UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
______________
(Mark One)
(Mark One)
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
For the quarterly period ended September 30, 2017
or
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From             to          
Commission File Number:001-37789
333-112593-01
CCO Holdings, LLC
CCO Holdings Capital Corp.
(Exact name of registrant as specified in its charter)

Delaware86-1067239
Delaware20-0257904
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)No.)
400 Atlantic Street
Stamford, Connecticut 06901
Stamford(203) 905-7801Connecticut06901
(Address of principal executive offices including zip code)Principal Executive Offices)(Registrant’s telephone number, including area code)Zip Code)

(203) 905-7801
(Registrant's telephone number, including area code)

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


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


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 o Accelerated filer o Non-accelerated filer xSmaller reporting company o☐ Emerging growth company o☐ 


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


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


All of the issued and outstanding shares of capital stock of CCO Holdings Capital Corp. are held by CCO Holdings, LLC. All of the limited liability company membership interests of CCO Holdings, LLC are held by CCH I Holdings, LLC (a subsidiary of Charter Communications, Inc., a reporting company under the Exchange Act). There is no public trading market for any of the aforementioned limited liability company membership interests or shares of capital stock.


CCO Holdings, LLC and CCO Holdings Capital Corp. meet the conditions set forth in General Instruction I(1)(a) and (b) to Form 10-K and are therefore filing with the reduced disclosure format.


Number of shares of common stock of CCO Holdings Capital Corporation outstanding as of September 30, 2017:March 31, 2020: 1










CCO HOLDINGS, LLC
CCO HOLDINGS CAPITAL CORP.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2017MARCH 31, 2020


TABLE OF CONTENTS
Page No.
Page No.
FINANCIAL INFORMATION
Item 1
1
2
for the three and nine months ended September 30, 2017March 31, 2020 and 20162019
23
for the three and nine months ended September 30, 2017 and 2016
3
Consolidated Statements of Cash Flows
for the ninethree months ended September 30, 2017March 31, 2020 and 20162019
4
5
3025
4738
4738
4940
4940
4940
S-1
E-1


This quarterly report on Form 10-Q is for the three and nine months ended September 30, 2017.March 31, 2020. The United States Securities and Exchange Commission (“SEC”) allows us to “incorporate by reference” information that we file with the SEC, which means that we can disclose important information to you by referring you directly to those documents. In this quarterly report, “CCO Holdings,” “we,” “us” and “our” refer to CCO Holdings, LLC 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”“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 abilitycustomers, our vendors, local, state and federal governmental responses to promptly, efficientlythe pandemic and effectively integrate acquired operations;our businesses generally;
•our ability to sustain and grow revenues and cash flow from operations by offering Internet, video, Internet, voice, mobile, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in our marketsservice areas and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures;
•the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite ("DBS") operators, wireless broadband and telephone providers, digital subscriber line (“DSL”) providers, fiber to the home providers video provided over the Internet by (i) market participants that have not historically competed in the multichannel video business, (ii) traditional multichannel video distributors, and (iii) content providers that have historically licensed cable networks to multichannel video distributors, and providers of advertisingvideo content over the Internet;broadband Internet connections;
general business conditions, economic uncertainty or downturn, unemployment levels and the level of activity in the housing sector;
•our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);
•
our ability to develop and deploy new products and technologies including wireless products, our cloud-based user interface, Spectrum Guide®, and downloadable security for set-top boxes, and any other cloud-based consumer services and service platforms;
•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 or potential business combination transactions including costs, disruptions and possible limitations on operating flexibility related to, and our ability to comply with, regulatory conditions applicable to us as a result of the Time Warner Cable Inc. and Bright House Networks, LLC Transactions;transactions;
any events that disrupt our networks, information systems•general business conditions, economic uncertainty or propertiesdownturn, including the impacts of the COVID-19 pandemic to unemployment levels and impair our operating activities or our reputation;the level of activity in the housing sector;
•the ability to retain and hire key personnel;
•the availability and access, in general, of funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets; and
•our ability to comply with all covenants in our indentures and credit facilities, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions.


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



ii



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.


CCO HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
March 31,
2020		December 31,
2019
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$2,660  $3,249  
Accounts receivable, less allowance for doubtful accounts of $175 and $151, respectively2,057  2,195  
Prepaid expenses and other current assets699  711  
Total current assets5,416  6,155  
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net of accumulated depreciation of $28,973 and $27,595, respectively33,377  33,908  
Customer relationships, net6,955  7,453  
Franchises67,322  67,322  
Goodwill29,554  29,554  
Total investment in cable properties, net137,208  138,237  
OTHER NONCURRENT ASSETS2,464  2,351  
Total assets$145,088  $146,743  
LIABILITIES AND MEMBER’S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities$7,628  $8,142  
Payables to related party161  298  
Current portion of long-term debt4,905  3,500  
Total current liabilities12,694  11,940  
LONG-TERM DEBT74,787  75,578  
LOANS PAYABLE - RELATED PARTY1,005  959  
DEFERRED INCOME TAXES55  55  
OTHER LONG-TERM LIABILITIES3,368  2,922  
MEMBER’S EQUITY:
Member's equity53,157  55,266  
Accumulated other comprehensive loss—  —  
Total CCO Holdings member's equity53,157  55,266  
Noncontrolling interests22  23  
Total member’s equity53,179  55,289  
Total liabilities and member’s equity$145,088  $146,743  

The accompanying notes are an integral part of these consolidated financial statements.
1
 September 30,
2017		 December 31,
2016
 (unaudited)  
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$1,974
 $1,324
Accounts receivable, less allowance for doubtful accounts of   
$103 and $124, respectively1,573
 1,387
Prepaid expenses and other current assets275
 300
Total current assets3,822
 3,011
    
INVESTMENT IN CABLE PROPERTIES:   
Property, plant and equipment, net of accumulated   
depreciation of $16,350 and $11,085, respectively33,066
 32,718
Customer relationships, net12,589
 14,608
Franchises67,316
 67,316
Goodwill29,554
 29,509
Total investment in cable properties, net142,525
 144,151
    
OTHER NONCURRENT ASSETS1,115
 1,157
    
Total assets$147,462
 $148,319
    
LIABILITIES AND MEMBER'S EQUITY   
CURRENT LIABILITIES:   
Accounts payable and accrued liabilities$7,503
 $6,897
Payables to related party636
 621
Current portion of long-term debt2,068
 2,028
Total current liabilities10,207
 9,546
    
LONG-TERM DEBT66,064
 59,719
LOANS PAYABLE - RELATED PARTY818
 640
DEFERRED INCOME TAXES39
 25
OTHER LONG-TERM LIABILITIES2,307
 2,526
    
MEMBER'S EQUITY:   
Member's equity68,005
 75,845
Accumulated other comprehensive loss(2) (7)
Total CCO Holdings member's equity68,003
 75,838
Noncontrolling interests24
 25
Total member’s equity68,027
 75,863
    
Total liabilities and member’s equity$147,462
 $148,319



CCO HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions)
Unaudited
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
REVENUES$10,458
 $10,037
 $30,979
 $18,728
        
COSTS AND EXPENSES:       
Operating costs and expenses (exclusive of items shown separately below)6,705
 6,490
 19,871
 12,173
Depreciation and amortization2,699
 2,435
 7,839
 4,409
Other operating expenses, net145
 206
 374
 513
 9,549
 9,131
 28,084
 17,095
Income from operations909
 906
 2,895
 1,633
        
OTHER EXPENSES:       
Interest expense, net(795) (729) (2,268) (1,391)
Loss on extinguishment of debt—
 —
 (35) (110)
Gain (loss) on financial instruments, net17
 71
 (15) 16
Other pension benefits (costs)(17) 13
 9
 533
Other expense, net(2) (2) (2) (2)
 (797) (647) (2,311) (954)
        
Income before income taxes112
 259
 584
 679
Income tax benefit (expense)(6) 7
 (35) —
Consolidated net income106
 266
 549
 679
Less: Net income attributable to noncontrolling interests—
 (1) (1) (1)
Net income attributable to CCO Holdings member$106
 $265
 $548
 $678



CCO HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEOPERATIONS
(dollars in millions)
Unaudited
Three Months Ended March 31,
20202019
REVENUES$11,736  $11,203  
COSTS AND EXPENSES:
Operating costs and expenses (exclusive of items shown separately below)7,452  7,242  
Depreciation and amortization2,493  2,547  
Other operating (income) expenses, net10  (4) 
9,955  9,785  
Income from operations1,781  1,418  
OTHER INCOME (EXPENSES):
Interest expense, net(992) (937) 
Loss on extinguishment of debt(27) —  
Gain (loss) on financial instruments, net(318) 37  
Other pension benefits, net10  9  
Other income (expense), net11  (110) 
(1,316) (1,001) 
Income before income taxes465  417  
Income tax expense(6) (67) 
Consolidated net income$459  $350  


The accompanying notes are an integral part of these consolidated financial statements.
2
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Consolidated net income$106
 $266
 $549
 $679
Net impact of interest rate derivative instruments1
 2
 4
 6
Foreign currency translation adjustment1
 (1) 1
 (1)
Consolidated comprehensive income108
 267
 554
 684
Less: Comprehensive income attributable to noncontrolling interests—
 (1) (1) (1)
Comprehensive income attributable to CCO Holdings member$108
 $266
 $553
 $683



CCO HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER’S EQUITY
(dollars in millions)
Unaudited
Member's EquityAccumulated Other Comprehensive LossTotal CCO Holdings Member’s EquityNoncontrolling InterestsTotal Member’s Equity
BALANCE, December 31, 2019$55,266  $—  $55,266  $23  $55,289  
Consolidated net income459  —  459  —  459  
Stock compensation expense90  —  90  —  90  
Contributions from parent27  —  27  —  27  
Distributions to parent(2,685) —  (2,685) —  (2,685) 
Distributions to noncontrolling interest—  —  —  (1) (1) 
BALANCE, March 31, 2020$53,157  $—  $53,157  $22  $53,179  

Member's EquityAccumulated Other Comprehensive LossTotal CCO Holdings Member’s EquityNoncontrolling InterestsTotal Member’s Equity
BALANCE, December 31, 2018$60,532  $(2) $60,530  $24  $60,554  
Consolidated net income350  —  350  —  350  
Stock compensation expense85  —  85  —  85  
Contributions from parent9  —  9  —  9  
Distributions to parent(1,040) —  (1,040) —  (1,040) 
Distributions to noncontrolling interest—  —  —  (1) (1) 
BALANCE, March 31, 2019$59,936  $(2) $59,934  $23  $59,957  

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

CCO HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
Unaudited
Three Months Ended March 31,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income$459  $350  
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
Depreciation and amortization2,493  2,547  
Stock compensation expense90  85  
Noncash interest income, net(12) (55) 
Other pension benefits, net(10) (9) 
Loss on extinguishment of debt27  —  
(Gain) loss on financial instruments, net318  (37) 
Deferred income taxes—  54  
Other, net(22) 107  
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable138  154  
Prepaid expenses and other assets(93) (279) 
Accounts payable, accrued liabilities and other(131) (124) 
Receivables from and payables to related party(67) (106) 
Net cash flows from operating activities3,190  2,687  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment(1,461) (1,665) 
Change in accrued expenses related to capital expenditures(388) (376) 
Other, net39  67  
Net cash flows from investing activities(1,810) (1,974) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt4,339  6,884  
Repayments of long-term debt(3,589) (5,572) 
Borrowings of loans payable - related parties5  —  
Payments for debt issuance costs(41) (25) 
Contributions from parent27  9  
Distributions to parent(2,685) (1,040) 
Distributions to noncontrolling interest(1) (1) 
Other, net(24) (4) 
Net cash flows from financing activities(1,969) 251  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS(589) 964  
CASH AND CASH EQUIVALENTS, beginning of period3,249  300  
CASH AND CASH EQUIVALENTS, end of period$2,660  $1,264  
CASH PAID FOR INTEREST$1,050  $966  
CASH PAID FOR TAXES$2  $—  

The accompanying notes are an integral part of these consolidated financial statements.
4
 Nine Months Ended September 30,
 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:   
Consolidated net income$549
 $679
Adjustments to reconcile consolidated net income to net cash flows from operating activities:   
Depreciation and amortization7,839
 4,409
Stock compensation expense198
 168
Accelerated vesting of equity awards43
 202
Noncash interest income, net(284) (148)
Other pension benefits(9) (533)
Loss on extinguishment of debt35
 110
(Gain) loss on financial instruments, net15
 (16)
Deferred income taxes14
 (14)
Other, net82
 (10)
Changes in operating assets and liabilities, net of effects from acquisitions:   
Accounts receivable(77) (2)
Prepaid expenses and other assets64
 105
Accounts payable, accrued liabilities and other6
 483
Receivables from and payables to related party, including deferred management fees46
 105
Net cash flows from operating activities8,521
 5,538
    
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of property, plant and equipment(6,096) (3,437)
Change in accrued expenses related to capital expenditures276
 86
Purchases of cable systems, net of cash acquired—
 (7)
Other, net(63) (8)
Net cash flows from investing activities(5,883) (3,366)
    
CASH FLOWS FROM FINANCING ACTIVITIES:   
Borrowings of long-term debt12,115
 5,997
Repayments of long-term debt(5,534) (4,120)
Borrowings (repayments) loans payable - related parties163
 (253)
Payments for debt issuance costs(83) (283)
Contributions from parent—
 478
Distributions to parent(8,641) (3,084)
Proceeds from termination of interest rate derivatives—
 88
Other, net(8) (4)
Net cash flows from financing activities(1,988) (1,181)
    
NET INCREASE IN CASH AND CASH EQUIVALENTS650
 991
CASH AND CASH EQUIVALENTS, beginning of period1,324
 5
CASH AND CASH EQUIVALENTS, end of period$1,974
 $996
    
CASH PAID FOR INTEREST$2,544
 $1,479
CASH PAID FOR TAXES$21
 $3



CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)





1. Organization and Basis of Presentation


Organization


CCO Holdings, LLC (together with its subsidiaries, “CCO Holdings,” or the “Company”) is the second largest cable operator in the United States and a leading broadband connectivity company and cable operator. Over an advanced communications company providing video, Internet and voice services tonetwork, the Company offers a full range of state-of-the-art residential and business customers. In addition,services including Spectrum Internet, TV, Mobile and Voice. For small and medium-sized companies, Spectrum Business® delivers the Company sells videosame suite of broadband products and onlineservices 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 inventory to local, regional and national advertising customers and fiber-delivered communications and managed information technology solutions to larger enterprise customers.production for the modern media landscape. The Company also ownsdistributes award-winning news coverage, sports and operates regional sports networkshigh-quality original programming to its customers through Spectrum Networks and local sports, news and lifestyle channels and sells security and home management services to the residential marketplace.Spectrum Originals.


CCO Holdings is a holding company whose principal assets are the equity interests in its operating subsidiaries. CCO Holdings is a direct subsidiary of CCH I Holdings, LLC, (“CCH I”), which is an indirect subsidiary of Charter Communications, Inc. (“Charter”), Charter Communications Holdings, LLC (“Charter Holdings”) and Spectrum Management Holding Company, LLC (“Spectrum Management”). All of the outstanding capital stock of CCO Holdings Capital Corp. ("CCO Holdings Capital") is owned by CCO Holdings. The consolidated financial statements include the accounts of CCO Holdings and all of its subsidiaries where the underlying operations reside. All significant intercompany accounts and transactions among consolidated entities have been eliminated. Charter, Charter Holdings and Spectrum Management have performed financing, cash management, treasury and other services for CCO Holdings on a centralized basis. Changes in member’s equity in the consolidated balance sheets related to these activities have been considered cash receipts (contributions) and payments (distributions) for purposes of the consolidated statements of cash flows and are reflected in financing activities.


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 one1 reportable segment, cable services.


Basis of Presentation


The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures typically included in CCO Holdings’ 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; depreciationcosts, impairments of franchises and amortization costs; purchase accounting valuations of assetsgoodwill, pension benefits and liabilities including, but not limited to, property, plant and equipment, intangibles and goodwill; pension benefits; income taxes; contingencies and programming expense.taxes. Actual results could differ from those estimates.


Certain prior period amounts have been reclassified to conform with the 20172020 presentation.

2.    Mergers and Acquisitions

The Transactions

On May 18, 2016, the transactions contemplated by the Agreement and Plan of Mergers dated as of May 23, 2015 (the “Merger Agreement”), by and among Time Warner Cable Inc. (“Legacy TWC”), Charter Communications, Inc. prior to the closing of the Merger Agreement (“Legacy Charter”), CCH I, LLC, previously a wholly owned subsidiary of Legacy Charter and certain other subsidiaries of CCH I, LLC were completed (the “TWC Transaction,” and together with the Bright House Transaction described below, the “Transactions”). As a result of the TWC Transaction, CCH I, LLC became the new public parent company that holds the operations of the combined companies and was renamed Charter Communications, Inc. As of the date of completion of the




5


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



Transactions, the total value of the TWC Transaction was approximately $85 billion, including cash, equity and Legacy TWC assumed debt.

Also, on May 18, 2016, Legacy Charter and Advance/Newhouse Partnership (“A/N”), the former parent of Bright House Networks, LLC (“Legacy Bright House”), completed their previously announced transaction, pursuant to a definitive Contribution Agreement (the “Contribution Agreement”), under which Charter acquired Legacy Bright House (the “Bright House Transaction”) for approximately $12.2 billion consisting of cash, convertible preferred units of Charter Holdings and common units of Charter Holdings. Pursuant to the Bright House Transaction, Charter became the owner of the membership interests in Legacy Bright House and the other assets primarily related to Legacy Bright House (other than certain excluded assets and liabilities and non-operating cash).

In connection with the TWC Transaction, Liberty Broadband purchased shares of Charter Class A common stock to partially finance the cash portion of the TWC Transaction consideration, and in connection with the Bright House Transaction, Liberty Broadband purchased shares of Charter Class A common stock (the “Liberty Transactions”).

Acquisition Accounting

Charter applied acquisition accounting to the Transactions. The total purchase price was allocated to the identifiable tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values. The fair values were primarily based on third-party valuations using assumptions developed by management and other information compiled by management including, but not limited to, future expected cash flows. The excess of the purchase price over those fair values was recorded as goodwill.

The tables below present the final allocation of the purchase price to the assets acquired and liabilities assumed in the Transactions.

TWC Allocation of Purchase Price

Cash and cash equivalents$1,058
Current assets1,417
Property, plant and equipment21,413
Customer relationships13,460
Franchises54,085
Goodwill28,337
Other noncurrent assets1,040
Accounts payable and accrued liabilities(4,107)
Debt(24,900)
Deferred income taxes(28,120)
Other long-term liabilities(3,162)
Noncontrolling interests(4)
 $60,517

Charter made measurement period adjustments to the fair value of certain assets acquired and liabilities assumed in the TWC Transaction during the six months ended June 30, 2017 upon completion of the measurement period, including a decrease to working capital of $73 million and a decrease of $28 million to deferred income tax liabilities, resulting in a net increase of $45 million to goodwill.



6

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)


Bright House Allocation of Purchase Price

Current assets$131
Property, plant and equipment2,884
Customer relationships2,150
Franchises7,225
Goodwill44
Other noncurrent assets86
Accounts payable and accrued liabilities(330)
Other long-term liabilities(12)
Noncontrolling interests(22)
 $12,156

In connection with the Transactions, subsidiaries of Charter contributed down to the Company the net assets and liabilities of Legacy TWC and Legacy Bright House except for the deferred tax liabilities of Charter, as noted above, and net assets of approximately $1.0 billion primarily comprised of cash and cash equivalents used as a source for the cash portion of the TWC purchase price.

