What changed in this filing

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Item 1. Financial Statements

2021-07-30 compared with 2021-04-30 · 193 added, 139 removed, 588 unchanged (36% of the section changed)

53 unchanged sentences

(dollars in millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

REVENUES $ 12,802 $ 11,696 $ 25,324 $ 23,434

1 unchanged sentence

Operating costs and expenses (exclusive of items shown separately below)

7,882 7,297 15,593 14,729

Depreciation and amortization 2,354 2,428 4,795 4,925

Other operating expenses, net 302 7

Other operating (income) expenses, net ( 9 ) 2 293 9

10,227 9,727 20,681 19,663

Income from operations 2,575 1,969 4,643 3,771

32 unchanged sentences

BALANCE, March 31, 2021 — — 29,037 ( 4,388 ) ( 3,652 ) 20,997 6,184 27,181

Consolidated net income — — — 1,020 — 1,020 138 1,158

Stock compensation expense — — 100 — — 100 — 100

Exercise of stock options — — 17 — — 17 — 17

Purchases of treasury stock — — — — ( 3,516 ) ( 3,516 ) — ( 3,516 )

Purchase of noncontrolling interest, net of tax — — ( 279 ) — — ( 279 ) ( 213 ) ( 492 )

Preferred unit conversion and change in noncontrolling interest ownership, net of tax — — 1,003 — — 1,003 ( 1,333 ) ( 330 )

Distributions to noncontrolling interest — — — — — — ( 32 ) ( 32 )

BALANCE, June 30, 2021 $ — $ — $ 29,878 $ ( 3,368 ) $ ( 7,168 ) $ 19,342 $ 4,744 $ 24,086

Class A Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Total Charter Shareholders’ Equity Non-controlling Interests Total Shareholders’ Equity

9 unchanged sentences

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

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

3 unchanged sentences

(dollars in millions)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

29 unchanged sentences

Net cash flows from financing activities ( 3,068 ) ( 4,595 )

NET DECREASE IN CASH AND CASH EQUIVALENTS ( 229 ) ( 613 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 710 ( 1,447 )

CASH AND CASH EQUIVALENTS, beginning of period 1,001 3,549

35 unchanged sentences

Franchises, Goodwill and Other Intangible Assets

Indefinite-lived and finite-lived intangible assets consist of the following as of March 31, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020

Indefinite-lived and finite-lived intangible assets consist of the following as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

9 unchanged sentences

$ 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 months ended March 31, 2021 and 2020 was $ 440 million and $ 508 million, respectively.

Amortization expense related to customer relationships and other intangible assets for the three and six months ended June 30, 2021 was $ 410 million and $ 850 million, respectively, and $ 478 million and $ 986 million for the three and six months ended June 30, 2020, respectively.

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

Nine months ended December 31, 2021 $ 1,162

Six months ended December 31, 2021 $ 753

Thereafter 469

7 unchanged sentences

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.

As of March 31, 2021, Charter does not guarantee the financing for SPE Building 2.

As of June 30, 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 the 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.

At the end of the lease term, there is a put option for the SPE Building 2 to sell the property

CHARTER COMMUNICATIONS, INC.

2 unchanged sentences

(dollars in millions, except per share amounts and where indicated)

As the Company has determined that SPE Building 1 and SPE Building 2 (collectively, the "SPEs") are variable interest entities ("VIEs") of which the Company became the primary beneficiary upon the effectiveness of the arrangements in July 2018 and April 2020, respectively, the Company has consolidated the assets and liabilities of the SPEs in its consolidated balance sheets as of March 31, 2021 and December 31, 2020 as follows.

March 31, 2021 December 31, 2020

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.

June 30, 2021 December 31, 2020

Current assets $ 5 $ 3

4 unchanged sentences

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 March 31, 2021 and December 31, 2020, other long-term liabilities include $ 465 million and $ 400 million in SPE mortgage note liability, respectively.

As of June 30, 2021 and December 31, 2020, other long-term liabilities include $ 515 million and $ 400 million in SPE mortgage note liability, respectively.

