 3.579%3.900% senior secured notes due June 2052 priced at 95.578% of the aggregate principal amount and $1.4 billion aggregate principal amount of 4.400% senior secured notes due December 2061 at a price of 99.906% of the aggregate principal amount. 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 $500 million of CCO Holdings' 5.750% notes due February 2026, all of CCO Holdings' 5.875% notes due May 2027, and in July 2020.2021, $1.0 billion of Time Warner Cable, LLC's 4.000% notes due September 2021.

The Charter Operating notes are guaranteed by CCO Holdings and substantially all of the operating subsidiaries of Charter Operating. In addition, the Charter Operating notes are secured by a perfected first priority security interest in substantially all of the assets of Charter Operating and substantially all of its subsidiaries 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.

In April 2021, CCO Holdings and CCO Holdings Capital Corp. jointly issued $1.0 billion of 4.500% senior unsecured notes due June 2033 at par, and in June 2021, an additional $750 million of the same series of notes was issued at a price of 99.250% of the aggregate principal amount. The net proceeds were used for general corporate purposes, including to fund potential buybacks of Charter Class A common stock and Charter Holdings common units, to repay certain indebtedness and to pay related fees and expenses.

The CCO Holdings notes are senior debt obligations of CCO Holdings and CCO Holdings Capital Corp. and rank equally with all other current and future unsecured, unsubordinated obligations of CCO Holdings and CCO Holdings Capital Corp. They are structurally subordinated to all obligations of subsidiaries of CCO Holdings.


10

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

CCO Holdings may redeem some or all of the notes at any time at a premium. Beginning in 2030, the optional redemption price declines to 100% of the principal amount, plus accrued and unpaid interest, if any.

In addition, at any time prior to 2024, CCO Holdings may redeem up to 40% of the aggregate principal amount of the notes at a premium plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more equity offerings (as defined in the indenture); provided that certain conditions are met. In the event of specified change of control events, CCO Holdings must offer to purchase the outstanding notes from the holders at a purchase price equal to 101% of the total principal amount of the notes, plus any accrued and unpaid interest.

Losses on extinguishment of debt are recorded in other income (expenses), net in the consolidated statements of operations and consisted of the following.

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
CCO Holdings notes redemption$(46)$(36)$(75)$(63)

7.    Common Stock

The following represents the Company's purchase of Charter Class A common stock and the effect on the consolidated statements of cash flows during the three and six months ended June 30, 20202021 and 2019.2020.

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Shares$Shares$Shares$Shares$Shares$Shares$Shares$Shares$
Share buybacksShare buybacks2,028,234  $1,026  2,247,279  $837  6,480,783  $3,202  4,862,996  $1,707  Share buybacks5,147,257 $3,392 2,028,234 $1,026 10,703,575 $6,866 6,480,783 $3,202 
Income tax withholdingIncome tax withholding247,651  129  63,425  24  583,305  305  278,040  94  Income tax withholding183,357 124 247,651 129 467,920 302 583,305 305 
Exercise costExercise cost188,923  90,951  430,675  185,170  Exercise cost185,698 188,923 495,513 430,675 
2,464,808  $1,155  2,401,655  $861  7,494,763  $3,507  5,326,206  $1,801  5,516,312 $3,516 2,464,808 $1,155 11,667,008 $7,168 7,494,763 $3,507 

Share buybacks above include shares of Charter Class A common stock purchased from Liberty Broadband Corporation (“Liberty Broadband”) pursuant to the LBB Letter Agreement as follows (see Note 19).

Three Months Ended June 30, 2021Six Months Ended June 30, 2021
Number of shares purchased1,927,032 2,761,608 
Amount of shares purchased$1,244 $1,762 

In July 2021, the Company purchased from Liberty Broadband an additional 0.4 million shares of Charter Class A common stock for approximately $279 million.

As of June 30, 2020,2021, Charter had remaining board authority to purchase an additional $837 million$1.7 billion of Charter’s Class A common stock and/or Charter Holdings common units.units, excluding purchases from Liberty Broadband. The Company also withholds shares of its Class A common stock in payment of income tax withholding owed by employees upon vesting of equity awards as well as exercise costs owed by employees upon exercise of stock options.

In 2019,2020, Charter’s board of directors approved the retirement of the then currently held treasury stock and those shares were retired as of December 31, 2019.2020. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of total shareholders’ equity.

In March 2020, pursuant to the terms of the Amended and Restated Stockholders Agreement with Liberty Broadband, Advance/Newhouse Partnership (“A/N”) and Charter, dated May 23, 2015 (the "Stockholders Agreement"), Charter, Liberty and A/N

11

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

In March 2020, pursuant to the terms of the Amended and Restated Stockholders Agreement with Liberty Broadband Corporation (“Liberty Broadband”), Advance/Newhouse Partnership (“A/N”) and Charter, dated May 23, 2015, Charter, Liberty and A/N closed on transactions in which Liberty Broadband and A/N exercised their preemptive right to purchase 35,112 and 20,182 shares, respectively, of Charter Class A common stock for a total purchase price of approximately $23 million.

8.    Noncontrolling Interests

Noncontrolling interests represents consolidated subsidiaries of which the Company owns less than 100%. The Company is a holding company whose principal asset is a controlling equity interest in Charter Holdings, the indirect owner of the Company’s cable systems. Noncontrolling interests on the Company’s balance sheet consist primarily of A/N's equity interests in Charter Holdings, which is comprised of a common ownership interest and prior to June 18, 2021, a convertible preferred ownership interest.

On June 18, 2021, the Company caused the conversion of all of A/N's 25 million Charter Holdings convertible preferred units into Charter Holdings common units. Each preferred unit was converted into 0.37334 Charter Holdings common units, representing a conversion price of $267.85 per unit, based on a conversion feature as defined in the Limited Liability Company Agreement of Charter Holdings, resulting in the issuance of a total of 9.3 million common units to A/N.

Net income of Charter Holdings attributable to A/N’s common noncontrolling interest for financial reporting purposes is based on the weighted average effective common ownership interest of approximately 8%,7% prior to conversion of the preferred units and 11% after conversion during 2021 and 8% during 2020, and was $105 million and $181 million for the three and six months ended June 30, 2021, respectively, and $72 million and $105 million for the three and six months ended June 30, 2020, respectively, and $34 million and $60 million or the three and six months ended June 30, 2019, respectively. Net income of Charter Holdings attributable to A/N's preferred noncontrolling interest for financial reporting purposes is based on the preferred dividend which was $37$32 million and $75$70 million for each of the three and six months ended June 30, 20202021, respectively, and 2019,$37 million and $75 million for the three and six months ended June 30, 2020, respectively.

The following table represents Charter Holdings' purchase of Charter Holdings common units from A/N pursuant to the A/N Letter Agreement (see Note 18)19) and the effect on total shareholders' equity during the three and six months ended June 30, 20202021 and 2019.2020.

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Number of units purchasedNumber of units purchased280,069  447,793  1,075,676  750,735  Number of units purchased912,034 280,069 1,704,688 1,075,676 
Average price per unitAverage price per unit$445.15  $358.21  $481.68  $338.12  Average price per unit$639.28 $445.15 $639.28 $481.68 
Amount of units purchasedAmount of units purchased$125  $161  $518  $254  Amount of units purchased$583 $125 $1,090 $518 
Decrease in noncontrolling interest based on carrying valueDecrease in noncontrolling interest based on carrying value$(69) $(111) $(264) $(185) Decrease in noncontrolling interest based on carrying value$(213)$(69)$(405)$(264)
Decrease in additional paid-in-capital, net of taxDecrease in additional paid-in-capital, net of tax$(42) $(37) $(191) $(52) Decrease in additional paid-in-capital, net of tax$(279)$(42)$(516)$(191)

Total shareholders' equity was also adjusted during the three and six months ended June 30, 20202021 and 20192020 due to the changes in Charter Holdings' ownership including the impact of the preferred unit conversion discussed above as follows.

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Decrease in noncontrolling interestDecrease in noncontrolling interest$(52) $(23) $(161) $(52) Decrease in noncontrolling interest$(1,333)$(52)$(1,508)$(161)
Increase in additional paid-in-capital, net of taxIncrease in additional paid-in-capital, net of tax$41  $17  $123  $39  Increase in additional paid-in-capital, net of tax$1,003 $41 $1,134 $123 

As a result of the preferred unit conversion, the preferred noncontrolling interest carrying amount of $3.2 billion was reclassified to common noncontrolling interest and remeasured to $2.0 billion representing the relative effective Charter Holdings common ownership amount in all Charter Holdings partnership capital account balances resulting in a $1.2 billion reclass from noncontrolling interest to additional paid-in capital. A deferred tax liability of $300 million was recorded with the offset to additional paid-in capital as part of the Charter Holdings ownership change equity adjustments.


12

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

9.     Accounting for Derivative Instruments and Hedging Activities

The Company uses derivative instruments to manage foreign exchange risk on the Sterling Notes, and does not hold or issue derivative instruments for speculative trading purposes.

Cross-currency derivative instruments are used to effectively convert £1.275 billion aggregate principal amount of fixed-rate British pound sterling denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt. The cross-currency swaps have maturities of June 2031 and July 2042. The Company is required to post collateral on the cross-currency derivative instruments when the derivative contracts are in a liability position. In April 2019, the Company entered into a collateral holiday agreement for 60% of both the 2031 and 2042 cross-currency swaps, which eliminates the requirement to post collateral for three years, as well as a ten year collateral cap on the remaining 40% of the cross-currency swaps which limits the required collateral posting on that 40% of the cross-currency swaps to $150

12

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars million. In March 2021, the collateral holiday for 20% of the swaps was extended to November 2022 in millions, except per share amounts and where indicated)

million.consideration for the Company's agreement to post collateral over a threshold amount on that 20% portion of the swaps from March 2021 through October 2021. The fair value of the Company's cross-currency derivatives was $589$206 million and $224$184 million and is included in other long-term liabilities on its consolidated balance sheets as of June 30, 20202021 and December 31, 2019,2020, 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.operations in other income (expenses), net. While these derivative instruments are not designated as hedges for accounting purposes, management continues to believe such instruments are closely correlated with the respective debt, thus managing associated risk.

The effect of financial instruments onare recorded in other income (expenses), net in the consolidated statements of operations is presented inand consisted of the table below.following.
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Gain (Loss) on Financial Instruments, Net:
Change in fair value of cross-currency derivative instruments$61  $(163) $(365) $(86) 
Foreign currency remeasurement of Sterling Notes to U.S. dollars3  44  111  4  
$64  $(119) $(254) $(82) 
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Change in fair value of cross-currency derivative instruments$(85)$61 $(22)$(365)
Foreign currency remeasurement of Sterling Notes to U.S. dollars(6)3 (21)111 
Gain (loss) on financial instruments, net$(91)$64 $(43)$(254)

10.    Fair Value Measurements

Accounting guidance establishes a three-level hierarchy for disclosure of fair value measurements, based on the transparency of inputs to the valuation of an asset or liability as of the measurement date, as follows:

•Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
•Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Financial Assets and Liabilities

The Company has estimated the fair value of its financial instruments as of June 30, 20202021 and December 31, 20192020 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.

13

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


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.

As of June 30, 2021 and December 31, 2020, accounts receivable, net on the consolidated balance sheets includes approximately $363 million and $338 million of current equipment installment plan receivables, respectively, and other noncurrent assets includes approximately $173 million and $134 million of noncurrent equipment installment plan receivables, respectively.

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 which are recorded in other-long term liabilities on the consolidated balance sheets and were valued at $589$206 million and $224$184 million as of June 30, 20202021 and December 31, 2019,2020, respectively.

The estimated fair value of the Company’s senior notes and debentures as of June 30, 20202021 and December 31, 20192020 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.


13

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

A summary of the carrying value and fair value of debt as of June 30, 20202021 and December 31, 20192020 is as follows:

June 30, 2020December 31, 2019June 30, 2021December 31, 2020
Carrying ValueFair ValueCarrying ValueFair ValueCarrying ValueFair ValueCarrying ValueFair Value
Senior notes and debenturesSenior notes and debentures$68,156  $74,279  $68,733  $74,938  Senior notes and debentures$78,015 $87,958 $72,671 $84,163 
Credit facilitiesCredit facilities$10,213  $9,926  $10,345  $10,448  Credit facilities$9,949 $9,963 $10,081 $10,063 

Nonfinancial Assets and Liabilities

The Company’s nonfinancial assets such as equity-method investments, franchises, property, plant, and equipment, and other intangible assets are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist.  When such impairments are recorded, fair values are generally classified within Level 3 of the valuation hierarchy.


14

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

11.    Revenues

The Company’s revenues by product line are as follows:

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
InternetInternet$4,530  $4,103  $8,937  $8,127  Internet$5,221 $4,530 $10,307 $8,937 
VideoVideo4,371  4,391  8,793  8,775  Video4,378 4,371 8,722 8,793 
VoiceVoice451  489  908  993  Voice394 451 793 908 
Residential revenueResidential revenue9,352  8,983  18,638  17,895  Residential revenue9,993 9,352 19,822 18,638 
Small and medium businessSmall and medium business983  963  1,979  1,908  Small and medium business1,042 983 2,054 1,979 
EnterpriseEnterprise606  652  1,228  1,295  Enterprise636 606 1,274 1,228 
Commercial revenueCommercial revenue1,589  1,615  3,207  3,203  Commercial revenue1,678 1,589 3,328 3,207 
Advertising salesAdvertising sales249  395  614  740  Advertising sales411 249 755 614 
MobileMobile310  158  568  298  Mobile519 310 1,011 568 
OtherOther196  196  407  417  Other201 196 408 407 
$11,696  $11,347  $23,434  $22,553  $12,802 $11,696 $25,324 $23,434 

12.     Operating Costs and Expenses

Operating costs and expenses, exclusive of items shown separately in the consolidated statements of operations, consist of the following for the periods presented:

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
ProgrammingProgramming$2,873  $2,827  $5,765  $5,692  Programming$2,978 $2,873 $5,966 $5,765 
Regulatory, connectivity and produced contentRegulatory, connectivity and produced content488  597  1,039  1,158  Regulatory, connectivity and produced content668 488 1,268 1,039 
Costs to service customersCosts to service customers1,848  1,767  3,696  3,589  Costs to service customers1,827 1,848 3,631 3,696 
MarketingMarketing719  768  1,485  1,503  Marketing741 719 1,492 1,485 
MobileMobile413  277  787  537  Mobile586 413 1,158 787 
OtherOther956  1,008  1,957  2,001  Other1,082 956 2,078 1,957 
$7,297  $7,244  $14,729  $14,480  $7,882 $7,297 $15,593 $14,729 


14

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

Programming costs consist primarily of costs paid to programmers for basic, premium, digital, video on demand and pay-per-view programming. Regulatory, connectivity and produced content costs represent payments to franchise and regulatory authorities, costs directly related to providing video, Internet video and voice services as well as payments for sports, local and news content produced by the Company. Included in regulatory, connectivity and produced content costs is content acquisition costs for the Los Angeles Lakers’ basketball games and Los Angeles Dodgers’ baseball games, which are recorded as games are exhibited over the contract period. Costs to service customers include costs related to field operations, network operations and customer care for the Company’s residential and small and medium businessSMB 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.