Selected Pro Forma Financial Information

The following unaudited pro forma financial information of the Company is based on the historical consolidated financial statements of Legacy Charter, Legacy TWC and Legacy Bright House and is intended to provide information about how the Transactions and related financing may have affected the Company’s historical consolidated financial statements if they had closed as of January 1, 2015. The pro forma financial information below is based on available information and assumptions that the Company believes are reasonable. The pro forma financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what the Company’s financial condition or results of operations would have been had the transactions described above occurred on the date indicated. The pro forma financial information also should not be considered representative of the Company’s future financial condition or results of operations.

 Nine Months Ended September 30, 2016
Revenues$29,748
Net income attributable to CCO Holdings member$1,112



7

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)


3.2. Franchises, Goodwill and Other Intangible Assets


Indefinite-lived and finite-lived intangible assets consist of the following as of September 30, 2017March 31, 2020 and December 31, 2016:2019:


March 31, 2020December 31, 2019
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Indefinite-lived intangible assets:
Franchises$67,322  $—  $67,322  $67,322  $—  $67,322  
Goodwill29,554  —  29,554  29,554  —  29,554  
$96,876  $—  $96,876  $96,876  $—  $96,876  
Finite-lived intangible assets:
Customer relationships$18,230  $(11,275) $6,955  $18,230  $(10,777) $7,453  
Other intangible assets405  (132) 273  405  (122) 283  
$18,635  $(11,407) $7,228  $18,635  $(10,899) $7,736  
  September 30, 2017 December 31, 2016
  Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Indefinite-lived intangible assets:            
Franchises $67,316
 $—
 $67,316
 $67,316
 $—
 $67,316
Goodwill 29,554
 —
 29,554
 29,509
 —
 29,509
Other intangible assets —
 —
 —
 4
 —
 4
  $96,870
 $—
 $96,870
 $96,829
 $—
 $96,829
             
Finite-lived intangible assets:            
Customer relationships $18,227
 $(5,638) $12,589
 $18,226
 $(3,618) $14,608
Other intangible assets 673
 (181) 492
 615
 (128) 487
  $18,900
 $(5,819) $13,081
 $18,841
 $(3,746) $15,095


Amortization expense related to customer relationships and other intangible assets for the three and nine months ended September 30, 2017March 31, 2020 and 2019 was $664$508 million and $2.1 billion, respectively, and was $748$578 million, and $1.2 billion for the three and nine months ended September 30, 2016, respectively.
The Company expects amortization expense on its finite-lived intangible assets will be as follows:


Nine months ended December 31, 2020$1,366  
20211,599  
20221,329  
20231,072  
2024821  
Thereafter1,041  
$7,228  
Three months ended December 31, 2017 $662
2018 2,470
2019 2,187
2020 1,895
2021 1,611
Thereafter 4,256
  $13,081


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


4.    Accounts Payable and Accrued Liabilities3. Investments


Accounts payable and accrued liabilities consistThe Company recorded impairments on equity investments of approximately $110 million during the following asthree months ended March 31, 2019 which were recorded in other income (expense), net in the consolidated statements of September 30, 2017 and December 31, 2016:operations.



6
 September 30, 2017 December 31, 2016
Accounts payable – trade$519
 $416
Deferred revenue405
 352
Accrued liabilities:   
Programming costs1,947
 1,783
Labor741
 953
Capital expenditures1,389
 1,107
Interest994
 958
Taxes and regulatory fees572
 529
Other936
 799
 $7,503
 $6,897


8


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



4. Accounts Payable and Accrued Liabilities


5.    Long-Term Debt

Long-term debt consistsAccounts payable and accrued liabilities consist of the following as of September 30, 2017March 31, 2020 and December 31, 2016:2019:


March 31, 2020December 31, 2019
Accounts payable – trade$694  $727  
Deferred revenue477  460  
Accrued liabilities:
Programming costs2,133  2,042  
Labor847  939  
Capital expenditures1,029  1,441  
Interest1,005  1,052  
Taxes and regulatory fees479  501  
Operating lease liabilities187  184  
Other777  796  
$7,628  $8,142  

5. Leases

Operating lease expenses were $95 million and $94 million for the three months ended March 31, 2020 and 2019, respectively, inclusive of $32 million and $34 million for the three months ended March 31, 2020 and 2019, respectively, of both short-term lease costs and variable lease costs that were not included in the measurement of operating lease liabilities.

Cash paid for amounts included in the measurement of operating lease liabilities, recorded as operating cash flows in the statements of cash flows, were $61 million and $57 million, for the three months ended March 31, 2020 and 2019, respectively. Operating lease right-of-use assets obtained in exchange for operating lease obligations were $62 million and $56 million for the three months ended March 31, 2020 and 2019, respectively.

Supplemental balance sheet information related to leases is as follows.

March 31, 2020December 31, 2019
Operating lease right-of-use assets:  
Included within other noncurrent assets  $935  $925  
Operating lease liabilities:  
Current portion included within accounts payable and accrued liabilities  $187  $184  
Long-term portion included within other long-term liabilities  800  788  
$987  $972  
Weighted average remaining lease term for operating leases  6.6 years6.6 years
Weighted average discount rate for operating leases  4.3 %4.4 %


 September 30, 2017 December 31, 2016
 Principal Amount Accreted Value Principal Amount Accreted Value
CCO Holdings, LLC:       
5.250% senior notes due March 15, 2021$500
 $497
 $500
 $496
6.625% senior notes due January 31, 2022—
 —
 750
 741
5.250% senior notes due September 30, 20221,250
 1,234
 1,250
 1,232
5.125% senior notes due February 15, 20231,000
 992
 1,000
 992
5.125% senior notes due May 1, 20231,150
 1,142
 1,150
 1,141
5.750% senior notes due September 1, 2023500
 496
 500
 496
5.750% senior notes due January 15, 20241,000
 992
 1,000
 991
5.875% senior notes due April 1, 20241,700
 1,686
 1,700
 1,685
5.375% senior notes due May 1, 2025750
 745
 750
 744
5.750% senior notes due February 15, 20262,500
 2,463
 2,500
 2,460
5.500% senior notes due May 1, 20261,500
 1,489
 1,500
 1,487
5.875% senior notes due May 1, 2027800
 794
 800
 794
5.125% senior notes due May 1, 20273,250
 3,215
 —
 —
5.000% senior notes due February 1, 20281,500
 1,486
 —
 —
Charter Communications Operating, LLC:       
3.579% senior notes due July 23, 20202,000
 1,987
 2,000
 1,983
4.464% senior notes due July 23, 20223,000
 2,976
 3,000
 2,973
4.908% senior notes due July 23, 20254,500
 4,461
 4,500
 4,458
3.750% senior notes due February 15, 20281,000
 985
 —
 —
4.200% senior notes due March 15, 20281,250
 1,237
 —
 —
6.384% senior notes due October 23, 20352,000
 1,981
 2,000
 1,980
6.484% senior notes due October 23, 20453,500
 3,466
 3,500
 3,466
5.375% senior notes due May 1, 20472,500
 2,506
 —
 —
6.834% senior notes due October 23, 2055500
 495
 500
 495
Credit facilities8,768
 8,681
 8,916
 8,814
Time Warner Cable, LLC:       
5.850% senior notes due May 1, 2017—
 —
 2,000
 2,028
6.750% senior notes due July 1, 20182,000
 2,068
 2,000
 2,135
8.750% senior notes due February 14, 20191,250
 1,356
 1,250
 1,412
8.250% senior notes due April 1, 20192,000
 2,177
 2,000
 2,264
5.000% senior notes due February 1, 20201,500
 1,588
 1,500
 1,615
4.125% senior notes due February 15, 2021700
 732
 700
 739
4.000% senior notes due September 1, 20211,000
 1,048
 1,000
 1,056
5.750% sterling senior notes due June 2, 2031 (a)
838
 905
 770
 834
6.550% senior debentures due May 1, 20371,500
 1,687
 1,500
 1,691
7.300% senior debentures due July 1, 20381,500
 1,790
 1,500
 1,795
6.750% senior debentures due June 15, 20391,500
 1,725
 1,500
 1,730
5.875% senior debentures due November 15, 20401,200
 1,258
 1,200
 1,259
5.500% senior debentures due September 1, 20411,250
 1,258
 1,250
 1,258
7


9


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



Maturities of lease liabilities are as follows.

Operating leases
Nine months ended December 31, 2020$166  
2021227  
2022192  
2023168  
2024131  
Thereafter328  
Undiscounted lease cash flow commitments1,212  
Reconciling impact from discounting(225) 
Lease liabilities on consolidated balance sheet as of March 31, 2020$987  

The Company has $60 million and $62 million of finance lease liabilities recognized in the consolidated balance sheets as of March 31, 2020 and December 31, 2019, respectively, included within accounts payable and accrued liabilities and other long-term liabilities.The related finance lease right-of-use assets are recorded in property, plant and equipment, net.The Company’s finance leases were not considered material for further supplemental lease disclosures.

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

March 31, 2020December 31, 2019
Principal AmountAccreted ValuePrincipal AmountAccreted Value
CCO Holdings, LLC:
5.250% senior notes due September 30, 20221,105  1,097  1,250  1,241  
5.125% senior notes due February 15, 2023—  —  1,000  995  
4.000% senior notes due March 1, 2023500  497  500  497  
5.125% senior notes due May 1, 20231,105  1,101  1,150  1,145  
5.750% senior notes due September 1, 2023—  —  500  497  
5.750% senior notes due January 15, 2024—  —  150  149  
5.875% senior notes due April 1, 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  2,472  2,500  2,471  
5.500% senior notes due May 1, 20261,500  1,491  1,500  1,491  
5.875% senior notes due May 1, 2027800  796  800  796  
5.125% senior notes due May 1, 20273,250  3,223  3,250  3,222  
5.000% senior notes due February 1, 20282,500  2,469  2,500  2,469  
5.375% senior notes due June 1, 20291,500  1,501  1,500  1,501  
4.750% senior notes due March 1, 20303,050  3,041  3,050  3,041  
4.500% senior notes due August 15, 20302,750  2,750  —  —  
4.500% senior notes due May 1, 20321,400  1,387  —  —  
Charter Communications Operating, LLC:
3.579% senior notes due July 23, 20202,000  1,998  2,000  1,997  
4.464% senior notes due July 23, 20223,000  2,988  3,000  2,987  
Senior floating rate notes due February 1, 2024900  902  900  902  
4.500% senior notes due February 1, 20241,100  1,093  1,100  1,093  

8

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)

4.908% senior notes due July 23, 20254.908% senior notes due July 23, 20254,500  4,472  4,500  4,471  
3.750% senior notes due February 15, 20283.750% senior notes due February 15, 20281,000  988  1,000  987  
4.200% senior notes due March 15, 20284.200% senior notes due March 15, 20281,250  1,241  1,250  1,240  
5.050% senior notes due March 30, 20295.050% senior notes due March 30, 20291,250  1,241  1,250  1,241  
6.384% senior notes due October 23, 20356.384% senior notes due October 23, 20352,000  1,983  2,000  1,982  
5.375% senior notes due April 1, 20385.375% senior notes due April 1, 2038800  786  800  786  
6.484% senior notes due October 23, 20456.484% senior notes due October 23, 20453,500  3,467  3,500  3,467  
5.375% senior notes due May 1, 20475.375% 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  
5.125% senior notes due July 1, 20495.125% 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  
6.834% senior notes due October 23, 20556.834% senior notes due October 23, 2055500  495  500  495  
Credit facilitiesCredit facilities10,357  10,279  10,427  10,345  
Time Warner Cable, LLC:Time Warner Cable, LLC:
5.000% senior notes due February 1, 20205.000% senior notes due February 1, 2020—  —  1,500  1,503  
4.125% senior notes due February 15, 20214.125% senior notes due February 15, 2021700  709  700  711  
4.000% senior notes due September 1, 20214.000% senior notes due September 1, 20211,000  1,018  1,000  1,021  
5.750% sterling senior notes due June 2, 2031 (a)
5.750% sterling senior notes due June 2, 2031 (a)
776  830  828  886  
6.550% senior debentures due May 1, 20376.550% senior debentures due May 1, 20371,500  1,673  1,500  1,675  
7.300% senior debentures due July 1, 20387.300% senior debentures due July 1, 20381,500  1,770  1,500  1,772  
6.750% senior debentures due June 15, 20396.750% senior debentures due June 15, 20391,500  1,711  1,500  1,713  
5.875% senior debentures due November 15, 20405.875% senior debentures due November 15, 20401,200  1,254  1,200  1,255  
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)
871
 839
 800
 771
5.250% sterling senior notes due July 15, 2042 (b)
807  779  861  831  
4.500% senior debentures due September 15, 20421,250
 1,137
 1,250
 1,135
4.500% senior debentures due September 15, 20421,250  1,143  1,250  1,142  
Time Warner Cable Enterprises LLC:       Time Warner Cable Enterprises LLC:
8.375% senior debentures due March 15, 20231,000
 1,243
 1,000
 1,273
8.375% senior debentures due March 15, 20231,000  1,137  1,000  1,148  
8.375% senior debentures due July 15, 20331,000
 1,315
 1,000
 1,324
8.375% senior debentures due July 15, 20331,000  1,281  1,000  1,284  
Total debt66,777
 68,132
 60,036
 61,747
Total debt79,050  79,692  78,416  79,078  
Less current portion:       Less current portion:
5.850% senior notes due May 1, 2017—
 —
 (2,000) (2,028)
6.750% senior notes due July 1, 2018(2,000) (2,068) —
 —
5.000% senior notes due February 1, 20205.000% senior notes due February 1, 2020—  —  (1,500) (1,503) 
3.579% senior notes due July 23, 20203.579% senior notes due July 23, 2020(2,000) (1,998) (2,000) (1,997) 
4.125% senior notes due February 15, 20214.125% senior notes due February 15, 2021(700) (709) —  —  
5.250% senior notes due September 30, 20225.250% senior notes due September 30, 2022(1,105) (1,097) —  —  
5.125% senior notes due May 1, 20235.125% senior notes due May 1, 2023(1,105) (1,101) —  —  
Long-term debt$64,777
 $66,064
 $58,036
 $59,719
Long-term debt74,140  74,787  74,916  75,578  

(a)
Principal amount includes £625 million valued at $838 million and $770 million as of September 30, 2017 and December 31, 2016, respectively, using the exchange rate at the respective dates.
(b)
Principal amount includes £650 million valued at $871 million and $800 million as of September 30, 2017 and December 31, 2016, respectively, using the exchange rate at the respective dates.


(a)Principal amount includes £625 million remeasured at $776 million and $828 million as of March 31, 2020 and December 31, 2019, respectively, using the exchange rate at the respective dates.
(b)Principal amount includes £650 million remeasured at $807 million and $861 million as of March 31, 2020 and December 31, 2019, respectively, using the exchange rate at the respective dates.

The accreted values presented in the table above represent the principal amount of the debt less theadjusted for original issue discount or premium at the time of sale, deferred financing costs, and, in regards to the Legacy TWC 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 is remeasured as of each balance sheet date. See Note 7.8. The Company has availability under the Charter Operating credit facilities of approximately $2.9 billion as of September 30, 2017.

CCO Holdings

In February 2016, CCO Holdings and CCO Holdings Capital Corp. ("CCO Holdings Capital") jointly issued $1.7 billion aggregate principal amount of 5.875% senior notes due 2024 and, in April 2016, they issued $1.5 billion aggregate principal amount of 5.500% senior notes due 2026 at a price of 100.075% of the aggregate principal amount. The net proceeds from both issuances were used to repurchase all of CCO Holdings’ 7.000% senior notes due 2019, 7.375% senior notes due 2020 and 6.500% senior notes due 2021 and to pay related fees and expenses and for general corporate purposes. These debt repurchases resulted in a loss on extinguishment of debt of $110 million for the nine months ended September 30, 2016.

In February 2017, CCO Holdings and CCO Holdings Capital jointly issued $1.0 billion aggregate principal amount of 5.125% senior notes due May 1, 2027. The net proceeds were used to redeem CCO Holdings’ 6.625% senior notes due 2022, pay related fees and expenses and for general corporate purposes. The Company recorded a loss on extinguishment of debt of $33 million for the nine months ended September 30, 2017 related to these transactions.

In March 2017, CCO Holdings and CCO Holdings Capital jointly issued an additional $1.0 billion aggregate principal amount of 5.125% senior notes due May 1, 2027 at a price of 99.0% of the aggregate principal amount. The net proceeds, as well as cash on hand, were used in April 2017 to redeem Time Warner Cable, LLC's 5.850% senior notes due 2017, pay related fees and expenses and for general corporate purposes. The Company recorded a loss on extinguishment of debt of $1 million for the nine months ended September 30, 2017 related to these transactions.

In April 2017, CCO Holdings and CCO Holdings Capital jointly issued an additional $1.25 billion aggregate principal amount of 5.125% senior notes due May 1, 2027 at a price of 100.5% of the aggregate principal amount. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including to fund buybacks of Charter Class A common stock or Charter Holdings common units.

In August 2017, CCO Holdings and CCO Holdings Capital jointly issued $1.5 billion aggregate principal amount of 5.000% senior notes due February 1, 2028. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including to fund buybacks of Charter Class A common stock or Charter Holdings common units.




109


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



availability under the Charter Communications Operating, LLC ("Charter Operating") credit facilities of approximately $4.7 billion as of March 31, 2020.

In October 2017,February 2020, CCO Holdings and CCO Holdings Capital Corp. jointly issued $500 million aggregate principal amount of 4.000% senior notes due March 1, 2023 (the "2023 Notes") and an additional $1.0$1.65 billion aggregate principal amount of 5.000%4.500% senior unsecured notes due February 1, 20282030 at par and in March 2020, an additional $1.1 billion of the same series of notes were issued at a price of 98.5%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 (together with theof 4.500% senior unsecured notes issued in February, March, April and October 2017 described above, the "Notes").due 2032 at par. The net proceeds were or 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' 5.250% 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 distributions to the Company's parent companies to fund potential buybacks of Charter Class A common stock orand Charter Holdings common units. The Company recorded a loss on extinguishment of debt of $27 million during the three months ended March 31, 2020 related to these transactions.


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


CCO Holdings may redeem some or all of the Notesnotes at any time at a premium. Beginning in 2025 (2021 for 2023 Notes),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 2020 (2019 for the 2023, Notes), CCO Holdings may redeem up to 40% of the aggregate principal amount of the Notesnotes 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 Notesnotes from the holders at a purchase price equal to 101% of the total principal amount of the Notes,notes, plus any accrued and unpaid interest.

Charter Operating

In January 2017, Charter Operating entered into an amendment to its Amended and Restated Credit Agreement dated May 18, 2016 (the “Credit Agreement”) decreasing the applicable LIBOR margin on both the term loan E and term loan F to 2.00% and eliminating the LIBOR floor. The Company recorded a loss on extinguishment of debt of $1 million for the nine months ended September 30, 2017 related to these transactions.


In April 2017,2020, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.25$1.6 billion aggregate principal amount of 5.375%2.800% senior secured notes due May 1, 2047April 2031 at a price of 99.968%99.561% of the aggregate principal amount and $1.4 billion aggregate principal amount of 3.700% senior secured notes due April 2051 at a price of 99.217% of the aggregate principal amount. The net proceeds werewill be used to pay related fees and expenses and for general corporate purposes, including to fund buybacks of Charter Class A common stock or Charter Holdings common units.purposes.

In July 2017, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.0 billion aggregate principal amount of 3.750% senior notes due February 15, 2028 at a price of 99.166% of the aggregate principal amount and an additional $500 million aggregate principal amount of 5.375% senior secured notes due May 1, 2047 at a price of 106.529% of the aggregate principal amount. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including to fund buybacks of Charter Class A common stock or Charter Holdings common units.

In September 2017, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.25 billion aggregate principal amount of 4.200% senior notes due March 15, 2028 at a price of 99.757% of the aggregate principal amount and an additional $750 million aggregate principal amount of 5.375% senior secured notes due May 1, 2047 at a price of 98.969% of the aggregate principal amount (collectively together with the notes issued in April and July 2017 described above, the "Charter Operating Notes"). The net proceeds were used to pay related fees and expenses and for general corporate purposes, including to fund buybacks of Charter Class A common stock or Charter Holdings common units.