Equity-Method Investments

During the three and six months ended June 30, 2021, the Company recorded impairments on equity investments of approximately $ 165 million which was recorded in other income (expenses), net in the consolidated statements of operations.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following as of March 31, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020

Accounts payable and accrued liabilities consist of the following as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

Accounts payable – trade $ 704 $ 763

10 unchanged sentences

$ 9,036 $ 8,867

Operating lease expenses were $ 115 million and $ 108 million for the three months ended March 31, 2021 and 2020, respectively, inclusive of $ 35 million for each of the three months ended March 31, 2021 and 2020 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 $ 81 million and $ 73 million for the three months ended March 31, 2021 and 2020, respectively.

Operating lease right-of-use assets obtained in exchange for operating lease obligations were $ 96 million and $ 65 million for the three months ended March 31, 2021 and 2020, respectively.

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, inclusive of $ 35 million and $ 70 million for the three and six months ended June 30, 2021, respectively, and $ 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.

CHARTER COMMUNICATIONS, INC.

2 unchanged sentences

(dollars in millions, except per share amounts and where indicated)

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 the six months ended June 30, 2021 and 2020, respectively.

Operating lease right-of-use assets obtained in exchange for operating lease obligations were $ 209 million and $ 164 million for the six months ended June 30, 2021 and 2020, respectively.

Supplemental balance sheet information related to leases is as follows.

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Operating lease right-of-use assets:

6 unchanged sentences

Weighted average discount rate for operating leases 3.6 % 3.9 %

Maturities of lease liabilities as of March 31, 2021 are as follows.

Operating leases

Nine months ended December 31, 2021 $ 237

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

Six months ended December 31, 2021 $ 165

Thereafter 421

1 unchanged sentence

Reconciling impact from discounting ( 230 )

Lease liabilities on consolidated balance sheet as of March 31, 2021

The Company has $ 64 million and $ 63 million of finance lease liabilities recognized in the consolidated balance sheets as of March 31, 2021 and December 31, 2020, respectively, included within accounts payable and accrued liabilities and other long-term liabilities.

Lease liabilities on consolidated balance sheet as of June 30, 2021

The Company has $ 64 million and $ 63 million of finance lease liabilities recognized in the consolidated balance sheets as of June 30, 2021 and December 31, 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.

1 unchanged sentence

Long-Term Debt

Long-term debt consists of the following as of March 31, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020

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

June 30, 2021 December 31, 2020

Principal Amount Accreted Value Principal Amount Accreted Value

7 unchanged sentences

5.875 % senior notes due May 1, 2027

800 796 800 796

5.125 % senior notes due May 1, 2027

3,250 3,227 3,250 3,225

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

5.000 % senior notes due February 1, 2028

4 unchanged sentences

3,050 3,042 3,050 3,042

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

4.500 % senior notes due August 15, 2030

4 unchanged sentences

2,900 2,927 2,900 2,928

4.500 % senior notes due June 1, 2033

1,750 1,728 — —

Charter Communications Operating, LLC:

40 unchanged sentences

1,850 1,809 1,350 1,339

4.400 % senior notes due December 1, 2061

1,400 1,389 — —

Credit facilities 10,012 9,949 10,150 10,081

25 unchanged sentences

Less current portion:

4.000% senior notes due September 1, 2021 ( 1,000 ) ( 1,005 ) ( 1,000 ) ( 1,008 )

Long-term debt $ 83,339 $ 83,882 $ 81,143 $ 81,744

(a) Principal amount includes £ 625 million remeasured at $ 862 million and $ 854 million as of March 31, 2021 and December 31, 2020, respectively, using the exchange rate at the respective dates.

CHARTER COMMUNICATIONS, INC.

2 unchanged sentences

(dollars in millions, except per share amounts and where indicated)

(b) Principal amount includes £ 650 million remeasured at $ 896 million and $ 889 million as of March 31, 2021 and December 31, 2020, respectively, using the exchange rate at the respective dates.

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 $ 865 million and $ 854 million as of June 30, 2021 and December 31, 2020, respectively, using the exchange rate at the respective dates.

(b) Principal amount includes £ 650 million remeasured at $ 899 million and $ 889 million as of June 30, 2021 and December 31, 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.

1 unchanged sentence

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.

The Company has availability under the Charter Operating credit facilities of approximately $ 4.7 billion as of March 31, 2021.

The Company has availability under the Charter Operating credit facilities of approximately $ 4.7 billion as of June 30, 2021.