15

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

13.     Other Operating (Income) Expenses, Net

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

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Special charges, netSpecial charges, net$6  $23  $22  19  Special charges, net$(6)$6 $249 $22 
(Gain) loss on sale of assets, net(4) 39  (13) 38  
(Gain) loss on disposal of assets, net(Gain) loss on disposal of assets, net(3)(4)44 (13)
$2  $62  $9  $57  $(9)$2 $293 $9 

Special charges, net

Special charges, net primarily includes employee termination costs and net amounts of litigation settlements.settlements, including the $220 million tentative settlement with Sprint Communications Company L.P. (“Sprint”) and T-Mobile USA, Inc. ("T-Mobile") for the six months ended June 30, 2021 discussed in Note 20, and employee termination costs.

(Gain) loss on saledisposal of assets, net

(Gain) loss on saledisposal of assets, net represents the net (gain) loss recognized on the sales and disposals of fixed assets and cable systems. The three and six months ended June 30, 2019 includes a $41 million impairment

14.     Other Income (Expenses), Net

Other income (expenses), net consist of non-strategic assets.the following for the periods presented:

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Loss on extinguishment of debt (see Note 6)$(46)$(36)$(75)$(63)
Gain (loss) on financial instruments, net (see Note 9)(91)64 (43)(254)
Other pension benefits, net (see Note 21)173 11 191 21 
Loss on equity investments, net (see Note 3)(168)(9)(153)0 
$(132)$30 $(80)$(296)

14.15.     Stock Compensation Plans

Charter’s stock incentive plans provide for grants of nonqualified stock options, incentive stock options, stock appreciation rights, dividend equivalent rights, performance units and performance shares, share awards, phantom stock, restricted stock units and restricted stock.  Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting services for the Company, are eligible for grants under the stock incentive plans.

Charter granted the following equity awards for the periods presented.

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Stock optionsStock options11,600  31,500  1,265,300  1,782,400  Stock options16,800 11,600 1,241,800 1,265,300 
Restricted stockRestricted stock6,000  8,100  6,000  8,100  Restricted stock4,600 6,000 4,600 6,000 
Restricted stock unitsRestricted stock units7,600  13,200  415,900  686,900  Restricted stock units9,100 7,600 354,200 415,900 

Charter stock options and restricted stock units generally cliff vest three years from the date of grant. Certain stock options and restricted stock units vest based on achievement of stock price hurdles. Stock options generally expire ten years from the grant date and restricted stock units have no voting rights. Restricted stock generally vests one year from the date of grant.

1516

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


As of June 30, 2020,2021, total unrecognized compensation remaining to be recognized in future periods totaled $263$319 million for stock options, $3$2 million for restricted stock and $309$305 million for restricted stock units and the weighted average period over which they are expected to be recognized is two years for stock options, ten months for restricted stock and two years for restricted stock units.

The Company recorded stock compensation expense of $100 million and $234 million for the three and six months ended June 30, 2021, respectively, and $90 million and $180 million for the three and six months ended June 30, 2020, respectively, and $82 million and $167 million for the three and six months ended June 30, 2019, respectively, which is included in operating costs and expenses.

15.16.    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 $281 million and $497 million for the three and six months ended June 30, 2021, respectively, and $166 million and $195 million for the three and six months ended June 30, 2020, respectively, and $84 million and $203 million forrespectively. Income tax expense increased during the three and six months ended June 30, 2019, respectively. Income tax expense increased during the three months ended June 30, 20202021 compared to the corresponding period in 20192020 primarily as a result of higher pretax income offset by increased recognition of excess tax benefits resulting from share-based compensation during 2020. Income tax expense decreased during the six months ended June 30, 2020 compared to the corresponding period in 2019 primarily as a result of increased recognition of excess tax benefits resulting from share-based compensation during 2020 and an internal entity simplification that increased expense in 2019 offset by higher pretax income in 2020.

On March 18, 2020, the Families First Coronavirus Response Act ("FFCR Act"), and on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") were each enacted in response to the COVID-19 pandemic. The FFCR Act and the CARES Act contain numerous tax provisions, such as deferring payroll payments, establishing a credit for the retention of certain employees, relaxing limitations on the deductibility of interest, and updating the definition of qualified improvement property. This legislation currently has no material impact to the Company’s financial statements.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.

In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain tax positions unless such positions are determined to be “more likely than not” of being sustained upon examination, based on their technical merits. There is considerable judgment involved in making such a determination. The Company has recorded unrecognized tax benefits totaling approximately $252$333 million and $230$298 million, excluding interest and penalties, as of June 30, 20202021 and December 31, 2019,2020, respectively. The Company does not currently anticipate that its reserve for uncertain tax positions will significantly increase or decrease during 2020;2021; however, various events could cause the Company’s current expectations to change in the future. These uncertain tax positions, if ever recognized in the financial statements, would be recorded in the consolidated statements of operations as part of the income tax provision.

No tax years for Charter are currently under examination by the Internal Revenue Service ("IRS") for income tax purposes. Charter's 2016 through 20192020 tax years remain open for examination and assessment. Charter’s short period return dated May 17, 2016 (prior to the merger with Time Warner Cable Inc. ("TWC") and acquisition of Bright House Networks, LLC ("Bright House")

16

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

transactions)) and prior years remain open solely for purposes of examination of Charter’s loss and credit carryforwards. The IRS is currently examining Charter Holdings’ income tax return for 2016. Charter Holdings’ 2017 through 20192020 tax years remain open for examination and assessment. The IRS is currently examining TWC’s income tax returns for 2011 through 2014. TWC’s tax year 2015 remains subject to examination and assessment. Prior to TWC’s separation from Time Warner Inc. (“Time Warner”) in March 2009, TWC was included in the consolidated U.S. federal and certain state income tax returns of Time Warner. The IRS has examined Time Warner’s 2008 through 2010 income tax returns and the results are under appeal. The Company does not anticipate that these examinations will have a material impact on the Company’s consolidated financial position or results of operations. In addition, the Company is also subject to ongoing

17

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

examinations of the Company’s tax returns by state and local tax authorities for various periods. Activity related to these state and local examinations did not have a material impact on the Company’s consolidated financial position or results of operations during the three and six months ended June 30, 2020,2021, nor does the Company anticipate a material impact in the future.

16.17.    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 units of 15 million for the three and six months ended June 30, 2021 and Charter Holdings common and convertible preferred units of 26 million for each of the three and six months ended June 30, 2020 respectively, and 29 million for each of the three and six months ended June 30, 2019 were not included in the computation of diluted earnings per share as their effect would have been antidilutive. The following is the computation of diluted earnings per common share for the three and six months ended June 30, 20202021 and 2019.2020.

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Numerator:Numerator:Numerator:
Net income attributable to Charter shareholdersNet income attributable to Charter shareholders$766  $314  $1,162  $567  Net income attributable to Charter shareholders$1,020 $766 $1,827 $1,162 
Effect of dilutive securities:Effect of dilutive securities:
Charter Holdings convertible preferred unitsCharter Holdings convertible preferred units32 0 70 0 
Net income attributable to Charter shareholders after assumed conversionsNet income attributable to Charter shareholders after assumed conversions$1,052 $766 $1,897 $1,162 
Denominator:Denominator:Denominator:
Weighted average common shares outstanding, basicWeighted average common shares outstanding, basic205,777,438  222,392,274  206,804,371  223,505,016  Weighted average common shares outstanding, basic185,916,505 205,777,438 188,645,356 206,804,371 
Effect of dilutive securities:Effect of dilutive securities:Effect of dilutive securities:
Assumed exercise or issuance of shares relating to stock plansAssumed exercise or issuance of shares relating to stock plans5,129,508  3,549,898  5,353,847  3,384,729  Assumed exercise or issuance of shares relating to stock plans5,058,176 5,129,508 5,098,205 5,353,847 
Weighted average Charter Holdings convertible preferred unitsWeighted average Charter Holdings convertible preferred units8,102,709 0 8,714,704 0 
Weighted average common shares outstanding, dilutedWeighted average common shares outstanding, diluted210,906,946  225,942,172  212,158,218  226,889,745  Weighted average common shares outstanding, diluted199,077,390 210,906,946 202,458,265 212,158,218 
Basic earnings per common share attributable to Charter shareholdersBasic earnings per common share attributable to Charter shareholders$3.72  $1.41  $5.62  $2.54  Basic earnings per common share attributable to Charter shareholders$5.48 $3.72 $9.69 $5.62 
Diluted earnings per common share attributable to Charter shareholdersDiluted earnings per common share attributable to Charter shareholders$3.63  $1.39  $5.48  $2.50  Diluted earnings per common share attributable to Charter shareholders$5.29 $3.63 $9.37 $5.48 

17.18.     Comprehensive Income

Comprehensive income equaled net income attributable to Charter shareholders for each of the three and six months ended June 30, 20202021 and 2019.2020.


17

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

18.19.     Related Party Transactions

The following sets forth certain transactions in which the Company and the directors, executive officers, and affiliates of the Company are involved.

Liberty Broadband and A/N

Under the terms of the Amended and Restated Stockholders Agreement, with Liberty Broadband, A/N and Charter, dated May 23, 2015, the number of Charter’s directors is fixed at 13, and includes its CEO. Two designees selected by A/N are members of the board of directors of Charter and three designees selected by Liberty Broadband

18

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

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 designationdesignations and other governance rights. Mr. Thomas Rutledge, the Company’s CEO, is the chairman of the board of Charter.

In December 2017,2016, Charter and A/N entered into an amendment to thea letter agreement, as amended in December 2017 (the “Letter“A/N 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.

In February 2021, Charter and Liberty Broadband entered into a letter agreement (the “LBB Letter Agreement”). The CompanyLBB Letter Agreement implements Liberty Broadband’s obligations under the Stockholders Agreement to participate in share repurchases by Charter. Under the LBB Letter Agreement, Liberty Broadband will sell to Charter, generally on a monthly basis, a number of shares of Charter Class A common stock representing an amount sufficient for Liberty Broadband’s ownership of Charter to be reduced such that it does not exceed the ownership cap then applicable to Liberty Broadband under the Stockholders Agreement at a purchase price per share equal to the volume weighted average price per share paid by Charter for shares repurchased during such immediately preceding calendar month other than (i) purchases from A/N, (ii) purchases in privately negotiated transactions or (iii) purchases for the withholding of shares of Charter Class A common stock pursuant to equity compensation programs of Charter.

Gregory Maffei, a director of Charter and President and CEO and director and holder of 12.6% voting interest in Liberty Broadband, is aware thatChairman of the board of directors of Qurate Retail, Inc. ("Qurate") and Dr. John Malone, a director emeritus of Charter and Chairman of the board of directors and holder of 48.8%45.8% of voting interest in Liberty Broadband, may be deemed to have a 40.9%also serves on the Qurate board of directors. As reported in SEC filings of Qurate, Mr. Maffei and Dr. Malone, Mr. Maffei has ownership of an approximate 6.3% voting interest in Qurate Retail, Inc. ("Qurate")Quarate and is on the boardDr. Malone has ownership of directors ofan approximate 41.2% voting interest in Qurate. Qurate wholly owns HSN, Inc. (“HSN”) and QVC, Inc. (“QVC”). The Company has programming relationships with HSN and QVC. For each of the three and six months ended June 30, 2020 and 2019,2021, the Company recorded revenue in aggregate of approximately $12 million and $24$23 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.footprint, and approximately $12 million and $24 million for the three and six months ended June 30, 2020, respectively.

Dr. Malone and Mr. Steven Miron, a member of Charter’s board of directors, also serve on the board of directors of Discovery, Inc., (“Discovery”). The Company is aware thatAs reported in Discovery's SEC filings, Dr. Malone owns 1.2%less than 1.0% of the series A common stock, 93.6%95.0% of the series B common stock and 3.6%3.7% of the series C common stock of Discovery and has a 27.9%26.5% voting interest in Discovery for the election of directors. The Company is aware thatAs reported in Discovery's SEC filings, Advance/Newhouse Programming Partnership (“A/N PP”), an affiliate of A/N and ofin which Mr. Miron is the CEO, owns 100% of the Series A-1 preferred stock of Discovery and 100% of the Series C-1 preferred stock of Discovery and has a 23.9%23.2% voting interest for matters other than the election of directors. A/N PP also has the right to appoint three directors out of a total of twelve directors to Discovery’s board. The Company purchases programming from Discovery. Based on publicly available information, the Company does not believe that Discovery would currently be considered a related party. The amount paid in the aggregate to Discovery represents less than 2% of total operating costs and expenses for the three and six months ended June 30, 20202021 and 2019.2020.

Equity Investments

The Company has agreements with certain equity investees pursuant to which the Company has made or received related party transaction payments. The Company recorded payments to equity investees totaling $54$59 million and $117 million during the three and six months ended June 30, 2020, respectively, and $81 million and $167 million during the three and six months ended June 30, 2019, respectively.


1819

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

three and six months ended June 30, 2021, respectively, and $54 million and $117 million during the three and six months ended June 30, 2020, respectively.
19.
20.     Contingencies

In August 2015, a purported stockholder of Charter, Matthew Sciabacucchi, filed a lawsuit in the Delaware Court of Chancery, on behalf of a putative class of Charter stockholders, challenging the transactions involving Charter, TWC, A/N, and Liberty Broadband announced by Charter on May 26, 2015. The lawsuit, which named as defendants Charter and its board of directors, alleged that the transactions resulted from breaches of fiduciary duty by Charter’s directors and that Liberty Broadband improperly benefited from the challenged transactions at the expense of other Charter stockholders. The lawsuit has proceeded to the discovery phase. Charter denies any liability, believes that it has substantial defenses, and is vigorously defending this lawsuit. Although Charter is unable to predict the outcome of this lawsuit, it does not expect the outcome will have a material effect on its operations, financial condition or cash flows.

The California Attorney General and the Alameda County, California District Attorney are investigating whether certain of Charter’s waste disposal policies, procedures and practices are in violation of the California Business and Professions Code and the California Health and Safety Code. That investigation was commenced in January 2014. A similar investigation involving TWC was initiated in February 2012. Charter is cooperating with these investigations. While the Company is unable to predict the outcome of these investigations, it does not expect that the outcome will have a material effect on its operations, financial condition, or cash flows.