The Charter Operating Notesnotes are guaranteed by CCO Holdings Time Warner Cable, LLC, Time Warner Cable Enterprises LLC and substantially all of the operating subsidiaries of Charter Operating. In addition, the Charter Operating Notesnotes are secured by a perfected first priority security interest in substantially all of the assets of Charter Operating to the extent such liens can be perfected under the Uniform Commercial Code by the filing of a financing statement. Thestatement and the liens rank equally with the liens on the collateral securing obligations under the Charter Operating credit facilities and continue to exist as long as the liens securing such facilities exist.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.
6.
7. Loans Payable - Related Party


Loans payable - related party as of September 30, 2017March 31, 2020 and December 31, 20162019 consists of loans from Charter Communications HoldingsHolding Company, LLC (“Charter Holdco”) to the Company of $655$727 million and $640$699 million, respectively, and loans from Charter to the Company of $278 million and $260 million, respectively. LoansInterest accrued at LIBOR plus 1.25% on the loans payable -from Charter Holdco during the period ending March 31, 2020 and LIBOR plus 1.50% during the period ending December 31, 2019. Interest accrued at 2.00% on the loans payable from Charter during both periods ending March 31, 2020 and December 31, 2019.


8.  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.


1110


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



related party as of September 30, 2017 also includes a loan from Charter to the Company of $163 million. Interest accrues on loans payable - related party at LIBOR plus 1.75%.

7.     Accounting for Derivative Instruments and Hedging Activities

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

Interest rate derivative instruments are used to manage interest costs and to reduce the Company’s exposure to increases in floating interest rates. The Company manages its exposure to fluctuations in interest rates by maintaining a mix of fixed and variable rate debt. Using interest rate derivative instruments, the Company agrees to exchange, at specified intervals through 2017, the difference between fixed and variable interest amounts calculated by reference to agreed-upon notional principal amounts. As of September 30, 2017 and December 31, 2016, the Company had $850 million in notional amounts of interest rate derivative instruments outstanding. The notional amounts of interest rate derivative instruments do not represent amounts exchanged by the parties and, thus, are not a measure of exposure to credit loss. The amounts exchanged were determined by reference to the notional amount and the other terms of the contracts.


Cross-currency derivative instruments are used to effectively convert £1.275 billion aggregate principal amount of fixed-rate British pound sterling denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt. The cross-currency swaps have maturities of June 2031 and July 2042. The Company is required to post collateral on the cross-currency derivative instruments when the derivative contracts are in a liability position. In May 2016,April 2019, the Company entered into a collateral holiday agreement for 80%60% of both the 2031 and 2042 cross-currency swaps, which eliminates the requirement to post collateral for three years.

The effect of derivative instrumentsyears, 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. The fair value of the Company's cross-currency derivatives was $650 million and $224 million and is included in other long-term liabilities on its consolidated balance sheets is presented in the table below:as of March 31, 2020 and December 31, 2019, respectively.

 September 30, 2017 December 31, 2016
Interest Rate Derivatives   
Accrued interest$1
 $5
Accumulated other comprehensive loss$(1) $(5)
    
Cross-Currency Derivatives   
Other long-term liabilities$125
 $251


The Company’s interest rate and cross-currency derivative instruments are not designated as hedges and are marked to fair value each period, with the impact recorded as a gain or loss on financial instruments, net in the consolidated statements of operations. While these derivative instruments are not designated as cash flow hedges for accounting purposes, management continues to believe such instruments are closely correlated with the respective debt, thus managing associated risk.


The effect of financial instruments on the consolidated statements of operations is presented in the table below.
Three Months Ended March 31,
20202019
Gain (Loss) on Financial Instruments, Net:
Change in fair value of cross-currency derivative instruments$(426) $77  
Foreign currency remeasurement of Sterling Notes to U.S. dollars108  (40) 
$(318) $37  

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Gain (loss) on Financial Instruments, Net:       
Change in fair value of interest rate derivative instruments$—
 $7
 $4
 $5
Change in fair value of cross-currency derivative instruments68
 17
 126
 (168)
Foreign currency remeasurement of Sterling Notes to U.S. dollars(50) 49
 (141) 196
Loss on termination of interest rate derivative instruments—
 —
 —
 (11)
Loss reclassified from accumulated other comprehensive loss due to discontinuance of hedge accounting(1) (2) (4) (6)
 $17
 $71
 $(15) $16


12

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



8.9. Fair Value Measurements


The accountingAccounting guidanceestablishes 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 September 30, 2017March 31, 2020 and December 31, 20162019 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.

A portion of the Company’s cash and cash equivalents as of September 30, 2017 and December 31, 2016 were invested in money market funds. The money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange which approximates fair value. The money market funds potentially subject the Company to concentration of credit risk. The amount invested within any one financial instrument did not exceed $500 million and $250 million as of September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017 and December 31, 2016, there were no significant concentrations of financial instruments in a single investee, industry or geographic location.

Interest rate derivative instruments are valued using a present value calculation based on an implied forward LIBOR curve (adjusted for Charter Operating’s and counterparties’ credit risk). The weighted average pay rate for the Company’s currently effective interest rate derivative instruments was 1.59% at September 30, 2017 and December 31, 2016 (exclusive of applicable spreads). The cross-currency derivative instruments are valued using a present value calculation based on expected forward interest and exchange rates (adjusted for Charter Operating’s and counterparties’ credit risk).


Financial instruments accounted for at fair value on a recurring basis are presented inand classified within Level 2 of the table below.

valuation hierarchy include the Company's cross-currency derivative instruments and were valued at $650 million and $224 million as of March 31, 2020 and December 31, 2019, respectively.

 September 30, 2017 December 31, 2016
 Level 1 Level 2 Level 1 Level 2
Assets       
Money market funds$1,312
 $—
 $1,003
 $—
        
Liabilities       
Interest rate derivative instruments$—
 $1
 $—
 $5
Cross-currency derivative instruments$—
 $125
 $—
 $251
11



13


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)




A summary of the carrying value and fair value of debt as of September 30, 2017 and December 31, 2016 is as follows:

  September 30, 2017 December 31, 2016
  Carrying Value Fair Value Carrying Value Fair Value
Senior notes and debentures $59,451
 $62,657
 $52,933
 $55,203
Credit facilities $8,681
 $8,788
 $8,814
 $8,943

The estimated fair value of the Company’s senior notes and debentures as of September 30, 2017March 31, 2020 and December 31, 20162019 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.


A summary of the carrying value and fair value of debt as of March 31, 2020 and December 31, 2019 is as follows:

March 31, 2020December 31, 2019
Carrying ValueFair ValueCarrying ValueFair Value
Senior notes and debentures$69,413  $72,108  $68,733  $74,938  
Credit facilities$10,279  $9,610  $10,345  $10,448  

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.  No materialWhen such impairments wereare recorded, during the three and nine months ended September 30, 2017 and 2016. Upon closingfair values are generally classified within Level 3 of the Transactions, all of Legacy TWC and Legacy Bright House nonfinancial assets and liabilities were recorded at fair values. See Note 2.valuation hierarchy.


9.10. Revenues

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

Three Months Ended March 31,
20202019
Internet$4,407  $4,024  
Video4,422  4,384  
Voice457  504  
Residential revenue9,286  8,912  
Small and medium business996  945  
Enterprise622  643  
Commercial revenue1,618  1,588  
Advertising sales365  345  
Mobile258  140  
Other209  218  
$11,736  $11,203  


12

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)

11.  Operating Costs and Expenses


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


Three Months Ended March 31,
20202019
Programming  $2,892  $2,865  
Regulatory, connectivity and produced content  551  561  
Costs to service customers  1,848  1,822  
Marketing  766  735  
Mobile  374  260  
Other  1,021  999  
$7,452  $7,242  
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Programming$2,699
 $2,404
 $7,952
 $4,648
Regulatory, connectivity and produced content523
 515
 1,553
 944
Costs to service customers1,943
 2,016
 5,798
 3,663
Marketing629
 596
 1,812
 1,143
Transition costs23
 32
 104
 78
Other888
 927
 2,652
 1,697
 $6,705
 $6,490
 $19,871
 $12,173


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 Internet, video Internet and voice services as well as payments for sports, local and news content produced by the Company. Included in regulatory, connectivity and produced content costs is content acquisition costs for the Los Angeles Lakers’ basketball games and Los Angeles Dodgers’ baseball games, which are recorded as games are exhibited over the applicable season. Costs to service customers include costs related to field operations, network operations and customer care for the Company’s residential and small and medium business customers, including internal and third-party labor for the non-capitalizable portion of installations, service and repairs, maintenance, bad debt expense, billing and collection, occupancy and vehicle costs. Marketing costs represent the costs of marketing to current and potential commercial and residential customers including labor costs. TransitionMobile costs represent incremental costs incurred to integrateassociated with the TWCCompany's mobile service such as device and Bright House operationsservice costs, marketing, sales and to increase the scale of the Company’s business as a result of the Transactions. See Note 2.commissions, retail stores, personnel costs and taxes, among others. Other includes corporate overhead, advertising sales expenses, indirect costs associated with the Company’s enterprise business customers and regional sports and news networks, property tax and insurance expense and stock compensation expense, among others.


12.  Other Operating (Income) Expenses, Net

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

Three Months Ended March 31,
20202019
Special charges, net$19  (3) 
(Gain) loss on sale of assets, net(9) (1) 
$10  $(4) 

Special charges, net

Special charges, net primarily includes employee termination costs and net amounts of litigation settlements.

(Gain) loss on sale of assets, net

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



1413


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



13.    Stock Compensation Plans
10.     Other Operating Expenses, Net

Other operating expenses, net consistCharter’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:presented.


Three Months Ended March 31,
20202019
Stock options1,253,700  1,750,900  
Restricted stock units408,300  673,700  
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Merger and restructuring costs$67
 $205
 $293
 $513
Special charges, net80
 4
 86
 10
Gain on sale of assets, net(2) (3) (5) (10)
 $145
 $206
 $374
 $513


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.
Merger
As of March 31, 2020, total unrecognized compensation remaining to be recognized in future periods totaled $307 million for stock options, $0.2 million for restricted stock and restructuring costs$358 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.


Merger and restructuring costs represent costs incurred in connection with merger and acquisition transactions and related restructuring, such as advisory, legal and accounting fees, employee retention costs, employee termination costs related to the Transactions and other exit costs. The Company expects to incur additional merger and restructuring costs in connection with the Transactions. Changes in accruals for merger and restructuring costs from December 31, 2016 through September 30, 2017 are presented below:

 Employee Retention Costs Employee Termination Costs Transaction and Advisory Costs Other Costs Total
Liability, December 31, 2015$—
 $—
 $33
 $—
 $33
Liability assumed in the Transactions80
 9
 3
 —
 92
Costs incurred26
 337
 66
 31
 460
Cash paid(99) (102) (77) (31) (309)
Remaining liability, December 31, 20167
 244
 25
 —
 276
          
Costs incurred4
 186
 3
 57
 250
Cash paid(9) (253) (4) (45) (311)
Remaining liability, September 30, 2017$2
 $177
 $24
 $12
 $215

In addition to the costs incurred indicated above, the Company recorded $6stock compensation expense of $90 million and $43$85 million of expense related to accelerated vesting of equity awards of terminated employees duringfor the three and nine months ended September 30, 2017,March 31, 2020 and 2019, respectively, which is included in operating costs and $57 million and $202 million during the three and nine months ended September 30, 2016, respectively.expenses.


Special charges, net

Special charges, net primarily includes employee termination costs not related to the Transactions and net amounts of litigation settlements. In 2017, special charges, net also includes an $83 million charge related to the Company's withdrawal liability from a multiemployer pension plan.

Gain on sale of assets, net

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

11.14. Income Taxes


CCO Holdings is a single member limited liability company not subject to income tax. CCO Holdings holds all operations through indirect subsidiaries. The majority of these indirect subsidiaries are limited liability companies that are not subject to income tax.


15

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)


Certain indirect subsidiaries that are required to file separate returns are subject to federal and state tax. CCO Holdings’ tax provision reflects the tax provision of the entities required to file separate returns.


Generally, the taxable income, gains, losses, deductions and credits of CCO Holdings are passed through to its indirect members, Charter and Advance/Newhouse Partnership (“A/N.N”). Charter is responsible for its share of taxable income or loss of CCO Holdings allocated to it in accordance with the Charter Holdings Limited Liability Company Agreement (“LLC Agreement”) and partnership tax rules and regulations. Charter also records financial statement deferred tax assets and liabilities related to its investment, and its underlying net assets, in CCO Holdings.Holdings


For the three and nine months ended September 30, 2017, theThe Company recorded income tax expense of $6 million and $35 million, respectively, and income tax benefit of $7$67 million for the three months ended September 30, 2016. Income tax benefit for the nine months ended September 30, 2016 was insignificant.March 31, 2020 and 2019, respectively. Income tax expense is generally recognized through increasesdecreased during the three months ended March 31, 2020 compared to the corresponding period in deferred2019 primarily as a result of an internal entity simplification that increased expense in 2019.

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 liabilitiesprovisions, such as well as through current federaldeferring payroll payments, establishing a credit for the retention of certain employees, relaxing limitations on the deductibility of interest, and state income tax expense.updating the definition of qualified improvement property. This legislation currently has no material impact to the Company’s financial statements.


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 $158$108 million and $159$110 million, excluding interest and penalties, as of September 30, 2017March 31, 2020 and December 31, 2016,2019, respectively. The Company does not currently anticipate that its reserve for uncertain

14

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)

tax positions will significantly increase or decrease during 2017;2020; 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 Charter Holdings, or Charter Holdco, the Company’s indirect parent companies, for income tax purposes, are currently under examination by the IRS. Legacy Charter’sInternal Revenue Service ("IRS") for income tax purposes. Charter's 2016 through 2019 tax years ending 2014 through 2016 remain subject toopen for examination and assessment. YearsCharter’s short period return dated May 17, 2016 (prior to the Time Warner Cable Inc. ("TWC") and Bright House Networks, LLC ("Bright House") transactions) and prior to 2014years remain open solely for purposes of examination of Legacy Charter’s loss and credit carryforwards. The IRS is currently examining LegacyCharter Holdings’ income tax return for 2016. Charter Holdings’ 2017 through 2019 tax years remain open for examination and assessment. The IRS is currently examining TWC’s income tax returns for 2011 through 2014. Legacy TWC’s tax year 2015 remains subject to examination and assessment. Prior to Legacy TWC’s separation from Time Warner Inc. (“Time Warner”) in March 2009, (the “Separation”), Legacy TWC was included in the consolidated U.S. federal and certain state income tax returns of Time Warner. The IRS is currently examininghas examined Time Warner’s 2008 through 2010 income tax returns. Time Warner’s income tax returns for 2005 to 2007, whichand the results are periods prior to the Separation, were settled with the exception of an immaterial item that has been referred to the IRS Appeals Division.under appeal. The Company does not anticipate that these examinations will have a material impact on the Company’s consolidated financial position or results of operations. In addition, the Company is also subject to ongoing examinations of the Company’s tax returns by state and local tax authorities for various periods. Activity related to these state and local examinations did not have a material impact on the Company’s consolidated financial position or results of operations during the three and nine months ended September 30, 2017,March 31, 2020, nor does the Company anticipate a material impact in the future.


12.15.    Comprehensive Income

Comprehensive income equaled consolidated net income for each of the three months ended March 31, 2020 and 2019.

16.    Related Party Transactions


On May 23, 2015,The following sets forth certain transactions in connection withwhich the executionCompany and the directors, executive officers, and affiliates of the Merger AgreementCompany are involved.

Liberty Broadband and A/N

Under the amendmentterms of the Contribution Agreement, Charter entered into the Amended and Restated Stockholders Agreement with Liberty Broadband, A/N and Legacy Charter, (the “Stockholders Agreement”) and the LLC Agreement with Liberty Broadband and A/N. As of the closing of the Merger Agreement and the Contribution Agreement ondated May 18, 2016, the Stockholders Agreement replaced Legacy Charter’s existing stockholders agreement with Liberty Broadband, dated September 29, 2014, and superseded the amended and restated stockholders agreement among Legacy Charter, Charter, Liberty Broadband and A/N, dated March 31, 2015.

Under the terms of the Stockholders Agreement,23, 2015, the number of Charter’s directors is fixed at 13, and includes its CEO. Upon the closing of the Bright House Transaction, twoTwo designees selected by A/N becameare members of the board of directors of Charter and three designees selected by Liberty Broadband continued asare 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 the CompanyCharter (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


16

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)


directors and one designee of each of A/N and Liberty Broadband. A/N and Liberty Broadband also have certain other committee designation and other governance rights. Upon the closing of the Bright House Transaction, Mr. Thomas Rutledge, the Company’s CEO, becameis the chairman of the board of Charter.


In December 2016,2017, Charter and A/N entered into aan amendment to the letter agreement (the "Letter Agreement"“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 once Charter or Charter Holdings have repurchased shares of Class A common stock or Charter Holdings common units from A/N and its affiliates for an aggregate purchase price of $537 million which threshold has been reached.basis.


The Company is aware that Dr. John Malone, a director emeritus of Charter and Chairman of the board of directors and holder of 48.8% of voting interest in Liberty Broadband, may be deemed to have a 37.9%40.9% voting interest in Liberty InteractiveQurate Retail, Inc. ("Qurate") and is Chairman ofon the board of directors an executive officer position, of Liberty Interactive. Liberty InteractiveQurate. Qurate wholly owns 38.2% of the common stock of HSN, Inc. (“HSN”) and has the right to elect 20% of the board members of HSN. Liberty Interactive wholly owns QVC, Inc. (“QVC”). The Company has programming relationships with HSN and QVC which pre-date the transaction with Liberty Media Corporation.QVC. For each of the three and nine months ended September 30, 2017, March 31, 2020 and 2019,

15

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)

the Company recorded paymentsrevenue in aggregate of approximately $17$12 million and $50 million, respectively, and for the three and nine months ended September 30, 2016, the Company recorded payments in aggregate of approximately $18 million and $33 million, respectively, from HSN and QVC as part of channel carriage fees and revenue sharing arrangements for home shopping sales made to customers in the Company’s footprint.


Dr. Malone and Mr. Steven Miron, each a member of Charter’s board of directors, also serve on the board of directors of Discovery Communications, Inc., (“Discovery”) and the. The Company is aware that Dr. Malone owns 5.1% in1.2% of the aggregateseries 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 28.5%27.9% voting interest in Discovery for the election of directors. The Company is aware that Advance/Newhouse Programming Partnership (“A/N PP”), an affiliate of A/N and inof which Mr. Miron is the CEO, owns 100% of the Series AA-1 preferred stock of Discovery and 100% of the Series CC-1 preferred stock of Discovery representing approximately 34.6%and has a 23.9% voting interest for matters other than the election of the outstanding equity of Discovery’s stock, on an as-converted basis.directors. A/N PP also has the right to appoint three directors out of a total of eleventwelve directors to Discovery’s board to be elected by the holders of Discovery’s Series A preferred stock. In addition, Dr. Malone is a member of the board of directors of Lions Gate Entertainment Corp. ("Lions Gate", parent company of Starz, Inc.) and owns approximately 5.9% in the aggregate of the common stock of Lions Gate and has 8.1% of the voting power, pursuant to his ownership of Lions Gate Class A voting shares.board. The Company purchases programming from both Discovery and Lions Gate pursuant to agreements entered into prior to Dr. Malone and Mr. Miron joining Charter’s board of directors.Discovery. Based on publicly available information, the Company does not believe that either Discovery or Lions Gate would currently be considered a related parties.party. The amountsamount paid in the aggregate to Discovery and Lions Gate representrepresents less than 3%2% of total operating costs and expenses for the three and nine months ended September 30, 2017March 31, 2020 and 2016.2019.