In March 2021, Charter Operating and Charter Communications Operating Capital Corp.

jointly issued $ 1.5 billion aggregate principal amount of 3.500 % senior secured notes due June 2041 at a price of 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 an additional $ 500 million aggregate principal amount of 3.850 % senior secured notes due April 2061 at a price of 94.668 % of the aggregate principal amount.

The net proceeds were used to pay related fees and expenses and for general corporate purposes, including funding buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness, including $ 750 million of CCO Holdings, LLC ("CCO Holdings") 5.750% notes due February 2026.

The Company recorded a loss on extinguishment of debt of $ 29 million during the three months ended March 31, 2021 related to these transactions which is recorded in in other income (expenses), net in the consolidated statements of operations.

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 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 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 subsidiaries of Charter Operating.

5 unchanged sentences

In April 2021, CCO Holdings and CCO Holdings Capital Corp.

jointly issued $ 1.0 billion of 4.500 % senior unsecured notes due 2033 at par.

The net proceeds will be 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.

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.

1 unchanged sentence

They are structurally subordinated to all obligations of subsidiaries of CCO Holdings.

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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.

3 unchanged sentences

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.

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

The following represents the Company's purchase of Charter Class A common stock and the effect on the consolidated statements of cash flows during the three months ended March 31, 2021 and 2020.

Three Months Ended March 31,

Shares $ Shares $

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,

2021 2020 2021 2020

CCO Holdings notes redemption

$ ( 46 ) $ ( 36 ) $ ( 75 ) $ ( 63 )

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, 2021 and 2020.

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Shares $ Shares $ Shares $ Shares $

Share buybacks 5,147,257 $ 3,392 2,028,234 $ 1,026 10,703,575 $ 6,866 6,480,783 $ 3,202

2 unchanged sentences

5,516,312 $ 3,516 2,464,808 $ 1,155 11,667,008 $ 7,168 7,494,763 $ 3,507

Share buybacks includes 0.8 million shares of Charter Class A common stock purchased from Liberty Broadband Corporation (“Liberty Broadband”) during the three months ended March 31, 2021 at an average price of $ 621.16 for approximately $ 518 million pursuant to the LBB Letter Agreement.

In April 2021, the Company purchased from Liberty Broadband an additional 0.7 million shares of Charter Class A common stock for approximately $ 460 million (see Note 19).

As of March 31, 2021, Charter had remaining board authority to purchase an additional $ 1.2 billion of Charter’s Class A common stock and/or Charter Holdings common units.

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, 2021 Six Months Ended June 30, 2021

Number of shares purchased 1,927,032 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, 2021, Charter had remaining board authority to purchase an additional $ 1.7 billion of Charter’s Class A common stock and/or Charter Holdings common 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.

1 unchanged sentence

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 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.

Noncontrolling Interests

Noncontrolling interests represents consolidated subsidiaries of which the Company owns less than 100 %.

The Company is a holding company whose principal asset is a controlling equity interest in Charter Holdings, the indirect owner of the Company’s cable systems.

Noncontrolling interests on the Company’s balance sheet consist primarily of A/N's equity interests in Charter Holdings, which is comprised of a common ownership interest and a convertible preferred ownership interest.

Net income of Charter Holdings attributable to A/N’s common noncontrolling interest for financial reporting purposes is based on the weighted average effective common ownership interest of approximately 7 % during 2021 and 8 % during 2020, and was $ 76 million and $ 33 million for the three months ended March 31, 2021 and 2020, respectively.

Net income of Charter Holdings attributable to A/N's preferred noncontrolling interest for financial reporting purposes is based on the preferred dividend which was $ 38 million for each of the three months ended March 31, 2021 and 2020.

CHARTER COMMUNICATIONS, INC.

2 unchanged sentences

(dollars in millions, except per share amounts and where indicated)

The following table represents Charter Holdings' purchase of Charter Holdings common units from A/N pursuant to the A/N Letter Agreement (see Note 19) and the effect on total shareholders' equity during the three months ended March 31, 2021 and 2020.

Three Months Ended March 31,

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.

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.

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 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.

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 $ 32 million and $ 70 million for the three and six months ended June 30, 2021, respectively, and $ 37 million and $ 75 million for the three and six months ended June 30, 2020, respectively.