On December 19, 2011, Sprint Communications Company L.P. (“Sprint”) filed a complaintpatent suit against Charter and Bright House on December 2, 2017 in the United States District Court for the District of Kansas alleging that TWC infringed certain U.S.Delaware. This suit alleges infringement of 9 patents purportedly relatingrelated to the Company's provision of Voice over Internet Protocol (“VoIP”) services. AtSprint previously sued TWC with respect to eight of these patents and obtained a final judgment of $151 million inclusive of interest and costs, which 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.Company paid in November 2019. The Company has now paid the verdict, interest and costs in full. The Company continues to pursue indemnity from one of its vendors and hasalso brought a patent suit against Sprint (TC Tech, LLC v. Sprint) in the United States District Court for the District of Delaware implicating Sprint's LTE technology.  The ultimate outcomes of the pursuit of indemnity against the Company’s vendortechnology and the TC Tech litigation cannot be predicted. The Company does not expect the outcome of its indemnity claim nor the outcome of the TC Tech litigation will have a material adverse effect on its operations or financial condition.
Sprint filed a second patentsimilar suit against Charter and Bright House Networks, LLC on December 2, 2017T-Mobile in the United States District Court for the Western District of Delaware. This suit alleges infringement of 11 patents related to the Company's provision of VoIP services (ten of which were asserted against Legacy TWC in the matter described above).

On February 18, 2020 Sprint filed a lawsuit against Charter, Bright House, and TWC in the District Court for Johnson County, Kansas. Sprint alleges that Charter misappropriated trade secrets from Sprint years ago through employees hired by Bright House. Sprint asserts that the alleged trade secrets relate to the VoIP business of Charter and Bright House. Charter has removed this case to the United States District Court for the District of Kansas.Texas.

Sprint filed a thirdsubsequent patent suit against Charter on May 17, 2018 in the United States District Court for the Eastern District of Virginia. This suit alleges infringement of two patents related to the Company's video on demand services. The court transferred this case to the United States District Court for the District of Delaware on December 20, 2018 pursuant to an agreement between the parties.

On February 18, 2020, Sprint filed a lawsuit against Charter, Bright House and TWC. Sprint alleges that Charter misappropriated trade secrets from Sprint years ago through employees hired by Bright House. Sprint asserts that the alleged trade secrets relate to the VoIP business of Charter, TWC and Bright House. The case is now pending in the United States District Court for the District of Kansas.

Charter, T-Mobile and Sprint have tentatively reached a settlement of all of the foregoing suits that would result in a payment of $220 million by Charter to T-Mobile. The Company can give no assurance that this tentative settlement will be finalized. Pending finalization of the settlement and in the event the settlement is not finalized, the Company will vigorously defend these Sprint suits and prosecute the suits it has brought against T-Mobile and Sprint. While the Company is vigorously defending these suits and is unable to predict the outcome of the Sprintthese lawsuits, the Companyit does not expect that the litigation will have a material effect on its operations, financial condition, or cash flows.

In addition to the Sprint litigation described above, the Company is a defendant or co-defendant in several additional lawsuits involving alleged infringement of various intellectual property relating to various aspects of its businesses. Other industry participants are also defendants in certain of these cases or related cases. In the event that a court ultimately determines that the Company infringes on any intellectual property, the Company may be subject to substantial damages and/or an injunction that could require the Company or its vendors to modify certain products and services the Company offers to its subscribers, as well as negotiate royalty or license agreements with respect to the intellectual property at issue. While the Company believes the lawsuits are without merit and intends to defend the actions vigorously, no assurance can be given that any adverse outcome would not be material to the Company’s consolidated financial condition, results of operations, or liquidity. The Company cannot predict the outcome of any such claims nor can it reasonably estimate a range of possible loss.


1920

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


The Company is party to other lawsuits, claims and regulatory inquiries that arise in the ordinary course of conducting its business. The ultimate outcome of these other legal matters pending against the Company cannot be predicted, and although such lawsuits and claims are not expected individually to have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity, such lawsuits could have, in the aggregate, a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity. Whether or not the Company ultimately prevails in any particular lawsuit or claim, litigation can be time consuming and costly and injure the Company’s reputation.

20.21.     Employee Benefit Plans

The Company sponsors three qualified defined and nonqualified defined benefit pension plans and one nonqualified defined benefit pension plan that provide pension benefits to a majority of employees who were employed by TWC before the merger with TWC.

Pension benefits are based on formulas that reflect the employees’ years of service and compensation during their employment period. Actuarial gains or losses are changes in the amount of either the benefit obligation or the fair value of plan assets resulting from experience different from that assumed or from changes in assumptions. The Company has elected to follow a mark-to-market pension accounting policy for recording the actuarial gains or losses annually during the fourth quarter, or earlier if a remeasurement event occurs during an interim period. No future compensation increases or future service will be credited to participants of the pension plans given the frozen nature of the plans.

The components of net periodic pension benefit (costs) for the three and six months ended June 30, 20202021 and 20192020 are recorded in in other pension benefits,income (expenses), net in the consolidated statements of operations and consisted of the following:

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Interest costInterest cost$(28) $(32) $(56) $(64) Interest cost$(24)$(28)$(48)$(56)
Expected return on plan assetsExpected return on plan assets39  41  77  82  Expected return on plan assets42 39 84 77 
Remeasurement gain, netRemeasurement gain, net155 0 155 0 
Net periodic pension benefitsNet periodic pension benefits$11  $9  $21  $18  Net periodic pension benefits$173 $11 $191 $21 

During the three and six months ended June 30, 2021, settlements for lump-sum distributions to pension plan participants exceeded the estimated annual interest cost of the plans. As a result, the pension liability and pension asset values were reassessed as of June 30, 2021 utilizing remeasurement date assumptions in accordance with the Company's mark-to-market pension accounting policy to record gains and losses in the period in which a remeasurement event occurs. The $155 million remeasurement gain recorded during the three and six months ended June 30, 2021 was primarily driven by changes in the discount rate.

The Company made no cash contributions to the qualified pension plans during the three and six months ended June 30, 20202021 and 2019;2020; 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 20202021 to the extent benefits are paid.

21.22.     Recently Issued Accounting Standards

Accounting Standards Adopted January 1, 2020

ASU No. 2016-13, Measurement of Credit Losses on Financial2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2016-13”2020-06”)

In June 2016,August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13,2020-06, which requires a financial asset (or a groupreduces the number of financial assets) measured at amortized cost basis to be assessedaccounting models for impairment under the current expected credit loss model rather than an incurred loss model. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount.  The primary financial assets of the Company in scope of ASU 2016-13 include accounts receivables and equipment installment plan notes receivables.  The Company adopted ASU 2016-13 on January 1, 2020. The adoption of ASU 2016-13 did not have a material impact to the Company's consolidated financial statements.

ASU No. 2018-15, Customer’s Accounting for Implementation Costs in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15")

In August 2018, the FASB issued ASU 2018-15 which requires upfront implementation costs incurred in a cloud computing arrangement (or hosting arrangement) that is a service contract to be amortized to hosting expense over the term of the

20

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, exceptconvertible instruments, amends diluted earnings per share amountscalculations for convertible instruments and where indicated)

arrangement, beginning when the module or component of the hosting arrangement is readyallows more contracts to qualify for its intended use. The Company adoptedequity classification. ASU 2018-15 on January 1, 2020. The adoption of ASU 2018-15 did not have a material impact to the Company's consolidated financial statements.

ASU No. 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials ("ASU 2019-02")

In March 2019, the FASB issued ASU 2019-02 which aligns the accounting for production costs of an episodic television series with the accounting for production costs of films regarding cost capitalization, amortization, impairment, presentation and disclosure. The Company adopted ASU 2019-02 on January 1, 2020. The adoption of ASU 2019-02 did not have a material impact to the Company's consolidated financial statements.

ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”)

In December 2019, the FASB issued ASU 2019-12, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-122020-06 will be effective for interim and annual periods beginning after December 15, 2020.2021. Early adoption is permitted. The Company elected to early adopt ASU 2019-122020-06 on January 1, 2020.2021. The adoption of ASU 2019-122020-06 did not have a material impact on the Company's consolidated financial statements.

22.    Consolidating Schedules

Each of Charter Operating, TWC, LLC, TWCE, CCO Holdings and certain subsidiaries jointly, severally, fully and unconditionally guarantee the outstanding debt securities of the others (other than the CCO Holdings notes) on an unsecured senior basis and the condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. Certain Charter Operating subsidiaries that are regulated entities only become guarantor subsidiaries upon approval by regulators. This information is not intended to present the financial position, results of operations and cash flows of the individual companies or groups of companies in accordance with generally accepted accounting principles.
The "Intermediate Holding Companies" column includes the assets and liabilities of the captive insurance company, a company wholly-owned by Charter outside of Charter Holdings and which does not, directly or indirectly, own any interest in Charter Holdings. The “Charter Operating and Restricted Subsidiaries” column is presented to comply with the terms of the Credit Agreement.

Comprehensive income equaled net income attributable to Charter shareholders for the six months ended June 30, 2020 and 2019. Condensed consolidating financial statements as of June 30, 2020 and December 31, 2019 and for the six months ended June 30, 2020 and 2019 follow.


21

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

Charter Communications, Inc. and Subsidiaries
Condensed Consolidating Balance Sheets
As of June 30, 2020
Non-Guarantor SubsidiariesGuarantor Subsidiaries
CharterIntermediate Holding CompaniesCCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCharter Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$—  $239  $200  $1,658  $—  $2,097  
Accounts receivable, net—  33  —  1,961  —  1,994  
Receivables from related party31  107  43  —  (181) —  
Prepaid expenses and other current assets4  45  —  625  —  674  
Total current assets35  424  243  4,244  (181) 4,765  
RESTRICTED CASH—  5  —  —  —  5  
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net—  770  —  33,304  —  34,074  
Customer relationships, net—  —  —  6,486  —  6,486  
Franchises—  —  —  67,322  —  67,322  
Goodwill—  —  —  29,554  —  29,554  
Total investment in cable properties, net—  770  —  136,666  —  137,436  
INVESTMENT IN SUBSIDIARIES47,040  52,975  74,548  —  (174,563) —  
LOANS RECEIVABLE – RELATED PARTY297  727  567  —  (1,591) —  
OTHER NONCURRENT ASSETS2  364  —  2,564  —  2,930  
Total assets$47,374  $55,265  $75,358  $143,474  $(176,335) $145,136  
LIABILITIES AND SHAREHOLDERS’/MEMBER’S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities$51  $628  $314  $7,443  $—  $8,436  
Payables to related party—  —  —  181  (181) —  
Current portion of long-term debt—  —  —  706  —  706  
Total current liabilities51  628  314  8,330  (181) 9,142  
LONG-TERM DEBT—  —  22,069  55,594  —  77,663  
LOANS PAYABLE – RELATED PARTY—  —  —  1,591  (1,591) —  
DEFERRED INCOME TAXES17,717  17  —  55  —  17,789  
OTHER LONG-TERM LIABILITIES250  558  —  3,333  —  4,141  
SHAREHOLDERS’/MEMBER’S EQUITY
Controlling interest29,356  47,040  52,975  74,548  (174,563) 29,356  
Noncontrolling interests—  7,022  —  23  —  7,045  
Total shareholders’/member’s equity29,356  54,062  52,975  74,571  (174,563) 36,401  
Total liabilities and shareholders’/member’s equity$47,374  $55,265  $75,358  $143,474  $(176,335) $145,136  


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 December 31, 2019
Non-Guarantor SubsidiariesGuarantor Subsidiaries
CharterIntermediate Holding CompaniesCCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCharter Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$—  $234  $500  $2,749  $—  $3,483  
Accounts receivable, net1  31  —  2,195  —  2,227  
Receivables from related party34  264  59  —  (357) —  
Prepaid expenses and other current assets10  40  —  711  —  761  
Total current assets45  569  559  5,655  (357) 6,471  
RESTRICTED CASH—  66  —  —  —  66  
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net—  683  —  33,908  —  34,591  
Customer relationships, net—  —  —  7,453  —  7,453  
Franchises—  —  —  67,322  —  67,322  
Goodwill—  —  —  29,554  —  29,554  
Total investment in cable properties, net—  683  —  138,237  —  138,920  
INVESTMENT IN SUBSIDIARIES49,024  55,266  76,409  —  (180,699) —  
LOANS RECEIVABLE – RELATED PARTY260  699  545  —  (1,504) —  
OTHER NONCURRENT ASSETS2  378  —  2,351  —  2,731  
Total assets$49,331  $57,661  $77,513  $146,243  $(182,560) $148,188  
LIABILITIES AND SHAREHOLDERS’/MEMBER’S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities$18  $725  $296  $7,846  $—  $8,885  
Payables to related party—  —  —  357  (357) —  
Current portion of long-term debt—  —  —  3,500  —  3,500  
Total current liabilities18  725  296  11,703  (357) 12,385  
LONG-TERM DEBT—  —  21,951  53,627  —  75,578  
LOANS PAYABLE – RELATED PARTY—  —  —  1,504  (1,504) —  
DEFERRED INCOME TAXES17,641  15  —  55  —  17,711  
OTHER LONG-TERM LIABILITIES227  554  —  2,922  —  3,703  
SHAREHOLDERS’/MEMBER’S EQUITY
Controlling interest31,445  49,024  55,266  76,409  (180,699) 31,445  
Noncontrolling interests—  7,343  —  23  —  7,366  
Total shareholders’/member’s equity31,445  56,367  55,266  76,432  (180,699) 38,811  
Total liabilities and shareholders’/member’s equity$49,331  $57,661  $77,513  $146,243  $(182,560) $148,188  


23

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


Charter Communications, Inc. and Subsidiaries
Condensed Consolidating Statements of Operations
For the six months June 30, 2020
Non-Guarantor SubsidiariesGuarantor Subsidiaries
CharterIntermediate Holding CompaniesCCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCharter Consolidated
REVENUES$29  $597  $—  $23,430  $(622) $23,434  
COSTS AND EXPENSES:
Operating costs and expenses (exclusive of items shown separately below)29  545  —  14,774  (619) 14,729  
Depreciation and amortization—  8  —  4,917  —  4,925  
Other operating expense, net—  —  —  12  (3) 9  
29  553  —  19,703  (622) 19,663  
Income from operations—  44  —  3,727  —  3,771  
OTHER INCOME (EXPENSES):
Interest income (expense), net8  12  (587) (1,370) —  (1,937) 
Loss on extinguishment of debt—  —  (63) —  —  (63) 
Loss on financial instruments, net—  —  —  (254) —  (254) 
Other pension benefits, net—  —  —  21  —  21  
Other income (expense), net—  (5) —  5  —  —  
Equity in income of subsidiaries1,313  1,465  2,115  —  (4,893) —  
1,321  1,472  1,465  (1,598) (4,893) (2,233) 
Income before income taxes1,321  1,516  1,465  2,129  (4,893) 1,538  
Income tax expense(159) (23) —  (13) —  (195) 
Consolidated net income1,162  1,493  1,465  2,116  (4,893) 1,343  
Less: Net income attributable to noncontrolling interests—  (180) —  (1) —  (181) 
Net income$1,162  $1,313  $1,465  $2,115  $(4,893) $1,162  