Equity Investments

The Company and its parent companies have agreements with certain equity-methodequity investees pursuant to which the Company has made or received related party transaction payments. The Company and its parent companies recorded payments to equity-methodequity investees totaling $62$63 million and $208$86 million during the three and nine months ended September 30, 2017, respectively,March 31, 2020 and $67 million and $108 million during the three and nine months ended September 30, 2016, respectively. The Company recorded advertising revenues from transactions with equity-method investees totaling $3 million and $8 million during the three and nine months ended September 30, 2017, respectively, and $3 million and $4 million during the three and nine months ended September 30, 2016,2019, respectively.


13.17.    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 betweeninvolving Charter, TWC, A/N, and Liberty Broadband announced by Charter on May 26, 2015. The lawsuit, nameswhich named as defendants Liberty Broadband, Legacy Charter theand its board of directors, of Charter, and Charter. Plaintiff alleged that the Liberty Transactions improperly benefittransactions 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 shareholders, and that Charter issued a false and misleading proxy statement in connection withstockholders. The lawsuit has proceeded to the Transactions and the Liberty Transactions.  Plaintiff requested, among other things, that the Delaware Court of Chancery enjoin the September 21, 2015 special meeting of Charter stockholders at which Charter stockholders were asked to vote on the Transactions and the Liberty Transactions until the defendants disclosed certain information relating to Charter, the Transactions


17

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)


and the Liberty Transactions. The disclosures demanded by the plaintiff included (i) certain unlevered free cash flow projections for Charter and (ii) a Form of Proxy and Right of First Refusal Agreement (“Proxy”) by and among Liberty Broadband, A/N, Legacy Charter and Charter, which was referenced in the description of the Second Amended and Restated Stockholders Agreement, dated May 23, 2015, among Legacy Charter, Charter, Liberty Broadband and A/N. On September 9, 2015, Charter issued supplemental disclosures containing unlevered free cash flow projections for Charter. In return, the plaintiff agreed its disclosure claims were moot and withdrew its application to enjoin the Charter stockholder vote on the Transactions and the Liberty Transactions. Charter filed a motion to dismiss this litigation and on May 31, 2017, the court issued an opinion, concluding a number of issues but reserving ruling on Charter’s motion until further briefing can be done regarding whether plaintiff’s claims are direct or derivative. The parties are presently providing the additional briefing that the court seeks.discovery phase. Charter denies any liability, believes that it has substantial defenses, and intends tois vigorously defenddefending this suit.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 Legacy 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 Legacy TWC was initiated in February 2012. Charter is cooperating with these investigations. While the Company is unable to predict the outcome of these investigations, it does not expect that the outcome will have a material effect on its operations, financial condition, or cash flows.


On December 19, 2011, Sprint Communications Company L.P. (“Sprint”) filed a complaint in the U.S.United States District Court for the District of Kansas alleging that Legacy TWC infringed 12certain U.S. patents purportedly relating to Voice over Internet Protocol (“VoIP”) services. OverAt the course of the litigation Sprint dismissed its claims relating to five of the asserted patents, and shortly before trial, Sprint dropped its claims with respect to two additional patents.  A trial on the remaining five patents began on February 13, 2017.  On March 3, 2017 the jury returned a verdict of $140 million against Legacy TWC and further concluded that Legacy TWC had willfully infringed Sprint’s patents. The court subsequently declined to enhance the damage award as a result of the purported willful infringement. On May 30, 2017, the courtinfringement and awarded Sprint an additional $6 million, representing pre-judgment interest on the damages award. On June 28, 2017,The Company has now paid the verdict, interest and costs in full. The Company filed its notice of appeal with the United States Court of Appeals for the Federal Circuit. In addition to its appeal, the Company will continuecontinues to pursue indemnity from one of its vendors.vendors and has 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 impactultimate outcomes of the verdict was reflected inpursuit of indemnity against the adjustment to net current liabilities as described in Note 2.Company’s vendor and the TC Tech litigation cannot be predicted. The Company does not expect that the outcome of thisits indemnity claim nor the outcome of the TC Tech litigation will have a material adverse effect on its operations or financial condition.  The ultimate outcome of this litigation or the pursuit of indemnity against the Company’s vendor cannot be predicted.
 
On October 23, 2015, the New York Office of the Attorney General (the “NY AG”) began an investigation of Legacy TWC's advertised Internet speedsSprint filed a second patent suit against Charter and other Internet product advertising. On February 1,Bright House Networks, LLC on December 2, 2017 the NY AG filed suit in the SupremeUnited States District Court for the StateDistrict of New York allegingDelaware. 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 Legacy TWC's advertisingCharter misappropriated trade secrets from Sprint years ago through employees hired by Bright

16

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)

House. Sprint asserts that the alleged trade secrets relate to the VoIP business of Internet speeds was falseCharter and misleading.Bright House. Charter has removed this case to the United States District Court for the District of Kansas.

Sprint filed a third 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 suit seeks restitution and injunctive relief. On May 26, 2017,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.

While the Company movedis vigorously defending these suits and is unable to dismisspredict the NY AG’s complaint. The Company intends to defend itself vigorously. However, no assurances can be made that such defenses would ultimately be successful. At this time,outcome of the Sprint lawsuits, the Company does not expect that the outcome of this litigation will have a material adverse effect on its operations, financial condition, or cash flows.


TheIn addition to the Sprint litigation described above, the Company and its parent companies are defendants or co-defendants in several additional lawsuits involving alleged infringement of various patentsintellectual property relating to various aspects of their 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, rights, 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 patentsintellectual property at issue. While the Company believes the lawsuits are without merit and intends to defend the actions vigorously, no assurance can be given that any adverse outcome would not be material to the Company’s consolidated financial condition, results of operations, or liquidity. The Company cannot predict the outcome of any such claims nor can it reasonably estimate a range of possible loss.


The Company and its parent companies are party to other lawsuits, claims and regulatory inquiries that arise in the ordinary course of conducting their business, including lawsuits claiming violation of wage and hour laws and breach of contract by vendors, including by one of its programmers.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


18

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)


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.


14.    Stock Compensation Plans

Charter’s 2009 Stock Incentive Plan provides for grants of nonqualified stock options, incentive stock options, stock appreciation rights, dividend equivalent rights, performance units and performance shares, share awards, phantom stock, restricted stock units and restricted stock.  Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting services for the Company, are eligible for grants under the 2009 Stock Incentive Plan.

Charter granted the following equity awards for the periods presented after applying the parent company merger ratio as a result of the Transactions, as applicable.

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Stock options20,900
 275,400
 1,167,100
 5,980,800
Restricted stock—
 400
 9,500
 10,400
Restricted stock units5,100
 39,300
 283,000
 890,700

Charter stock options and restricted stock units cliff vest upon the three year anniversary of each grant. Certain stock options and restricted stock units vest based on achievement of stock price hurdles. Stock options generally expire ten years from the grant date and restricted stock units have no voting rights. Restricted stock generally vests one year from the date of grant. Legacy TWC restricted stock units that were converted into Charter restricted stock units generally vest 50% on each of the third and fourth anniversary of the grant date. Legacy TWC stock options that were converted into Charter stock options vest ratably over a four-year period and expire ten years from the grant date.

As of September 30, 2017, total unrecognized compensation remaining to be recognized in future periods totaled $242 million for stock options, $2 million for restricted stock and $209 million for restricted stock units and the weighted average period over which they are expected to be recognized is three years for stock options, one year for restricted stock and two years for restricted stock units.

The Company recorded $64 million and $198 million of stock compensation expense for the three and nine months ended September 30, 2017, respectively and $81 million and $168 million for the three and nine months ended September 30, 2016, respectively, which is included in operating costs and expenses. The Company also recorded $6 million and $43 million of expense for the three and nine months ended September 30, 2017, respectively, and $57 million and $202 million for the three and nine months ended September 30, 2016, respectively, related to accelerated vesting of equity awards of terminated employees which is recorded in merger and restructuring costs.

15.18.    Employee Benefit Plans


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



19

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)


The components of net periodic pension cost (benefit) for the three and nine months ended September 30, 2017 and 2016 consisted of the following:

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Service cost$—
 $51
 $—
 $86
Interest cost33
 34
 101
 55
Expected return on plan assets(46) (47) (140) (70)
Pension curtailment gain—
 —
 —
 (675)
Remeasurement loss, net30
 —
 30
 157
Net periodic pension cost (benefit)$17
 $38
 $(9) $(447)

The service cost component of net periodic pension cost (benefit) is recorded in operating costs and expenses in the consolidated statements of operations while the remaining components are recorded in other pension benefits (costs). During the three and nine months ended September 30, 2017, settlements for lump-sum distributions to qualified and nonqualified 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 September 30, 2017 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 $30 million remeasurement loss recorded during the three and nine months ended September 30, 2017 was primarily driven by the adoption of the revised lump sum conversion mortality tables published by the Internal Revenue Service effective January 1, 2018, and the effects of a decrease of the discount rate from 4.20% at December 31, 2016 to 3.88% at September 30, 2017. The effects of these changes were partially offset by a gain to record pension assets to fair value at September 30, 2017. The expected long-term rate of return on plan assets remains at 6.50%.

The $675 million pension curtailment gain and $157 million net remeasurement loss recognized during the nine months ended September 30, 2016 resulted from an amendment to the plans made subsequent to the TWC Transaction. During the second quarter of 2016, the Company amended the pension plans to freeze future benefit accruals to current active plan participants, driving the recognition of the pension curtailment gain, as no No future compensation increases or future service will be credited to participants of the pension plans. Upon announcement and approvalplans given the frozen nature of the plan amendment,plans.

The components of net periodic pension benefit (costs) for the assumptions underlying thethree months ended March 31, 2020 and 2019 are recorded in other pension liability and pension asset values were reassessed utilizing remeasurement date assumptions, resultingbenefits, net in the net remeasurement loss.consolidated statements of operations and consisted of the following:


Three Months Ended March 31,
20202019
Interest cost$(28) $(32) 
Expected return on plan assets38  41  
Net periodic pension benefits$10  $9  

The Company made no cash contributions to the qualified pension plans during the three and nine months ended September 30, 2017March 31, 2020 and 2016;2019; 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

17

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)

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 20172020 to the extent benefits are paid.


16.19.    Recently Issued Accounting Standards

Accounting Standards Adopted January 1, 2020

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

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be assessed for impairment under the current expected credit loss model rather than an incurred loss model. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount.  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 arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. The Company adopted 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 2019-12 will be effective for interim and annual periods beginning after December 15, 2020. Early adoption is permitted. The Company elected to early adopt ASU 2019-12 on January 1, 2020. The adoption of ASU 2019-12 did not have a material impact on the Company's consolidated financial statements.

20.    Consolidating Schedules


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

Condensed consolidating financial statements as of September 30, 2017 and December 31, 2016 and for the nine months ended September 30, 2017 and 2016 follow.




2018


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



Comprehensive income equaled consolidated net income for the three months ended March 31, 2020 and 2019. Condensed consolidating financial statements as of March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and 2019 follow.

CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Balance Sheets
As of March 31, 2020
Guarantor Subsidiaries
CCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCCO Holdings Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$200  $2,460  $—  $2,660  
Accounts receivable, net—  2,057  —  2,057  
Receivables from related party41  —  (41) —  
Prepaid expenses and other current assets—  699  —  699  
Total current assets241  5,216  (41) 5,416  
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net—  33,377  —  33,377  
Customer relationships, net—  6,955  —  6,955  
Franchises—  67,322  —  67,322  
Goodwill—  29,554  —  29,554  
Total investment in cable properties, net—  137,208  —  137,208  
INVESTMENT IN SUBSIDIARIES76,925  —  (76,925) —  
LOANS RECEIVABLE – RELATED PARTY567  —  (567) —  
OTHER NONCURRENT ASSETS—  2,464  —  2,464  
Total assets$77,733  $144,888  $(77,533) $145,088  
LIABILITIES AND MEMBER’S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities$314  $7,314  $—  $7,628  
Payables to related party—  202  (41) 161  
Current portion of long-term debt2,198  2,707  —  4,905  
Total current liabilities2,512  10,223  (41) 12,694  
LONG-TERM DEBT22,064  52,723  —  74,787  
LOANS PAYABLE – RELATED PARTY—  1,572  (567) 1,005  
DEFERRED INCOME TAXES—  55  —  55  
OTHER LONG-TERM LIABILITIES—  3,368  —  3,368  
MEMBER’S EQUITY
Controlling interest53,157  76,925  (76,925) 53,157  
Noncontrolling interests—  22  —  22  
Total member’s equity53,157  76,947  (76,925) 53,179  
Total liabilities and member’s equity$77,733  $144,888  $(77,533) $145,088  


CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Balance Sheets
As of September 30, 2017
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
ASSETS       
CURRENT ASSETS:       
Cash and cash equivalents$—
 $1,974
 $—
 $1,974
Accounts receivable, net—
 1,573
 —
 1,573
Receivables from related party51
 —
 (51) —
Prepaid expenses and other current assets—
 275
 —
 275
Total current assets51
 3,822
 (51) 3,822
        
INVESTMENT IN CABLE PROPERTIES:       
Property, plant and equipment, net—
 33,066
 —
 33,066
Customer relationships, net—
 12,589
 —
 12,589
Franchises—
 67,316
 —
 67,316
Goodwill—
 29,554
 —
 29,554
Total investment in cable properties, net—
 142,525
 —
 142,525
        
INVESTMENT IN SUBSIDIARIES85,011
 —
 (85,011) —
LOANS RECEIVABLE – RELATED PARTY511
 —
 (511) —
OTHER NONCURRENT ASSETS—
 1,115
 —
 1,115
        
Total assets$85,573
 $147,462
 $(85,573) $147,462
        
LIABILITIES AND MEMBER’S EQUITY       
CURRENT LIABILITIES:       
Accounts payable and accrued liabilities$339
 $7,164
 $—
 $7,503
Payables to related party—
 687
 (51) 636
Current portion of long-term debt—
 2,068
 —
 2,068
Total current liabilities339
 9,919
 (51) 10,207
        
LONG-TERM DEBT17,231
 48,833
 —
 66,064
LOANS PAYABLE – RELATED PARTY—
 1,329
 (511) 818
DEFERRED INCOME TAXES—
 39
 —
 39
OTHER LONG-TERM LIABILITIES—
 2,307
 —
 2,307
        
MEMBER’S EQUITY       
Controlling interest68,003
 85,011
 (85,011) 68,003
Noncontrolling interests—
 24
 —
 24
Total member’s equity68,003
 85,035
 (85,011) 68,027
        
Total liabilities and member’s equity$85,573
 $147,462
 $(85,573) $147,462
19



21


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Balance Sheets
As of December 31, 2019
Guarantor Subsidiaries
CCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCCO Holdings Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$500  $2,749  $—  $3,249  
Accounts receivable, net—  2,195  —  2,195  
Receivables from related party59  —  (59) —  
Prepaid expenses and other current assets—  711  —  711  
Total current assets559  5,655  (59) 6,155  
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net—  33,908  —  33,908  
Customer relationships, net—  7,453  —  7,453  
Franchises—  67,322  —  67,322  
Goodwill—  29,554  —  29,554  
Total investment in cable properties, net—  138,237  —  138,237  
INVESTMENT IN SUBSIDIARIES76,409  —  (76,409) —  
LOANS RECEIVABLE – RELATED PARTY545  —  (545) —  
OTHER NONCURRENT ASSETS—  2,351  —  2,351  
Total assets$77,513  $146,243  $(77,013) $146,743  
LIABILITIES AND MEMBER’S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities$296  $7,846  $—  $8,142  
Payables to related party—  357  (59) 298  
Current portion of long-term debt—  3,500  —  3,500  
Total current liabilities296  11,703  (59) 11,940  
LONG-TERM DEBT21,951  53,627  —  75,578  
LOANS PAYABLE – RELATED PARTY—  1,504  (545) 959  
DEFERRED INCOME TAXES—  55  —  55  
OTHER LONG-TERM LIABILITIES—  2,922  —  2,922  
MEMBER’S EQUITY
Controlling interest55,266  76,409  (76,409) 55,266  
Noncontrolling interests—  23  —  23  
Total member’s equity55,266  76,432  (76,409) 55,289  
Total liabilities and member’s equity$77,513  $146,243  $(77,013) $146,743  


CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Balance Sheets
As of December 31, 2016
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
ASSETS       
CURRENT ASSETS:       
Cash and cash equivalents$—
 $1,324
 $—
 $1,324
Accounts receivable, net—
 1,387
 —
 1,387
Receivables from related party62
 —
 (62) —
Prepaid expenses and other current assets—
 300
 —
 300
Total current assets62
 3,011
 (62) 3,011
        
INVESTMENT IN CABLE PROPERTIES:       
Property, plant and equipment, net—
 32,718
 —
 32,718
Customer relationships, net—
 14,608
 —
 14,608
Franchises—
 67,316
 —
 67,316
Goodwill—
 29,509
 —
 29,509
Total investment in cable properties, net—
 144,151
 —
 144,151
        
INVESTMENT IN SUBSIDIARIES88,760
 —
 (88,760) —
LOANS RECEIVABLE – RELATED PARTY494
 —
 (494) —
OTHER NONCURRENT ASSETS—
 1,157
 —
 1,157
        
Total assets$89,316
 $148,319
 $(89,316) $148,319
        
LIABILITIES AND MEMBER’S EQUITY       
CURRENT LIABILITIES:       
Accounts payable and accrued liabilities$219
 $6,678
 $—
 $6,897
Payables to related party—
 683
 (62) 621
Current portion of long-term debt—
 2,028
 —
 2,028
Total current liabilities219
 9,389
 (62) 9,546
        
LONG-TERM DEBT13,259
 46,460
 —
 59,719
LOANS PAYABLE – RELATED PARTY—
 1,134
 (494) 640
DEFERRED INCOME TAXES—
 25
 —
 25
OTHER LONG-TERM LIABILITIES—
 2,526
 —
 2,526
        
MEMBER’S EQUITY       
Controlling interest75,838
 88,760
 (88,760) 75,838
Noncontrolling interests—
 25
 —
 25
Total member’s equity75,838
 88,785
 (88,760) 75,863
        
Total liabilities and member’s equity$89,316
 $148,319
 $(89,316) $148,319
20



22


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)





CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Statements of Operations
For the three months ended March 31, 2019
Guarantor Subsidiaries
CCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCCO Holdings Consolidated
REVENUES$—  $11,736  $—  $11,736  
COSTS AND EXPENSES:
Operating costs and expenses (exclusive of items shown separately below)—  7,452  —  7,452  
Depreciation and amortization—  2,493  —  2,493  
Other operating expense, net—  10  —  10  
—  9,955  —  9,955  
Income from operations—  1,781  —  1,781  
OTHER INCOME (EXPENSES):
Interest expense, net(297) (695) —  (992) 
Loss on extinguishment of debt(27) —  —  (27) 
Loss on financial instruments, net—  (318) —  (318) 
Other pension benefits, net—  10  —  10  
Other income, net—  11  —  11  
Equity in income of subsidiaries783  —  (783) —  
459  (992) (783) (1,316) 
Income before income taxes459  789  (783) 465  
Income tax expense—  (6) —  (6) 
Consolidated net income$459  $783  $(783) $459  


CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Statements of Operations
For the nine months ended September 30, 2017
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
REVENUES$—
 $30,979
 $—
 $30,979
        
COSTS AND EXPENSES:       
Operating costs and expenses (exclusive of items shown separately below)—
 19,871
 —
 19,871
Depreciation and amortization—
 7,839
 —
 7,839
Other operating expenses, net—
 374
 —
 374
 —
 28,084
 —
 28,084
Income from operations—
 2,895
 —
 2,895
        
OTHER INCOME (EXPENSES):       
Interest expense, net(631) (1,637) —
 (2,268)
Loss on extinguishment of debt(33) (2) —
 (35)
Loss on financial instruments, net—
 (15) —
 (15)
Other pension benefits—
 9
 —
 9
Other expense, net—
 (2) —
 (2)
Equity in income of subsidiaries1,212
 —
 (1,212) —
 548
 (1,647) (1,212) (2,311)
        