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Number of units purchased 912,034 280,069 1,704,688 1,075,676

3 unchanged sentences

Decrease in additional paid-in-capital, net of tax $ ( 279 ) $ ( 42 ) $ ( 516 ) $ ( 191 )

Total shareholders' equity was also adjusted during the three months ended March 31, 2021 and 2020 due to the changes in Charter Holdings' ownership as follows.

Three Months Ended March 31,

Total shareholders' equity was also adjusted during the three and six months ended June 30, 2021 and 2020 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,

2021 2020 2021 2020

Decrease in noncontrolling interest $ ( 1,333 ) $ ( 52 ) $ ( 1,508 ) $ ( 161 )

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.

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

Accounting for Derivative Instruments and Hedging Activities

6 unchanged sentences

In March 2021, the collateral holiday for 20 % of the swaps was extended to November 2022 in 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 $ 121 million and $ 184 million and is included in other long-term liabilities on its consolidated balance sheets as of March 31, 2021 and December 31, 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 in the consolidated statements of operations in other expenses, net.

The fair value of the Company's cross-currency derivatives was $ 206 million and $ 184 million and is included in other long-term liabilities on its consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively.

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.

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

The effect of financial instruments are recorded in other income (expenses), net in the consolidated statements of operations and consisted of the following.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Change in fair value of cross-currency derivative instruments

1 unchanged sentence

Foreign currency remeasurement of Sterling Notes to U.S.

( 6 ) 3 ( 21 ) 111

Gain (loss) on financial instruments, net $ ( 91 ) $ 64 $ ( 43 ) $ ( 254 )

5 unchanged sentences

Financial Assets and Liabilities

The Company has estimated the fair value of its financial instruments as of March 31, 2021 and December 31, 2020 using available market information or other appropriate valuation methodologies.

The Company has estimated the fair value of its financial instruments as of June 30, 2021 and December 31, 2020 using available market information or other appropriate valuation methodologies.

Considerable judgment, however, is required in interpreting market data to develop the estimates of fair value.

Accordingly, the estimates presented in the accompanying consolidated financial statements are not necessarily indicative of the amounts the Company would realize in a current market exchange.

The carrying amounts of cash and cash equivalents, receivables, payables and other current assets and liabilities approximate fair value because of the short maturity of those instruments.

As of March 31, 2021 and December 31, 2020, accounts receivable, net on the consolidated balance sheets includes approximately $ 344 million and $ 338 million of current equipment installment plan receivables, respectively, and other noncurrent assets includes approximately $ 168 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 and were valued at $ 121 million and $ 184 million as of March 31, 2021 and December 31, 2020, respectively.

The estimated fair value of the Company’s senior notes and debentures as of March 31, 2021 and December 31, 2020 is based on quoted market prices in active markets and is classified within Level 1 of the valuation hierarchy, while the estimated fair value of the Company’s credit facilities is based on quoted market prices in inactive markets and is classified within Level 2.

The carrying amount of the consolidated variable interest entity's mortgage note liability approximates fair value.

CHARTER COMMUNICATIONS, INC.

2 unchanged sentences

(dollars in millions, except per share amounts and where indicated)

A summary of the carrying value and fair value of debt as of March 31, 2021 and December 31, 2020 is as follows:

March 31, 2021 December 31, 2020

The carrying amounts of cash and cash equivalents, 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 $ 206 million and $ 184 million as of June 30, 2021 and December 31, 2020, respectively.

The estimated fair value of the Company’s senior notes and debentures as of June 30, 2021 and December 31, 2020 is based on quoted market prices in active markets and is classified within Level 1 of the valuation hierarchy, while the estimated fair value of the Company’s credit facilities is based on quoted market prices in inactive markets and is classified within Level 2.

The carrying amount of the consolidated variable interest entity's mortgage note liability approximates fair value.

A summary of the carrying value and fair value of debt as of June 30, 2021 and December 31, 2020 is as follows:

June 30, 2021 December 31, 2020

Carrying Value Fair Value Carrying Value Fair Value

5 unchanged sentences

When such impairments are recorded, fair values are generally classified within Level 3 of the valuation hierarchy.