24

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


Charter Communications, Inc. and Subsidiaries
Condensed Consolidating Statements of Operations
For the six months ended June 30, 2019
Non-Guarantor SubsidiariesGuarantor Subsidiaries
CharterIntermediate Holding CompaniesCCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCharter Consolidated
REVENUES$23  $575  $—  $22,548  $(593) $22,553  
COSTS AND EXPENSES:
Operating costs and expenses (exclusive of items shown separately below)23  556  —  14,500  (599) 14,480  
Depreciation and amortization—  8  —  5,042  —  5,050  
Other operating expense (income), net—  (8) —  59  6  57  
23  556  —  19,601  (593) 19,587  
Income from operations—  19  —  2,947  —  2,966  
OTHER INCOME (EXPENSES):
Interest income (expense), net5  17  (511) (1,381) —  (1,870) 
Loss on financial instruments, net—  —  —  (82) —  (82) 
Other pension benefits, net—  —  —  18  —  18  
Other expense, net—  —  —  (126) —  (126) 
Equity in income of subsidiaries685  788  1,299  —  (2,772) —  
690  805  788  (1,571) (2,772) (2,060) 
Income before income taxes690  824  788  1,376  (2,772) 906  
Income tax expense(123) (4) —  (76) —  (203) 
Consolidated net income567  820  788  1,300  (2,772) 703  
Less: Net income attributable to noncontrolling interests—  (135) —  (1) —  (136) 
Net income$567  $685  $788  $1,299  $(2,772) $567  


25

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

Charter Communications, Inc. and Subsidiaries
Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2020
Non-Guarantor SubsidiariesGuarantor Subsidiaries
CharterIntermediate Holding CompaniesCCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCharter Consolidated
NET CASH FLOWS FROM OPERATING ACTIVITIES$3  $51  $(565) $7,260  $—  $6,749  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment—  —  —  (3,338) —  (3,338) 
Change in accrued expenses related to capital expenditures—  —  —  (174) —  (174) 
Real estate investments through variable interest entities—  (81) —  —  —  (81) 
Contributions to subsidiaries(145) (39) (4,385) —  4,569  —  
Distributions from subsidiaries3,530  3,975  8,541  —  (16,046) —  
Other, net—  (3) —  (5) —  (8) 
Net cash flows from investing activities3,385  3,852  4,156  (3,517) (11,477) (3,601) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt—  —  4,178  3,144  —  7,322  
Repayments of long-term debt—  —  (4,092) (3,800) —  (7,892) 
Borrowings (repayments) of loans payable - related parties(25) —  —  25  —  —  
Payments for debt issuance costs—  —  (41) (21) —  (62) 
Issuance of equity23  —  —  —  —  23  
Purchase of treasury stock(3,507) —  —  —  —  (3,507) 
Proceeds from exercise of stock options121  —  —  —  —  121  
Purchase of noncontrolling interest—  (518) —  —  —  (518) 
Distributions to noncontrolling interest—  (76) —  (1) —  (77) 
Contributions from parent—  145  39  4,385  (4,569) —  
Distributions to parent—  (3,530) (3,975) (8,541) 16,046  —  
Borrowings for real estate investments through variable interest entities—  24  —  —  —  24  
Distributions to variable interest entities noncontrolling interest—  (4) —  —  —  (4) 
Other, net—  —  —  (25) —  (25) 
Net cash flows from financing activities(3,388) (3,959) (3,891) (4,834) 11,477  (4,595) 
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH—  (56) (300) (1,091) —  (1,447) 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period—  300  500  2,749  —  3,549  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period$—  $244  $200  $1,658  $—  $2,102  


26

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

Charter Communications, Inc. and Subsidiaries
Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2019
Non-Guarantor SubsidiariesGuarantor Subsidiaries
CharterIntermediate Holding CompaniesCCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCharter Consolidated
NET CASH FLOWS FROM OPERATING ACTIVITIES$(18) $55  $(509) $5,919  $—  $5,447  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment—  (67) —  (3,262) 67  (3,262) 
Change in accrued expenses related to capital expenditures—  —  —  (428) —  (428) 
Real estate investments through variable interest entities—  (64) —  —  —  (64) 
Contribution to subsidiaries(91) (51) (792) —  934  —  
Distributions from subsidiaries1,829  2,084  2,591  —  (6,504) —  
Other, net—  (5) —  80  (67) 8  
Net cash flows from investing activities1,738  1,897  1,799  (3,610) (5,570) (3,746) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt—  —  750  9,964  —  10,714  
Repayments of long-term debt—  —  —  (10,123) —  (10,123) 
Payments for debt issuance costs—  —  (7) (25) —  (32) 
Purchase of treasury stock(1,801) —  —  —  —  (1,801) 
Proceeds from exercise of stock options81  —  —  —  —  81  
Purchase of noncontrolling interest—  (254) —  —  —  (254) 
Distributions to noncontrolling interest—  (77) —  (1) —  (78) 
Contributions from parent—  91  51  792  (934) —  
Distributions to parent—  (1,829) (2,084) (2,591) 6,504  —  
Other, net—  —  —  (127) —  (127) 
Net cash flows from financing activities(1,720) (2,069) (1,290) (2,111) 5,570  (1,620) 
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH—  (117) —  198  —  81  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period—  465  —  300  —  765  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period$—  $348  $—  $498  $—  $846  


27

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.

General

Charter Communications, Inc. (together with its controlled subsidiaries, “Charter”) is a leading broadband connectivity company and cable operator serving more than 3031 million customers in 41 states through itsour Spectrum brand. Over an advanced communicationshigh-capacity, two-way telecommunications network, we offer 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. We also distribute award-winning news coverage, sports and high-quality original programming to our 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.

Overview

AsIn the COVID-19first half of both 2021 and 2020, the Novel Coronavirus (“COVID-19”) pandemic continues tohas significantly impact the United States, we have continued to deliver services uninterrupted by the pandemic. Because we have invested significantly inimpacted how our network and through normal course capacity increases, we have been able to respond to the significant increase in network activity from the private and public response to COVID-19 as we do our part as a major provider of Internet services in the United States by, among other things, enabling social distancing through telecommuting and e-learning across our footprint of 41 states. We have invested significantly in our self-service infrastructure, and customers have accelerated the adoption of our self-installation and digital self-service capabilities. Our front-line service infrastructure in call centers and field operations continues to experience higher service transaction volume and is performing well. Much of that increase in activity has been driven by increased demand for our connectivity services to residential, healthcare, government and educational customers. The response to our Remote Education Offer ("REO") pursuant to which new customers with students or educators in the household were eligible to receive our Internet service for free for 60 days generated 448,000 new Internet customers as of June 30, 2020, of which 288,000 had rolled off the promotional period by the end of the quarter while 160,000 remained within their free period. The REO program ended June 30, 2020 and is no longer being offered to new customers.

We also participated in the Federal Communications Commission's ("FCC") Keep Americans Connected (“KAC”) Pledge, pausing collection efforts and related disconnects for residential and small and medium business ("SMB") customers with COVID-19 related payment challenges through June 30, 2020. Approximately 700,000 residential and SMB customers requested protection from disconnection under this program of which, at the peak of the program approximately 222,000 customers would have been disconnected under our normal collection policies. In an effort to assist these COVID-19 impacted customers with overdue balances, we waived approximately $85 million of receivables which was recorded as a reduction of revenue during the three and six months ended June 30, 2020. Any remaining balance will be paid over the next twelve months with continued service. In addition, we have offered a seasonal plan at reduced rates to SMB and Enterprise hospitality customers that have requested a reduced level of service due to temporary business closure or because these customers have reduced their service offering to their own customers ("Seasonal Plan").

We cannot predict the ultimate impact of COVID-19 on our business, including the depth and duration of the economic impact to household formation and growth and our residential and business customers’ ability to pay foruse our products and services, includinghow they interact with us, and how our employees work and provide services to our customers. During the impactfirst half of extended unemployment benefits2021, customer activity levels remained below normal which contributed to lower operating expense from reduced service transactions and other stimulus packages. Wesignificantly lower bad debt, however, those trends are slowly returning to pre-COVID-19 levels and we expect that some ofto continue throughout 2021 as the COVID-19 programs discussed above may resulteconomy reopens and normal activities resume.

In May 2021, the Federal Communications Commission ("FCC") introduced the Emergency Broadband Benefit ("EBB") program to help households pay for Internet service. The EBB program provides eligible low-income households with up to $50 per month toward Internet service. We estimate that the EBB program favorably impacted our net increase in incremental churncustomer relationships by approximately 60,000 for the quarter ended June 30, 2021. Additional new and bad debt duringexisting customers also enrolled in the remainder of the year. In addition, there is uncertainty regarding the impact of government emergency declarations, the ability of our suppliers and vendors to provide products and services to us, the pace of new housing construction, changes in business spend in our local and national ad sales business, the effects to our employees’ health and safety and resulting reorientation of our work activities, and the risk of limitations on the deployment and maintenance of our services (including by limiting our customer support and on-site service repairs and installations).EBB program.

Although the ultimate impact of the COVID-19 pandemic cannot be predicted, we remain focused on driving customer relationship growth by deploying superior products and services packaged with attractive pricing. Further, we expect to continue to drive customer relationship growth through sales of bundled services and improving customer retention despite the expectation for continued losses of video and wireline voice customers. With the completion of our all-digital conversion, roll-

28

out of DOCSIS 3.1 technology across our footprint, and the integration of TWC and Bright House substantially complete, we expect continued lower cable capital intensity in 2020.

Our Spectrum Mobile service is offered to customers subscribing to our Internet service and runs on Verizon'sVerizon Communications Inc.'s ("Verizon") mobile network combined with Spectrum WiFi. In March 2020, we launched 5G service offerings and we expect that, along with broader availability of our Spectrum Mobile bring-your-own-device program, to contribute to the growth of our mobile business. We also continue to explore ways to drive even more mobile traffic to our network. We intend to use Citizens Broadband Radio Service (“CBRS”) Priority Access Licenses (“PALs”) we purchased in 2020, along with unlicensed CBRS spectrum to build our own 5G mobile network which we plan to use in combination with our mobile virtual network operator (“MVNO”) reseller agreement with Verizon and WiFi network in conjunction with additional unlicensed,to enhance the customer’s experience and potentially licensed, spectrum to improve network performance and expand capacity to offer consumers a superior mobile service at a lower totalour cost to us. Further, we have experimental wireless licenses from the FCC that we are utilizing to test next generation mobile services in several service areas around the country.structure.

We believe Spectrum-branded mobile services will drive higher sales of our core products, create longer customer lives and increase profitability and cash flow over time. As a result of growth costs associated with our new mobile product line, we cannot be certain that we will be able to grow revenues or maintain our margins at recent historical rates. During the three and six months ended June 30, 2021, our mobile product line increased revenues by $519 million and $1.0 billion, respectively, reduced Adjusted EBITDA by approximately $67 million and $147 million, respectively, and reduced free cash flow by approximately $277 million and $461 million, respectively. During the three and six months ended June 30, 2020, our mobile product line increased revenues by $310 million and $568 million, respectively, reduced Adjusted EBITDA by approximately $103 million and $219 million, respectively, and reduced free cash flow by approximately $233 million and $493 million, respectively. DuringPrimarily as a result of growth-related sales and marketing and other customer acquisition costs for mobile services, and depending on the three and six months ended June 30, 2019, ourpace of that growth, we expect mobile product line increased revenues by $158 million and $298 million, respectively, reduced Adjusted EBITDA by approximately $119 million and $239 million, respectively, and reducedwill continue to be negative. We also expect to continue to see negative free cash flow by approximately $297 million and $588 million, respectively. As we continue to grow our mobile service and scale the business, we expect continued negative impacts to Adjusted EBITDA, as well as negative working capital impacts from the timing of device-related cash flows when we sell the handset or tabletdevices to customers pursuant to equipment installment plans.plans and capital expenditures related to retail store and CBRS build-out.

22


We realized revenue, Adjusted EBITDA and income from operations during the periods presented as follows (in millions; all percentages are calculated using whole numbers. Minor differences may exist due to rounding):

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019% Change20202019% Change20212020% Change20212020% Change
RevenuesRevenues$11,696  $11,347  3.1 %$23,434  $22,553  3.9 %Revenues$12,802 $11,696 9.5 %$25,324 $23,434 8.1 %
Adjusted EBITDAAdjusted EBITDA$4,489  $4,185  7.3 %$8,885  $8,240  7.8 %Adjusted EBITDA$5,020 $4,489 11.8 %$9,965 $8,885 12.2 %
Income from operationsIncome from operations$1,969  $1,541  27.8 %$3,771  $2,966  27.1 %Income from operations$2,575 $1,969 30.7 %$4,643 $3,771 23.1 %

Adjusted EBITDA is defined as net income attributable to Charter shareholders plus net income attributable to noncontrolling interest, net interest expense, income taxes, depreciation and amortization, stock compensation expense, loss on extinguishment of debt, (gain) loss on financial instruments, net, other pension (benefits) costs, other (income) expense,expenses, net and other operating (income) expenses, net, such as special charges and (gain) loss on sale or retirement of assets. See “—Use of Adjusted EBITDA and Free Cash Flow” for further information on Adjusted EBITDA and free cash flow. 

Growth in total revenue for the three and six months ended June 30, 2020 compared to the corresponding prior periods was primarily due to growth in our residential Internet and mobile customers, price adjustments and small and medium business customers.an increase in advertising sales. Adjusted EBITDA and income from operations growth was impacted by growth in revenue and increases in operating costs and expenses, primarily mobile, costs to service customers and programming offset by lower regulatory, connectivity and produced content costs. Income from operations was also affected by a decrease in depreciationcosts as well as mobile and amortization expense and other operating expenses, net.

programming.

2923

The following table summarizes our customer statistics for Internet, video, mobilevoice and voicemobile as of June 30, 20202021 and 20192020 (in thousands except per customer data and footnotes).