Income before income taxes548
 1,248
 (1,212) 584
INCOME TAX EXPENSE—
 (35) —
 (35)
Consolidated net income548
 1,213
 (1,212) 549
Less: Net income attributable to noncontrolling interests—
 (1) —
 (1)
Net income$548
 $1,212
 $(1,212) $548
21



23


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)





CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Statements of Operations
For the three months ended March 31, 2019
Guarantor Subsidiaries
CCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCCO Holdings Consolidated
REVENUES$—  $11,203  $—  $11,203  
COSTS AND EXPENSES:
Operating costs and expenses (exclusive of items shown separately below)—  7,242  —  7,242  
Depreciation and amortization—  2,547  —  2,547  
Other operating income, net—  (4) —  (4) 
—  9,785  —  9,785  
Income from operations—  1,418  —  1,418  
OTHER INCOME (EXPENSES):
Interest expense, net(254) (683) —  (937) 
Gain on financial instruments, net—  37  —  37  
Other pension benefits, net—  9  —  9  
Other expense, net—  (110) —  (110) 
Equity in income of subsidiaries604  —  (604) —  
350  (747) (604) (1,001) 
Income before income taxes350  671  (604) 417  
Income tax expense—  (67) —  (67) 
Consolidated net income$350  $604  $(604) $350  


CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Statements of Operations
For the nine months ended September 30, 2016
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
REVENUES$—
 $18,728
 $—
 $18,728
        
COSTS AND EXPENSES:       
Operating costs and expenses (exclusive of items shown separately below)—
 12,173
 —
 12,173
Depreciation and amortization—
 4,409
 —
 4,409
Other operating expenses, net—
 513
 —
 513
 —
 17,095
 —
 17,095
Income (loss) from operations—
 1,633
 —
 1,633
        
OTHER INCOME (EXPENSES):       
Interest expense, net(539) (852) —
 (1,391)
Loss on extinguishment of debt(110) —
 —
 (110)
Gain on financial instruments, net—
 16
 —
 16
Other pension benefits—
 533
 —
 533
Other expense, net—
 (2) —
 (2)
Equity in income of subsidiaries1,327
 —
 (1,327) —
 678
 (305) (1,327) (954)
        
Incomebefore income taxes678
 1,328
 (1,327) 679
INCOME TAX BENEFIT—
 —
 —
 —
Consolidated net income678
 1,328
 (1,327) 679
Less: Net income attributable to noncontrolling interests—
 (1) —
 (1)
Net income$678
 $1,327
 $(1,327) $678
22



24


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Statements of Cash Flows
For the three months ended March 31, 2020
Guarantor Subsidiaries
CCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCCO Holdings Consolidated
NET CASH FLOWS FROM OPERATING ACTIVITIES$(276) $3,466  $—  $3,190  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment—  (1,461) —  (1,461) 
Change in accrued expenses related to capital expenditures—  (388) —  (388) 
Contributions to subsidiaries(4,273) —  4,273  —  
Distributions from subsidiaries4,629  —  (4,629) —  
Other, net—  39  —  39  
Net cash flows from investing activities356  (1,810) (356) (1,810) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt4,177  162  —  4,339  
Repayments of long-term debt(1,858) (1,731) —  (3,589) 
Borrowings of loans payable - related parties—  5  —  5  
Payments for debt issuance costs(41) —  —  (41) 
Distributions to noncontrolling interest—  (1) —  (1) 
Contributions from parent27  4,273  (4,273) 27  
Distributions to parent(2,685) (4,629) 4,629  (2,685) 
Other, net—  (24) —  (24) 
Net cash flows from financing activities(380) (1,945) 356  (1,969) 
NET DECREASE IN CASH AND CASH EQUIVALENTS(300) (289) —  (589) 
CASH AND CASH EQUIVALENTS, beginning of period500  2,749  —  3,249  
CASH AND CASH EQUIVALENTS, end of period$200  $2,460  $—  $2,660  



CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Statements of Comprehensive Income
For the nine months ended September 30, 2017
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
Consolidated net income$548
 $1,213
 $(1,212) $549
Net impact of interest rate derivative instruments4
 4
 (4) 4
Foreign currency translation adjustment1
 1
 (1) 1
Consolidated comprehensive income553
 1,218
 (1,217) 554
Less: Comprehensive income attributable to noncontrolling interests—
 (1) —
 (1)
Comprehensive income$553
 $1,217
 $(1,217) $553
23

CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Statements of Comprehensive Income
For the nine months ended September 30, 2016
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
Consolidated net income$678
 $1,328
 $(1,327) $679
Net impact of interest rate derivative instruments6
 6
 (6) 6
Foreign currency translation adjustment(1) (1) 1
 (1)
Consolidated comprehensive income$683
 $1,333
 $(1,332) $684
Less: Comprehensive income attributable to noncontrolling interests—
 (1) —
 (1)
Comprehensive income$683
 $1,332
 $(1,332) $683






25


CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Statements of Cash Flows
For the three months ended March 31, 2019
Guarantor Subsidiaries
CCO HoldingsCharter Operating and Restricted SubsidiariesEliminationsCCO Holdings Consolidated
NET CASH FLOWS FROM OPERATING ACTIVITIES$(226) $2,913  $—  $2,687  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment—  (1,665) —  (1,665) 
Change in accrued expenses related to capital expenditures—  (376) —  (376) 
Contribution to subsidiaries(9) —  9  —  
Distributions from subsidiaries1,266  —  (1,266) —  
Other, net—  67  —  67  
Net cash flows from investing activities1,257  (1,974) (1,257) (1,974) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt—  6,884  —  6,884  
Repayments of long-term debt—  (5,572) —  (5,572) 
Payments for debt issuance costs—  (25) —  (25) 
Distributions to noncontrolling interest—  (1) —  (1) 
Contributions from parent9  9  (9) 9  
Distributions to parent(1,040) (1,266) 1,266  (1,040) 
Other, net—  (4) —  (4) 
Net cash flows from financing activities(1,031) 25  1,257  251  
NET INCREASE IN CASH AND CASH EQUIVALENTS—  964  —  964  
CASH AND CASH EQUIVALENTS, beginning of period—  300  —  300  
CASH AND CASH EQUIVALENTS, end of period$—  $1,264  $—  $1,264  


24
CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Statements of Cash Flows
For the nine months ended September 30, 2017
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
NET CASH FLOWS FROM OPERATING ACTIVITIES$(504) $9,025
 $—
 $8,521
        
CASH FLOWS FROM INVESTING ACTIVITIES:       
Purchases of property, plant and equipment—
 (6,096) —
 (6,096)
Change in accrued expenses related to capital expenditures—
 276
 —
 276
Contributions to subsidiaries(693) —
 693
 —
Distributions from subsidiaries5,912
 —
 (5,912) —
Other, net—
 (63) —
 (63)
Net cash flows from investing activities5,219
 (5,883) (5,219) (5,883)
        
CASH FLOWS FROM FINANCING ACTIVITIES:       
Borrowings of long-term debt4,747
 7,368
 —
 12,115
Repayments of long-term debt(775) (4,759) —
 (5,534)
Borrowings loans payable - related parties—
 163
 —
 163
Payments for debt issuance costs(46) (37) —
 (83)
Contributions from parent—
 693
 (693) —
Distributions to parent(8,641) (5,912) 5,912
 (8,641)
Other, net—
 (8) —
 (8)
Net cash flows from financing activities(4,715) (2,492) 5,219
 (1,988)
        
NET INCREASE IN CASH AND CASH EQUIVALENTS—
 650
 —
 650
CASH AND CASH EQUIVALENTS, beginning of period—
 1,324
 —
 1,324
        
CASH AND CASH EQUIVALENTS, end of period$—
 $1,974
 $—
 $1,974


26

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)



CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Statements of Cash Flows
For the nine months ended September 30, 2016
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
NET CASH FLOWS FROM OPERATING ACTIVITIES$(533) $6,071
 $—
 $5,538
        
CASH FLOWS FROM INVESTING ACTIVITIES:       
Purchases of property, plant and equipment—
 (3,437) —
 (3,437)
Change in accrued expenses related to capital expenditures—
 86
 —
 86
Purchases of cable systems, net of cash acquired—
 (7) —
 (7)
Contribution to subsidiary(437) —
 437
 —
Distributions from subsidiaries3,455
 —
 (3,455) —
Other, net—
 (8) —
 (8)
Net cash flows from investing activities3,018
 (3,366) (3,018) (3,366)
        
CASH FLOWS FROM FINANCING ACTIVITIES:       
Borrowings of long-term debt3,201
 2,796
 —
 5,997
Repayments of long-term debt(2,937) (1,183) —
 (4,120)
Repayments loans payable - related parties(71) (182) —
 (253)
Payments for debt issuance costs(73) (210) —
 (283)
Proceeds from termination of interest rate derivatives—
 88
 —
 88
Contributions from parent478
 437
 (437) 478
Distributions to parent(3,084) (3,455) 3,455
 (3,084)
Other, net1
 (5) —
 (4)
Net cash flows from financing activities(2,485) (1,714) 3,018
 (1,181)
        
NET INCREASE IN CASH AND CASH EQUIVALENTS—
 991
 —
 991
CASH AND CASH EQUIVALENTS, beginning of period—
 5
 —
 5
        
CASH AND CASH EQUIVALENTS, end of period$—
 $996
 $—
 $996


27

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)


17.    Recently Issued Accounting Standards

Accounting Standards Adopted January 1, 2017

In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. The new standard (1) requires all excess tax benefits and deficiencies to be recognized as income tax expense or benefit in the income statement in the period in which they occur regardless of whether the benefit reduces taxes payable in the current period, (2) requires classification of excess tax benefits as an operating activity on the statements of cash flows, (3) allows an entity to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur and (4) causes the threshold under which employee share-based awards partially settled in cash can qualify for equity classification to increase to the maximum statutory tax rates in the applicable jurisdiction. ASU 2016-09 will be effective for interim and annual periods after December 15, 2016 (January 1, 2017 for the Company). The new standard generally requires a modified retrospective transition through a cumulative-effect adjustment as of the beginning of the period of adoption, with certain provisions requiring either a prospective or retrospective transition. The Company adopted ASU 2016-09 on January 1, 2017. On January 1, 2017, the Company also established an accounting policy election to assume zero forfeitures for stock award grants and account for forfeitures when they occur which prospectively impacts stock compensation expense. Other aspects of adoption ASU 2016-09 did not have a material impact to the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU 2017-07"), which requires employers to report the service cost component of net periodic pension cost in the same line item as other compensation costs arising from services rendered during the period. The standard also requires the other components of net periodic cost be presented in the income statement separately from the service cost component and outside of a subtotal of income from operations. ASU 2017-07 will be effective for annual periods beginning after December 15, 2017, and early adoption is permitted. The new standard requires retrospective application and allows a practical expedient that permits an employer to use the amounts disclosed in its pension plan footnote for the prior comparative periods as the estimation basis for applying the retrospective presentation. The Company early adopted ASU 2017-07 on January 1, 2017 and utilized the practical expedient to estimate the impact on the prior comparative period information presented in interim and annual financial statements. The Company previously recorded service cost with other compensation costs in operating costs and expenses in the consolidated statements of operations, and recorded other pension benefits (costs), in other operating expenses, net. Adoption of the standard results in the reclassification of other pension benefits (costs) to other expenses, net (non-operating). Adopting the standard will reduce 2016 income from operations presented for comparative purposes in the 2017 annual financial statements by $899 million with a corresponding decrease to other expenses of $899 million, with no impact to net income. For the three and nine months ended September 30, 2016, the adoption of the standard resulted in reductions of income from operations by $13 million and $533 million, respectively, with corresponding decreases to other expenses, with no impact to net income. ASU 2017-07 does not impact the consolidated balance sheets or statements of cash flows.

Accounting Standards Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP.  The new standard provides a single principles-based, five-step model to be applied to all contracts with customers, which steps are to (1) identify the contract(s) with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when each performance obligation is satisfied. ASU 2014-09 will be effective for interim and annual periods beginning after December 15, 2017 (January 1, 2018 for the Company).  The Company has substantially completed the review of its revenue arrangements and does not currently expect that the adoption of the new standard will have a material impact on the Company’s financial position or results of operations. However, the adoption is anticipated to result in the deferral of residential installation revenues and enterprise commission expenses over a period of time instead of recognized immediately. The adoption is also anticipated to result in the reclassification to operating costs and expenses the amortization of up-front fees paid to market and serve customers who reside in residential multiple dwelling units (“MDUs”) instead of amortized as an intangible to depreciation and amortization expense. The new standard also requires additional disclosures regarding the nature, timing and uncertainty of the Company’s revenue transactions. The Company intends to adopt the provisions of the guidance using a cumulative effect adjustment as of the January 1, 2018 adoption date.



28

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except where indicated)


In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. Lessees are allowed to account for short-term leases (i.e., leases with a term of 12 months or less) off-balance sheet, consistent with current operating lease accounting. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. ASU 2016-02 will be effective for interim and annual periods beginning after December 15, 2018 (January 1, 2019 for the Company). The new standard requires a modified retrospective transition through a cumulative-effect adjustment as of the beginning of the earliest period presented in the financial statements. The Company is currently in the process of evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements including identifying the population of leases, evaluating technology solutions and collecting lease data.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which clarifies how entities should classify cash receipts and cash payments related to eight specific cash flow matters on the statement of cash flows, with the objective of reducing existing diversity in practice. ASU 2016-15 will be effective for interim and annual periods beginning after December 15, 2017 (January 1, 2018 for the Company). Early adoption is permitted. The Company is currently in the process of evaluating the impact that the adoption of ASU 2016-15 will have on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates step two from the goodwill impairment test. Under the new standard, to the extent the carrying amount of a reporting unit exceeds the fair value, the Company will record an impairment charge equal to the difference. The impairment charge recognized should not exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 will be effective for interim and annual periods beginning after December 15, 2019 (January 1, 2020 for the Company). Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The Company is currently in the process of evaluating the impact that the adoption of ASU 2017-04 will have on its consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting ("ASU 2017-09"), which amends the scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. ASU 2017-09 will be applied prospectively to awards modified on or after the effective date. ASU 2017-09 will be effective for interim and annual periods beginning after December 15, 2017 (January 1, 2018 for the Company). Early adoption is permitted. The Company is currently in the process of evaluating the impact that the adoption of ASU 2017-09 will have on its consolidated financial statements.



29


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


General


CCO Holdings, LLC (“CCO Holdings”) is a holding company whose principal assets are the equity interests in its operating subsidiaries. CCO Holdings is a direct subsidiary of CCH I Holdings, LLC (“CCH I”), which is an indirect subsidiary of Charter Communications, Inc. (“Charter”), Charter Communications Holdings, LLC (“Charter Holdings”) and Spectrum Management Holding Company, LLC (“Spectrum Holdings”LLC. All of the outstanding capital stock of CCO Holdings Capital Corp. ("CCO Holdings Capital"). is owned by CCO Holdings. The consolidated financial statements include the accounts of CCO Holdings and all of its subsidiaries where the underlying operations reside. All significant intercompany accounts and transactions among consolidated entities have been eliminated.eliminated


We are the second largesta leading broadband connectivity company and cable operator serving more than 29 million customers in 41 states through its Spectrum brand. Over an advanced communications 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.

Overview

As the COVID-19 pandemic develops and significantly impacts the United States, we have continued to deliver services uninterrupted by the pandemic. Because we have invested significantly in our network and through normal course capacity increases, we expect to be able to continue to respond to the significant increase in network activity from the private and public response to COVID-19. Our front-line service infrastructure in call centers and field operations is experiencing higher service transaction volume and is performing well although we have seen increased wait times for customer calls to our call centers. Much of that increase in activity is being 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 are eligible to receive our Internet service for free for 60 days has generated 119,000 new Internet accounts in March, while new connects for our residential Internet services, when excluding the REO, were also up in March as compared to March 2019. We are also participating in the Federal Communications Commission's ("FCC") Keep Americans Connected pledge, pausing collection efforts and related disconnects for residential and small and medium business customers with COVID-19 related payment challenges. In addition, we have offered a seasonal plan at reduced rates to small and medium business customers that have temporarily closed or because these customers have reduced their service offerings to their own customers ("SMB Seasonal Plan"). 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 a leading broadband communications services company providing video, Internete-learning across our footprint of 41 states, we are focused on promoting the health and voice servicessafety of our employees and customers. We have invested significantly in our self-service infrastructure, and we are seeing an accelerated adoption by customers of our self-installation and digital self-service capabilities.

However, we cannot predict the ultimate impact of COVID-19 on our business, including the depth and duration of the economic impact to approximately 27.0 millionour residential and business customers at September 30, 2017.customers’ ability to pay for our products and services including the impact of extended unemployment benefits and other stimulus packages and what assistance we may provide to our customers. 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).

Although the ultimate impact of the COVID-19 pandemic cannot be predicted, we sellremain 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 online advertising inventorywireline voice customers. With the completion of our all-digital conversion, roll-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.


25

Our Spectrum Mobile service is offered to local, regionalcustomers subscribing to our Internet service and national advertising customersruns on Verizon's mobile network combined with Spectrum WiFi. In March 2020, we launched 5G service offerings and fiber-delivered communications and managed information technology ("IT") solutionswe expect that, along with broader availability of our Spectrum Mobile bring-your-own-device program, to larger enterprise customers.contribute to the growth of our mobile business. We also owncontinue to explore ways to drive even more mobile traffic to our network. We plan to use our WiFi network in conjunction with additional unlicensed, and operate regional sports networkspotentially licensed, spectrum to improve network performance and local sports, newsexpand capacity to offer consumers a superior mobile service at a lower total 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.

We believe Spectrum-branded mobile services will drive higher sales of our core products, create longer customer lives and community channelsincrease profitability and sell security and home management services to the residential marketplace.

The Transactions

On May 18, 2016, the transactions contemplated by the Agreement and Plan of Mergers dated as of May 23, 2015 (the “Merger Agreement”), by and among Time Warner Cable Inc. (“Legacy TWC”), Charter Communications, Inc. prior to the closing of the Merger Agreement (“Legacy Charter”), CCH I, LLC, previously a wholly owned subsidiary of Legacy Charter and certain other subsidiaries of CCH I, LLC were completed (the “TWC Transaction,” and together with the Bright House Transaction described below, the “Transactions”).cash flow over time. As a result of the TWC Transaction, CCH I, LLC became thegrowth costs associated with our new public parent company that holds the operations of the combined companies and was renamed Charter Communications, Inc.

Also, on May 18, 2016, Legacy Charter and Advance/Newhouse Partnership (“A/N”), the former parent of Bright House Networks, LLC (“Legacy Bright House”), completed their previously announced transaction, pursuant to a definitive Contribution Agreement (the “Contribution Agreement”), under which Charter acquired Legacy Bright House (the “Bright House Transaction”). Pursuant to the Bright House Transaction, Charter became the owner of the membership interests in Legacy Bright House and the other assets primarily related to Legacy Bright House (other than certain excluded assets and liabilities and non-operating cash).

In connection with the TWC Transaction, Legacy Charter and Liberty Broadband completed their previously announced transactions pursuant to their investment agreement, in which Liberty Broadband purchased shares of Charter Class A common stock to partially finance the cash portion of the TWC Transaction consideration, and in connection with the Bright House Transaction, Liberty Broadband purchased shares of Charter Class A common stock (the “Liberty Transactions”).

Comcast Wireless Cooperation Agreement

In May 2017, Charter announced an agreement with Comcast Corporation (“Comcast”) to, for one year, explore potential opportunities for operational cooperation in our respective wireless businesses to accelerate and enhance each company’s ability to participate in the national wireless marketplace. Charter and Comcast have each separately activated a mobile virtual network operator (“MVNO”) reseller agreement with Verizon Wireless, and have each agreed to explore working together in a number of potential operational areas in the wireless space, including: creating common operating platforms; technical standards development and harmonization; device forward and reverse logistics; and emerging wireless technology platforms. The efficiencies created are expected to provide more choice, innovative products and competitive prices for customers in each of our respective footprints. Additionally, the companies have agreed to work only together with respect to national mobile network operators, through potential commercial arrangements, including MVNOs and other material transactions in the wireless industry, for a period of one year. We intend to consider and pursue opportunities in the wireless space which may include entering into joint ventures or partnerships with wireless or cable providers which may require significant investment in our wireless business. There is no assurance we will enter into such arrangements or that if we do, that they will be successful.

Overview

Since 2012, Legacy Charter has actively invested in its network and operations and has improved the quality and value of the products and packages that it offers. Through the roll-out of Spectrum pricing and packaging ("SPP") across Legacy Charter, we have simplified our offers and improved our packaging of products, delivering more value to new and existing customers. Further,


30


through the transition of our Legacy Charter markets to our all-digital platform, we increased our offerings to more than 200 HD channels in most of the Legacy Charter markets and offered Internet speeds of at least 60 or 100 Mbps, among other benefits. We believe that this product set combined with improved customer service, as we insource our workforce in our call centers and in our field operations, has led to lower customer churn and longer customer lifetimes.

In September 2016, we began launching SPP to Legacy TWC and Legacy Bright House markets and as of September 30, 2017, we offer SPP in all Legacy TWC and Legacy Bright House markets. In the second half of 2017, we began converting the remaining Legacy TWC and Legacy Bright House analog markets to an all-digital platform. The bulk of this all-digital initiative will take place in 2018. Our corporate organization, as well as our marketing, sales and product development departments, are now centralized. Field operations are managed through eleven regional areas, each designed to represent a combination of designated marketing areas and managed with largely the same set of field employees that were with the three legacy companies prior to completion of the Transactions. Over a multi-year period, Legacy TWC and Legacy Bright House customer care centers will migrate to Legacy Charter's model of using segmented, virtualized, U.S.-based in-house call centers. We are focused on deploying superior products and service with minimal service disruptions as we integrate our information technology and network operations. We expect customer and financial results to trend similarly to Legacy Charter following the implementation of Legacy Charter's operating strategies across the Legacy TWC and Legacy Bright House markets. As a result of implementing our operating strategy across Legacy TWC and Legacy Bright House,line, we cannot be certain that we will be able to grow revenues or maintain our margins at recent historical rates. During the three months ended March 31, 2020 and 2019, our mobile product line increased revenues by $258 million and $140 million, respectively, reduced Adjusted EBITDA by approximately $116 million and $120 million, respectively, and reduced free cash flow by approximately $260 million and $291 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 tablet to customers pursuant to equipment installment plans.


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 March 31,
20202019% Change
Revenues$11,736  $11,203  4.8 %
Adjusted EBITDA$4,374  $4,046  8.1 %
Income from operations$1,781  $1,418  25.6 %
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 % Change 2017 2016 % Change
 Actual
Revenues$10,458
 $10,037
 4.2% $30,979
 $18,728
 65.4%
Adjusted EBITDA$3,817
 $3,628
 5.2% $11,306
 $6,723
 68.2%
Income from operations$909
 $906
 0.3% $2,895
 $1,633
 77.3%

 Nine Months Ended September 30,
 2017 2016  
 Actual Pro forma % Change
Revenues$30,979
 $29,748
 4.1%
Adjusted EBITDA$11,306
 $10,596
 6.7%
Income from operations$2,895
 $2,805
 3.2%


Adjusted EBITDA is defined as consolidated net income plus 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, net and other operating (income) expenses, such as merger and restructuring costs, special charges and gain (loss)(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 and Adjusted EBITDA for the three months ended September 30, 2017March 31, 2020 compared to the corresponding prior period was primarily due to growth in our residential Internet, mobile and commercial businesses,business customers. Adjusted EBITDA and growth for the nine months ended September 30, 2017 compared to the corresponding prior period was primarily due to the Transactions. On a pro forma basis for the nine months ended September 30, 2017, assuming the Transactions occurred as of January 1, 2015, total revenueincome from operations growth was primarily due toimpacted by growth in our Internetrevenue and commercial businesses offset by an early contract termination benefit at Legacy TWC and Legacy Bright House in 2016 and lower advertising sales revenue due to a decrease in political and local advertising. In addition to the items noted above, Adjusted EBITDA growth on a pro forma basis was affected by increases in programmingoperating costs and transition costs offset by decreases in costs to service customersexpenses, primarily mobile, marketing and other operating expenses.programming. Income from operations on a pro forma basis was additionallyalso affected by an increasea decrease in depreciation and amortization offset by a decrease in merger and restructuring costs.expense.

On a pro forma basis, income from operations for the nine months ended September 30, 2016 has been reduced from what was previously reported by $549 million to reflect the adoption of Accounting Standards Update No. 2017-07, Improving the




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Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU 2017-07"). For more information, see Note 17 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

We incurred the following transition costs in connection with the Transactions (in millions).

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Operating expenses$23
 $32
 $104
 $78
Other operating expenses$67
 $205
 $293
 $513
Capital expenditures$125
 $109
 $287
 $273

Amounts included in transition operating expenses and transition capital expenditures represent incremental costs incurred to integrate the Legacy TWC and Legacy Bright House operations and to bring the three companies’ systems and processes into a uniform operating structure.  Costs are incremental and would not be incurred absent the integration.  Other operating expenses associated with the Transactions represent merger and restructuring costs and include advisory, legal and accounting fees, employee retention costs, employee termination costs and other exit costs. 

All customer statistics as of September 30, 2017 include the operations of Legacy TWC, Legacy Bright House and Legacy Charter, each of which is based on individual legacy company reporting methodology. These methodologies differ and their differences may be material. Statistical reporting will be conformed over time to a single reporting methodology. The following table summarizes our customer statistics for Internet, video, Internetmobile and voice as of September 30, 2017March 31, 2020 and 20162019 (in thousands except per customer data and footnotes).


Approximate as of
March 31,
2020 (a)
2019 (a)
Customer Relationships (b)
Residential27,745  26,591  
Small and Medium Business1,976  1,863  
Total Customer Relationships29,721  28,454  
Residential Primary Service Units (“PSU”)
Internet25,471  24,023  
Video15,550  15,952  
Voice9,360  10,015  
Monthly Residential Revenue per Residential Customer (c)
$112.73  $112.47  
Small and Medium Business PSUs
Internet1,775  1,664  
Video524  509  
Voice1,162  1,072  
Monthly Small and Medium Business Revenue per Customer (d)
$168.83  $170.64  
Mobile Lines1,372  310  
Enterprise PSUs (e)
269  253  


(a)We calculate the aging of customer accounts based on the monthly billing cycle for each account. On that basis, as of March 31, 2020 and 2019, customers include approximately 140,800 and 171,100 customers, respectively, whose accounts were over 60 days past due, approximately 12,500 and 19,500 customers, respectively, whose accounts were over 90 days past due and approximately 8,200 and 20,800 customers, respectively, whose accounts were over 120 days past due. As detailed in the table below, our customer counts include those customers who connected as part of our Remote Education Offer and those customers who we have not disconnected in our normal timelines associated with our Keep Americans Connected pledge.
(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 customers excludes mobile revenue and customers.
(d)Monthly small and medium business revenue per customer is calculated as total small and medium business quarterly revenue divided by three divided by average small and medium business customer relationships during the respective quarter. Monthly small and medium business revenue per small and medium customer excludes mobile revenue and customers.
(e)Enterprise PSUs represent the aggregate number of fiber service offerings counting each separate service offering at each customer location as an individual PSU.


 Approximate as of
 September 30,
 2017 (a) 2016 (a)(b)
Customer Relationships (c)   
Residential25,470
 24,551
Small and Medium Business1,523
 1,367
Total Customer Relationships26,993
 25,918
    
Residential Primary Service Units (“PSU”)   
Video16,542
 16,887
Internet22,282
 21,017
Voice10,405
 10,288
 49,229
 48,192
    
Monthly Residential Revenue per Residential Customer (d)$110.12
 $109.70
    
Small and Medium Business PSUs   
Video440
 388
Internet1,321
 1,185
Voice881
 751
 2,642
 2,324
    
Monthly Small and Medium Business Revenue per Customer (e)$206.64
 $214.53
    
Enterprise PSUs (f)108
 93
27

(a)We calculate the aging of customer accounts based on the monthly billing cycle for each account. On that basis, as of September 30, 2017 and 2016, customers include approximately 218,300 and 200,900 customers, respectively, whose accounts were over 60 days past due, approximately 20,300 and 15,200 customers, respectively, whose accounts were over 90 days past due, and approximately 12,000 and 8,900 customers, respectively, whose accounts were over 120 days past due.


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(b)In the second quarter of 2017, we conformed the seasonal customer program in the Legacy Bright House footprint to our program. Prior to the plan change, Legacy Bright House customers enrolling in the seasonal plan were charged a one-time fee and counted as customer disconnects, and as new connects, when moving off the seasonal plan. Under our seasonal plan, residential customers pay a reduced monthly fee while the seasonal plan is active and remain reported as customers. Excluding the impact of net customer disconnect activity related to the previous seasonal plan, Legacy Bright House residential customer relationships, video, Internet and voice PSUs at September 30, 2016 would have been higher by approximately 54,000, 48,000, 66,000 and 45,000 respectively.
(c)Customer relationships include the number of customers that receive one or more levels of service, encompassing video, Internet 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 excludes enterprise customer relationships.
(d)Monthly residential revenue per residential customer is calculated as total residential video, Internet and voice quarterly revenue divided by three divided by average residential customer relationships during the respective quarter.
(e)Monthly small and medium business revenue per customer is calculated as total small and medium business quarterly revenue divided by three divided by average small and medium business customer relationships during the respective quarter.
(f)Enterprise PSUs represent the aggregate number of fiber service offerings counting each separate service offering as an individual PSU.

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

Remote Education Offer (a)
Keep Americans Connected (b)
Small and Medium Business Seasonal Plan (c)
Total
Residential
Customer Relationships119  1  n/a  120  
Internet PSUs119  1  n/a  120  
Video PSUs46  
(d)
1  n/a  47  
Voice PSUs34  
(d)
—  n/a  34  
Mobile Lines3  
(d)
—  n/a  3  
Small and Medium Business
Customer Relationshipsn/a  —  5  5  
Internet PSUsn/a  —  4  4  
Video PSUsn/a  —  2  2  
Voice PSUsn/a  —  3  3  
Mobile Linesn/a  —  —  —  

(a)The REO represents residential customers participating in our free 60-day Internet offer available to households with K-12 and/or college students or educators who are not currently Spectrum Internet customers. These residential customers are generally eligible to purchase additional products and services (i.e., video, voice and mobile) at current promotional rates.
(b)As part of our pledge to the FCC, Keep Americans Connected customers represents customers who would have been disconnected by quarter end as a result of non-payment under our normal policies, but were not disconnected and collection efforts paused due to COVID-19 related payment challenges. As of quarter end, approximately 140,000 residential customers had requested protection from disconnection under the pledge of which 1,000 would have been disconnected for non-payment under our normal policies. At the end of April, 36,000 of those 140,000 customers’ outstanding balance is now fully current, and in total nearly 50% have made partial or full payments since entering disconnection protection. However, at the end of April, 67,000 of those 140,000 customers now have past due balances beyond the point of normal disconnection.
(c)Small and Medium Business Seasonal Plan represents small and medium business 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 that connected 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. Approximately 5,000 and 1,000 of the REO customers were current video and voice customers, respectively.

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 20162019 Annual Report on Form 10-K. There have been no material changes from the critical accounting policies described in our Form 10-K.



28

Results of Operations

We completed the Transactions on May 18, 2016 and have included the Legacy TWC and Legacy Bright House operating results since that date. In accordance with U.S. generally accepted accounting principles (“GAAP”), operating results from Legacy TWC and Legacy Bright House prior to the closing of the Transactions have been excluded. For purposes of management’s discussion and analysis, we have given explanations of increases and decreases in our results of operations on an actual basis, as well as on a pro forma basis assuming the Transactions occurred as of January 1, 2015. Due to the size of the Transactions, we believe that providing a discussion of our results of operations on a pro forma basis provides management and investors a more meaningful perspective on our financial and operational performance and trends. The results of operations data on a pro forma basis are provided for illustrative purposes only and are based on available information and assumptions that we believe are reasonable and do not purport to represent what our actual consolidated results of operations would have been had the Transactions occurred as of January 1, 2015, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position.

See Exhibit 99.1 in CCO Holdings' Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2016 filed with the SEC on November 10, 2016 for pro forma financial information for each quarter of 2015 and the first and second quarter of 2016.



33



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


Three Months Ended March 31,
20202019
Revenues$11,736  $11,203  
Costs and Expenses:
Operating costs and expenses (exclusive of items shown separately below)7,452  7,242  
Depreciation and amortization2,493  2,547  
Other operating (income) expenses, net10  (4) 
9,955  9,785  
Income from operations1,781  1,418  
Other Income (Expenses):
Interest expense, net(992) (937) 
Loss on extinguishment of debt(27) —  
Gain (loss) on financial instruments, net(318) 37  
Other pension benefits, net10  9  
Other income (expense), net11  (110) 
(1,316) (1,001) 
Income before income taxes465  417  
Income tax expense(6) (67) 
Consolidated net income$459  $350  
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues$10,458
 $10,037
 $30,979
 $18,728
        
Costs and Expenses:       
Operating costs and expenses (exclusive of items shown separately below)6,705
 6,490
 19,871
 12,173
Depreciation and amortization2,699
 2,435
 7,839
 4,409
Other operating expenses, net145
 206
 374
 513
 9,549
 9,131
 28,084
 17,095
Income from operations909
 906
 2,895
 1,633
        
Other Expenses:       
Interest expense, net(795) (729) (2,268) (1,391)
Loss on extinguishment of debt—
 —
 (35) (110)
Gain (loss) on financial instruments, net17
 71
 (15) 16
Other pension benefits (costs)(17) 13
 9
 533
Other expense, net(2) (2) (2) (2)
 (797) (647) (2,311) (954)
        
Income before income taxes112
 259
 584
 679
Income tax benefit (expense)(6) 7
 (35) —
Consolidated net income106
 266
 549
 679
Less: Net income attributable to noncontrolling interests—
 (1) (1) (1)
        
Net income attributable to CCO Holdings member$106
 $265
 $548
 $678


Revenues.Total revenues grew $421$533 million and $12.3 billion for the three and nine months ended September 30, 2017March 31, 2020 compared to the corresponding periodsperiod in 2016, respectively,2019 primarily due to increases in the number of residential Internet and commercial business customers, price adjustments as well as price adjustmentsan increase in our mobile service offset by a decrease in basic video customers and advertising sales, and in the nine month period due to the Transactions which increased total revenues by approximately $11.4 billion. On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, total revenue growth was 4.1% for the nine months ended September 30, 2017 compared to the corresponding period in 2016.customers.


34


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 March 31,
20202019% Change
Internet$4,407  $4,024  9.5 %
Video4,422  4,384  0.9 %
Voice457  504  (9.4)%
Residential revenue9,286  8,912  4.2 %
Small and medium business996  945  5.4 %
Enterprise622  643  (3.2)%
Commercial revenue1,618  1,588  1.9 %
Advertising sales365  345  5.7 %
Mobile258  140  85.0 %
Other209  218  (4.5)%
$11,736  $11,203  4.8 %


 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 % Change 2017 2016 % Change
 Actual
Video$4,213
 $4,094
 2.9 % $12,416
 $7,869
 57.8%
Internet3,556
 3,206
 10.9 % 10,467
 5,960
 75.6%
Voice611
 728
 (16.1)% 1,955
 1,286
 51.9%
Residential revenue8,380
 8,028
 4.4 % 24,838
 15,115
 64.3%
            
Small and medium business931
 867
 7.4 % 2,755
 1,589
 73.3%
Enterprise553
 508
 8.9 % 1,640
 903
 81.6%
Commercial revenue1,484
 1,375
 8.0 % 4,395
 2,492
 76.3%
            
Advertising sales373
 420
 (11.1)% 1,091
 729
 49.9%
Other221
 214
 3.0 % 655
 392
 66.9%
 $10,458
 $10,037
 4.2 % $30,979
 $18,728
 65.4%
29

 Nine Months Ended September 30,
 2017 2016  
 Actual Pro forma % Change
Video$12,416
 $12,292
 1.0 %
Internet10,467
 9,376
 11.6 %
Voice1,955
 2,186
 (10.6)%
Residential revenue24,838
 23,854
 4.1 %
      
Small and medium business2,755
 2,518
 9.4 %
Enterprise1,640
 1,499
 9.4 %
Commercial revenue4,395
 4,017
 9.4 %
      
Advertising sales1,091
 1,190
 (8.2)%
Other655
 687
 (4.8)%
 $30,979
 $29,748
 4.1 %




35



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

Three months ended
March 31, 2020
compared to
three months ended
March 31, 2019
Increase / (Decrease)
Increase in average residential Internet customers$225 
Increase related to rate changes158 
$383 

Residential Internet customers grew by 1,448,000 customers from March 31, 2019 to March 31, 2020 of which 119,000 were added pursuant to the REO program. The increase related to rate changes was primarily due to price adjustments including promotional roll-off.

Video revenues consist primarily of revenues from basic and digital video services provided to our residential customers, as well as franchise fees, equipment rentalservice fees and video installation revenue. Residential video customers decreased by 345,000 from September 30, 2016 to September 30, 2017.

The increase in video revenues is attributable to the following (dollars in millions):


Three months ended
March 31, 2020
compared to
three months ended
March 31, 2019
Increase / (Decrease)
Increase related to rate changes$178 
Decrease in average residential video customers(126)
Decrease in video on demand and pay-per-view(14)
$38 
 Three months ended
September 30, 2017
compared to
three months ended
September 30, 2016
Increase / (Decrease)		 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Bundle revenue allocation and price adjustments$140
 $169
Increase in video on demand and pay-per-view55
 45
Decrease in average basic video customers(76) (102)
TWC Transaction—
 3,806
Bright House Transaction—
 629
 $119
 $4,547


On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, the increase in video revenues is attributable to the following (dollars in millions):

 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Bundle revenue allocation and price adjustments$299
Increase in video on demand and pay-per-view46
Decrease in average basic video customers(221)
 $124

Residential Internet customers grew by 1,265,000 customers from September 30, 2016 to September 30, 2017. The increase in Internet revenuesrelated to rate changes was primarily due to price adjustments including annual increases and promotional roll-off partly offset by a higher mix of streaming and lighter video packages within our video customer base. Residential video customers decreased by 402,000 from our residential customers is attributableMarch 31, 2019 to the following (dollars in millions):March 31, 2020.


 Three months ended
September 30, 2017
compared to
three months ended
September 30, 2016
Increase / (Decrease)		 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Increase in average residential Internet customers$205
 $410
Price adjustments, bundle revenue allocation and service level changes145
 258
TWC Transaction—
 3,268
Bright House Transaction—
 571
 $350
 $4,507



36


On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, the increase in Internet revenues is attributable to the following (dollars in millions):

 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Increase in average residential Internet customers$629
Price adjustments, bundle revenue allocation and service level changes462
 $1,091

Residential voice customers grew by 117,000 customers from September 30, 2016 to September 30, 2017. The changedecrease in voice revenues from our residential customers is attributable to the following (dollars in millions):


Three months ended
March 31, 2020
compared to
three months ended
March 31, 2019
Increase / (Decrease)
Decrease in average residential voice customers$(34)
Decrease related to rate changes(13)
$(47)

Residential wireline voice customers decreased by 655,000 customers from March 31, 2019 to March 31, 2020. The decrease related to rate changes was primarily due to value-based pricing.

30

 Three months ended
September 30, 2017
compared to
three months ended
September 30, 2016
Increase / (Decrease)		 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Bundle revenue allocation and price adjustments$(126) $(180)
Increase in average residential voice customers9
 20
TWC Transaction—
 707
Bright House Transaction—
 122
 $(117) $669


On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, the decrease in voice revenues is attributable to the following (dollars in millions):

 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Bundle revenue allocation and price adjustments$(271)
Increase in average residential voice customers40
 $(231)

Small and medium business PSUs grew by 318,000 from September 30, 2016 to September 30, 2017. The increase in small and medium business commercial revenues is attributable to the following (dollars in millions):


 Three months ended
September 30, 2017
compared to
three months ended
September 30, 2016
Increase / (Decrease)		 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Increase in small and medium business customers$100
 $195
Price adjustments(36) (58)
TWC Transaction—
 890
Bright House Transaction—
 139
 $64
 $1,166


37



On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, the increase
Three months ended
March 31, 2020
compared to
three months ended
March 31, 2019
Increase / (Decrease)
Increase in small and medium business customers$62 
Decrease related to rate changes(11)
$51 

Small and medium business commercial revenues is attributablecustomers grew by 113,000 from March 31, 2019 to the following (dollars in millions):March 31, 2020. The decrease related to rate changes was primarily due to value-based pricing related to Spectrum pricing and packaging ("SPP"), net of promotional roll-off and price adjustments.

 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Increase in small and medium business customers$299
Price adjustments(62)
 $237


Enterprise PSUs increased 15,000 from September 30, 2016 to September 30, 2017. Enterprise commercial revenues increased $45 million and $737decreased $21 million during the three and nine months ended September 30, 2017 compared to the corresponding periods in 2016, respectively, primarily due to growth in customers and in the nine month period due to the Transactions which increased enterprise commercial revenues by $655 million. On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, enterprise commercial revenues increased $141 million during the nine months ended September 30, 2017March 31, 2020 compared to the corresponding period in 20162019 primarily due to the sale of non-strategic assets in the third quarter of 2019 offset by growth in customers. Enterprise PSUs increased 16,000 from March 31, 2019 to March 31, 2020.


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 $47increased $20 million during the three months ended September 30, 2017March 31, 2020 compared to the corresponding period in 20162019 primarily due to a decreasean increase in political advertising. Advertising salesrevenue partially offset by lower local ad revenues increased $362 million duringdue to COVID-19.

During the ninethree months ended September 30, 2017 compared to the corresponding period in 2016 primarily due to the Transactions which increased advertising salesMarch 31, 2020 and 2019, mobile revenues by $425 million. On a pro forma basis, assuming the Transactions occurred asrepresented approximately $131 million and $116 million of January 1, 2015, advertising salesdevice revenues, decreased $99respectively, and approximately $127 million during the nine months ended September 30, 2017 compared to the corresponding period in 2016 primarily due to a decrease in political and local advertising.$24 million of service revenues, respectively. As of March 31, 2020, we had 1,372,000 mobile lines.


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, wire maintenance fees and other miscellaneous revenues. Other revenues increased $7 million and $263decreased $9 million during the three and nine months ended September 30, 2017, respectively, compared to the corresponding periods in 2016. The Transactions increased other revenues for the nine months ended September 30, 2017March 31, 2020 compared to the corresponding period in 2016 by $255 million. On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, other revenues decreased by $32 million during the nine months ended September 30, 2017 compared to the corresponding period in 20162019 primarily due to a settlement incurreddecrease in 2016 related to an early contract termination at Legacy TWChome security revenue, late payment fees and Legacy Bright House.regional sports and news channels revenue offset by the sale of video devices.


Operating costs and expenses. The increases 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
March 31, 2020
compared to
three months ended
March 31, 2019
Increase / (Decrease)
Programming$27 
Regulatory, connectivity and produced content(10)
Costs to service customers26 
Marketing31 
Mobile114 
Other22 
$210 
 Three months ended
September 30, 2017
compared to
three months ended
September 30, 2016
Increase / (Decrease)		 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Programming$295
 $3,304
Regulatory, connectivity and produced content8
 609
Costs to service customers(73) 2,135
Marketing33
 669
Transition costs(9) 26
Other(39) 955
 $215
 $7,698



38



Programming costs were approximately $2.7$2.9 billion for both the three months ended March 31, 2020 and $2.4 billion,2019, representing 40%39% and 37%40% of total operating costs and expenses, for the three months ended September 30, 2017 and 2016, respectively, and $8.0 billion and $4.6 billion, representing 40% and 38% of total operating costs and expenses for the nine months ended September 30, 2017 and 2016, respectively. The increase in operating costs and expenses for the three and nine months ended September 30, 2017 compared to the corresponding prior period was primarily due to an increase in programming costs and the Transactions.

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

 Three months ended
September 30, 2017
compared to
three months ended
September 30, 2016
Increase / (Decrease)		 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Corporate costs$(35) $225
Enterprise4
 240
Advertising sales expense12
 245
Property tax and insurance1
 115
Stock compensation expense(17) 30
Other(4) 100
 $(39) $955

The increase in other expense for the nine months ended September 30, 2017 compared to the corresponding prior period was primarily due to the Transactions.

On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, increases 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):

 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Programming$724
Regulatory, connectivity and produced content(17)
Costs to service customers(135)
Marketing8
Transition costs26
Other(106)
 $500

On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, programming costs were approximately $7.2 billion, representing 37% of total operating costs and expenses for the nine months ended September 30, 2016.

Programming costs consist primarily of costs paid to programmers for basic, digital, premium, video on demand, and pay-per-view programming. The increase in programming costs for the three months ended September 30, 2017 and nine months ended September 30, 2017, on a pro forma basis assuming the Transactions occurred as of January 1, 2015, compared to the corresponding periods in 2016 is primarily a result of contractual rate adjustments, including renewals and increases in amounts paid for retransmission

31

consents higher expanded basic package customers and higher pay-per-view eventspartly offset by synergies as a result of the Transactions.lower video customers, pay-per-view and nonrecurring benefits.  We expect programming expensesrates 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 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. We have been unable to fully pass these increases on to our customers norand do wenot expect to be able to do so in the future without a potential loss of customers.



39



Costs to service customersRegulatory, connectivity and produced content decreased $73 million and $135$10 million during the three months ended September 30, 2017 and nine months ended September 30, 2017, on a pro forma basis assuming the Transactions occurred as of January 1, 2015,March 31, 2020 compared to the corresponding periodsperiod in 20162019 primarily due to benefits from combining Legacy TWClower regulatory pass-through fees and Legacy Bright House into Charter, including lower employee benefitsports and maintenancenews rights fees driven by fewer games due to COVID-19 postponements offset by higher original programming costs and costs of video devices sold to customers.
Costs to service customers increased $26 million during the three months ended March 31, 2020 compared to the corresponding period in 2019 primarily due to higher laborbad debt expense. Bad debt expense increased due to higher expected losses as a result of COVID-19, recognized in accordance with the new credit loss accounting standard. For more information, see Note 19 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements”.

Mobile costs of $374 million and material capitalization with increases in placement$260 million for the three months ended March 31, 2020 and 2019, respectively, were comprised of new customer equipmentmobile device costs and improved productivity.mobile service and operating costs.


On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, theThe increase in other expense is attributable to the following (dollars in millions):


Three months ended
March 31, 2020
compared to
three months ended
March 31, 2019
Increase / (Decrease)
Corporate costs$14 
Advertising sales expense11 
Stock compensation expense5 
Enterprise(23)
Other15 
$22 
 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Corporate costs$(139)
Enterprise21
Advertising sales expense38
Property tax and insurance(15)
Stock compensation expense(21)
Other10
 $(106)


Enterprise costs decreased primarily due to the sale of non-strategic assets in the third quarter of 2019.

Depreciation and amortization.Depreciation and amortization expense increaseddecreased by $264$54 million during the three months ended September 30, 2017March 31, 2020 compared to the corresponding period in 20162019 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 highermore recent capital expenditures in the current year. Depreciation and amortization expense increased by $3.4 billion during the nine months ended September 30, 2017 compared to the corresponding period in 2016 primarily as a result of additional depreciation and amortization related to the Transactions, inclusive of the incremental amounts as a result of the higher fair values recorded in acquisition accounting.expenditures.


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


Three months ended
March 31, 2020
compared to
three months ended
March 31, 2019
Increase / (Decrease)
Special charges, net$22 
(Gain) loss on sale of assets, net(8)
$14 

See Note 12 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements” for more information.


32

 Three months ended
September 30, 2017
compared to
three months ended
September 30, 2016
Increase / (Decrease)		 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Merger and restructuring costs$(138) $(220)
Special charges, net76
 76
(Gain) loss on sale of assets, net1
 5
 $(61) $(139)

The decrease in merger and restructuring costs duringInterest expense, net. Net interest expense increased by $55 million for the three and nine months ended September 30, 2017 compared to the corresponding periods in 2016 is primarily due to a decrease of approximately $118 million and $208 million, respectively, of employee termination and retention costs. The increase in special charges, net during the three and nine months endedSeptember 30, 2017March 31, 2020 compared to the corresponding period in 2016 is2019 primarily as a result of an increase in weighted average debt outstanding of approximately $4.5 billion primarily due to an $83the issuance of notes throughout 2019 and 2020 for general corporate purposes including distributions to parent companies for stock buybacks and debt repayments offset by a reduction in weighted average interest rates.

Loss on extinguishment of debt. Loss on extinguishment of debt of $27 million charge related tofor the Company's withdrawal liability fromthree months ended March 31, 2020 represents losses recognized as a multiemployer pension plan. Seeresult of the purchase of CCO Holdings notes. For more information, see Note 106 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”


Interest expense, net. Net interest expense increased by $66 million and $877 million for the three and nine months ended September 30, 2017 compared to the corresponding periods in 2016 primarily as a result of an increase in weighted average debt outstanding primarily due to the issuance of notes in 2017. Interest expense associated with debt assumed from Legacy TWC also increased interest expense during the nine months ended September 30, 2017 compared to the corresponding period in 2016 by approximately $350 million as well as interest expense associated with debt incurred to fund the Transactions by approximately $369 million.


40



Loss on extinguishment of debt. Loss on extinguishment of debt of $35 million and $110 million for the nine months ended September 30, 2017 and 2016, respectively, primarily represents losses recognized as a result of repurchases of CCO Holdings, LLC ("CCO Holdings") notes. For more information, see Note 5 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Gain (loss) on financial instruments, net. We recorded a gainloss on financial instruments of $17 million and a loss of $15$318 million during the three and nine months ended September 30, 2017, respectivelyMarch 31, 2020 and gainsa gain of $71 million and $16$37 million during the three and nine months ended September 30, 2016, respectively.March 31, 2019. Gains and losses on financial instruments are primarily recognized due to changes in the fair value of our interest rate and our cross currencycross-currency derivative instruments and the foreign currency remeasurement of the fixed-rate British pound sterling denominated notes (the “Sterling Notes”) into U.S. dollars. For more information, see Note 78 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”


Other pension benefits, (costs). Othernet. Net other pension benefits decreasedincreased by $30$1 million and $524 million during the three and nine months ended September 30, 2017, respectively, compared to the corresponding periods in 2016. The decrease during the three months ended September 30, 2017March 31, 2020 compared to the corresponding period in 2016 was primarily due to a third quarter 2017 remeasurement as a result of significant lump sum settlement payments to participants. The decrease during the nine months ended September 30, 2017 compared to the corresponding period in 2016 was also affected by a $675 million pension curtailment gain offset by an $157 million net remeasurement loss recognized in 2016 that resulted from an amendment to the plans made subsequent to the TWC Transaction.2019. For more information, see Note 1518 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”


Other expense,income (expense), net. Other expense,income (expense), net primarily represents equity lossesgains (losses) on our equity-methodequity investments. Other income (expense), net also includes an impairment on equity investments of approximately $110 million during the three months ended March 31, 2019.


Income tax benefit (expense).expense.We recognized income tax expense of $6 million and $35 million for the three and nine months ended September 30, 2017, respectively, and income tax benefit of $7$67 million for the three months ended September 30, 2016. Income tax benefit for the nine months ended September 30, 2016 was insignificant.March 31, 2020 and 2019, respectively. Income tax expense is recognizeddecreased during the three months ended March 31, 2020 compared to the corresponding period in 2019 primarily through increasesas a result of an internal entity simplification that increased expense in deferred tax liabilities, as well as through current federal and state income tax expense. 2019.For more information, see Note 1114 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”


NetConsolidated net income.Consolidated net income attributable to noncontrolling interest. Net income attributable to noncontrolling interest relates to our third-party
interest in CV of Viera, LLP, a consolidated joint venture in a small cable system in Florida assumed in the Transactions.

Net income attributable to CCO Holdings member.Net income attributable to CCO Holdings member decreasedincreased from $265$350 million for the three months ended September 30, 2016March 31, 2019 to $106$459 million for the three months ended September 30, 2017, and from $678 million for the nine months ended September 30, 2016 to $548 million for the nine months ended September 30, 2017March 31, 2020 primarily as a result of the factors described above. On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, net income attributable to CCO Holdings member was $1.1 billion for the nine months ended September 30, 2016.


Use of Adjusted EBITDAand Free Cash Flow


We use certain measures that are not defined by GAAPU.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, consolidated net income 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 consolidated net income 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


41


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

33

Charter entities. Our debt covenants refer to these expenses as management fees, which were $262$311 million and $791$300 million for the three and nine months ended September 30, 2017, respectively,March 31, 2020 and $330 million and $634 million for the three and nine months ended September 30, 2016,2019, respectively.


Three Months Ended March 31,
20202019
Consolidated net income$459  $350  
Plus: Interest expense, net992  937  
Income tax expense6  67  
Depreciation and amortization2,493  2,547  
Stock compensation expense90  85  
Loss on extinguishment of debt27  —  
(Gain) loss on financial instruments, net318  (37) 
Other pension benefits, net(10) (9) 
Other, net(1) 106  
Adjusted EBITDA$4,374  $4,046  
Net cash flows from operating activities$3,190  $2,687  
Less: Purchases of property, plant and equipment(1,461) (1,665) 
Change in accrued expenses related to capital expenditures(388) (376) 
Free cash flow$1,341  $646  

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 Actual
Consolidated net income$106
 $266
 $549
 $679
Plus: Interest expense, net795
 729
 2,268
 1,391
Income tax (benefit) expense6
 (7) 35
 —
Depreciation and amortization2,699
 2,435
 7,839
 4,409
Stock compensation expense64
 81
 198
 168
Loss on extinguishment of debt—
 —
 35
 110
(Gain) loss on financial instruments, net(17) (71) 15
 (16)
Other pension (benefits) costs17
 (13) (9) (533)
Other, net147
 208
 376
 515
Adjusted EBITDA$3,817
 $3,628
 $11,306
 $6,723
        
Net cash flows from operating activities$2,893
 $2,790
 $8,521
 $5,538
Less: Purchases of property, plant and equipment(2,393) (1,748) (6,096) (3,437)
Change in accrued expenses related to capital expenditures79
 (52) 276
 86
Free cash flow$579
 $990
 $2,701
 $2,187
 Nine Months Ended
 September 30, 2016
 Pro forma
Consolidated net income$1,113
Plus: Interest expense, net2,160
Depreciation and amortization7,054
Stock compensation expense219
Loss on extinguishment of debt110
Gain on financial instruments, net(16)
Other pension benefits(549)
Other, net505
Adjusted EBITDA$10,596

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.


2017 Financing ActivitiesRecent Events

In January 2017, Charter Operating entered into an amendment to its Amended and Restated Credit Agreement dated May 18, 2016 decreasing the applicable LIBOR margin on both the term loan E and term loan F to 2.00% and eliminating the LIBOR floor.



42



In February 2017,2020, CCO Holdings and CCO Holdings Capital Corp. jointly issued $1.0$1.65 billion aggregate principal amount of 5.125%4.500% senior unsecured notes due May 1, 2027. The net proceeds2030 at par and in March 2020, an additional $1.1 billion of the same series of notes were used to redeem CCO Holdings’ 6.625% senior notes due 2022, pay related fees and expenses and for general corporate purposes.

Inissued at a price of 102.5% of the aggregate principal amount. Also in March 2017,2020, CCO Holdings and CCO Holdings Capital jointlyCorp. issued an additional $1.0$1.4 billion aggregate principal amount of 5.125%4.500% senior unsecured notes due May 1, 20272032 at a price of 99.0% of the aggregate principal amount.par. The net proceeds as well as cash on hand, were used in April 2017 to redeem Time Warner Cable, LLC's 5.850% senior notes due 2017, pay related fees and expenses and for general corporate purposes.

In April 2017, CCO Holdings and CCO Holdings Capital jointly issued an additional $1.25 billion aggregate principal amount of 5.125% senior notes due May 1, 2027 at a price of 100.5% of the aggregate principal amount. The net proceeds wereor 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' 5.250% 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 distributions to our parent companies to fund potential buybacks of Charter Class A common stock orand Charter Holdings common units.

In April 2017,2020, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.25$1.6 billion aggregate principal amount of 5.375%2.800% senior secured notes due May 1, 2047April 2031 at a price of 99.968%99.561% of the aggregate principal amount and $1.4 billion aggregate principal amount of 3.700% senior secured notes due April 2051 at a price of 99.217% of the aggregate principal amount. The net proceeds werewill be used to pay related fees and expenses and for general corporate purposes, including to fund buybacks of Charter Class A common stock or Charter Holdings common units.purposes.

In July 2017, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.0 billion aggregate principal amount of 3.750% senior notes due February 15, 2028 at a price of 99.166% of the aggregate principal amount and an additional $500 million aggregate principal amount of 5.375% senior secured notes due May 1, 2047 at a price of 106.529% of the aggregate principal amount. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including to fund buybacks of Charter Class A common stock or Charter Holdings common units.

In August 2017, CCO Holdings and CCO Holdings Capital jointly issued $1.5 billion aggregate principal amount of 5.000% senior notes due February 1, 2028. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including to fund buybacks of Charter Class A common stock or Charter Holdings common units.

In September 2017, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.25 billion aggregate principal amount of 4.200% senior notes due March 15, 2028 at a price of 99.757% of the aggregate principal amount and an additional $750 million aggregate principal amount of 5.375% senior secured notes due May 1, 2047 at a price of 98.969% of the aggregate principal amount. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including to fund buybacks of Charter Class A common stock or Charter Holdings common units.

In October 2017, CCO Holdings and CCO Holdings Capital jointly issued $500 million aggregate principal amount of 4.000% senior notes due March 1, 2023 and an additional $1.0 billion aggregate principal amount of 5.000% senior notes due February 1, 2028 at a price of 98.5% of the aggregate principal amount. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including to fund buybacks of Charter Class A common stock or Charter Holdings common units.


Overview of Our Contractual Obligations and Liquidity


We have significant amounts of debt. The principal amount of our debt as of September 30, 2017March 31, 2020 was $66.8$79.1 billion, consisting of $8.8$10.4 billion of credit facility debt, $40.6$44.3 billion of investment grade senior secured notes and $17.4$24.4 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

34

tablet to customers pursuant to equipment installment plans. Free cash flow was $579$1.3 billion and $646 million and $2.7 billion for the three and nine months ended September 30, 2017, respectively,March 31, 2020 and was $990 million and $2.2 billion2019, respectively. See table below for factors impacting free cash flow during the three and nine months ended September 30, 2016, respectively.March 31, 2020 compared to the corresponding prior period. As of September 30, 2017,March 31, 2020, the amount available under our credit facilities was approximately $2.9$4.7 billion and cash on hand was approximately $2.0$2.7 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.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.



43



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 mergers and acquisitions as well as distributions to our parent companycompanies for 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 level. We mayOur leverage ratio was 4.4 times Adjusted EBITDA as of March 31, 2020. As Adjusted EBITDA grows, we expect to increase the total amount of our indebtedness to maintain leverage within Charter's target leverage range. During the three and nine months ended September 30, 2017,March 31, 2020 and 2019, Charter purchased approximately 9.54.5 million and 21.92.6 million shares, respectively, of Charter Class A common stock for approximately $3.5$2.2 billion and $7.6 billion,$870 million, respectively. As of September 30, 2017, Charter had remaining board authority to purchase an additional $5.2 billion of Charter’s Class A common stock without taking into account shares or units that may be purchased from A/N. 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. To the extent such purchases occur, CCO Holdings and its subsidiaries are the primary source for funding such purchases through distributions to their parent companies. As possible acquisitions, swaps or dispositions arise, we actively review them against our objectives including, among other considerations, improving the operational efficiency, clustering, 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.


In December 2016,2017, Charter and A/N entered into aan amendment to the letter agreement (the "Letter Agreement") that requires A/N to sell to Charter or to Charter Holdings, on a monthly basis, a number of shares of Charter Class A common stock or Charter Holdings common units that represents a pro rata participation by A/N and its affiliates in any repurchases of shares of Charter Class A common stock from persons other than A/N effected by Charter during the immediately preceding calendar month, at a purchase price equal to the average price paid by Charter for the shares repurchased from persons other than A/N during such immediately preceding calendar month. A/N and Charter both have the right to terminate or suspend the pro rata repurchase arrangement on a prospective basis once Charter or Charter Holdings have repurchased shares of Class A common stock or Charter Holdings common units from A/N and its affiliates for an aggregate purchase price of $537 million which threshold has been reached.basis. Charter Holdings purchased from A/N 1.40.8 million and 0.3 million Charter Holdings common units at an average price per unit of $355.83,$494.54 and $308.42, or $493$393 million and $93 million, during the three months ended September 30, 2017,March 31, 2020 and 2.7March 31, 2019, respectively.

As of March 31, 2020, Charter had remaining board authority to purchase an additional $286 million of Charter’s Class A common stock and/or Charter Holdings common units at an average price per unitunits. 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 $341.49,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 $922 million duringnegotiated transactions. To the nine months ended September 30, 2017.extent such purchases occur, CCO Holdings and its subsidiaries are the primary source for funding such purchases through distributions to their parent companies.


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.


35

Free Cash Flow


Free cash flow decreased $411 million and increased $514$695 million during the three and nine months ended September 30, 2017, respectively,March 31, 2020 compared to the corresponding prior periodsperiod in 20162019 due to the following (dollars in millions).


Three months ended
March 31, 2020
compared to
three months ended
March 31, 2019
Increase / (Decrease)
Increase in Adjusted EBITDA$328 
Changes in working capital, excluding change in accrued interest288 
Decrease in capital expenditures204 
Increase in cash paid for interest, net(86)
Other, net(39)
$695 
 Three months ended
September 30, 2017
compared to
three months ended
September 30, 2016
Increase / (Decrease)		 Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Increase in Adjusted EBITDA$189
 $4,583
Decrease in merger and restructuring costs87
 61
Increase in capital expenditures(645) (2,659)
Decrease (increase) in cash paid for interest, net61
 (1,059)
Changes in working capital, excluding change in accrued interest(123) (418)
Other, net20
 6
 $(411) $514


Free cash flow was reduced by $260 million and $291 million during the three months ended March 31, 2020 and 2019, respectively, due to mobile with impacts negatively affecting working capital, capital expenditures and Adjusted EBITDA.

Limitations on Distributions


Distributions by us and our subsidiaries to a parent company for payment of principal on parent company notes are restricted under indentures and credit facilities governing our indebtedness, unless there is no default under the applicable indenture and credit facilities, and unless each applicable subsidiary’s leverage ratio test is met at the time of such distribution. As of September 30, 2017,March 31, 2020, there was no default under any of these indentures or credit facilities, and each subsidiary met its applicable leverage ratio tests based on September 30, 2017March 31, 2020 financial results. Such distributions would be restricted, however, if any such subsidiary fails to meet these tests at the time of the contemplated distribution. There can be no assurance that they will satisfy these tests at the


44


time of the contemplated distribution. Distributions by Charter Operating for payment of principal on parent company 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.


In addition to the limitation on distributions under the various indentures, discussed above, 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, Cash Equivalents and Cash Equivalents. Restricted Cash. We held $2.0$2.7 billion and $1.3$3.2 billion in cash and cash equivalents as of September 30, 2017March 31, 2020 and December 31, 2016,2019, respectively.


Operating Activities.Net cash provided by operating activities increased $3.0 billion$503 million during the ninethree months ended September 30, 2017March 31, 2020 compared to the ninethree months ended September 30, 2016,March 31, 2019, primarily due to an increase in Adjusted EBITDA of $4.6 billion$328 million and changes in working capital, excluding the change in accrued interest and accrued expenses related to capital expenditures, that used $300 million less cash offset by an increase in cash paid for interest, net of $1.1 billion as a result$86 million and cash paid for taxes, net of the Transactions as well as changes in operating assets and liabilities, excluding the change in accrued interest, that provided $418 million less cash during the nine months ended September 30, 2017.$25 million.


Investing Activities.Net cash used in investing activities was $5.9$1.8 billion and $3.4$2.0 billion for the ninethree months ended September 30, 2017March 31, 2020 and 2016,2019, respectively. The increasedecrease in cash used was primarily due to an increasea decrease in capital expenditures as a result of the Transactions.expenditures.


Financing Activities.Net cash used in financing activities was $2.0 billion and $1.2$2.0 billion for the ninethree months ended September 30, 2017March 31, 2020 and 2016, respectively.net cash provided by financing activities was $251 million for the three months ended March 31, 2019. The increase in cash used was primarily due to an increase in distributions offsetto parent companies and a decrease in the amount by an increase inwhich borrowings of long-term debt exceedingexceeded repayments.


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Capital Expenditures


We have significant ongoing capital expenditure requirements.  Capital expenditures were $2.4$1.5 billion and $6.1$1.7 billion for the three and nine months ended September 30, 2017, respectively,March 31, 2020 and $1.7 billion and $3.4 billion for the three and nine months ended September 30, 2016,2019, respectively.  The increase during the nine months ended September 30, 2017 compared to 2016 was driven by the Transactions. On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, capital expenditures increased $439 million during the nine months ended September 30, 2017 compared to the corresponding period in 2016. The increase during the three months ended September 30, 2017 compared to 2016decrease was primarily due to higherlower scalable infrastructure as a result of timing of spend onand lower customer premise equipment due to the launchexpenditures driven by a higher mix of boxless video outlets, increasing customer self-installations and fewer SPP and our all-digital initiative and higher scalable infrastructure costs and support primarily due to the timing of spend.migrations. See the table below for more details.
 
We currently expect 2020 cable capital expenditures to decline as a percentage of cable revenue versus 2019.The actual amount of our capital expenditures in 20172020 will depend on a number of factors including the pace of transition planningfurther spend related to service a larger customer base as a result of the Transactions, our all-digital transition in the Legacy TWC and Legacy Bright House marketsproduct 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 increaseddecreased by $276$388 million and $86$376 million for the ninethree months ended September 30, 2017March 31, 2020 and 2016,2019, respectively.



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The following tables present our major capital expenditures categories on an actual and pro forma basis, assuming the Transactions occurred as of January 1, 2015, in accordance with National Cable and Telecommunications Association (“NCTA”) disclosure guidelines for the three and nine months ended September 30, 2017March 31, 2020 and 2016. The disclosure is intended to provide more consistency in the reporting of capital expenditures among peer companies in the cable industry.2019. 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 March 31,
20202019
Customer premise equipment (a)$463  $565  
Scalable infrastructure (b)170  297  
Line extensions (c)343  321  
Upgrade/rebuild (d)129  131  
Support capital (e)356  351  
Total capital expenditures$1,461  $1,665  
Capital expenditures included in total related to:
Mobile$87  $88  
Commercial services$261  $305  
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 Actual
Customer premise equipment (a)$855
 $662
 $2,579
 $1,177
Scalable infrastructure (b)632
 441
 1,282
 937
Line extensions (c)319
 249
 864
 467
Upgrade/rebuild (d)163
 156
 415
 307
Support capital (e)424
 240
 956
 549
Total capital expenditures$2,393
 $1,748
 $6,096
 $3,437
        
Capital expenditures included in total related to:       
Commercial services$339
 $306
 $941
 $566
Transition (f)$125
 $109
 $287
 $273

(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 boxes and cable modems).
 Nine Months Ended September 30, 2016
 Pro Forma
Customer premise equipment (a)$2,074
Scalable infrastructure (b)1,556
Line extensions (c)751
Upgrade/rebuild (d)461
Support capital (e)815
Total capital expenditures$5,657
  
Capital expenditures included in total related to: 
Commercial services$931
Transition (f)$273
(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).
(a)Customer premise equipment includes costs incurred at the customer residence to secure new customers and revenue generating units. It also includes customer installation costs and customer premise equipment (e.g., set-top boxes 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).
(f)Transition represents incremental costs incurred to integrate the Legacy TWC and Legacy Bright House operations and to bring the three companies' systems and processes into a uniform operating structure.

(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 1719 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 interest rate risk on variable debt and foreign exchange risk on the Sterling Notes, and do not hold or issue derivative instruments for speculative trading purposes.

Interest rate derivative instruments are used to manage interest costs and to reduce our exposure to increases in floating interest rates. We manage our exposure to fluctuations in interest rates by maintaining a mix of fixed and variable-rate debt. Using interest rate derivative instruments, we agree to exchange, at specified intervals through 2017, the difference between fixed and variable interest amounts calculated by reference to agreed-upon notional principal amounts.


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 May 2016,April 2019, we entered into a collateral holiday agreement for 80%60% of both the 2031 and 2042 cross-currency swaps, which eliminates the requirement to post collateral for three years.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. For more information, see Note 78 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”
As of September 30, 2017March 31, 2020 and December 31, 2016,2019, the weighted average interest rate on the credit facility debt including the effects of our interest rate swap agreements, was approximately 3.3%2.6% and 2.9%3.3%, respectively, and the weighted average interest rate on the senior notes was approximately 5.7%5.3% and 5.9%5.4%, respectively, resulting in a blended weighted average interest rate of 5.4% as of both time periods.5.0% and 5.1%, respectively. The interest rate on approximately 88% and 87%86% of the total principal amount of our debt was effectively fixed including the effects of our interest rate swap agreements as of September 30, 2017March 31, 2020 and December 31, 2016, respectively.2019.
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 September 30, 2017March 31, 2020 (dollars in millions).


20202021202220232024ThereafterTotalFair Value
Debt:
Fixed-Rate$2,000  $1,700  $4,105  $2,605  $2,800  $54,583  $67,793  $71,223  
Average Interest Rate3.58 %4.05 %4.68 %6.16 %5.33 %5.45 %5.33 %
Variable Rate$207  $277  $277  $436  $1,165  $8,895  $11,257  $10,494  
Average Interest Rate1.73 %1.60 %1.72 %1.82 %2.09 %2.28 %2.20 %
 2017 2018 2019 2020 2021 Thereafter Total Fair Value
Debt:               
Fixed-Rate$—
 $2,000
 $3,250
 $3,500
 $2,200
 $47,059
 $58,009
 $62,657
Average Interest Rate—% 6.75% 8.44% 4.19% 4.32% 5.64% 5.70%  
                
Variable Rate$49
 $197
 $296
 $1,716
 $2,928
 $3,582
 $8,768
 $8,788
Average Interest Rate3.13% 3.58% 3.77% 4.07% 4.07% 4.68% 4.29%  
                
Interest Rate Instruments:              
Variable to Fixed-Rate$850
 $—
 $—
 $—
 $—
 $—
 $850
 $1
Average Pay Rate3.84% —% —% —% —% —% 3.84%  
Average Receive Rate3.68% —% —% —% —% —% 3.68%  


As of September 30, 2017, we had $850 million in notional amounts of interest rate derivative instruments outstanding. The notional amounts of interest rate derivative instruments do not represent amounts exchanged by the parties and, thus, are not a measure of our exposure to credit loss. The amounts exchanged are determined by reference to the notional amount and the other terms of the contracts.

The estimated fair value of the interest rate derivative instruments is determined using a present value calculation based on an implied forward LIBOR curve (adjusted for Charter Operating’s and counterparties’ credit risk). 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 September 30, 2017March 31, 2020 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 evaluation was


47


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.


On May 18, 2016,In January 2020, we completed the Transactionsimplementation of an Enterprise Resource Planning ("ERP") system and asrelated boundary systems which improved the efficiency of certain financial and related transactional processes. As a result we have incorporated internal controls over significant processes specific to the Transactions and to activities post-Transactions that we believe to be appropriate and necessary in consideration of the implementation of a new ERP and related integration, includingboundary systems, we designed, implemented and are operating new information technology general controls, associated with the Transactions for the valuations ofand revised and updated certain Legacy TWC and Legacy Bright House assets and liabilities assumed, as well as adoption of common financial reporting and internal control practices for the combined company. In January 2017, we consolidated our separate human resource platforms into one platform which resulted in significant changes to the nature and type of certain internal controls for the most recent fiscal quarter. As we further integrate Legacy TWC and Legacy Bright House, we will continue to validate the effectiveness and integration of internalprocess-level controls.



38

Except as described above in the preceding paragraph, during the quarter ended September 30, 2017,March 31, 2020, 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.



39


48



PART IIII. OTHER INFORMATION


Item 1.Legal Proceedings.


Our Annual Report on Form 10-K for the year ended December 31, 2016 includes “Legal Proceedings” under Item 3 of Part I. Other than as described inSee Note 1317 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements,” there have been no material changes from the legal proceedings described in our Form 10-K.Statements” for Legal Proceedings.


Item 1A.Risk Factors.


Our Annual Report on Form 10-K for the year ended December 31, 20162019 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.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 or 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 our residential and business customers’ ability to pay for our products and services including the impact of extended unemployment benefits and other stimulus packages and what assistance we may provide to our customers. 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.

Item 6.Exhibits.


See Exhibit Index.



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49



SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, CCO Holdings, LLC and CCO Holdings Capital Corp. havehas duly caused this quarterly report to be signed on their behalf by the undersigned, thereunto duly authorized.


CCO HOLDINGS, LLC
RegistrantRegistrant
By:/s/ Kevin D. Howard
Kevin D. Howard
Senior Vice President - Finance, Controller and
Date: October 27, 2017Chief Accounting Officer
CCO HOLDINGS CAPITAL CORP.
Registrant
By:/s/ Kevin D. Howard
Kevin D. Howard
Senior Vice President - Finance, Controller and
Date: October 27, 2017Chief Accounting Officer





S- 1



Exhibit Index
ExhibitDescription
By:/s/ Kevin D. Howard
10.1Kevin D. Howard
Date: May 4, 2020Executive Vice President, Chief Accounting Officer and Controller
CCO HOLDINGS CAPITAL CORP.
Registrant
By:/s/ Kevin D. Howard
Kevin D. Howard
Date: May 4, 2020Executive Vice President, Chief Accounting Officer and Controller


S-1


Exhibit Index
ExhibitDescription
10.1 
SixthThird Supplemental Indenture, dated as of July 6, 2017, among Charter Communications Operating, LLC, Charter Communications Operating Capital Corp., the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent (incorporated by reference to Exhibit 4.3 to the current report on Form 8-K filed by Charter Communications, Inc. on July 12, 2017 (File No. 001-33664)).
10.2
Exchange and Registration Rights Agreement, dated July 6, 2017, relating to the 3.750% Senior Notes due 2028, among Charter Communications Operating, LLC, Charter Communications Operating Capital Corp., the guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated, 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 12, 2017 (File No. 001-33664)).
10.3
Exchange and Registration Rights Agreement, dated July 6, 2017, relating to the 5.375% Senior Notes due 2047, among Charter Communications Operating, LLC, Charter Communications Operating Capital Corp., the guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several Purchasers (as defined therein) (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on July 12, 2017 (File No. 001-33664)).
10.4
Fourth Supplemental Indenture, dated as of August 8, 2017,February 18, 2020, among CCO Holdings, LLC, CCO Holdings Capital Corp. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.14.2 to the current reportCurrent Report on Form 8-K filed by Charter Communications, Inc. on August 14, 2017 (File No. 001-33664))February 21, 2020).
10.510.2 
Form of 4.500% Senior Notes due 2030 (included in Exhibit 10.1 hereto).
10.3 
Exchange and Registration Rights Agreement, dated August 8, 2017,February 18, 2020, relating to the 5.000%4.500% Senior Notes due 2028,2030, among CCO Holdings, LLC, CCO Holdings Capital Corp. and Merrill Lynch, Pierce, Fenner & Smith Incorporated,Deutsche Bank Securities, Inc., as representative of the several Purchasers (as defined therein) (incorporated by reference to Exhibit 10.1 to the current reportCurrent Report on Form 8-K filed by Charter Communications, Inc. on August 14, 2017 (File No. 001-33664))February 21, 2020).
10.610.4 
SeventhFourth Supplemental Indenture, dated as of SeptemberMarch 18, 2017,2020, among CCO Holdings, LLC, CCO Holdings Capital Corp. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K filed by Charter Communications, Inc. on March 23, 2020).
10.5 
Form of 4.500% Senior Notes due 2032 (included in Exhibit 10.4 hereto).
10.6 
2030 Exchange and Registration Rights Agreement, dated March 18, 2020, relating to the 4.500% Senior Notes due 2030, among CCO Holdings, LLC, CCO Holdings Capital Corp. and 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 March 23, 2020).
10.7 
2032 Exchange and Registration Rights Agreement, dated March 18, 2020, relating to the 4.500% Senior Notes due 2032, among CCO Holdings, LLC, CCO Holdings Capital Corp. and Deutsche Bank Securities, Inc., as representative of the several Purchasers (as defined therein) (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Charter Communications, Inc. on March 23, 2020).
10.8 
Underwriting Agreement, dated as of April 14, 2020, among Charter Communications Operating, LLC, Charter Communications Operating Capital Corp., CCO Holdings, LLC, as parent guarantor, the subsidiary guarantors party thereto and BofA Securities, Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters named in Schedule I thereto (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by Charter Communications, Inc. on April 17, 2020).
10.9 
Sixteenth Supplemental Indenture, dated as of April 17, 2020, among Charter Communications Operating, LLC, Charter Communications Operating Capital Corp., as issuers, CCO Holdings, LLC, 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 4.34.2 to the current reportCurrent Report on Form 8-K filed by Charter Communications, Inc. on September 21, 2017 (File No. 001-33664))April 17, 2020).
10.710.10 
Exchange and Registration Rights Agreement, dated September 18, 2017, relating to the 4.200%Form of 2.800% Senior Secured Notes due 2028, among Charter Communications Operating, LLC, Charter Communications Operating Capital Corp., the guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc., as representatives of the several Purchasers (as defined therein) (incorporated by reference to2031 (included in Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on September 21, 2017 (File No. 001-33664))10.9 hereto).
10.810.11 
Exchange and Registration Rights Agreement, dated September 18, 2017, relating to the 5.375%Form of 3.700% Senior Secured Notes due 2047, among Charter Communications Operating, LLC, Charter Communications Operating Capital Corp., the guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc., as representatives of the several Purchasers (as defined therein) (incorporated by reference to2051 (included in Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on September 21, 2017 (File No. 001-33664))10.9 hereto).
31.1*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*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*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*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**101 
The following financial statementsinformation from CCO Holdings, LLC'sLLC’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2017,March 31, 2020, filed with the Securities and Exchange Commission on October 27, 2017,May 4, 2020, formatted in XBRL (eXtensibleiXBRL (inline eXtensible Business Reporting Language): includes: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income;Changes in Member's Equity; (iv) the Consolidated Statements of Cash Flows; and (vi) the Notes to the Consolidated Financial Statements.
104 Cover Page, formatted in iXBRL and contained in Exhibit 101.


_____________
*Filed herewith.
**This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. 78r) or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference


E- 1
E-1




into any filing under the Securities Act or Securities Exchange Act, except to the extent that the company specifically incorporates it by reference.


E- 2