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Internet $ 5,221 $ 4,530 $ 10,307 $ 8,937

11 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Programming $ 2,978 $ 2,873 $ 5,966 $ 5,765

5 unchanged sentences

$ 7,882 $ 7,297 $ 15,593 $ 14,729

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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.

5 unchanged sentences

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.

Other Operating Expenses, Net

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

Three Months Ended March 31,

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

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,

2021 2020 2021 2020

Special charges, net $ ( 6 ) $ 6 $ 249 $ 22

(Gain) loss on disposal of assets, net ( 3 ) ( 4 ) 44 ( 13 )

$ ( 9 ) $ 2 $ 293 $ 9

Special charges, net

1 unchanged sentence

(“Sprint”) and T-Mobile USA, Inc.

("T-Mobile") discussed in Note 20, and employee termination costs.

("T-Mobile") for the six months ended June 30, 2021 discussed in Note 20, and employee termination costs.

(Gain) loss on disposal of assets, net

2 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Loss on extinguishment of debt (see Note 6) $ ( 46 ) $ ( 36 ) $ ( 75 ) $ ( 63 )

1 unchanged sentence

Other pension benefits, net (see Note 21) 173 11 191 21

Gain on equity investments, net 15 9

Loss on equity investments, net (see Note 3) ( 168 ) ( 9 ) ( 153 ) —

$ ( 132 ) $ 30 $ ( 80 ) $ ( 296 )

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

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Stock options 16,800 11,600 1,241,800 1,265,300

Restricted stock 4,600 6,000 4,600 6,000

Restricted stock units 9,100 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.

As of March 31, 2021, total unrecognized compensation remaining to be recognized in future periods totaled $ 374 million for stock options, $ 0.2 million for restricted stock and $ 357 million for restricted stock units and the weighted average period over which they are expected to be recognized is two years for stock options, one month for restricted stock and two years for restricted stock units.

The Company recorded stock compensation expense of $ 134 million and $ 90 million for the three months ended March 31, 2021 and 2020, respectively, which is included in operating costs and expenses.

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

As of June 30, 2021, total unrecognized compensation remaining to be recognized in future periods totaled $ 319 million for stock options, $ 2 million for restricted stock and $ 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, which is included in operating costs and expenses.

Substantially all of the Company’s operations are held through Charter Holdings and its direct and indirect subsidiaries.

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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 $ 216 million and $ 29 million for the three months ended March 31, 2021 and 2020, respectively.

Income tax expense increased during the three months ended March 31, 2021 compared to the corresponding period in 2020 primarily as a result of higher pretax income.

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 tax 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 income tax expense on the Company’s financial statements.

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.

Income tax expense increased during the three and six months ended June 30, 2021 compared to the corresponding period in 2020 primarily as a result of higher pretax income.

Charter Holdings, the indirect owner of the Company’s cable systems, generally allocates its taxable income, gains, losses, deductions and credits proportionately according to the members’ respective ownership interests, except for special allocations required under Section 704(c) of the Internal Revenue Code and the Treasury Regulations (“Section 704(c)”).

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federal income tax purposes and its initial gross asset value using the “traditional method” as described in the Treasury Regulations.

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain tax positions unless such positions are determined to be “more likely than not” of being sustained upon examination, based on their technical merits.

There is considerable judgment involved in making such a determination.

The Company has recorded unrecognized tax benefits totaling approximately $ 316 million and $ 298 million, excluding interest and penalties, as of March 31, 2021 and December 31, 2020, respectively.

The Company has recorded unrecognized tax benefits totaling approximately $ 333 million and $ 298 million, excluding interest and penalties, as of June 30, 2021 and December 31, 2020, respectively.

The Company does not currently anticipate that its reserve for uncertain tax positions will significantly increase or decrease during 2021;

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The Company does not anticipate that these examinations will have a material impact on the Company’s consolidated financial position or results of operations.

In addition, the Company is also subject to ongoing examinations of the Company’s tax returns by state and local tax authorities for various periods.

Activity related to these state and local examinations did not have a material impact on the Company’s consolidated financial position or results of operations during the three months ended March 31, 2021, nor does the Company anticipate a material impact in the future.

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 months ended March 31, 2021 and Charter Holdings common and convertible preferred units of 27 million for the three months ended March 31, 2020 were not included in the

In addition, the Company is also subject to ongoing

CHARTER COMMUNICATIONS, INC.