Approximate as ofApproximate as of
June 30,June 30,
2020 (a)
2019 (a)
2021 (a)
2020 (a)
Customer Relationships (b)
Customer Relationships (b)
Customer Relationships (b)
ResidentialResidential28,496  26,755  Residential29,660 28,496 
Small and Medium Business1,980  1,902  
Small and Medium Business ("SMB")Small and Medium Business ("SMB")2,104 1,980 
Total Customer RelationshipsTotal Customer Relationships30,476  28,657  Total Customer Relationships31,764 30,476 
Residential Primary Service Units (“PSU”)
Monthly Residential Revenue per Residential Customer (c)
Monthly Residential Revenue per Residential Customer (c)
$112.85 $110.82 
Monthly SMB Revenue per SMB Customer (d)
Monthly SMB Revenue per SMB Customer (d)
$166.28 $166.06 
InternetInternet26,313  24,244  Internet
ResidentialResidential27,722 26,313 
SMBSMB1,912 1,783 
Total Internet CustomersTotal Internet Customers29,634 28,096 
VideoVideo15,652  15,802  Video
ResidentialResidential15,420 15,652 
SMBSMB592 516 
Total Video CustomersTotal Video Customers16,012 16,168 
VoiceVoice9,398  9,808  Voice
ResidentialResidential9,014 9,398 
SMBSMB1,259 1,169 
Total Voice CustomersTotal Voice Customers10,273 10,567 
Monthly Residential Revenue per Residential Customer (c)
$110.82  $112.20  
Mobile Lines (e)
Mobile Lines (e)
ResidentialResidential2,855 1,672 
SMBSMB85 25 
Total Mobile LinesTotal Mobile Lines2,940 1,697 
Small and Medium Business PSUs
Internet1,783  1,701  
Video516  518  
Voice1,169  1,097  
Monthly Small and Medium Business Revenue per Customer (d)
$166.06  $170.42  
Mobile Lines1,697  518  
Enterprise PSUs (e)
270  258  
Enterprise Primary Service Units ("PSUs") (f)
Enterprise Primary Service Units ("PSUs") (f)
280270 


(a)
(a)We calculate the aging of customer accounts based on the monthly billing cycle for each account. On that basis, as of June 30, 20202021 and 2019,2020, customers include approximately 124,500201,100 and 152,900124,500 customers, respectively, whose accounts were over 60 days past due, approximately 18,40037,700 and 13,80018,400 customers, respectively, whose accounts were over 90 days past due and approximately 10,40030,900 and 15,80010,400 customers, respectively, whose accounts were over 120 days past due. As detailedIncluded in the table below, our customer counts include thoseJune 30, 2021 aging statistics are approximately 73,500 residential customers who connected as part of our Remote Education Offer and those customers who wethat would have notbeen disconnected inunder our normal timelines associated with our Keep Americans Connected Pledge.collection policies, but were not due to certain state mandates in place.
(b)Customer relationships include the number of customers that receive one or more levels of service, encompassing Internet, video and voice services, without regard to which service(s) such customers receive. Customers who reside in residential multiple dwelling units (“MDUs”) and that are billed under bulk contracts are counted based on the number of billed units within each bulk MDU. Total customer relationships exclude enterprise and mobile-only customer relationships.
(c)Monthly residential revenue per residential customer is calculated as total residential Internet, video and voice quarterly revenue divided by three divided by average residential customer relationships during the respective quarter. Monthly residential revenue per residential customersquarter and excludes mobile revenue and customers.
(d)Monthly small and medium businessSMB revenue per SMB customer is calculated as total small and medium businessSMB quarterly revenue divided by three divided by average small and medium businessSMB customer relationships during the respective quarter. Monthly smallquarter and medium business revenue per small and medium customer excludes mobile revenue and customers.
(e)Mobile lines include phones and tablets which require one of our standard rate plans (e.g., "Unlimited" or "By the Gig"). Mobile lines exclude wearables and other devices that do not require standard phone rate plans.
(f)Enterprise PSUs represent the aggregate number of fiber service offerings counting each separate service offering at each customer location as an individual PSU.


3024

The table above includes the impact on customers of COVID-19 related offers and programs launched by us in the first quarter of 2020 as follows (in thousands except footnotes).

Remote Education Offer (a)
Keep Americans Connected (b)
Seasonal Plan (c)
Total
Residential
Customer Relationships160  208  n/a368  
Internet PSUs160  202  n/a362  
Video PSUs58  
(d)
148  n/a206  
Voice PSUs46  
(d)
90  n/a136  
Mobile Lines10  
(d)
8  n/a18  
Small and Medium Business
Customer Relationshipsn/a14  13  27  
Internet PSUsn/a13  11  24  
Video PSUsn/a6  13  19  
Voice PSUsn/a11  8  19  
Mobile Linesn/a—  —  —  
Enterprise PSUs
Enterprise PSUSn/a1  9  10  

(a)The REO represents residential customers receiving free Internet service by participating in Charter's free 60-day Internet offer available to households with K-12 and/or college students or educators who were not Spectrum Internet customers. This offer for new customers ended on June 30, 2020. These residential customers are generally eligible to purchase additional products and services (i.e. video, voice and mobile) at current promotional rates. Of the 448,000 Internet customers who were added as part of the REO through June 30, 2020 (of which 119,000 were added in March), 160,000 remained within their 60-day free period with 288,000 having rolled off the promotional period as of June 30, 2020. Nearly 90% of cumulative connects on the REO remained Internet customers as of July 27, 2020.
(b)As part of our March 2020 pledge to the FCC which we extended through June 30, KAC represents customers who requested to not be disconnected from service due to COVID-19 related payment challenges and would have been disconnected under our normal collection policies during the pledge period. Approximately 600,000 residential customers and 100,000 SMB customers had requested protection from disconnection, of which at the peak of the program, 208,000 and 14,000, respectively, would have been disconnected under our normal collection policies. Approximately 30% of the KAC customer bills were current, and over 60% were making partial or full payments. In an effort to assist these COVID-19 impacted customers with overdue balances, we waived $76 of million residential, $6 million of SMB and $3 million of mobile receivables, each of which were recorded as a reduction to revenue in the second quarter. These customers no longer have an overdue balance and will be subject to Charter's standard collection practices going forward.
(c)Represents small and medium businesses and Enterprise hospitality customers who have requested a reduced level of service and now pay a reduced price for their service due to temporary business closure or because these customers have reduced their service offering to their own customers.
(d)Customers who are receiving free Internet Service as part of the REO who have subscribed to products in addition to Spectrum Internet (i.e., video, voice, mobile) during the 60-day Free Internet Offer. Billings are not deferred for these additional services.

Critical Accounting Policies and Estimates

For a discussion of our critical accounting policies and the means by which we develop estimates therefore, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 20192020 Annual Report on Form 10-K. There have been no material changes from the critical accounting policies described in our Form 10-K.


31

Results of Operations

The following table sets forth the consolidated statements of operations for the periods presented (dollars in millions, except per share data):

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
RevenuesRevenues$11,696  $11,347  $23,434  $22,553  Revenues$12,802 $11,696 $25,324 $23,434 
Costs and Expenses:Costs and Expenses:Costs and Expenses:
Operating costs and expenses (exclusive of items shown separately below)Operating costs and expenses (exclusive of items shown separately below)7,297  7,244  14,729  14,480  Operating costs and expenses (exclusive of items shown separately below)7,882 7,297 15,593 14,729 
Depreciation and amortizationDepreciation and amortization2,428  2,500  4,925  5,050  Depreciation and amortization2,354��2,428 4,795 4,925 
Other operating expenses, net2  62  9  57  
Other operating (income) expenses, netOther operating (income) expenses, net(9)2 293 9 
9,727  9,806  19,663  19,587  10,227 9,727 20,681 19,663 
Income from operationsIncome from operations1,969  1,541  3,771  2,966  Income from operations2,575 1,969 4,643 3,771 
Other Income (Expenses):Other Income (Expenses):Other Income (Expenses):
Interest expense, netInterest expense, net(957) (945) (1,937) (1,870) Interest expense, net(1,004)(957)(1,987)(1,937)
Loss on extinguishment of debt(36) —  (63) —  
Gain (loss) on financial instruments, net64  (119) (254) (82) 
Other pension benefits, net11  9  21  18  
Other expense, net(9) (16) —  (126) 
Other income (expenses), netOther income (expenses), net(132)30 (80)(296)
(927) (1,071) (2,233) (2,060) (1,136)(927)(2,067)(2,233)
Income before income taxesIncome before income taxes1,042  470  1,538  906  Income before income taxes1,439 1,042 2,576 1,538 
Income tax expenseIncome tax expense(166) (84) (195) (203) Income tax expense(281)(166)(497)(195)
Consolidated net incomeConsolidated net income876  386  1,343  703  Consolidated net income1,158 876 2,079 1,343 
Less: Net income attributable to noncontrolling interestsLess: Net income attributable to noncontrolling interests(110) (72) (181) (136) Less: Net income attributable to noncontrolling interests(138)(110)(252)(181)
Net income attributable to Charter shareholdersNet income attributable to Charter shareholders$766  $314  $1,162  $567  Net income attributable to Charter shareholders$1,020 $766 $1,827 $1,162 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
BasicBasic$3.72  $1.41  $5.62  $2.54  Basic$5.48 $3.72 $9.69 $5.62 
DilutedDiluted$3.63  $1.39  $5.48  $2.50  Diluted$5.29 $3.63 $9.37 $5.48 
Weighted average common shares outstanding, basicWeighted average common shares outstanding, basic205,777,438  222,392,274  206,804,371  223,505,016  Weighted average common shares outstanding, basic185,916,505 205,777,438 188,645,356 206,804,371 
Weighted average common shares outstanding, dilutedWeighted average common shares outstanding, diluted210,906,946  225,942,172  212,158,218  226,889,745  Weighted average common shares outstanding, diluted199,077,390 210,906,946 202,458,265 212,158,218 

Revenues. Total revenues grew $349 million$1.1 billion and $881 million$1.9 billion for the three and six months ended June 30, 2020,2021, respectively, compared to the corresponding periods in 20192020 primarily due to increases in the number of residential Internet and commercial businessmobile customers, price adjustments as well asand an increase in our mobile service offset by a decrease in video customers and $85 million of waived receivables related to the KAC program.advertising sales.

3225

Revenues by service offering were as follows (dollars in millions; all percentages are calculated using whole numbers. Minor differences may exist due to rounding):

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019% Change20202019% Change20212020% Change20212020% Change
InternetInternet$4,530  $4,103  10.4 %$8,937  $8,127  10.0 %Internet$5,221 $4,530 15.2 %$10,307 $8,937 15.3 %
VideoVideo4,371  4,391  (0.4)%8,793  8,775  0.2 %Video4,378 4,371 0.2 %8,722 8,793 (0.8)%
VoiceVoice451  489  (7.7)%908  993  (8.6)%Voice394 451 (12.7)%793 908 (12.7)%
Residential revenueResidential revenue9,352  8,983  4.1 %18,638  17,895  4.2 %Residential revenue9,993 9,352 6.8 %19,822 18,638 6.3 %
Small and medium businessSmall and medium business983  963  2.0 %1,979  1,908  3.7 %Small and medium business1,042 983 6.0 %2,054 1,979 3.8 %
EnterpriseEnterprise606  652  (7.1)%1,228  1,295  (5.2)%Enterprise636 606 5.1 %1,274 1,228 3.8 %
Commercial revenueCommercial revenue1,589  1,615  (1.7)%3,207  3,203  0.1 %Commercial revenue1,678 1,589 5.6 %3,328 3,207 3.8 %
Advertising salesAdvertising sales249  395  (37.0)%614  740  (17.1)%Advertising sales411 249 65.1 %755 614 23.0 %
MobileMobile310  158  96.1 %568  298  90.9 %Mobile519 310 67.5 %1,011 568 78.0 %
OtherOther196  196  — %407  417  (2.3)%Other201 196 2.8 %408 407 0.3 %
$11,696  $11,347  3.1 %$23,434  $22,553  3.9 %$12,802 $11,696 9.5 %$25,324 $23,434 8.1 %

The increase in Internet revenues from our residential customers is attributable to the following (dollars in millions):

Three months ended
June 30, 2020
compared to
three months ended
June 30, 2019
Increase / (Decrease)		Six months ended
June 30, 2020
compared to
six months ended
June 30, 2019
Increase / (Decrease)		Three months ended
June 30, 2021
compared to
three months ended
June 30, 2020
Increase / (Decrease)		Six months ended
June 30, 2021
compared to
six months ended
June 30, 2020
Increase / (Decrease)
Increase related to rate, product mix and bundle allocation changesIncrease related to rate, product mix and bundle allocation changes$404 $728 
Increase in average residential Internet customersIncrease in average residential Internet customers$299  $529  Increase in average residential Internet customers287 642 
Increase related to rate, product mix and allocation changes128  281  
$427  $810  $691 $1,370 

Residential Internet customers grew by 2,069,000 customers from June 30, 2019 to June 30, 2020 due in part to higher demand for our services and the impacts of COVID-19 programs. The increase related to rate, product mix and bundle allocation changes was primarily due to price adjustments, including promotional roll-off offset by aand higher bundled revenue allocation as well as $29 million reductionof credits related to prior year's Keep Americans Connected ("KAC") Pledge which reduced revenue during the KAC program credits.three and six months ended June 30, 2020. Residential Internet customers grew by 1,409,000 customers from June 30, 2020 to June 30, 2021.

Video revenues consist primarily of revenues from basic and digital video services provided to our residential customers, as well as franchise fees, equipment service fees and video installation revenue. The change in video revenues is attributable to the following (dollars in millions):

Three months ended
June 30, 2020
compared to
three months ended
June 30, 2019
Increase / (Decrease)		Six months ended
June 30, 2020
compared to
six months ended
June 30, 2019
Increase / (Decrease)
Increase related to rate, product mix and allocation changes$53  $228  
Decrease in average residential video customers(79) (202) 
Increase (decrease) in video on demand and pay-per-view6  (8) 
$(20) $18  
Three months ended
June 30, 2021
compared to
three months ended
June 30, 2020
Increase / (Decrease)		Six months ended
June 30, 2021
compared to
six months ended
June 30, 2020
Increase / (Decrease)
Decrease in average residential video customers$(39)$(40)
Decrease in video on demand and pay-per-view(17)(37)
Decrease in installation(3)(13)
Increase related to rate, product mix and bundle allocation changes66 19 
$7 $(71)


26

Residential video customers decreased by 232,000 from June 30, 2020 to June 30, 2021. The increase related to rate, product mix and bundle allocation changes was primarily due to $44 million of credits related to prior year's KAC program which reduced revenue during the three and six months ended June 30, 2020 as well as price adjustments including annual increases and promotional roll-off and was partly offset by a $44 million reduction related to KAC program credits and a higher mix of streaming and lighterlower cost video packages within our video customer base. Residential video customers decreased by 150,000 from June 30, 2019 to June 30, 2020.

33

base and lower bundled revenue allocation.

The decrease in voice revenues from our residential customers is attributable to the following (dollars in millions):

Three months ended
June 30, 2020
compared to
three months ended
June 30, 2019
Increase / (Decrease)		Six months ended
June 30, 2020
compared to
six months ended
June 30, 2019
Increase / (Decrease)		Three months ended
June 30, 2021
compared to
three months ended
June 30, 2020
Increase / (Decrease)		Six months ended
June 30, 2021
compared to
six months ended
June 30, 2020
Increase / (Decrease)
Decrease related to rate and bundle allocation changesDecrease related to rate and bundle allocation changes$(43)$(90)
Decrease in average residential voice customersDecrease in average residential voice customers$(27) $(61) Decrease in average residential voice customers(14)(25)
Decrease related to rate, product mix and allocation changes(11) (24) 
$(38) $(85) $(57)$(115)

The decrease related to rate and bundle allocation changes was impacted by value-based pricing and changes in bundled revenue allocations. Residential wireline voice customers decreased by 410,000384,000 customers from June 30, 20192020 to June 30, 2020. The decrease related to rate, product mix and allocation changes was primarily due to value-based pricing and a $3 million reduction related to KAC program credits.2021.

The increase in small and medium business commercialSMB revenues is attributable to the following (dollars in millions):

Three months ended
June 30, 2020
compared to
three months ended
June 30, 2019
Increase / (Decrease)		Six months ended
June 30, 2020
compared to
six months ended
June 30, 2019
Increase / (Decrease)		Three months ended
June 30, 2021
compared to
three months ended
June 30, 2020
Increase / (Decrease)		Six months ended
June 30, 2021
compared to
six months ended
June 30, 2020
Increase / (Decrease)
Increase in small and medium business customers$44  $106  
Increase in SMB customersIncrease in SMB customers$57 $106 
Increase related to COVID-19 programs which reduced prior year revenueIncrease related to COVID-19 programs which reduced prior year revenue17 13 
Decrease related to rate and product mix changesDecrease related to rate and product mix changes(24) (35) Decrease related to rate and product mix changes(15)(44)
$20  $71  $59 $75 

Small and medium businessSMB customers grew by 78,000124,000 from June 30, 20192020 to June 30, 2020.2021. The decrease related to rate and product mix changes during the six months ended June 30, 2021 compared to the corresponding period in 2020 was primarily due to a $17 million reductionvalue-based pricing related to COVID-19 programs.Spectrum pricing and packaging ("SPP") net of promotional roll-off and price adjustments.

Enterprise revenues decreased $46increased $30 million and $67$46 million during the three and six months ended June 30, 2020,2021, respectively, compared to the corresponding periods in 20192020 primarily due to the salean increase in Internet PSUs as well as $18 million of non-strategic assetsimpacts from COVID-19 related programs which reduced revenues in the third quarter of 2019three and a revenue reduction of $18 million related to the Enterprise hospitality seasonal program.six months ended June 30, 2020 offset by lower wholesale PSUs. Enterprise PSUs increased 12,00010,000 from June 30, 20192020 to June 30, 2020.2021.

Advertising sales revenues consist primarily of revenues from commercial advertising customers, programmers and other vendors, as well as local cable and advertising on regional sports and news channels. Advertising sales revenues decreased $146increased $162 million and $126$141 million during the three and six months ended June 30, 2020,2021, respectively, as compared to the corresponding periods in 20192020 primarily due to lower local and national adthe impacts of COVID-19 that lowered revenues due to COVID-19.in 2020 offset by a decrease in political revenue.

During the three and six months ended June 30, 2021, mobile revenues represented approximately $214 million and $442 million of device revenues, respectively, and approximately $305 million and $569 million of service revenues, respectively. During the three and six months ended June 30, 2020, mobile revenues represented approximately $158 million and $289 million of device revenues, respectively, and approximately $152 million and $279 million of service revenues, respectively. During the three and six months ended June 30, 2019, mobileThe increases in revenues represented approximately $111 million and $225 millionare a result of device revenues, respectively, and approximately $47 million and $73 million of service revenues, respectively. The revenue increases are attributable to an increase inof 1,243,000 mobile lines from 518,000 as of June 30, 20192020 to 1,697,000 mobile lines as of June 30, 2020.2021.


27

Other revenues consist of revenue from regional sports and news channels (excluding intercompany charges or advertising sales on those channels), home shopping, late payment fees, video device sales, wire maintenance fees and other miscellaneous revenues. Other revenues remained unchangedincreased $5 million and $1 million during the three months ended June 30, 2020 compared to the corresponding period in 2019 and decreased $10 million during the six months ended June 30, 20202021, respectively, compared to the corresponding periods in 2019 primarily due to a decrease in home security revenue and late payment fees offset by an increase in the sale of video devices.2020.


34

Operating costs and expenses. The increase in our operating costs and expenses, exclusive of items shown separately in the consolidated statements of operations, are attributable to the following (dollars in millions):

Three months ended
June 30, 2020
compared to
three months ended
June 30, 2019
Increase / (Decrease)		Six months ended
June 30, 2020
compared to
six months ended
June 30, 2019
Increase / (Decrease)		Three months ended
June 30, 2021
compared to
three months ended
June 30, 2020
Increase / (Decrease)		Six months ended
June 30, 2021
compared to
six months ended
June 30, 2020
Increase / (Decrease)
ProgrammingProgramming$46  $73  Programming$105 $201 
Regulatory, connectivity and produced contentRegulatory, connectivity and produced content(109) (119) Regulatory, connectivity and produced content180 229 
Costs to service customersCosts to service customers81  107  Costs to service customers(21)(65)
MarketingMarketing(49) (18) Marketing22 7 
MobileMobile136  250  Mobile173 371 
OtherOther(52) (44) Other126 121 
$53  $249  $585 $864 

Programming costs were approximately $3.0 billion and $6.0 billion for the three and six months ended June 30, 2021, respectively, representing 38% of total operating costs and expense for both time periods, and $2.9 billion and $5.8 billion for the three and six months ended June 30, 2020, respectively, representing 39% of total operating costs and expenses for both time periods, and $2.8 billion and $5.7 billion for the three and six months ended June 30, 2019, respectively, representing 39% of total operating costs and expensesexpense for both time periods. Programming costs consist primarily of costs paid to programmers for basic, digital, premium, video on demand, and pay-per-view programming. The increase in programmingProgramming costs is primarilyincreased as a result of contractual rate adjustments, including renewals and increases in amounts paid for retransmission consent partly offset by lower video customers, nonrecurring benefits and a higher mix of lower cost video packages within our video customer base. We expect programming rates per customer will continue to increase due to a variety of factors, including annual increases imposed by programmers with additional selling power as a result of media and broadcast station groups consolidation, increased demands by owners of broadcast stations for payment for retransmission consent or linking carriage of other services to retransmission consent, and additional programming, particularly new services.programming. We have been unable to fully pass these increases on to our customers and do not expect to be able to do so in the future without a potential loss of customers.

Regulatory, connectivity and produced content decreased $109increased $180 million and $119$229 million during the three and six months ended June 30, 2020,2021, respectively, compared to the corresponding periods in 20192020 primarily due to timing ofhigher sports rights fees driven by delayedcosts as a result of more basketball and baseball games during the first half of 2021 as compared to the corresponding period in 2020 as the prior period had postponement of games and the current period had additional games due to COVID-19 and lower regulatory pass-through fees offset by higher original programming costs and coststhe delayed start of video devices sold to customers.the 2020 - 2021 NBA season as a result of COVID-19.

Costs to service customers increased $81decreased $21 million and $107$65 million during the three and six months ended June 30, 2020,2021, respectively, compared to the corresponding periods in 20192020 despite 4.2% customer growth primarily due to fewer transactions and a decrease in bad debt expense partly driven by government stimulus packages offset by the higher labor costs resulting from COVID-19 related wage increases and flex time benefits along with 6.3% customer growth partially offset by lower medical costs and one-time payroll tax credits. Bad debt expense increased only slightly given the revenue write-off associated with the KAC program and better collections enhanced by government stimulus benefits.our commitment to a minimum $20 per hour wage in 2022.

MarketingMobile costs decreased $49of $586 million and $18 million during$1.2 billion for the three and six months ended June 30, 2020,2021, respectively, compared to the corresponding periods in 2019 primarily due to better media placement rates and a one-time payroll tax credit.

Mobile costs of $413 million and $787 million for the three and six months ended June 30, 2020, respectively, and $277 million and $537 million for the three and six months ended 2019, respectively, were comprised of mobile device costs and mobile service, customer acquisition and operating costs. The increases areincrease is attributable to increasesan increase in the number of mobile lines.


3528

The increase in other expense is attributable to the following (dollars in millions):

Three months ended
June 30, 2020
compared to
three months ended
June 30, 2019
Increase / (Decrease)		Six months ended
June 30, 2020
compared to
six months ended
June 30, 2019
Increase / (Decrease)		Three months ended
June 30, 2021
compared to
three months ended
June 30, 2020
Increase / (Decrease)		Six months ended
June 30, 2021
compared to
six months ended
June 30, 2020
Increase / (Decrease)
Corporate costsCorporate costs$17  $31  Corporate costs$53 $26 
Advertising sales expenseAdvertising sales expense51 34 
Stock compensation expenseStock compensation expense8  13  Stock compensation expense10 54 
Advertising sales expense(45) (34) 
EnterpriseEnterprise(26) (49) Enterprise7 9 
Property tax and insuranceProperty tax and insurance2 (4)
OtherOther(6) (5) Other3 2 
$(52) $(44) $126 $121 

Corporate costs increased during the three and six months ended June 30, 2021 compared to the corresponding prior periods primarily due to higher labor costs. Advertising sales expense decreasedincreased due to lowerhigher cost of sales fees driven by lowerhigher revenue. Enterprise costs decreasedStock compensation expense increased during the six months ended June 30, 2021 compared to the corresponding period in 2020 primarily due to changes in certain equity award provisions that result in additional expense at the saletime of non-strategic assets in the third quarter of 2019.grant.

Depreciation and amortization. Depreciation and amortization expense decreased by $72$74 million and $125$130 million during the three and six months ended June 30, 2020,2021, respectively, compared to the corresponding periods in 20192020 primarily due to a decrease in depreciation and amortization as certain assets acquired in acquisitions become fully depreciated offset by an increase in depreciation as a result of more recent capital expenditures.

Other operating (income) expenses, net. The change in other operating (income) expenses, net is attributable to the following (dollars in millions):

Three months ended
June 30, 2020
compared to
three months ended
June 30, 2019
Increase / (Decrease)		Six months ended
June 30, 2020
compared to
six months ended
June 30, 2019
Increase / (Decrease)		Three months ended
June 30, 2021
compared to
three months ended
June 30, 2020
Increase / (Decrease)		Six months ended
June 30, 2021
compared to
six months ended
June 30, 2020
Increase / (Decrease)
Special charges, netSpecial charges, net$(17) $3  Special charges, net$(12)$227 
(Gain) loss on sale of assets, net(43) (51) 
(Gain) loss on disposal of assets, net(Gain) loss on disposal of assets, net1 57 
$(60) $(48) $(11)$284 

See Note 13 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements” for more information.

Interest expense, net. Net interest expense increased by $12$47 million and $67$50 million for the three and six months ended June 30, 2020,2021, respectively, compared to the corresponding periods in 2019 primarily as a2020. The increase in net interest expense is the result of an increase in weighted average debt outstanding of approximately $6.5$6.6 billion and $5.5$5.6 billion during the three and six months ended June 30, 2021, respectively, compared to the corresponding periods in 2020 offset by reductions in weighted average interest rates. The increase in weighted average debt outstanding is primarily due to the issuance of notes throughout 20192020 and 20202021 for general corporate purposes including stock buybacks and debt repayments offset by a reduction in weighted average interest rates.repayments.

Loss on extinguishment of debt.
29

Other income (expenses), net. Loss on extinguishment of debt of $36 million and $63 million forThe change in other income (expenses), net is attributable to the three and six months ended June 30, 2020, respectively, represents losses recognized as a result of the redemption of CCO Holdings notes. For more information, see Note 6following (dollars in millions):

Three months ended
June 30, 2021
compared to
three months ended
June 30, 2020
Increase / (Decrease)		Six months ended
June 30, 2021
compared to
six months ended
June 30, 2020
Increase / (Decrease)
Loss on extinguishment of debt (see Note 6)$(10)$(12)
Gain (loss) on financial instruments, net (see Note 9)(155)211 
Other pension benefits, net (see Note 21)162 170 
Loss on equity investments, net (see Note 3)(159)(153)
$(162)$216 

See Notes referenced above to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Gain (loss) on financial instruments, net. We recorded gains on financial instruments of $64 million and losses on financial instruments of $254 million during the three and six months ended June 30, 2020, respectively, and losses on financial instruments of $119 million and $82 million during the three and six months ended June 30, 2019, respectively. Gains and losses on financial instruments are primarily recognized due to changes in the fair value of our cross-currency derivative instruments and the foreign currency remeasurement of the fixed-rate British pound sterling denominated notes (the “Sterling Notes”) into U.S. dollars. ForStatements” for more information, see Note 9 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”


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Other pension benefits, net. Net other pension benefits increased by $2 million and $3 million during the three and six months ended June 30, 2020, respectively, compared to the corresponding periods in 2019. For more information, see Note 20 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Other expense, net. Other expense, net primarily represents equity losses on our equity investments. Other expense, net also includes an impairment on equity investments of approximately $11 million and $121 million during the three and six months ended June 30, 2019, respectively.information.

Income tax expense. We recognized income tax expense of $281 million and $497 million for the three and six months ended June 30, 2021, respectively, and $166 million and $195 million for the three and six months ended June 30, 2020, respectively, and $84 million and $203 million for the three and six months ended June 30, 2019, respectively. Income tax expense increased during the three months ended June 30, 2020 compared to the corresponding period in 2019The increase is primarily as a result of higher pretax income offset by increased recognition of excess tax benefits resulting from share-based compensation during 2020. Income tax expense decreased during the six months ended June 30, 2020 compared to the corresponding period in 2019 primarily as a result of increased recognition of excess tax benefits resulting from share-based compensation during 2020 and an internal entity simplification that increased expense in 2019 offset by higher pretax income in 2020.income. For more information, see Note 1516 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Net income attributable to noncontrolling interest. Net income attributable to noncontrolling interest for financial reporting purposes represents A/N’s portion of Charter Holdings’ net income based on its effective common unit ownership interest and the preferred dividend of $37$32 million and $75$70 million for each of the three and six months ended June 30, 20202021, respectively, and 2019,$37 million and $75 million for the three and six months ended June 30, 2020, respectively. For more information, see Note 8 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Net income attributable to Charter shareholders. Net income attributable to Charter shareholders increased from $314 million and $567 million for the three and six months ended June 30, 2019, respectively, to $766 million and $1.2 billion for the three and six months ended June 30, 2020, respectively, to $1.0 billion and $1.8 billion for the three and six months ended June 30, 2021, respectively, primarily as a result of the factors described above.

Use of Adjusted EBITDA and Free Cash Flow

We use certain measures that are not defined by U.S. generally accepted accounting principles ("GAAP") to evaluate various aspects of our business. Adjusted EBITDA and free cash flow are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net income attributable to Charter shareholders and net cash flows from operating activities reported in accordance with GAAP. These terms, as defined by us, may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA and free cash flow are reconciled to net income attributable to Charter shareholders and net cash flows from operating activities, respectively, below.

Adjusted EBITDA eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of our businesses as well as other non-cash or special items, and is unaffected by our capital structure or investment activities. However, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and our cash cost of financing. These costs are evaluated through other financial measures.

Free cash flow is defined as net cash flows from operating activities, less capital expenditures and changes in accrued expenses related to capital expenditures.

Management and Charter’s board of directors use Adjusted EBITDA and free cash flow to assess our performance and our ability to service our debt, fund operations and make additional investments with internally generated funds. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under our credit facilities or outstanding notes to determine compliance with the covenants contained in the facilities and notes (all such documents have been previously filed with the Securities and Exchange Commission (the “SEC”)). For the purpose of calculating compliance with leverage covenants, we use Adjusted EBITDA, as presented, excluding certain expenses paid by our operating subsidiaries to other Charter entities. Our debt covenants refer to these expenses as management fees, which were $365 million and $642 million for

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the three and six months ended June 30, 2021, respectively, and $308 million and $619 million for the three and six months ended June 30, 2020, respectively, and $299 million and $599 million for the three and six months ended June 30, 2019, respectively.

A reconciliation of Adjusted EBITDA and free cash flow to net income attributable to Charter shareholders and net cash flows from operating activities, respectively, is as follows (dollars in millions).

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Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Net income attributable to Charter shareholdersNet income attributable to Charter shareholders$766  $314  $1,162  $567  Net income attributable to Charter shareholders$1,020 $766 $1,827 $1,162 
Plus: Net income attributable to noncontrolling interestPlus: Net income attributable to noncontrolling interest110  72  181  136  Plus: Net income attributable to noncontrolling interest138 110 252 181 
Interest expense, netInterest expense, net957  945  1,937  1,870  Interest expense, net1,004 957 1,987 1,937 
Income tax expenseIncome tax expense166  84  195  203  Income tax expense281 166 497 195 
Depreciation and amortizationDepreciation and amortization2,428  2,500  4,925  5,050  Depreciation and amortization2,354 2,428 4,795 4,925 
Stock compensation expenseStock compensation expense90  82  180  167  Stock compensation expense100 90 234 180 
Loss on extinguishment of debt36  —  63  —  
(Gain) loss on financial instruments, net(64) 119  254  82  
Other pension benefits, net(11) (9) (21) (18) 
Other, net11  78  9  183  
Other (income) expenses, netOther (income) expenses, net123 (28)373 305 
Adjusted EBITDAAdjusted EBITDA$4,489  $4,185  $8,885  $8,240  Adjusted EBITDA$5,020 $4,489 $9,965 $8,885 
Net cash flows from operating activitiesNet cash flows from operating activities$3,529  $2,761  $6,749  $5,447  Net cash flows from operating activities$3,999 $3,529 $7,750 $6,749 
Less: Purchases of property, plant and equipmentLess: Purchases of property, plant and equipment(1,877) (1,597) (3,338) (3,262) Less: Purchases of property, plant and equipment(1,881)(1,877)(3,702)(3,338)
Change in accrued expenses related to capital expendituresChange in accrued expenses related to capital expenditures214  (52) (174) (428) Change in accrued expenses related to capital expenditures(50)214 (125)(174)
Free cash flowFree cash flow$1,866  $1,112  $3,237  $1,757  Free cash flow$2,068 $1,866 $3,923 $3,237 

Liquidity and Capital Resources

Introduction

This section contains a discussion of our liquidity and capital resources, including a discussion of our cash position, sources and uses of cash, access to credit facilities and other financing sources, historical financing activities, cash needs, capital expenditures and outstanding debt.

Recent Events

In February 2020, CCO Holdings and CCO Holdings Capital Corp. jointly issued $1.65 billion aggregate principal amount of 4.500% senior unsecured notes due 2030 at par and in March 2020, an additional $1.1 billion of the same series of notes were issued at a price of 102.5% of the aggregate principal amount. Also in March 2020, CCO Holdings and CCO Holdings Capital Corp. issued $1.4 billion aggregate principal amount of 4.500% senior unsecured notes due 2032 at par. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.250% senior notes due September 30, 2022, 5.125% senior notes due February 15, 2023, 5.125% senior notes due May 1, 2023, 5.750% senior notes due September 1, 2023 and 5.750% senior notes due January 15, 2024, as well as to fund potential buybacks of Charter Class A common stock and Charter Holdings common units.

In April 2020,2021, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.6$1.5 billion aggregate principal amount of 2.800%3.500% senior secured notes due April 2031June 2041 at a price of 99.561%99.544% of the aggregate principal amount, $1.0 billion aggregate principal amount of 3.900% senior secured notes due June 2052 at a price of 99.951% of the aggregate principal amount and $1.4 billionan additional $500 million aggregate principal amount of 3.700%3.850% senior secured notes due April 20512061 at a price of 99.217%94.668% of the aggregate principal amount. The net proceeds were used to pay related fees and expenses and for general corporate purposes.purposes, including funding buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness, including $750 million of CCO Holdings, LLC's ("CCO Holdings") 5.750% notes due February 2026.

In June 2020, Charter Operating and Charter Communications Operating Capital Corp. redeemed all of their 3.579% senior secured notes due July 2020.

In July 2020,April 2021, CCO Holdings and CCO Holdings Capital Corp. jointly issued $1.5$1.0 billion aggregate principal amount of 4.250%4.500% senior unsecured notes due 2031June 2033 at par, and later in July 2020,June 2021, an additional $1.5 billion$750 million of the same series of notes werewas issued at a price of 102%.99.250% of the aggregate principal amount. The net proceeds will bewere used for general corporate purposes, including to fund potential buybacks of Charter Class A common stock and Charter Holdings common units, to repay certain indebtedness and to pay related fees and expenses.

In June 2021, Charter Operating and Charter Communications Operating Capital Corp. issued an additional $1.4 billion of 3.900% senior secured notes due June 2052 priced at 95.578% of the aggregate principal amount and $1.4 billion aggregate principal amount of 4.400% senior secured notes due December 2061 at a price of 99.906% of the aggregate principal amount. Net proceeds were used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.875% senior notes due April 1, 2024, as well as funding buybacks of Charter Class A common stock and Charter Holdings common units.units as well as repaying certain indebtedness, including

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$500 million of CCO Holdings' 5.750% notes due February 2026, all of CCO Holdings' 5.875% notes due May 2027, and in July 2021, $1.0 billion of Time Warner Cable, LLC's 4.000% notes due September 2021.

Overview of Our Contractual Obligations and Liquidity

We have significant amounts of debt. The principal amount of our debt as of June 30, 20202021 was $77.8$87.5 billion, consisting of $10.3$10.0 billion of credit facility debt, $45.3$53.6 billion of investment grade senior secured notes and $22.2$24.0 billion of high-yield senior unsecured notes. Our business requires significant cash to fund principal and interest payments on our debt. 

Our projected cash needs and projected sources of liquidity depend upon, among other things, our actual results, and the timing and amount of our expenditures. As we continue to grow our mobile services, we expect an initial funding period to grow a new product as well as negative working capital impacts from the timing of device-related cash flows when we sell the handset or tabletdevices to customers pursuant to equipment installment plans. Further, in 2022, Charter expects to become a meaningful federal cash tax payer as the majority of net operating losses will have been utilized. Free cash flow was $2.1 billion and $3.9 billion for the three and six months ended June 30, 2021, respectively, and $1.9 billion and $3.2 billion for the three and six months ended June 30, 2020, respectively, and $1.1 billion and $1.8 billion for the three and six months ended June 30, 2019, respectively. See table below for factors impacting free cash flow during the three and six months ended June 30, 20202021 compared to the corresponding prior periods. As of June 30, 2020,2021, the amount available under our credit facilities was approximately $4.7 billion and cash on hand was approximately $2.1$1.7 billion. We expect to utilize free cash flow, cash on hand and availability under our credit facilities as well as future refinancing transactions to further extend the maturities of our obligations. The timing and terms of any refinancing transactions will be subject to market conditions among other considerations. Additionally, we may, from time to time, and depending on market conditions and other factors, use cash on hand and the proceeds from securities offerings or other borrowings to retire our debt through open market purchases, privately negotiated purchases, tender offers or redemption provisions. We believe we have sufficient liquidity from cash on hand, free cash flow and Charter Operating’s revolving credit facility as well as access to the capital markets to fund our projected cash needs.

We continue to evaluate the deployment of our cash on hand and anticipated future free cash flow including to invest in our business growth and other strategic opportunities, including the expansion of our network such as through our Rural Digital Opportunity Fund ("RDOF") project, the build-out and deployment of our CBRS spectrum, and mergers and acquisitions as well as stock repurchases and dividends. Charter's target leverage of net debt to the last twelve months Adjusted EBITDA remains at 4 to 4.5 times Adjusted EBITDA, and up to 3.5 times Adjusted EBITDA at the Charter Operating first lien level. Our leverage ratio was 4.34.4 times Adjusted EBITDA as of June 30, 2020.2021. As Adjusted EBITDA grows, we expect to increase the total amount of our indebtedness to maintain leverage within Charter's target leverage range. DuringExcluding purchases from Liberty Broadband Corporation (“Liberty Broadband”) discussed below, during the three and six months ended June 30, 2021, Charter purchased in the public market approximately 3.2 million and 7.9 million shares of Charter Class A common stock, respectively, for approximately $2.1 billion and $5.1 billion, respectively, and during the three and six months ended June 30, 2020, Charter purchased approximately 2.0 million and 6.5 million shares of Charter Class A common stock, respectively, for approximately $1.0 billion and $3.2 billion, respectively. Since the beginning of its buyback program in September 2016 through June 30, 2021, Charter has purchased in the public market approximately 95.6 million shares of Class A common stock for approximately $39.7 billion.

In February 2021, Charter and Liberty Broadband entered into a letter agreement (the “LBB Letter Agreement”). The LBB Letter Agreement implements Liberty Broadband’s obligations under the Amended and Restated Stockholders Agreement with Charter, Liberty Broadband and Advance/Newhouse Partnership (“A/N”), dated as of May 23, 2015 (as amended, the “Stockholders Agreement”) to participate in share repurchases by Charter. Under the LBB Letter Agreement, Liberty Broadband will sell to Charter, generally on a monthly basis, a number of shares of Charter Class A common stock representing an amount sufficient for Liberty Broadband’s ownership of Charter to be reduced such that it does not exceed the ownership cap then applicable to Liberty Broadband under the Stockholders Agreement at a purchase price per share equal to the volume weighted average price per share paid by Charter for shares repurchased during such immediately preceding calendar month other than (i) purchases from A/N, (ii) purchases in privately negotiated transactions or (iii) purchases for the withholding of shares of Charter Class A common stock pursuant to equity compensation programs of Charter. Charter purchased from Liberty Broadband 1.9 million and 2.8 million shares of Charter Class A common stock for approximately $1.0$1.2 billion and $3.2$1.8 billion respectively, and during the three and six months ended June 30, 2019,2021, respectively. In July 2021, Charter purchased approximately 2.2from Liberty Broadband an additional 0.4 million and 4.9 million shares respectively, of Charter Class A common stock for approximately $837 million and $1.7 billion, respectively.$279 million.

In December 2017,2016, Charter and A/N entered into an amendment to thea letter agreement, as amended in December 2017 (the "Letter"A/N 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

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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. During the three and six months ended June 30, 2021, Charter Holdings purchased from A/N 0.9 million and 1.7 million Charter Holdings common units, respectively, for approximately $583 million and $1.1 billion, respectively, and during the three and six months ended June 30, 2020, Charter Holdings purchased from A/N 0.3 million and 1.1 million Charter Holdings common units, at an average price per unit of $445.15 and $481.68, orrespectively, for approximately $125 million and $518 million, during the three and six months ended June 30, 2020, respectively, and 0.4 million and 0.8 million Charter Holdings common units at an average price per unit of $358.21 and $338.12, or $161 million and $254 million, during the three and six months ended June 30, 2019, respectively.

As of June 30, 2020,2021, Charter had remaining board authority to purchase an additional $837 million$1.7 billion of Charter’s Class A common stock and/or Charter Holdings common units.units, excluding purchases from Liberty Broadband. Although Charter expects to continue to buy back its common stock consistent with its leverage target range, Charter is not obligated to acquire any particular amount of common stock, and the timing of any purchases that may occur cannot be predicted and will largely depend on market conditions and other potential uses of capital. Purchases may include open market purchases, tender offers or negotiated transactions.

As possible acquisitions, swaps or dispositions arise, we actively review them against our objectives including, among other considerations, improving the operational efficiency, geographic clustering of assets, product development or technology capabilities of our business and achieving appropriate return targets, and we may participate to the extent we believe these possibilities present attractive opportunities. However, there can be no assurance that we will actually complete any acquisitions, dispositions or system swaps, or that any such transactions will be material to our operations or results.


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Free Cash Flow

Free cash flow increased $754$202 million and $1.5 billion$686 million during the three and six months ended June 30, 20202021, respectively, compared to the corresponding prior periods in 20192020 due to the following (dollars in millions).

Three months ended
June 30, 2020
compared to
three months ended
June 30, 2019
Increase / (Decrease)		Six months ended
June 30, 2020
compared to
six months ended
June 30, 2019
Increase / (Decrease)		Three months ended
June 30, 2021
compared to
three months ended
June 30, 2020
Increase / (Decrease)		Six months ended
June 30, 2021
compared to
six months ended
June 30, 2020
Increase / (Decrease)
Increase in Adjusted EBITDAIncrease in Adjusted EBITDA$531 $1,080 
Changes in working capital, excluding change in accrued interestChanges in working capital, excluding change in accrued interest$590  $902  Changes in working capital, excluding change in accrued interest(275)20 
Increase in Adjusted EBITDA304  645  
Decrease in cash paid for interest, net114  28  
Increase in cash paid for interest, netIncrease in cash paid for interest, net(47)(24)
Increase in capital expendituresIncrease in capital expenditures(280) (76) Increase in capital expenditures(4)(364)
Other, netOther, net26  (19) Other, net(3)(26)
$754  $1,480  $202 $686 

Free cash flow was reduced by $277 million and $461 million during the three and six months ended June 30, 2021, respectively, and $233 million and $493 million during the three and six months ended June 30, 2020, respectively, and $297 million and $588 million during the three and six months ended June 30, 2019, respectively, due to mobile with impacts negatively affecting working capital, capital expenditures and Adjusted EBITDA.

Limitations on Distributions

Distributions by our subsidiaries to a parent company for payment of principal on parent company notes are restricted under CCO Holdings indentures and Charter Operating credit facilities governing our indebtedness, unless there is no default under the applicable indenture and credit facilities, and unless each applicable subsidiary’sentity’s leverage ratio test is met at the time of such distribution. As of June 30, 2020,2021, there was no default under any of these indentures or credit facilities, and each subsidiaryapplicable entity met its applicable leverage ratio tests based on June 30, 20202021 financial results. There can be no assurance that they will satisfy these tests at the time of the contemplated distribution. Distributions by Charter Operating for payment of principal on parent company (CCO Holdings) notes are further restricted by the covenants in its credit facilities.

However, without regard to leverage, during any calendar year or any portion thereof during which the borrower is a flow-through entity for tax purposes, and so long as no event of default exists, the borrower may make distributions to the equity interests of the borrower in an amount sufficient to make permitted tax payments.

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In addition to the limitation on distributions under the various indentures, distributions by our subsidiaries may be limited by applicable law, including the Delaware Limited Liability Company Act, under which our subsidiaries may only make distributions if they have “surplus” as defined in the act.

Historical Operating, Investing, and Financing Activities

Cash and Cash Equivalents and Restricted Cash.Equivalents. We held $2.1$1.7 billion and $3.5$1.0 billion in cash and cash equivalents as of June 30, 20202021 and December 31, 2019,2020, respectively. We also held $5 million and $66 million in restricted cash as of June 30, 2020 and December 31, 2019, respectively, representing escrowed funds of a consolidated variable interest entity. See Note 3 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Operating Activities. Net cash provided by operating activities increased $1.3$1.0 billion during the six months ended June 30, 20202021 compared to the six months ended June 30, 2019,2020, primarily due to an increase in Adjusted EBITDA of $645 million and changes in working capital, excluding the change in accrued interest and accrued expenses related to capital expenditures, that used $648 million less cash.$1.1 billion.

Investing Activities. Net cash used in investing activities was $3.6$4.0 billion and $3.7$3.6 billion for the six months ended June 30, 20202021 and 2019, respectively. The decrease in cash used was primarily due to the change in accrued expenses related to capital expenditures.


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Financing Activities.Net cash used in financing activities was $4.6 billion and $1.6 billion for the six months ended June 30, 2020, and 2019, respectively. The increase in cash used was primarily due to an increase in capital expenditures.

Financing Activities.Net cash used in financing activities decreased $1.5 billion during the purchase of treasury stock and noncontrolling interest and a decreasesix months ended June 30, 2021 compared to the six months ended June 30, 2020 due to an increase in the amount by which borrowings of long-term debt exceeded repayments.repayments offset by an increase in the purchase of treasury stock and noncontrolling interest.

Capital Expenditures

We have significant ongoing capital expenditure requirements.  Capital expenditures were $1.9 billion and $3.3$3.7 billion for the three and six months ended June 30, 2020,2021, respectively, and $1.6$1.9 billion and $3.3 billion for the three and six months ended June 30, 2019,2020, respectively.  The increase during the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily due to higheran increase in scalable infrastructure as a resultdriven by augmentation of core network enhancement and node splits to maintain excess network capacity for customer growth and usage, with growing customersincremental spending to reclaim network headroom maintained prior to COVID-19, and traffic, higher line extensions driven by continued network expansion, including to rural areas and an increase in Internet customer premise equipment.areas. See the table below for more details.
 
We currently expect 20202021 cable capital expenditures, excluding RDOF investments, to declinebe relatively consistent as a percentage of cable revenue versus 2019.2020. The actual amount of our capital expenditures in 20202021 will depend on a number of factors including further spend related to product development and growth rates of both our residential and commercial businesses.

Our capital expenditures are funded primarily from cash flows from operating activities and borrowings on our credit facility. In addition, our accrued liabilities related to capital expenditures decreased by $174$125 million and $428$174 million for the six months ended June 30, 20202021 and 2019,2020, respectively.

The following tables present our major capital expenditures categories in accordance with National Cable and Telecommunications Association (“NCTA”) disclosure guidelines for the three and six months ended June 30, 20202021 and 2019.2020. These disclosure guidelines are not required disclosures under GAAP, nor do they impact our accounting for capital expenditures under GAAP (dollars in millions):

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Customer premise equipment (a)Customer premise equipment (a)$518  $492  $981  $1,057  Customer premise equipment (a)$494 $518 $983 $981 
Scalable infrastructure (b)Scalable infrastructure (b)385  223  555  520  Scalable infrastructure (b)437 385 848 555 
Line extensions (c)Line extensions (c)422  363  765  684  Line extensions (c)400 422 799 765 
Upgrade/rebuild (d)Upgrade/rebuild (d)155  155  284  286  Upgrade/rebuild (d)161 155 306 284 
Support capital (e)Support capital (e)397  364  753  715  Support capital (e)389 397 766 753 
Total capital expendituresTotal capital expenditures$1,877  $1,597  $3,338  $3,262  Total capital expenditures$1,881 $1,877 $3,702 $3,338 
Capital expenditures included in total related to:Capital expenditures included in total related to:Capital expenditures included in total related to:
Commercial servicesCommercial services$397 $323 $730 $584 
MobileMobile$125  $93  $212  $181  Mobile$124 $125 $236 $212 
Commercial services$323  $324  $584  $629  


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(a)Customer premise equipment includes costs incurred at the customer residence to secure new customers and revenue generating units, including customer installation costs and customer premise equipment (e.g., set-top boxesdigital receivers and cable modems).
(b)Scalable infrastructure includes costs not related to customer premise equipment, to secure growth of new customers and revenue generating units, or provide service enhancements (e.g., headend equipment).
(c)Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).
(d)Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.
(e)Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles).

Recently Issued Accounting Standards

See Note 2122 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements” for a discussion of recently issued accounting standards.


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Item 3.     Quantitative and Qualitative Disclosures About Market Risk.

We use derivative instruments to manage foreign exchange risk on the Sterling Notes, and do 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 derivative instruments have maturities of June 2031 and July 2042. We are required to post collateral on the cross-currency derivative instruments when such instruments are in a liability position. In April 2019, we entered into a collateral holiday agreement for 60% of both the 2031 and 2042 cross-currency swaps, which eliminates the requirement to post collateral for three years, as well as a ten year collateral cap on the remaining 40% of the cross-currency swaps which limits the required collateral posting on that 40% of the cross-currency swaps to $150 million. In March 2021, the collateral holiday for 20% of the swaps was extended to November 2022 in consideration for our agreement to post collateral over a threshold amount on that 20% portion of the swaps from March 2021 through October 2021. For more information, see Note 9 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

As of June 30, 20202021 and December 31, 2019,2020, the weighted average interest rate on credit facility debt was approximately 1.7% and 3.3%1.7%, respectively, and the weighted average interest rate on the senior notes was approximately 5.3%4.9% and 5.4%5.1%, respectively, resulting in a blended weighted average interest rate of 4.8%4.6% and 5.1%4.7%, respectively. The interest rate on approximately 86%88% and 87% of the total principal amount of our debt was effectively fixed as of June 30, 20202021 and December 31, 2019.2020, respectively.

The table set forth below summarizes the fair values and contract terms of financial instruments subject to interest rate risk maintained by us as of June 30, 20202021 (dollars in millions).

20202021202220232024ThereafterTotalFair Value20212022202320242025ThereafterTotalFair Value
Debt:Debt:Debt:
Fixed-RateFixed-Rate$—  $1,700  $3,000  $1,500  $2,800  $57,580  $66,580  $73,353  Fixed-Rate$1,000 $3,000 $1,500 $1,100 $4,500 $65,514 $76,614 $87,032 
Average Interest RateAverage Interest Rate— %4.05 %4.46 %6.92 %5.33 %5.33 %5.30 %Average Interest Rate4.00 %4.46 %6.92 %4.50 %4.91 %5.04 %5.02 %
Variable RateVariable Rate$138  $277  $277  $436  $1,165  $8,895  $11,188  $10,852  Variable Rate$139 $277 $436 $1,165 $5,320 $3,575 $10,912 $10,889 
Average Interest RateAverage Interest Rate1.53 %1.50 %1.52 %1.65 %1.98 %2.27 %2.17 %Average Interest Rate1.48 %1.60 %2.09 %2.71 %2.90 %3.48 %2.99 %

Interest rates on variable-rate debt are estimated using the average implied forward LIBOR for the year of maturity based on the yield curve in effect at June 30, 20202021 including applicable bank spread.

Item 4.     Controls and Procedures.

As of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our design and operation of disclosure controls and procedures with respect to the information generated for use in this quarterly report. The

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evaluation was based upon reports and certifications provided by a number of executives. Based on, and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to provide reasonable assurances that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon the evaluation, we believe that our controls provide such reasonable assurances.

During the quarter ended June 30, 2020,2021, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.     Legal Proceedings.

See Note 1920 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements” for Legal Proceedings.

Item 1A.     Risk Factors.

Our Annual Report on Form 10-K for the year ended December 31, 20192020 includes "Risk Factors" under Item 1A of Part I. There have been no material changes from the updated risk factors described in our Form 10-K except as indicated below.

The ongoing COVID-19 pandemic could materially affect our financial condition and results of operations.

The ongoing COVID-19 pandemic has significantly increased economic and demand uncertainty. It is likely that the current pandemic and continued spread of COVID-19 will cause a significant economic recession. At this time, we cannot predict the duration of any business disruption and the ultimate impact of COVID-19 on our business, including the depth and duration of the economic impact to household formation and growth and our residential and business customers’ ability to pay for our products and services including the impact of extended unemployment benefits and other stimulus packages. We expect that some of the COVID-19 programs may result in incremental churn and bad debt during the remainder of the year. In addition, there is uncertainty regarding the impact of government emergency declarations, the ability of our suppliers and vendors to provide products and services to us, the pace of new housing construction, changes in business spend in our local and national ad sales business, the effects to our employees’ health and safety and resulting reorientation of our work activities, and the risk of limitations on the deployment and maintenance of our services (including by limiting our customer support and on-site service repairs and installations). The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.10-K.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds.

(C)Purchases of Equity Securities by the Issuer

The following table presents Charter’s purchases of equity securities completed during the second quarter of 20202021 (dollars in millions, except per share amounts):

Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
April 1 - 30, 2020557,005$443.45538,957$2
May 1 - 31, 2020604,565$512.05232,251$1,248
June 1 - 30, 20201,303,238$534.271,257,026$837
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
April 1 - 30, 20211,947,864$627.851,858,684$1,322
May 1 - 31, 20212,070,063$670.051,845,671$2,080
June 1 - 30, 20211,498,385$689.091,442,902$1,656

(1)Includes 18,048, 372,31489,180, 224,392 and 46,21255,483 shares withheld from employees for the payment of taxes and exercise costs upon the exercise of stock options or vesting of other equity awards for the months of April, May and June 2020,2021, respectively.
(2)During the three months ended June 30, 2020,2021, Charter purchased approximately 2.05.1 million shares of its Class A common stock for approximately $1.0$3.4 billion, which includes 1.9 million Charter class A common shares purchased from Liberty Broadband pursuant to the LBB Letter Agreement at an average price per unit of $645.63, or $1.2 billion. Charter Holdings purchased 0.30.9 million Charter Holdings common units from A/N at an average price per unit of $445.15,$639.28, or $125$583 million, during the three months ended June 30, 2020.2021. As of June 30, 2020,2021, Charter had remaining board authority to purchase an additional $837 million$1.7 billion of Charter’s Class A common stock and/or Charter Holdings common units. In addition to open market purchases including pursuant to Rule 10b5-1 plans adopted from time to time, Charter may also buy shares of Charter Class A common stock, from time to time, pursuant to private transactions outside of its Rule 10b5-1 plan and any such repurchases wouldmay also trigger the repurchases from A/N pursuant to and to the extent provided in the A/N Letter Agreement or Liberty pursuant to the LBB Letter Agreement.

Item 5.Other Information.

On July 27, 2021, Charter entered into an amended and restated employment agreement (the “Agreement”) with David G. Ellen, Charter’s Senior Executive Vice President.

The Agreement, which is effective as of July 1, 2021, has a term ending July 1, 2023 (or upon an earlier termination of employment) and provides that Mr. Ellen will continue to serve as Senior Executive Vice President. The Agreement provides that Mr. Ellen will receive an annual base salary of at least $1,250,000 and a target annual cash bonus opportunity of 160% of his annual base salary. Mr. Ellen will also continue to participate in Charter’s employee benefit plans and receive perquisites as generally provided to other senior executives of Charter.

In addition, consistent with Mr. Ellen’s prior employment agreement, Charter will continue to reimburse Mr. Ellen for all reasonable and necessary expenses incurred in connection with the performance of his duties. Mr. Ellen is also entitled to use the company aircraft for up to 30 hours of discretionary personal use per calendar year (without carryover).

If the employment of Mr. Ellen is terminated involuntarily by Charter without cause or by him for good reason, he would be entitled to (a) a cash severance payment equal to the product of 2.0 multiplied by the sum of his annual base salary and target

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annual bonus opportunity for the year in which the termination occurs, (b) a prorated annual bonus for the year of termination, determined based on actual performance, (c) a cash payment equal to the cost of COBRA coverage for 24 months following termination and (d) up to 12 months of executive-level outplacement services.

In the event of the termination of Mr. Ellen’s employment due to death or disability or if Charter does not renew the Agreement and Mr. Ellen terminates his employment during the year following the non-renewal, in addition to payment of amounts earned but unpaid and reimbursement of expenses through the date of termination, he would be eligible for a prorated annual bonus for the year of termination, determined based on actual performance.

The termination benefits described above are subject to Mr. Ellen’s execution of a release of claims in favor of Charter and its affiliates. In addition, Mr. Ellen has agreed to comply with covenants (a) concerning nondisclosure of confidential information, assignment of intellectual property and nondisparagement of Charter, (b) concerning noncompetition for two years following termination, and (c) concerning nonsolicitation of customers and employees of Charter for one year following termination.

A copy of the Agreement is filed herewith as Exhibit 10.4. The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of that document.

Item 6.     Exhibits.

See Exhibit Index.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Charter Communications, Inc. has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHARTER COMMUNICATIONS, INC.,
Registrant
By:/s/ Kevin D. Howard
Kevin D. Howard
Date: July 31, 202030, 2021Executive Vice President, Chief Accounting Officer and Controller


S-1


Exhibit Index
ExhibitDescription
  
10.1
FifthTwentieth Supplemental Indenture, dated as of July 9, 2020,June 2, 2021, among Charter Communications Operating, LLC, Charter Communications Operating Capital Corp., as issuers, CCO Holdings, LLC, CCO Holdings Capital Corp.the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent. (incorporated by reference to Exhibit 4.24.6 to the Current Report on Form 8-K filed by Charter Communications, Inc. on July 13, 2020)June 2, 2021).
10.2
10.3
Exchange and Registration Rights Agreement, dated July 9, 2020,June 2, 2021, relating to the 4.250%4.500% Senior Notes due 2031,2033, among CCO Holdings, LLC, CCO Holdings Capital Corp. and Morgan Stanley & Co. LLC,Deutsche Bank Securities Inc., as representative of the several Purchasers (as defined therein) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Charter Communications, Inc. on July 13, 2020)June 2, 2021).
10.4
ExchangeAmended and Registration Rights Agreement, dated July 24, 2020, relating to the 4.250% Senior Notes due 2031, among CCO Holdings, LLC, CCO Holdings Capital Corp. and Morgan Stanley & Co. LLC, as representative of the several Purchasers (as defined therein) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed byrestated employment agreement between Charter Communications, Inc. onand David G. Ellen, dated July 28, 2020)27, 2021.
31.1
Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the under the Securities Exchange Act of 1934.
31.2
Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of 1934.
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
101
The following financial information from Charter Communications, Inc.’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2020,2021, filed with the Securities and Exchange Commission on July 31, 2020,30, 2021, formatted in iXBRL (inline eXtensible Business Reporting Language) includes: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Changes in Shareholders' Equity; (iv) the Consolidated Statements of Cash Flows; and (vi) the Notes to the Consolidated Financial Statements.
104Cover Page, formatted in iXBRL and contained in Exhibit 101.



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