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(dollars in millions, except per share amounts and where indicated)

computation of diluted earnings per share as their effect would have been antidilutive.

The following is the computation of diluted earnings per common share for the three months ended March 31, 2021 and 2020.

Three Months Ended March 31,

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, 2021, nor does the Company anticipate a material impact in the future.

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.

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 the three and six months ended June 30, 2020 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, 2021 and 2020.

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net income attributable to Charter shareholders $ 1,020 $ 766 $ 1,827 $ 1,162

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Comprehensive Income

Comprehensive income equaled net income attributable to Charter shareholders for each of the three months ended March 31, 2021 and 2020.

Comprehensive income equaled net income attributable to Charter shareholders for each of the three and six months ended June 30, 2021 and 2020.

Related Party Transactions

2 unchanged sentences

Under the terms of the Stockholders Agreement, the number of Charter’s directors is fixed at 13, and includes its CEO.

Two designees selected by A/N are members of the board of directors of Charter and three designees selected by Liberty Broadband are members of the board of directors of Charter.

Two designees selected by A/N are members of the board of directors of Charter and three designees selected by Liberty Broadband

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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.

5 unchanged sentences

A/N and Charter both have the right to terminate or suspend the pro rata repurchase arrangement on a prospective basis.

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

In February 2021, Charter and Liberty Broadband entered into a letter agreement (the “LBB Letter Agreement”).

11 unchanged sentences

The Company has programming relationships with HSN and QVC.

For the three months ended March 31, 2021 and 2020, the Company recorded revenue in aggregate of approximately $ 11 million and $ 12 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.

For the three and six months ended June 30, 2021, the Company recorded revenue in aggregate of approximately $ 12 million and $ 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, and approximately $ 12 million and $ 24 million for the three and six months ended June 30, 2020, respectively.

Malone and Mr.

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As reported in Discovery's SEC filings, Dr.

Malone owns 1.2 % of the series A common stock, 93.6 % of the series B common stock and 3.6 % of the series C common stock of Discovery and has a 27.9 % voting interest in Discovery for the election of directors.

Malone owns less than 1.0 % of the series A common stock, 95.0 % of the series B common stock and 3.7 % of the series C common stock of Discovery and has a 26.5 % voting interest in Discovery for the election of directors.

As reported in Discovery's SEC filings, Advance/Newhouse Programming Partnership (“A/N PP”), an affiliate of A/N and in which Mr.

3 unchanged sentences

Based on publicly available information, the Company does not believe that Discovery would currently be considered a related party.

The amount paid in the aggregate to Discovery represents less than 2 % of total operating costs and expenses for the three months ended March 31, 2021 and 2020.

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, 2021 and 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 $ 58 million and $ 63 million during the three months ended March 31, 2021 and 2020, respectively.

The Company recorded payments to equity investees totaling $ 59 million and $ 117 million during the

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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.

Contingencies

8 unchanged sentences

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.

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

Sprint filed a patent suit against Charter and Bright House on December 2, 2017 in the United States District Court for the District of Delaware.

19 unchanged sentences

The Company cannot predict the outcome of any such claims nor can it reasonably estimate a range of possible loss.

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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.

7 unchanged sentences

No future compensation increases or future service will be credited to participants of the pension plans given the frozen nature of the plans.

CHARTER COMMUNICATIONS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts and where indicated)

The components of net periodic pension benefit (costs) for the three months ended March 31, 2021 and 2020 are recorded in in other income (expenses), net in the consolidated statements of operations and consisted of the following:

Three Months Ended March 31,

The components of net periodic pension benefit (costs) for the three and six months ended June 30, 2021 and 2020 are recorded in 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,

2021 2020 2021 2020

Interest cost $ ( 24 ) $ ( 28 ) $ ( 48 ) $ ( 56 )

Expected return on plan assets 42 39 84 77

Remeasurement gain, net 155 — 155 —

Net periodic pension benefits $ 173 $ 11 $ 191 $ 21

The Company made no cash contributions to the qualified pension plans during the three months ended March 31, 2021 and 2020;

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, 2021 and 2020;

however, the Company may make discretionary cash contributions to the qualified pension plans in the future.

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements