UNITED STATES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
______________
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20192020
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From             to             
Commission File Number: 001-37789
333-112593-01

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 No.)
400 Atlantic StreetStamfordConnecticut06901
(Address of Principal Executive Offices)(Zip Code)
(203)(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 x    Smaller reporting company ☐ Emerging growth company ☐ 

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

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

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, 2019:2020: 1







CCO HOLDINGS, LLCLLC.
CCO HOLDINGS CAPITAL CORP.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 20192020

TABLE OF CONTENTS
Page No.
1
for the three and nine months ended September 30, 20192020 and 20182019
2
for the three and nine months ended September 30, 20192020 and 20182019
3
for the nine months ended September 30, 20192020 and 20182019
45
56
2921
4135
4136
Legal Proceedings37
43
Risk Factors37
43
Exhibits37
43
S-1
E-1

This quarterly report on Form 10-Q is for the three and nine months ended September 30, 2019.2020. 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 customers, our vendors, local, state and federal governmental responses to the pandemic and our businesses generally;
•our ability to sustain and grow revenues and cash flow from operations by offering Internet, video, Internet, voice, mobile, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in our service areas and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures;
•the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite ("DBS") operators, wireless broadband and telephone providers, digital subscriber line (“DSL”) providers, fiber to the home providers video provided over the Internet by (i) market participants that have not historically competed in the multichannel video business, (ii) traditional multichannel video distributors, and (iii) content providers that have historically licensed cable networks to multichannel video distributors, and providers of advertisingvideo content over the Internet;broadband Internet connections;
•our ability to efficientlyobtain 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 effectively integrate acquired operations;deploy new products and technologies including mobile products and any other consumer services and service platforms;
•any events that disrupt our networks, information systems or properties and impair our operating activities or our reputation;
•the effects of governmental regulation on our business including costs, disruptions and possible limitations on operating flexibility related to, and our ability to comply with, regulatory conditions applicable to us as a result of the Time Warner Cable Inc. and Bright House Networks, LLC Transactions;transactions;
•general business conditions, economic uncertainty or downturn, including the impacts of the COVID-19 pandemic to unemployment levels and the level of activity in the housing sector;
our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);
our ability to develop and deploy new products and technologies including mobile products and any other consumer services and service platforms;
any events that disrupt our networks, information systems or properties and impair our operating activities or our reputation;
•the ability to retain and hire key personnel;
•the availability and access, in general, of funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets; and
•our ability to comply with all covenants in our indentures and credit facilities, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions.

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


ii



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.


CCO HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
September 30,
2020		December 31,
2019
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$1,015 $3,249 
Accounts receivable, less allowance for doubtful accounts of $223 and $151, respectively2,032 2,195 
Prepaid expenses and other current assets647 711 
Total current assets3,694 6,155 
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net of accumulated depreciation of $30,332 and $27,595, respectively33,387 33,908 
Customer relationships, net6,050 7,453 
Franchises67,322 67,322 
Goodwill29,554 29,554 
Total investment in cable properties, net136,313 138,237 
OTHER NONCURRENT ASSETS2,653 2,351 
Total assets$142,660 $146,743 
LIABILITIES AND MEMBER’S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities$7,881 $8,142 
Payables to related party94 298 
Current portion of long-term debt1,715 3,500 
Total current liabilities9,690 11,940 
LONG-TERM DEBT77,947 75,578 
LOANS PAYABLE - RELATED PARTY1,006 959 
DEFERRED INCOME TAXES55 55 
OTHER LONG-TERM LIABILITIES3,496 2,922 
MEMBER’S EQUITY:
Member's equity50,443 55,266 
Accumulated other comprehensive loss0 0 
Total CCO Holdings member’s equity50,443 55,266 
Noncontrolling interests23 23 
Total member’s equity50,466 55,289 
Total liabilities and member’s equity$142,660 $146,743 

The accompanying notes are an integral part of these consolidated financial statements.
1
 September 30,
2019		 December 31,
2018
 (unaudited)  
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$290
 $300
Accounts receivable, less allowance for doubtful accounts of $170 and $129, respectively2,252
 1,699
Prepaid expenses and other current assets548
 400
Total current assets3,090
 2,399
    
INVESTMENT IN CABLE PROPERTIES:   
Property, plant and equipment, net of accumulated depreciation of $26,306 and $23,038, respectively33,560
 34,658
Customer relationships, net7,956
 9,565
Franchises67,322
 67,319
Goodwill29,554
 29,554
Total investment in cable properties, net138,392
 141,096
    
OPERATING LEASE RIGHT-OF-USE ASSETS930
 —
OTHER NONCURRENT ASSETS1,398
 1,403
    
Total assets$143,810
 $144,898
LIABILITIES AND MEMBER’S EQUITY   
CURRENT LIABILITIES:   
Accounts payable and accrued liabilities$7,321
 $7,903
Payables to related party489
 545
Operating lease liabilities180
 —
Current portion of long-term debt3,509
 3,290
Total current liabilities11,499
 11,738
    
LONG-TERM DEBT71,390
 69,537
LOANS PAYABLE - RELATED PARTY959
 925
DEFERRED INCOME TAXES52
 —
LONG-TERM OPERATING LEASE LIABILITIES794
 —
OTHER LONG-TERM LIABILITIES2,146
 2,144
    
MEMBER’S EQUITY:   
Member's equity56,949
 60,532
Accumulated other comprehensive loss(2) (2)
Total CCO Holdings member's equity56,947
 60,530
Noncontrolling interests23
 24
Total member’s equity56,970
 60,554
    
Total liabilities and member’s equity$143,810
 $144,898


CCO HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions)
Unaudited
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
REVENUES$12,037 $11,449 $35,467 $33,997 
COSTS AND EXPENSES:
Operating costs and expenses (exclusive of items shown separately below)7,509 7,450 22,283 21,950 
Depreciation and amortization2,366 2,411 7,283 7,453 
Other operating expenses, net17 18 29 77 
9,892 9,879 29,595 29,480 
Income from operations2,145 1,570 5,872 4,517 
OTHER INCOME (EXPENSES):
Interest expense, net(947)(973)(2,904)(2,865)
Loss on extinguishment of debt(58)0 (121)0 
Gain (loss) on financial instruments, net69 (34)(185)(116)
Other pension benefits (costs), net(115)9 (94)27 
Other expense, net(11)(3)(6)(129)
(1,062)(1,001)(3,310)(3,083)
Income before income taxes1,083 569 2,562 1,434 
Income tax expense(10)(10)(23)(86)
Consolidated net income1,073 559 2,539 1,348 
Less: Net income attributable to noncontrolling interests0 0 (1)(1)
Net income attributable to CCO Holdings member$1,073 $559 $2,538 $1,347 
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
REVENUES$11,449
 $10,887
 $33,997
 $32,390
        
COSTS AND EXPENSES:       
Operating costs and expenses (exclusive of items shown separately below)7,450
 7,018
 21,950
 20,742
Depreciation and amortization2,411
 2,479
 7,453
 7,776
Other operating expenses, net18
 18
 77
 112
 9,879
 9,515
 29,480
 28,630
Income from operations1,570
 1,372
 4,517
 3,760
        
OTHER INCOME (EXPENSES):       
Interest expense, net(973) (912) (2,865) (2,658)
Gain (loss) on financial instruments, net(34) 12
 (116) —
Other pension benefits, net9
 207
 27
 247
Other expense, net(3) (4) (129) (49)
 (1,001) (697) (3,083) (2,460)
        
Income before income taxes569
 675
 1,434
 1,300
Income tax expense(10) (8) (86) (13)
Consolidated net income559
 667
 1,348
 1,287
Less: Net income attributable to noncontrolling interests—
 —
 (1) (1)
Net income attributable to CCO Holdings member$559
 $667
 $1,347
 $1,286



The accompanying notes are an integral part of these consolidated financial statements.
2

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 $0 $55,266 $23 $55,289 
Consolidated net income459 0 459 0 459 
Stock compensation expense90 0 90 0 90 
Contributions from parent27 0 27 0 27 
Distributions to parent(2,685)0 (2,685)0 (2,685)
Distributions to noncontrolling interest0 0 0 (1)(1)
BALANCE, March 31, 202053,157 0 53,157 22 53,179 
Consolidated net income1,006 0 1,006 1 1,007 
Stock compensation expense90 0 90 0 90 
Contributions from parent12 0 12 0 12 
Distributions to parent(1,290)0 (1,290)0 (1,290)
BALANCE, June 30, 202052,975 0 52,975 23 52,998 
Consolidated net income1,073 0 1,073 0 1,073 
Stock compensation expense83 0 83 0 83 
Contributions from parent4 0 4 0 4 
Distributions to parent(3,692)0 (3,692)0 (3,692)
BALANCE, September 30, 2020$50,443 $0 $50,443 $23 $50,466 
 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, 201959,936
(2)59,934
23
59,957
Consolidated net income438
—
438
1
439
Stock compensation expense82
—
82
—
82
Contributions from parent42
—
42
—
42
Distributions to parent(1,044)—
(1,044)—
(1,044)
BALANCE, June 30, 201959,454
(2)59,452
24
59,476
Consolidated net income559
—
559
—
559
Stock compensation expense71
—
71
—
71
Contributions from parent3
—
3
—
3
Distributions to parent(3,138)—
(3,138)—
(3,138)
Distributions to noncontrolling interest—
—
—
(1)(1)
BALANCE, September 30, 2019$56,949
$(2)$56,947
$23
$56,970

The accompanying notes are an integral part of these consolidated financial statements.
3
 Member's EquityAccumulated Other Comprehensive LossTotal CCO Holdings Member’s EquityNoncontrolling InterestsTotal Member's Equity
BALANCE, December 31, 2017$63,559
$(1)$63,558
$24
$63,582
Consolidated net income264
—
264
—
264
Stock compensation expense72
—
72
—
72
Accelerated vesting of equity awards5
—
5
—
5
Cumulative effect of accounting change49
—
49
—
49
Contributions from parent72
—
72
—
72
Distributions to parent(747)—
(747)—
(747)
Distributions to noncontrolling interest—
—
—
(1)(1)
BALANCE, March 31, 201863,274
(1)63,273
23
63,296
Consolidated net income355
—
355
1
356
Stock compensation expense70
—
70
—
70
Changes in accumulated other comprehensive loss—
(1)(1)—
(1)
Contributions from parent5
—
5
—
5
Distributions to parent(1,909)—
(1,909)—
(1,909)
BALANCE, June 30, 201861,795
(2)61,793
24
61,817
Consolidated net income667
—
667
—
667
Stock compensation expense71
—
71
—
71
Cumulative effect of accounting change38
—
38
—
38
Contributions from parent50
—
50
—
50
Distributions to parent(1,107)—
(1,107)—
(1,107)
BALANCE, September 30, 2018$61,514
$(2)$61,512
$24
$61,536


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, 2018$60,532 $(2)$60,530 $24 $60,554 
Consolidated net income350 0 350 0 350 
Stock compensation expense85 0 85 0 85 
Contributions from parent9 0 9 0 9 
Distributions to parent(1,040)0 (1,040)0 (1,040)
Distributions to noncontrolling interest0 0 0 (1)(1)
BALANCE, March 31, 201959,936 (2)59,934 23 59,957 
Consolidated net income438 0 438 1 439 
Stock compensation expense82 0 82 0 82 
Contributions from parent42 0 42 0 42 
Distributions to parent(1,044)0 (1,044)0 (1,044)
BALANCE, June 30, 201959,454 (2)59,452 24 59,476 
Consolidated net income559 0 559 0 559 
Stock compensation expense71 0 71 0 71 
Contributions from parent3 0 3 0 3 
Distributions to parent(3,138)0 (3,138)0 (3,138)
Distributions to noncontrolling interest0 0 0 (1)(1)
BALANCE, September 30, 2019$56,949 $(2)$56,947 $23 $56,970 

The accompanying notes are an integral part of these consolidated financial statements.
4

CCO HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
Unaudited
Nine Months Ended September 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income$2,539 $1,348 
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
Depreciation and amortization7,283 7,453 
Stock compensation expense263 238 
Noncash interest income, net(33)(89)
Other pension (benefits) costs, net94 (27)
Loss on extinguishment of debt121 0 
Loss on financial instruments, net185 116 
Deferred income taxes0 54 
Other, net(28)155 
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable163 (567)
Prepaid expenses and other assets(228)(207)
Accounts payable, accrued liabilities and other79 (104)
Receivables from and payables to related party(122)(23)
Net cash flows from operating activities10,316 8,347 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment(5,352)(4,913)
Change in accrued expenses related to capital expenditures(70)(449)
Other, net(33)85 
Net cash flows from investing activities(5,455)(5,277)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt10,352 13,157 
Repayments of long-term debt(9,711)(10,886)
Borrowings of loans payable - related parties6 — 
Payments for debt issuance costs(91)(48)
Contributions from parent43 54 
Distributions to parent(7,667)(5,222)
Distributions to noncontrolling interest(1)(2)
Other, net(26)(133)
Net cash flows from financing activities(7,095)(3,080)
NET DECREASE IN CASH AND CASH EQUIVALENTS(2,234)(10)
CASH AND CASH EQUIVALENTS, beginning of period3,249 300 
CASH AND CASH EQUIVALENTS, end of period$1,015 $290 
CASH PAID FOR INTEREST$3,020 $3,065 
CASH PAID FOR TAXES$36 $27 

The accompanying notes are an integral part of these consolidated financial statements.
5
 Nine Months Ended September 30,
 2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES:   
Consolidated net income$1,348
 $1,287
Adjustments to reconcile consolidated net income to net cash flows from operating activities:   
Depreciation and amortization7,453
 7,776
Stock compensation expense238
 213
Accelerated vesting of equity awards—
 5
Noncash interest income, net(89) (243)
Other pension benefits, net(27) (247)
Loss on financial instruments, net116
 —
Deferred income taxes54
 4
Other, net155
 54
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:   
Accounts receivable(567) (96)
Prepaid expenses and other assets(207) (101)
Accounts payable, accrued liabilities and other(104) (60)
Receivables from and payables to related party(23) (88)
Net cash flows from operating activities8,347
 8,504
    
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of property, plant and equipment(4,913) (6,692)
Change in accrued expenses related to capital expenditures(449) (620)
Other, net85
 (93)
Net cash flows from investing activities(5,277) (7,405)
    
CASH FLOWS FROM FINANCING ACTIVITIES:   
Borrowings of long-term debt13,157
 11,552
Repayments of long-term debt(10,886) (8,964)
Borrowings of loans payable - related parties—
 7
Payments for debt issuance costs(48) (29)
Contributions from parent54
 127
Distributions to parent(5,222) (3,763)
Distributions to noncontrolling interest(2) (1)
Other, net(133) (7)
Net cash flows from financing activities(3,080) (1,078)
    
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS(10) 21
CASH AND CASH EQUIVALENTS, beginning of period300
 330
CASH AND CASH EQUIVALENTS, end of period$290
 $351
    
CASH PAID FOR INTEREST$3,065
 $2,920
CASH PAID FOR TAXES$27
 $19


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.services including Spectrum Internet, TV, Mobile and Voice. For small and medium-sized companies, Spectrum Business® delivers the same suite of broadband products and services coupled with special features and applications to enhance productivity, while for larger businesses and government entities, Spectrum Enterprise provides highly customized, fiber-based solutions. Spectrum Reach® delivers tailored advertising and production for the modern media landscape. The Company also offers mobile servicedistributes award-winning news coverage, sports and high-quality original programming to residentialits customers through Spectrum Networks and recently launched mobile service to a select number of small and medium business customers. In addition, the Company sells video and online advertising inventory to local, regional and national advertising customers and fiber-delivered communications and managed information technology solutions to larger enterprise customers. The Company also owns and operates regional sports networks and local sports, news and community channels.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, 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. 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 1 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'the Company's Annual Report on Form 10-K have been condensed or omitted for this quarterly report. The accompanying consolidated financial statements are unaudited and are subject to review by regulatory authorities. However, in the opinion of management, such financial statements include all adjustments, which consist of only normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. Interim results are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant judgments and estimates include capitalization of labor and overhead costs; depreciation and amortization costs;costs, impairments of property, plantfranchises and equipment, intangiblesgoodwill, pension benefits 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 2020 presentation.


56

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


2.    Franchises, Goodwill and Other Intangible Assets

Indefinite-lived and finite-lived intangible assets consist of the following as of September 30, 20192020 and December 31, 2018:2019:

  September 30, 2019 December 31, 2018
  Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Indefinite-lived intangible assets:            
Franchises $67,322
 $—
 $67,322
 $67,319
 $—
 $67,319
Goodwill 29,554
 —
 29,554
 29,554
 —
 29,554
  $96,876
 $—
 $96,876
 $96,873
 $—
 $96,873
             
Finite-lived intangible assets:            
Customer relationships $18,230
 $(10,274) $7,956
 $18,229
 $(8,664) $9,565
Other intangible assets 405
 (111) 294
 409
 (92) 317
  $18,635
 $(10,385) $8,250
 $18,638
 $(8,756) $9,882


September 30, 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 $(12,180)$6,050 $18,230 $(10,777)$7,453 
Other intangible assets405 (150)255 405 (122)283 
$18,635 $(12,330)$6,305 $18,635 $(10,899)$7,736 

Amortization expense related to customer relationships and other intangible assets for the three and nine months ended September 30, 20192020 was $445 million and $1.4 billion, respectively, and $516 million and $1.6 billion, respectively, and $583 million and $1.8 billion for the three and nine months ended September 30, 2018,2019, respectively.
The Company expects amortization expense on its finite-lived intangible assets will be as follows:

Three months ended December 31, 2019 $514
2020 1,875
2021 1,599
2022 1,329
2023 1,072
Thereafter 1,861
  $8,250

Three months ended December 31, 2020$443 
20211,599 
20221,329 
20231,072 
2024821 
Thereafter1,041 
$6,305 

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

3.    Investments

The Company recorded impairments on equity investments of approximately $121 million and $58$121 million during the nine months ended September 30, 2019 and 2018, respectively, which waswere recorded in other expense, net in the consolidated statements of operations.



7

6

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


4.    Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following as of September 30, 20192020 and December 31, 2018:2019:

 September 30, 2019 December 31, 2018
Accounts payable – trade$610
 $702
Deferred revenue526
 494
Accrued liabilities:   
Programming costs2,064
 2,044
Labor726
 705
Capital expenditures973
 1,472
Interest943
 1,045
Taxes and regulatory fees532
 508
Other947
 933
 $7,321
 $7,903


September 30, 2020December 31, 2019
Accounts payable – trade$704 $727 
Deferred revenue477 460 
Accrued liabilities:
Programming costs1,913 2,042 
Labor1,124 939 
Capital expenditures1,264 1,441 
Interest962 1,052 
Taxes and regulatory fees537 501 
Operating lease liabilities203 184 
Other697 796 
$7,881 $8,142 

5.    Leases

The primary leased asset classesOperating lease expenses were $98 million and $289 million for the three and nine months ended September 30, 2020, respectively, and $92 million and $281 million for the three and nine months ended September 30, 2019, respectively, inclusive of $32 million and $94 million for the Company include real estate, dark fiber, colocation facilitiesthree and other equipment. Thenine months ended September 30, 2020, respectively, and $31 million and $92 million for the three and nine months ended September 30, 2019, respectively, of both short-term lease agreements include both leasecosts and non-lease components, which the Company accounts for separately depending on the election made for each leased asset class. For real estate and dark fiber leased asset classes, the Company accounts for lease and non-lease components as a single lease component and includes all fixed payments in the measurement of lease liabilities and lease assets. For colocation facilities leased asset class, the Company accounts for lease and non-lease components separately including only the fixed lease payment component in the measurement of lease liabilities and lease assets.

In addition to fixed lease payments, certain of the Company’s lease agreements include variable lease payments which are tied to an index or rate such as the change in the Consumer Price Index. These variable payments arecosts 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 $189 million and $185 million for the nine months ended September 30, 2020 and 2019, respectively. Operating lease assets.

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

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

The Company’s primary lease income represents sublease income on certain real estate leases. Sublease income is included in other revenue and presented gross from rent expense. For customer premise equipment ("CPE") where such CPE would qualify as a lease, the Company applies the practical expedient to combine the operating lease withobligations were $250 million and $171 million for the subscription service revenuenine months ended September 30, 2020 and 2019, respectively.

Supplemental balance sheet information related to leases is as a single performance obligation in accordance with revenue recognition accounting guidance as the subscription service is the predominant component.follows.

September 30, 2020December 31, 2019
Operating lease right-of-use assets:
Included within other noncurrent assets$1,012 $925 
Operating lease liabilities:
Current portion included within accounts payable and accrued liabilities$203 $184 
Long-term portion included within other long-term liabilities876 788 
$1,079 $972 
Weighted average remaining lease term for operating leases6.3 years6.6 years
Weighted average discount rate for operating leases4.1 %4.4 %


78

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


The componentsMaturities of lease related expenses, netliabilities are as follows.

 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Operating lease expense (a)
$92
 $281
    
Finance lease expense:   
Amortization of right-of-use assets3
 10
Interest on lease liabilities1
 4
Total finance lease expense4
 14
    
Sublease income(5) (15)
Total lease related expenses, net$91
 $280

(a)
Includes short-term leases and variable leases costs of $31 million and $92 million for the three and nine months ended September 30, 2019, respectively.

Supplemental cash flow information related to leases is as follows.

 Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities: 
Operating cash flows from operating leases$185
Operating cash flows from finance leases$4
Financing cash flows from finance leases$5
  
Right-of-use assets obtained in exchange for lease obligations: 
Operating leases$171
Finance leases$27


Operating leases
Three months ended December 31, 2020$66 
2021258 
2022225 
2023200 
2024162 
Thereafter378 
Undiscounted lease cash flow commitments1,289 
Reconciling impact from discounting(210)
Lease liabilities on consolidated balance sheet as of September 30, 2020$1,079 

The Company has $61 million and $62 million of finance lease liabilities recognized in the consolidated balance sheets as of September 30, 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 September 30, 2020 and December 31, 2019:

September 30, 2020December 31, 2019
Principal AmountAccreted ValuePrincipal AmountAccreted Value
CCO Holdings, LLC:
5.250% senior notes due September 30, 2022$0 $0 $1,250 $1,241 
5.125% senior notes due February 15, 20230 0 1,000 995 
4.000% senior notes due March 1, 2023500 498 500 497 
5.125% senior notes due May 1, 20230 0 1,150 1,145 
5.750% senior notes due September 1, 20230 0 500 497 
5.750% senior notes due January 15, 20240 0 150 149 
5.875% senior notes due April 1, 20240 0 1,700 1,690 
5.375% senior notes due May 1, 2025750 747 750 746 
5.750% senior notes due February 15, 20262,500 2,474 2,500 2,471 
5.500% senior notes due May 1, 20261,500 1,492 1,500 1,491 
5.875% senior notes due May 1, 2027800 796 800 796 
5.125% senior notes due May 1, 20273,250 3,224 3,250 3,222 
5.000% senior notes due February 1, 20282,500 2,471 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 3,042 3,050 3,041 
4.500% senior notes due August 15, 20302,750 2,750 0 0 
4.250% senior notes due February 1, 20313,000 3,001 0 0 
4.500% senior notes due May 1, 20321,400 1,387 0 0 
Charter Communications Operating, LLC:
3.579% senior notes due July 23, 20200 0 2,000 1,997 
4.464% senior notes due July 23, 20223,000 2,990 3,000 2,987 
Senior floating rate notes due February 1, 2024900 902 900 902 

89

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


4.500% senior notes due February 1, 20241,100 1,094 1,100 1,093 
4.908% senior notes due July 23, 20254,500 4,474 4,500 4,471 
3.750% senior notes due February 15, 20281,000 988 1,000 987 
4.200% senior notes due March 15, 20281,250 1,241 1,250 1,240 
5.050% senior notes due March 30, 20291,250 1,241 1,250 1,241 
2.800% senior notes due April 1, 20311,600 1,583 0 0 
6.384% senior notes due October 23, 20352,000 1,983 2,000 1,982 
5.375% senior notes due April 1, 2038800 786 800 786 
6.484% senior notes due October 23, 20453,500 3,468 3,500 3,467 
5.375% senior notes due May 1, 20472,500 2,506 2,500 2,506 
5.750% senior notes due April 1, 20482,450 2,391 2,450 2,391 
5.125% senior notes due July 1, 20491,250 1,240 1,250 1,240 
4.800% senior notes due March 1, 20502,800 2,797 2,800 2,798 
3.700% senior notes due April 1, 20511,400 1,380 0 0 
6.834% senior notes due October 23, 2055500 495 500 495 
Credit facilities10,219 10,147 10,427 10,345 
Time Warner Cable, LLC:
5.000% senior notes due February 1, 20200 0 1,500 1,503 
4.125% senior notes due February 15, 2021700 704 700 711 
4.000% senior notes due September 1, 20211,000 1,011 1,000 1,021 
5.750% sterling senior notes due June 2, 2031 (a)
806 860 828 886 
6.550% senior debentures due May 1, 20371,500 1,670 1,500 1,675 
7.300% senior debentures due July 1, 20381,500 1,766 1,500 1,772 
6.750% senior debentures due June 15, 20391,500 1,708 1,500 1,713 
5.875% senior debentures due November 15, 20401,200 1,254 1,200 1,255 
5.500% senior debentures due September 1, 20411,250 1,258 1,250 1,258 
5.250% sterling senior notes due July 15, 2042 (b)
839 810 861 831 
4.500% senior debentures due September 15, 20421,250 1,144 1,250 1,142 
Time Warner Cable Enterprises LLC:
8.375% senior debentures due March 15, 20231,000 1,115 1,000 1,148 
8.375% senior debentures due July 15, 20331,000 1,273 1,000 1,284 
Total debt79,064 79,662 78,416 79,078 
Less current portion:
5.000% senior notes due February 1, 20200 0 (1,500)(1,503)
3.579% senior notes due July 23, 20200 0 (2,000)(1,997)
4.125% senior notes due February 15, 2021(700)(704)0 0 
4.000% senior notes due September 1, 2021(1,000)(1,011)0 0 
Long-term debt$77,364 $77,947 $74,916 $75,578 
Supplemental balance sheet information related to leases is as follows.

 September 30, 2019
Operating leases: 
Operating lease right-of-use assets$930
  
Current operating lease liabilities$180
Long-term operating lease liabilities794
Total operating lease liabilities$974
  
Finance leases: 
Finance lease right-of-use assets (included within property, plant and equipment, net)$165
  
Current finance lease liabilities (included within accounts payable and accrued liabilities)$7
Long-term finance lease liabilities (included within other long-term liabilities)51
Total finance lease liabilities$58
  
Weighted average remaining lease term 
Operating leases6.8 years
Finance leases16.3 years
  
Weighted average discount rate 
Operating leases4.5%
Finance leases5.7%


Maturities of lease liabilities are as follows.

 Operating leases Finance leases
Three months ended December 31, 2019$59
 $1
2020237
 6
2021208
 6
2022173
 6
2023149
 5
Thereafter410
 59
Undiscounted lease cash flow commitments1,236
 83
Reconciling impact from discounting(262) (25)
Lease liabilities on consolidated balance sheet as of September 30, 2019$974
 $58

(a)



9

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


The following table presents the Company’s unadjusted lease commitmentsPrincipal amount includes £625 million remeasured at $806 million and $828 million as of December 31, 2018 as a required disclosure for companies adopting the lease standard prospectively without revising comparative period information.

 Operating leases Capital leases
2019$233
 $10
2020215
 9
2021176
 9
2022142
 9
2023119
 10
Thereafter342
 64
 $1,227
 $111


6.    Long-Term Debt

Long-term debt consists of the following as of September 30, 20192020 and December 31, 2018:2019, respectively, using the exchange rate at the respective dates.

(b)Principal amount includes £650 million remeasured at $839 million and $861 million as of September 30, 2020 and December 31, 2019, respectively, using the exchange rate at the respective dates.
 September 30, 2019 December 31, 2018
 Principal Amount Accreted Value Principal Amount Accreted Value
CCO Holdings, LLC:       
5.250% senior notes due March 15, 2021$500
 $499
 $500
 $498
5.250% senior notes due September 30, 20221,250
 1,240
 1,250
 1,238
5.125% senior notes due February 15, 20231,000
 995
 1,000
 994
4.000% senior notes due March 1, 2023500
 497
 500
 496
5.125% senior notes due May 1, 20231,150
 1,145
 1,150
 1,144
5.750% senior notes due September 1, 2023500
 497
 500
 497
5.750% senior notes due January 15, 20241,000
 994
 1,000
 993
5.875% senior notes due April 1, 20241,700
 1,690
 1,700
 1,688
5.375% senior notes due May 1, 2025750
 746
 750
 745
5.750% senior notes due February 15, 20262,500
 2,470
 2,500
 2,467
5.500% senior notes due May 1, 20261,500
 1,491
 1,500
 1,490
5.875% senior notes due May 1, 2027800
 795
 800
 795
5.125% senior notes due May 1, 20273,250
 3,221
 3,250
 3,219
5.000% senior notes due February 1, 20282,500
 2,468
 2,500
 2,466
5.375% senior notes due June 1, 20291,500
 1,501
 —
 —
Charter Communications Operating, LLC:       
3.579% senior notes due July 23, 20202,000
 1,996
 2,000
 1,992
4.464% senior notes due July 23, 20223,000
 2,985
 3,000
 2,982
Senior floating rate notes due February 1, 2024900
 902
 900
 903
4.500% senior notes due February 1, 20241,100
 1,092
 1,100
 1,091
4.908% senior notes due July 23, 20254,500
 4,470
 4,500
 4,466
3.750% senior notes due February 15, 20281,000
 987
 1,000
 986
4.200% senior notes due March 15, 20281,250
 1,240
 1,250
 1,240
5.050% senior notes due March 30, 20291,250
 1,241
 —
 —
6.384% senior notes due October 23, 20352,000
 1,982
 2,000
 1,982
5.375% senior notes due April 1, 2038800
 786
 800
 785
6.484% senior notes due October 23, 20453,500
 3,467
 3,500
 3,467



10

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


5.375% senior notes due May 1, 20472,500
 2,506
 2,500
 2,506
5.750% senior notes due April 1, 20482,450
 2,391
 1,700
 1,683
5.125% senior notes due July 1, 20491,250
 1,240
 —
 —
6.834% senior notes due October 23, 2055500
 495
 500
 495
Credit facilities10,834
 10,759
 10,038
 9,959
Time Warner Cable, LLC:       
8.750% senior notes due February 14, 2019—
 —
 1,250
 1,260
8.250% senior notes due April 1, 2019—
 —
 2,000
 2,030
5.000% senior notes due February 1, 20201,500
 1,513
 1,500
 1,541
4.125% senior notes due February 15, 2021700
 714
 700
 721
4.000% senior notes due September 1, 20211,000
 1,024
 1,000
 1,033
5.750% sterling senior notes due June 2, 2031 (a)
769
 823
 796
 855
6.550% senior debentures due May 1, 20371,500
 1,676
 1,500
 1,680
7.300% senior debentures due July 1, 20381,500
 1,774
 1,500
 1,780
6.750% senior debentures due June 15, 20391,500
 1,714
 1,500
 1,719
5.875% senior debentures due November 15, 20401,200
 1,255
 1,200
 1,256
5.500% senior debentures due September 1, 20411,250
 1,258
 1,250
 1,258
5.250% sterling senior notes due July 15, 2042 (b)
799
 771
 827
 798
4.500% senior debentures due September 15, 20421,250
 1,142
 1,250
 1,140
Time Warner Cable Enterprises LLC:       
8.375% senior debentures due March 15, 20231,000
 1,159
 1,000
 1,191
8.375% senior debentures due July 15, 20331,000
 1,288
 1,000
 1,298
Total debt74,202
 74,899
 71,961
 72,827
Less current portion:       
8.750% senior notes due February 14, 2019—
 —
 (1,250) (1,260)
8.250% senior notes due April 1, 2019—
 —
 (2,000) (2,030)
5.000% senior notes due February 1, 2020(1,500) (1,513) —
 —
3.579% senior notes due July 23, 2020(2,000) (1,996) —
 —
Long-term debt$70,702
 $71,390
 $68,711
 $69,537


(a)
Principal amount includes £625 million remeasured at $769 million and $796 million as of September 30, 2019 and December 31, 2018, respectively, using the exchange rate at the respective dates.
(b)
Principal amount includes £650 million remeasured at $799 million and $827 million as of September 30, 2019 and December 31, 2018, respectively, using the exchange rate at the respective dates.

The accreted values presented in the table above represent the principal amount of the debt less theadjusted for original issue discount or premium at the time of sale, deferred financing costs, and, in regards to Time Warner Cable, LLC and Time Warner Cable Enterprises LLC 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.

10

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

In regards to the fixed-rate British pound sterling denominated notes (the “Sterling Notes”), the principal amount of the debt and any premium or discount is remeasured into U.S.US dollars as of each balance sheet date. See Note 8. The Company has availability under the Charter Communications Operating, LLC ("Charter Operating") credit facilities of approximately $4.3$4.7 billion as of September 30, 2019.2020.

In July 2019, Charter OperatingFebruary 2020, CCO Holdings and Charter Communications OperatingCCO Holdings Capital Corp. jointly issued $1.25$1.65 billion aggregate principal amount of 4.500% senior unsecured notes due 2030 at par and in March 2020, an additional $1.1 billion of the same series of notes were issued at a price of 102.5% of the aggregate principal amount. Also in March 2020, CCO Holdings and CCO Holdings Capital Corp. issued $1.4 billion aggregate principal amount of 4.500% senior unsecured notes due 2032 at par. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.250% senior notes due September 30, 2022, 5.125% senior notes due 2049February 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 buybacks of Charter Class A common stock and Charter Holdings common units. The Company recorded a loss on extinguishment of debt of $63 million during the nine months ended September 30, 2020 related to these transactions.

In July 2020, CCO Holdings and CCO Holdings Capital Corp. jointly issued $1.5 billion aggregate principal amount of 4.250% senior unsecured notes due 2031 at par and later in July 2020, an additional $1.5 billion of the same series of notes were issued at a price of 99.880%102%. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.875% senior notes due April 1, 2024, as well as distributions to the Company's parent companies to fund buybacks of Charter Class A common stock and Charter Holdings common units. The Company recorded a loss on extinguishment of debt of $58 million during the three and nine months ended September 30, 2020 related to these transactions.

In October 2020, CCO Holdings and CCO Holdings Capital Corp. jointly issued an additional $1.5 billion of its 4.500% senior unsecured notes due 2032 at 103.75% of the aggregate principal amount. The net proceeds will be used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.375% senior notes due May 1, 2025, as well as distributions to the Company's parent companies to fund potential buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness, which may include Time Warner Cable, LLC's 5.000% senior notes due 2020.units.



11

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


In October 2019, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.5 billion aggregate principal amount of 4.800% senior unsecured notes due 2050 at a price of 99.436% of the aggregate principal amount. The net proceeds will be used to pay related fees and expenses and for general corporate purposes, including distributions to the Company's parent companies to fund potential buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness.

The Charter Operating notes are guaranteed by CCO Holdings and substantially all of the operating subsidiaries of Charter Operating. In addition, the Charter Operating notes are secured by a perfected first priority security interest in substantially all of the assets of Charter Operating to the extent such liens can be perfected under the Uniform Commercial Code by the filing of a financing statement and the liens rank equally with the liens on the collateral securing obligations under the Charter Operating credit facilities. Charter Operating may redeem some or all of the Charter Operating notes at any time at a premium.

The Charter Operating notes are subject to the terms and conditions of the indentures governing the Charter Operating notes. The Charter Operating notes contain customary representations and warranties and affirmative covenants with limited negative covenants. The Charter Operating indentures also contains customary events of default.

In October 2019, Charter Operating entered into an amendment to its Credit Agreement repricing $4.5 billion of its revolving loan and $4.0 billion of term loan A to LIBOR plus 1.25% and its existing term loan B to LIBOR plus 1.75%. In addition, $4.5 billion of the revolving loan and $4.0 billion of term loan A maturities were extended to 2025 and $3.8 billion of term loan B maturities were extended to 2027.

In May 2019, CCO Holdings and CCO Holdings Capital Corp. jointly issued $750 million aggregate principal amount of 5.375% senior unsecured notes due 2029 at par and in July 2019, an additional $750 million of the same series of notes were issued at a price of 102.000% of the aggregate principal amount. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including distributions to the Company's parent companies to fund buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness.

On October 1, 2019, CCO Holdings and CCO Holdings Capital Corp. jointly issued $1.35 billion aggregate principal amount of 4.750% senior unsecured notes due 2030 at par and on October 24, 2019, an additional $500 million of the same series of notes were issued at a price of 101.250% of the aggregate principal amount. The net proceeds from the October 1, 2019 issuance were used to finance a tender offer and call redemption of $500 million aggregate principal amount of CCO Holdings' 5.250% senior unsecured notes due 2021 and $850 million aggregate principal amount of CCO Holdings' 5.750% senior unsecured notes due 2024, as well as to pay related fees and expenses and for general corporate purposes. The net proceeds from the October 24, 2019 issuance will be used to pay related fees and expenses and for general corporate purposes, including distributions to the Company's parent companies to fund potential buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness.

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

CCO Holdings may redeem some or all of the notes at any time at a premium. Beginning in 2027,2028 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 2022,2023, CCO Holdings may redeem up to 40% of the aggregate principal amount of the notes at a premium plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more equity offerings (as defined in the indenture); provided that certain conditions are met. In the event of specified change of control events, CCO Holdings must offer to purchase the outstanding notes from the holders at a purchase price equal to 101% of the total principal amount of the notes, plus any accrued and unpaid interest.

7.    Loans Payable - Related Party

Loans payable - related party as of September 30, 2019In April 2020, Charter Operating and December 31, 2018 consists of loans from Charter Communications Holding Company, LLC (“Operating Capital Corp. jointly issued $1.6 billion aggregate principal amount of 2.800% senior secured notes due April 2031 at a price of 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 were used to pay related fees and expenses and for general corporate purposes.

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

The Charter Operating notes are guaranteed by CCO Holdings and substantially all of the operating subsidiaries of Charter Operating. In addition, the Charter Operating notes are secured by a perfected first priority security interest in substantially all of the assets of Charter Operating to the Companyextent such liens can be perfected under the Uniform Commercial Code by the filing of $699 million and $674 million, respectively, and loans from Charter


1211

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


a financing statement and the liens rank equally with the liens on the collateral securing obligations under the Charter Operating credit facilities. Charter Operating may redeem some or all of the Charter Operating notes at any time at a premium.

The Charter Operating notes are subject to the terms and conditions of the indenture governing the Charter Operating notes. The Charter Operating notes contain customary representations and warranties and affirmative covenants with limited negative covenants. The Charter Operating indenture also contains customary events of default.

7.    Loans Payable - Related Party

Loans payable - related party as of September 30, 2020 and December 31, 2019 consists of loans from Charter Communications Holding Company, LLC (“Charter Holdco”) to the Company of $260$727 million and $251$699 million, respectively, and loans from Charter to the Company of $279 million and $260 million, respectively. Interest accrued at LIBOR plus 1.25% on the loans payable - related party atfrom Charter Holdco during the period ending September 30, 2020 and LIBOR plus 1.50% during the period ending December 31, 2019. Interest accrued at LIBOR plus 2.00% on the loans payable from Charter during both periods ending September 30, 20192020 and December 31, 2018.2019.

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.

Cross-currency derivative instruments are used to effectively convert £1.275 billion aggregate principal amount of fixed-rate British pound sterling denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt. The cross-currency swaps have maturities of June 2031 and July 2042. The Company is required to post collateral on the cross-currency derivative instruments when the derivative contracts are in a liability position. In April 2019, the Company entered into a collateral holiday agreement for 60% of both the 2031 and 2042 cross-currency swaps, which eliminates the requirement to post collateral for three years, as well as a ten year collateral cap on the remaining 40% of the cross-currency swaps which limits the required collateral posting on that 40% of the cross-currency swaps to $150 million. The fair value of the Company's cross-currency derivatives was $409$454 million and $237$224 million and is included in other long-term liabilities on its consolidated balance sheets as of September 30, 20192020 and December 31, 2018,2019, respectively.

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

The effect of financial instruments on the consolidated statements of operations is presented in the table below.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
2019 2018 2019 20182020201920202019
Gain (Loss) on Financial Instruments, Net:       Gain (Loss) on Financial Instruments, Net:
Change in fair value of cross-currency derivative instruments$(86) $(10) $(172) $(63)Change in fair value of cross-currency derivative instruments$135 $(86)$(230)$(172)
Foreign currency remeasurement of Sterling Notes to U.S. dollars52
 22
 56
 63
Foreign currency remeasurement of Sterling Notes to U.S. dollars(66)52 45 56 
$(34) $12
 $(116) $—
$69 $(34)$(185)$(116)


12

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

9.    Fair Value Measurements

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

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

Financial Assets and Liabilities

The Company has estimated the fair value of its financial instruments as of September 30, 20192020 and December 31, 20182019 using available market information or other appropriate valuation methodologies. Considerable judgment, however, is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented in the accompanying consolidated financial statements are not necessarily indicative of the amounts the Company would realize in a current market exchange.


13

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



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.

Financial instruments accounted for at fair value on a recurring basis and classified within Level 2 of the valuation hierarchy include the Company's cross-currency derivative instruments and were valued at $409$454 million and $237$224 million as of September 30, 20192020 and December 31, 2018,2019, respectively.

The estimated fair value of the Company’s senior notes and debentures as of September 30, 20192020 and December 31, 20182019 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 September 30, 20192020 and December 31, 20182019 is as follows:

  September 30, 2019 December 31, 2018
  Carrying Value Fair Value Carrying Value Fair Value
Senior notes and debentures $64,140
 $69,315
 $62,868
 $61,087
Credit facilities $10,759
 $10,842
 $9,959
 $9,608

September 30, 2020December 31, 2019
Carrying ValueFair ValueCarrying ValueFair Value
Senior notes and debentures$69,515 $78,793 $68,733 $74,938 
Credit facilities$10,147 $9,983 $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.  When such impairments are recorded, fair values are generally classified within Level 3 of the valuation hierarchy.

10.    Revenues

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

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Video$4,359
 $4,332
 $13,134
 $12,987
Internet4,195
 3,809
 12,322
 11,286
Voice477
 512
 1,470
 1,599
Residential revenue9,031
 8,653
 26,926
 25,872
        
Small and medium business974
 922
 2,882
 2,737
Enterprise644
 632
 1,939
 1,881
Commercial revenue1,618
 1,554
 4,821
 4,618
        
Advertising sales394
 440
 1,134
 1,223
Mobile192
 17
 490
 17
Other214
 223
 626
 660
 $11,449
 $10,887
 $33,997
 $32,390



13

14

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

10.    Revenues

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

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Internet$4,722 $4,195 $13,659 $12,322 
Video4,221 4,359 13,014 13,134 
Voice449 477 1,357 1,470 
Residential revenue9,392 9,031 28,030 26,926 
Small and medium business988 974 2,967 2,882 
Enterprise617 644 1,845 1,939 
Commercial revenue1,605 1,618 4,812 4,821 
Advertising sales460 394 1,074 1,134 
Mobile368 192 936 490 
Other212 214 615 626 
$12,037 $11,449 $35,467 $33,997 

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 September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Programming$2,790
 $2,778
 $8,482
 $8,333
Regulatory, connectivity and produced content612
 546
 1,770
 1,639
Costs to service customers1,894
 1,854
 5,483
 5,492
Marketing793
 790
 2,296
 2,310
Mobile337
 94
 874
 135
Other1,024
 956
 3,045
 2,833
 $7,450
 $7,018
 $21,950
 $20,742

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Programming$2,727 $2,790 $8,492 $8,482 
Regulatory, connectivity and produced content612 612 1,651 1,770 
Costs to service customers1,902 1,894 5,598 5,483 
Marketing788 793 2,273 2,296 
Mobile456 337 1,243 874 
Other1,024 1,024 3,026 3,045 
$7,509 $7,450 $22,283 $21,950 

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.contract period. Costs to service customers include costs related to field operations, network operations and customer care for the Company’s residential and small and medium business customers, including internal and third-party labor for the non-capitalizable portion of installations, service and repairs, maintenance, bad debt expense, billing and collection, occupancy and vehicle costs. Marketing costs represent the costs of marketing to current and potential commercial and residential customers including labor costs. Mobile costs represent costs associated with the Company's mobile service such as device and service costs, marketing, sales and commissions, retail stores, personnel costs and taxes, among others. Other includes corporate overhead, advertising sales expenses, indirect costs associated with the Company’s enterprise business customers and regional sports and news networks, property tax and insurance expense and stock compensation expense, among others.

14

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


12.     Other Operating Expenses, Net

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

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Special charges, net$23
 $14
 $44
 $121
(Gain) loss on sale of assets, net(5) 4
 33
 (9)
 $18
 $18
 $77
 $112

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Special charges, net$31 $23 $56 44 
(Gain) loss on sale of assets, net(14)(5)(27)33 
$17 $18 $29 $77 

Special charges, net

Special charges, net primarily includes employee termination costs and net amounts of litigation settlements. The three and nine months ended September 30, 2018 includes $14 million and $85 million of merger and restructuring costs, respectively. The nine months ended September 30, 2018 also includes a $22 million charge related to the Company's withdrawal liability from a multiemployer pension plan.

Gain (loss)(Gain) loss on sale of assets, net

Gain (loss)(Gain) loss on sale of assets, net represents the net gain (loss)(gain) loss recognized on the sales and disposals of fixed assets and cable systems. The nine months ended September 30, 2019 includes a $41 million impairment of non-strategic assets.


15

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



13.     Stock Compensation Plans

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

Charter granted the following equity awards for the periods presented.

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Stock options39,400
 24,200
 1,821,800
 1,490,700
Restricted stock200
 500
 8,300
 10,200
Restricted stock units11,300
 13,500
 698,200
 518,900


Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Stock options17,100 39,400 1,282,400 1,821,800 
Restricted stock0 200 6,000 8,300 
Restricted stock units5,000 11,300 420,900 698,200 

Charter stock options and restricted stock units generally cliff vest uponthree years from the three year anniversarydate of each grant. Certain stock options and restricted stock units vest based on achievement of stock price hurdles. Stock options generally expire ten years from the grant date and restricted stock units have no voting rights. Restricted stock generally vests one year from the date of grant. Time Warner Cable Inc. ("TWC") restricted stock units that were converted into Charter restricted stock units generally vest 50% on each of the third and fourth anniversary of the grant date.


As of September 30, 2019,2020, total unrecognized compensation remaining to be recognized in future periods totaled $211$222 million for stock options, $2$2 million for restricted stock and $246$260 million for restricted stock units and the weighted average period over which they are expected to be recognized is two years for stock options, seven months for restricted stock and two years for restricted stock units.

The Company recorded stock compensation expense of $83 million and $263 million for the three and nine months ended September 30, 2020, respectively, and $71 million and $238 million for the three and nine months ended September 30, 2019, respectively, and $71 million and $213 million of stock compensation expense for the three and nine months ended September 30, 2018, respectively, which is included in operating costs and expenses. The Company also recorded $5 million of expense related to accelerated vesting of equity awards of terminated employees, which is recorded


15

CCO HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in other operating expenses, net in the consolidated statements of operations for the nine months ended September 30, 2018.millions, except where indicated)

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.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”). 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 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.

The Company recorded income tax expense of $10 million and $23 million for the three and nine months ended September 30, 2020, respectively, and $10 million and $86 million for the three and nine months ended September 30, 2019, respectively, and $8 million and $13 million for the three and nine months ended September 30, 2018, respectively. Income tax expense increaseddecreased during the nine months ended September 30, 20192020 compared to the corresponding period in 20182019 primarily as a result of an internal entity simplification and higher pretax incomethat 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 provisions, such as deferring payroll tax payments, establishing a credit for the retention of certain employees, relaxing limitations on the deductibility of interest, and updating the definition of qualified improvement property. This legislation currently has no material impact to income tax expense on the Company’s financial statements.

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


16

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


technical merits. There is considerable judgment involved in making such a determination. The Company has recorded unrecognized tax benefits totaling approximately $116$103 million and $119$110 million, excluding interest and penalties, as of September 30, 20192020 and December 31, 2018,2019, respectively. The Company does not currently anticipate that its reserve for uncertain tax positions will significantly increase or decrease during 2019;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 are currently under examination by the Internal Revenue Service ("IRS") for income tax purposes. Charter's 2016 through 20182019 tax years remain open for examination and assessment. Charter’s short period return dated May 17, 2016 (prior to the acquisition of TWCTime Warner Cable Inc. ("TWC") and Bright House Networks, LLC) remains subject to examinationLLC ("Bright House") transactions) and assessment. Years prior to 2016years remain open solely for purposes of examination of Charter’s loss and credit carryforwards. The IRS is currently examining Charter Holdings’ income tax return for 2016. Charter Holdings’ 2017 and 2018through 2019 tax years remain open for examination and assessment. The IRS is currently examining TWC’s income tax returns for 2011 through 2014. TWC’s tax year 2015 remains subject to examination and assessment. Prior to TWC’s separation from Time Warner Inc. (“Time Warner”) in March 2009, TWC was included in the consolidated U.S. federal and certain state income tax returns of Time Warner. The IRS has examined Time Warner’s 2008 through 2010 income tax returns and the results are under appeal. The Company does not anticipate that these examinations will have a material impact on the Company’s consolidated financial position or results of operations. In addition, the Company is also subject to ongoing 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, 2019,2020, nor does the Company anticipate a material impact in the future.

15.     Comprehensive Income

Comprehensive income equaled net income attributable to CCO Holdings member for each of the three and nine months ended September 30, 20192020 and three months ended September 30, 2018. The following table sets forth the consolidated statements of comprehensive income for the nine months ended September 30, 2018.2019.

 Nine Months Ended September 30, 2018
Consolidated net income$1,287
Foreign currency translation adjustment(1)
Consolidated comprehensive income1,286
Less: Comprehensive income attributable to noncontrolling interest(1)
Comprehensive income attributable to CCO Holdings member$1,285


16

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

16.     Related Party Transactions

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

Liberty Broadband and A/N

Under the terms of the Amended and Restated Stockholders Agreement with Liberty Broadband, Corporation (“Liberty Broadband”), A/N and Charter, dated May 23, 2015, the number of Charter’s directors is fixed at 13, and includes its CEO. Two designees selected by A/N are members of the board of directors of Charter and three designees selected by Liberty Broadband are members of the board of directors of Charter. The remaining eight directors are not affiliated with either A/N or Liberty Broadband. Each of A/N and Liberty Broadband is entitled to nominate at least one director to each of the committees of Charter’s board of directors, subject to applicable stock exchange listing rules and certain specified voting or equity ownership thresholds for each of A/N and Liberty Broadband, and provided that the Nominating and Corporate Governance Committee and the Compensation and Benefit Committee each have at least a majority of directors independent from A/N, Liberty Broadband and Charter (referred to as the “unaffiliated directors”). Each of the Nominating and Corporate Governance Committee and the Compensation and Benefits Committee is currently comprised of three unaffiliated directors and one designee of each of A/N and


17

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


Liberty Broadband. A/N and Liberty Broadband also have certain other committee designation and other governance rights. Mr. Thomas Rutledge, the Company’s CEO, is the chairman of the board of Charter.

In December 2017, Charter and A/N entered into an amendment to the letter agreement (the “Letter Agreement”) that requires A/N to sell to Charter or to Charter Holdings, on a monthly basis, a number of shares of Charter Class A common stock or Charter Holdings common units that represents a pro rata participation by A/N and its affiliates in any repurchases of shares of Charter Class A common stock from persons other than A/N effected by Charter during the immediately preceding calendar month, at a purchase price equal to the average price paid by Charter for the shares repurchased from persons other than A/N during such immediately preceding calendar month. A/N and Charter both have the right to terminate or suspend the pro rata repurchase arrangement on a prospective basis.

The Company is aware that Dr. John Malone, a director emeritus of Charter and Chairman of the board of directors and holder of 49.0%48.8% of voting interest in Liberty Broadband, may be deemed to have a 39.9% voting interest in Qurate Retail, Inc. ("Qurate") and isalso serves on the board of directors of Qurate.Qurate Retail, Inc. ("Qurate"). As reported in Qurate's SEC filings, Dr. Malone owns approximately 1.2 million shares of the Series A common stock and approximately 27.7 million shares of the Series B common stock of Qurate and has a 40.9% voting interest in Qurate for the election of directors. Qurate wholly owns HSN, Inc. (“HSN”) and QVC, Inc. (“QVC”). The Company has programming relationships with HSN and QVC. For the three and nine months ended September 30, 2020, the Company recorded revenue in aggregate of approximately $12 million and $36 million, respectively, and for three and nine months ended September 30, 2019, the Company recorded revenue in aggregate of approximately $11 million and $35 million, respectively, and for the three and nine months ended September 30, 2018, the Company recorded revenue in aggregate of approximately $18 million and $51 million, respectively, from HSN and QVC as part of channel carriage fees and revenue sharing arrangements for home shopping sales made to customers in the Company’s footprint.

Dr. Malone and Mr. Steven Miron, a member of Charter’s board of directors, also serve on the board of directors of Discovery, Communications, Inc., (“Discovery”). The Company is aware thatAs reported in Discovery's SEC filings, Dr. Malone owns 1.2% of the series A common stock, 93.6% of the series B common stock and 2.6%3.6% of the series C common stock of Discovery and has a 28.2%27.9% voting interest in Discovery for the election of directors. The Company is aware thatAs reported in Discovery's SEC filings, Advance/Newhouse Programming Partnership (“A/N PP”), an affiliate of A/N and of which Mr. Miron is the CEO, owns 100% of the Series A-1 preferred stock of Discovery and 100% of the Series C-1 preferred stock of Discovery and has a 24.1%23.9% voting interest for matters other than the election of directors. A/N PP also has the right to appoint three directors out of a total of eleventwelve directors to Discovery’s board to be elected by the holders of Discovery’s Series A-1 preferred stock.board. The Company purchases programming from Discovery 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 Discovery would currently be considered a related party. The amount paid in the aggregate to Discovery represents less than 2% of total operating costs and expenses for the three and nine months ended September 30, 20192020 and 2018.2019.

Equity Investments

The Company and its parent companies have agreements with certain equity investees pursuant to which the Company has made or received related party transaction payments. The Company and its parent companies recorded payments to equity investees totaling $50 million and $167 million during the three and nine months ended September 30, 2020, respectively, and $78 million and $245 million during the three and nine months ended September 30, 2019, respectively, and $99 million and $248 million during the three and nine months ended September 30, 2018, respectively.

17

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


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

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


18

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



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 TWC infringed certain U.S. patents purportedly relating to Voice over Internet Protocol (“VoIP”) services. At the trial, the jury returned a verdict of $140 million against TWC and further concluded that TWC had willfully infringed Sprint’s patents. The court subsequently declined to enhance the damage award as a result of the purported willful infringement and awarded Sprint an additional $6 million, representing pre-judgment interest on the damages award. The Company appealedhas now paid the case to the United States Court of Appeals for the Federal Circuit where the Company lost the appeal.verdict, interest and costs in full. The Company has filed a petition for writ of certiorari with the United States Supreme Court, and the Company could receive the decision of the Supreme Court as to whether the Court will grant the petition as early as November 2019. In addition to pursuing its appeal, the Company continues to pursue indemnity from one of its vendors and has brought a patent suit against Sprint (TC Tech, LLC v. Sprint) in the U.S.United States District Court for the District of Delaware implicating Sprint's LTE technology.technology and a similar suit against T-Mobile USA, Inc. in the Western District of Texas.  The expected financial impactultimate outcomes of the Sprint verdict has been reflected inpursuit of indemnity against the Company's financial statements.Company’s vendors and the TC Tech litigation cannot be predicted. The Company does not expect that the outcome of thisits indemnity claims nor the outcome of the TC Tech litigation will have a material adverse effect on its operations or financial condition.  The ultimate outcomes of the appeal of the Sprint Kansas case, the pursuit of indemnity against the Company’s vendor and the TC Tech litigation cannot be predicted.
 
Sprint filed a second patent suit against Charter and Bright House Networks, LLC on December 2, 2017 in the United States District Court for the District of Delaware. This suit alleges infringement of 1511 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, is vigorously defendingBright House, and TWC in the District Court for Johnson County, Kansas. Sprint alleges that Charter misappropriated trade secrets from Sprint years ago through employees hired by Bright House. Sprint asserts that the alleged trade secrets relate to the VoIP business of Charter and Bright House. Charter has removed this case. Whilecase to the Company is unable to predictUnited States District Court for the outcomeDistrict of this Sprint suit, it does not expect that this litigation will have a material effect on its operations, financial condition, or cash flows.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 threetwo patents related to the Company's video on demand services. The Company is vigorously defending this case. The court transferred this case to the United States District Court for the District of Delaware on December 20, 2018 pursuant to an agreement between the parties.

While the Company is vigorously defending these suits and is unable to predict the outcome of this litigation, itthe Sprint lawsuits, the Company does not expect that thisthe litigation will have a material effect on its operations, financial condition, or cash flows.

In 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 intellectual 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, the Company may be subject to substantial damages and/or an injunction that could require the Company or its vendors to modify certain products and services the Company offers to its subscribers, as well as negotiate royalty or license agreements with respect to the intellectual property at issue. While the Company believes the lawsuits are without merit and intends to defend the actions vigorously, no assurance

18

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

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

18.     Employee Benefit Plans

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


19

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



The components of net periodic pension benefit (costs) for the three and nine months ended September 30, 20192020 and 20182019 are recorded in other pension benefits, net in the consolidated statements of operations and consisted of the following:

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Interest cost$(32) $(32) $(96) $(96)
Expected return on plan assets41
 52
 123
 156
Remeasurement gain, net—
 187
 —
 187
Net periodic pension benefits$9
 $207
 $27
 $247

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Interest cost$(29)$(32)$(85)$(96)
Expected return on plan assets39 41 116 123 
Remeasurement loss, net(125)0 (125)0 
Net periodic pension benefits$(115)$9 $(94)$27 

During the three and nine months ended September 30, 2018,2020, 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, 20182020 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 $187$125 million remeasurement gainloss recorded during the three and nine months ended September 30, 20182020 was primarily driven by the effects of an increase ofchanges in the discount rate from 3.68% at December 31, 2017 to 4.24% at September 30, 2018. This was partially offset by a lossas well as net gains to record pension assets to fair value at September 30, 2018.value.

The Company made no cash contributions to the qualified pension plans during the three and nine months ended September 30, 20192020 and 2018;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 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 20192020 to the extent benefits are paid.

19.    Recently Issued Accounting Standards

Accounting Standards Adopted January 1, 201819

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

Upon adoption of ASU 2014-09, the Company recorded a cumulative-effect adjustment, which included an increase to total member’s equity of $49 million as of January 1, 2018.

ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory ("ASU 2016-16")

The Company identified a $38 million increase to total member's equity and corresponding increase to deferred tax assets related to the adoption of ASU 2016-16, which was recorded during the three months ended September 30, 2018.

Accounting Standards Adopted January 1, 2019

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

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

The Company adopted ASU 2016-02 using the modified retrospective approach with a cumulative-effect adjustment recorded at the beginning of the period of adoption (January 1, 2019). Therefore, the Company recognized and measured operating leases on the consolidated balance sheet without revising comparative period information or disclosure. At transition, the Company elected the package of practical expedients permitted under the transition guidance within the standard, which eliminates the reassessment


20

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


of past leases, classification and initial direct costs. The Company did not elect to use hindsight to reassess lease terms or impairment at the adoption date. The Company elected the land easements practical expedient which allows the Company not to retrospectively treat land easements as leases; however, must apply lease accounting prospectively to land easements if they meet the definition of a lease.

The Company implemented internal controls and key system functionality to enable the preparation of financial information on adoption. The new standard resulted in the recording of leased assets and lease liabilities for the Company’s operating leases of approximately $963 million and $990 million, respectively, as of January 1, 2019. The difference between the leased assets and lease liabilities primarily represents the prior year end deferred rent liabilities balance, resulting from historical straight-lining of operating leases, which was effectively reclassified upon adoption to reduce the measurement of the leased assets. The adoption of the standard did not have an impact on the Company’s member's equity and is not anticipated to have an impact on the Company’s results from operations and cash flows. The adoption of the new standard resulted in additional interim and annual lease disclosures. See Note 5 for interim lease disclosures for the three and nine months ended September 30, 2019.

19.    Recently Issued Accounting Standards Not Yet

Recently Adopted Accounting Standards

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

In June 2016, the FASBFinancial Accounting Standards Board ("FASB") issued ASUAccounting 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.  ASU 2016-13 will be effective for interim and annual periods beginning after December 15, 2019 (January 1, 2020 for the Company). The primary financial assets of the Company in scope of ASU 2016-13 include accounts receivables and equipment installment plan notes receivables.  The Company is currently in the process of evaluating the impact, if any, theadopted ASU 2016-13 on January 1, 2020. The adoption of ASU 2016-13 willdid not have on itsa material impact to the Company's consolidated financial statements.

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

In January 2017, the FASB issued ASU 2017-04, which eliminates step two from the goodwill impairment test. Under the new standard, to the extent the carrying amount of a reporting unit exceeds the fair value, the Company will record an impairment charge equal to the difference. ASU 2017-04 will be effective for interim and annual periods beginning after December 15, 2019 (January 1, 2020 for the Company). Early adoption is permitted. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.

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

In August 2018, the FASB issued ASU 2018-15 which requires upfront implementation costs incurred in a cloud computing arrangement (or hosting arrangement) that is a service contract to be amortized to hosting expense over the term of the arrangement.arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. The Company adopted ASU 2018-15 will be effective for interim and annual periods beginning after December 15, 2019 (Januaryon January 1, 2020 for the Company).2020. The Company does not expect the adoption of ASU 2018-15 todid not have a material impact on itsto 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, 2019 (January 1, 2020 for the Company).2020. Early adoption is permitted. The Company does not expect theelected to early adopt ASU 2019-12 on January 1, 2020. The adoption of ASU 2019-02 to2019-12 did not have a material impact on itsthe Company's consolidated financial statements.



21

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


Amendments to the financial disclosures requirements for guarantors and issuers of guaranteed securities under SEC Regulation S-X
20.    Consolidating Schedules

EachIn March 2020, the SEC adopted amendments to the financial disclosure requirements of Charter Operating, TWC, LLC, TWCE, CCO HoldingsRegulation S-X for guarantors and certain subsidiaries jointly, severally, fully and unconditionally guaranteeissuers of guaranteed securities. The final rule streamlines disclosure obligations under the outstanding debt securities of the others (other than the CCO Holdings notes) on an unsecured senior basis and theexisting rules, including replacing condensed consolidating financial information has been preparedwith summarized financial information for the "obligor group" of issuers and presented pursuantguarantors to SEC Regulation S-X Rule 3-10, Financial Statements of Guarantorsthe extent material, no longer requiring subsidiary issuer 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. Thiscash flow information, is not intended to present theand no longer requiring financial position, results of operations and cash flowsinformation for non-guarantor subsidiaries. It also permits presentation of the individual companies or groupsrequired disclosures to be included in the Management's Discussion and Analysis ("MD&A") section of companies in accordance with generally accepted accounting principles.
quarterly and annual reports rather than the notes to the Company's consolidated financial statements. The “Charter Operating and Restricted Subsidiaries” columnCompany is presented to complyvoluntarily complying with the terms of the Credit Agreement.

Comprehensive income equaled net income attributable to CCO Holdings membernew disclosure requirements beginning with its Quarterly Report on Form 10-Q for the nine monthsquarter ended September 30, 2019. Condensed consolidating2020 and has included summarized financial statements as of September 30, 2019 and December 31, 2018 and forinformation in the nine months ended September 30, 2019 and 2018 follow.MD&A.



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 Balance Sheets
As of September 30, 2019
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
ASSETS       
CURRENT ASSETS:       
Cash and cash equivalents$—
 $290
 $—
 $290
Accounts receivable, net—
 2,252
 —
 2,252
Receivables from related party55
 —
 (55) —
Prepaid expenses and other current assets—
 548
 —
 548
Total current assets55
 3,090
 (55) 3,090
        
INVESTMENT IN CABLE PROPERTIES:       
Property, plant and equipment, net—
 33,560
 —
 33,560
Customer relationships, net—
 7,956
 —
 7,956
Franchises—
 67,322
 —
 67,322
Goodwill—
 29,554
 —
 29,554
Total investment in cable properties, net—
 138,392
 —
 138,392
        
INVESTMENT IN SUBSIDIARIES76,898
 —
 (76,898) —
OPERATING LEASE RIGHT-OF-USE ASSETS—
 930
 —
 930
LOANS RECEIVABLE – RELATED PARTY545
 —
 (545) —
OTHER NONCURRENT ASSETS—
 1,398
 —
 1,398
        
Total assets$77,498
 $143,810
 $(77,498) $143,810
        
LIABILITIES AND MEMBER’S EQUITY      
CURRENT LIABILITIES:       
Accounts payable and accrued liabilities$302
 $7,019
 $—
 $7,321
Operating lease liabilities—
 180
 —
 180
Payables to related party—
 544
 (55) 489
Current portion of long-term debt—
 3,509
 —
 3,509
Total current liabilities302
 11,252
 (55) 11,499
        
LONG-TERM DEBT20,249
 51,141
 —
 71,390
LOANS PAYABLE – RELATED PARTY—
 1,504
 (545) 959
DEFERRED INCOME TAXES—
 52
 —
 52
LONG-TERM OPERATING LEASE LIABILITIES—
 794
 —
 794
OTHER LONG-TERM LIABILITIES—
 2,146
 —
 2,146
        
MEMBER’S EQUITY       
Controlling interest56,947
 76,898
 (76,898) 56,947
Noncontrolling interests—
 23
 —
 23
Total member’s equity56,947
 76,921
 (76,898) 56,970
        
Total liabilities and member’s equity$77,498
 $143,810
 $(77,498) $143,810



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 Balance Sheets
As of December 31, 2018
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
ASSETS       
CURRENT ASSETS:       
Cash and cash equivalents$—
 $300
 $—
 $300
Accounts receivable, net—
 1,699
 —
 1,699
Receivables from related party57
 —
 (57) —
Prepaid expenses and other current assets—
 400
 —
 400
Total current assets57
 2,399
 (57) 2,399
        
INVESTMENT IN CABLE PROPERTIES:       
Property, plant and equipment, net—
 34,658
 —
 34,658
Customer relationships, net—
 9,565
 —
 9,565
Franchises—
 67,319
 —
 67,319
Goodwill—
 29,554
 —
 29,554
Total investment in cable properties, net—
 141,096
 —
 141,096
        
INVESTMENT IN SUBSIDIARIES78,960
 —
 (78,960) —
LOANS RECEIVABLE – RELATED PARTY526
 —
 (526) —
OTHER NONCURRENT ASSETS—
 1,403
 —
 1,403
        
Total assets$79,543
 $144,898
 $(79,543) $144,898
        
LIABILITIES AND MEMBER’S EQUITY      
CURRENT LIABILITIES:       
Accounts payable and accrued liabilities$283
 $7,620
 $—
 $7,903
Payables to related party—
 602
 (57) 545
Current portion of long-term debt—
 3,290
 —
 3,290
Total current liabilities283
 11,512
 (57) 11,738
        
LONG-TERM DEBT18,730
 50,807
 —
 69,537
LOANS PAYABLE – RELATED PARTY—
 1,451
 (526) 925
OTHER LONG-TERM LIABILITIES—
 2,144
 —
 2,144
        
MEMBER’S EQUITY       
Controlling interest60,530
 78,960
 (78,960) 60,530
Noncontrolling interests—
 24
 —
 24
Total member’s equity60,530
 78,984
 (78,960) 60,554
        
Total liabilities and member’s equity$79,543
 $144,898
 $(79,543) $144,898



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 Operations
For the nine months ended September 30, 2019
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
REVENUES$—
 $33,997
 $—
 $33,997
        
COSTS AND EXPENSES:       
Operating costs and expenses (exclusive of items shown separately below)—
 21,950
 —
 21,950
Depreciation and amortization—
 7,453
 —
 7,453
Other operating expense, net—
 77
 —
 77
 —
 29,480
 —
 29,480
Income from operations—
 4,517
 —
 4,517
        
OTHER INCOME (EXPENSES):       
Interest expense, net(785) (2,080) —
 (2,865)
Loss on financial instruments, net—
 (116) —
 (116)
Other pension benefits, net—
 27
 —
 27
Other expense, net—
 (129) —
 (129)
Equity in income of subsidiaries2,132
 —
 (2,132) —
 1,347
 (2,298) (2,132) (3,083)
        
Income before income taxes1,347
 2,219
 (2,132) 1,434
Income tax expense—
 (86) —
 (86)
Consolidated net income1,347
 2,133
 (2,132) 1,348
Less: Net income attributable to noncontrolling interests—
 (1) —
 (1)
Net income$1,347
 $2,132
 $(2,132) $1,347



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 Operations
For the nine months ended September 30, 2018
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
REVENUES$—
 $32,390
 $—
 $32,390
        
COSTS AND EXPENSES:       
Operating costs and expenses (exclusive of items shown separately below)—
 20,742
 —
 20,742
Depreciation and amortization—
 7,776
 —
 7,776
Other operating expenses, net—
 112
 —
 112
 —
 28,630
 —
 28,630
Income from operations—
 3,760
 —
 3,760
        
OTHER INCOME (EXPENSES):       
Interest expense, net(762) (1,896) —
 (2,658)
Other pension benefits, net—
 247
 —
 247
Other expense, net—
 (49) —
 (49)
Equity in income of subsidiaries2,048
 —
 (2,048) —
 1,286
 (1,698) (2,048) (2,460)
        
Income before income taxes1,286
 2,062
 (2,048) 1,300
Income tax expense—
 (13) —
 (13)
Consolidated net income1,286
 2,049
 (2,048) 1,287
Less: Net income attributable to noncontrolling interests—
 (1) —
 (1)
Net income$1,286
 $2,048
 $(2,048) $1,286



CCO Holdings, LLC and Subsidiaries
Condensed Consolidating Statements of Comprehensive Income
For the nine months ended September 30, 2018
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
Consolidated net income$1,286
 $2,049
 $(2,048) $1,287
Foreign currency translation adjustment(1) (1) 1
 (1)
Consolidated comprehensive income$1,285
 $2,048
 $(2,047) $1,286
Less: Comprehensive income attributable to noncontrolling interests—
 (1) —
 (1)
Comprehensive income$1,285
 $2,047
 $(2,047) $1,285




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, 2019
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
NET CASH FLOWS FROM OPERATING ACTIVITIES$(762) $9,109
 $—
 $8,347
        
CASH FLOWS FROM INVESTING ACTIVITIES:       
Purchases of property, plant and equipment—
 (4,913) —
 (4,913)
Change in accrued expenses related to capital expenditures—
 (449) —
 (449)
Contributions to subsidiaries(1,559) —
 1,559
 —
Distributions from subsidiaries5,988
 —
 (5,988) —
Other, net—
 85
 —
 85
Net cash flows from investing activities4,429
 (5,277) (4,429) (5,277)
        
CASH FLOWS FROM FINANCING ACTIVITIES:       
Borrowings of long-term debt1,515
 11,642
 —
 13,157
Repayments of long-term debt—
 (10,886) —
 (10,886)
Payments for debt issuance costs(14) (34) —
 (48)
Distributions to noncontrolling interest—
 (2) —
 (2)
Contributions from parent54
 1,559
 (1,559) 54
Distributions to parent(5,222) (5,988) 5,988
 (5,222)
Other, net—
 (133) —
 (133)
Net cash flows from financing activities(3,667) (3,842) 4,429
 (3,080)
        
NET DECREASE IN CASH AND CASH EQUIVALENTS—
 (10) —
 (10)
CASH AND CASH EQUIVALENTS, beginning of period—
 300
 —
 300
CASH AND CASH EQUIVALENTS, end of period$—
 $290
 $—
 $290


20

27

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, 2018
        
 Guarantor Subsidiaries    
 CCO Holdings Charter Operating and Restricted Subsidiaries Eliminations CCO Holdings Consolidated
NET CASH FLOWS FROM OPERATING ACTIVITIES$(728) $9,232
 $—
 $8,504
        
CASH FLOWS FROM INVESTING ACTIVITIES:       
Purchases of property, plant and equipment—
 (6,692) —
 (6,692)
Change in accrued expenses related to capital expenditures—
 (620) —
 (620)
Contribution to subsidiaries(127) —
 127
 —
Distributions from subsidiaries4,491
 —
 (4,491) —
Other, net—
 (93) —
 (93)
Net cash flows from investing activities4,364
 (7,405) (4,364) (7,405)
        
CASH FLOWS FROM FINANCING ACTIVITIES:       
Borrowings of long-term debt—
 11,552
 —
 11,552
Repayments of long-term debt—
 (8,964) —
 (8,964)
Borrowings of loans payable - related parties—
 7
 —
 7
Payments for debt issuance costs—
 (29) —
 (29)
Distributions to noncontrolling interest—
 (1) —
 (1)
Contributions from parent127
 127
 (127) 127
Distributions to parent(3,763) (4,491) 4,491
 (3,763)
Other, net—
 (7) —
 (7)
Net cash flows from financing activities(3,636) (1,806) 4,364
 (1,078)
        
NET INCREASE IN CASH AND CASH EQUIVALENTS—
 21
 —
 21
CASH AND CASH EQUIVALENTS, beginning of period—
 330
 —
 330
CASH AND CASH EQUIVALENTS, end of period$—
 $351
 $—
 $351




28


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. 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 30 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 continues to significantly impact 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 have been able to respond to the significant increase in network activity from the private and public response to COVID-19 as we do our part as a major provider of Internet services in the United States by, among other things, enabling social distancing through telecommuting and a leading broadband communications services company providing video,e-learning across our footprint of 41 states. We have invested significantly in our self-service infrastructure, and customers have accelerated the adoption of our self-installation and digital self-service capabilities. Increased demand for our connectivity and the positive response to our Remote Education Offer ("REO") pursuant to which new customers with students or educators in the household were eligible to receive our Internet service for free for 60 days, and voice services to approximately 29.0 millionthe Keep Americans Connected (“KAC”) Pledge which paused collection efforts and related disconnects for residential and small and medium business ("SMB") customers atwith COVID-19 related payment challenges through June 30, 2020, have positively impacted our results for the nine months ended September 30, 2019.2020 with retention rates for these customers similar to our average customer base.

During the three and nine months ended September 30, 2020, our results were negatively impacted by COVID-19, including recording $218 million of estimated customer credits to be provided to video customers offset by $173 million in-period recognition of estimated rebates from sports programming networks as a result of canceled sporting events and related costs. The difference between the $218 million estimated credit to customers which lowered video revenue and the $163 million reduction in programming expense and $10 million reduction in regulatory, connectivity and produced content costs relates to an expected reduction in sports rights content costs which is being amortized over the life of the contract, consistent with the deferral of expense in the three months ended June 30, 2020 when games were canceled. We intend to provide a credit on our customers’ invoices for all of the rebates provided by the sports programming networks when details are finalized with these networks.

We have also offer mobileseen declines in advertising revenues as a result of COVID-19 and lower revenues from seasonal plans offered to SMB and Enterprise hospitality customers that have requested a reduced level of service due to residentialtemporary business closure or because these customers and recently launched mobilehave reduced their service offering to a select number of small and medium business customers.their own customers ("Seasonal Plan"). In addition, in an effort to assist COVID-19 impacted customers with overdue balances at the end of the KAC program, we sell videowaived approximately $85 million of receivables which was recorded as a reduction of revenue in the second quarter of 2020.

We cannot predict the ultimate impact of COVID-19 on our business, including the depth and online advertising inventoryduration of the economic impact to household formation and growth and our residential and business customers’ ability to pay for our products and services including the impact of extended unemployment benefits and other stimulus packages. We expect that some of the COVID-19 programs discussed above may result in incremental churn and bad debt during the remainder of the year and into 2021. 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 regional

21

and national advertising customersad sales business, the effects to our employees’ health and fiber-delivered communicationssafety and managed information technology solutions to larger enterprise customers. We also ownresulting reorientation of our work activities, and operate regional sports networksthe risk of limitations on the deployment and local sports, newsmaintenance of our services (including by limiting our customer support and community channels.on-site service repairs and installations).

Overview

SinceAlthough the closeultimate impact of the merger in 2016 of Charter and Time Warner Cable Inc. ("TWC") and the acquisition of Bright House Networks, LLC ("Bright House"),COVID-19 pandemic cannot be predicted, we have beenremain focused on integrating the practices and systems of Charter, TWC and Bright House, centralizing our product, marketing, sales and service operations, insourcing the TWC and Bright House workforces in our call centers and field operations, and rolling out Spectrum pricing and packaging ("SPP") to TWC and Bright House service areas. In 2018, we completed the conversion of the remaining TWC and Bright House analog service areas to an all-digital platform enabling us to deliver more HD channels and higher Internet speeds. Nearly all of our footprint is now all-digital. Additionally, we have doubled minimum Internet speeds to 200 Mbps in a number of service areas at no additional cost to new and existing SPP Internet customers. In 2018, leveraging DOCSIS 3.1 technology, we also expanded the availability of our Spectrum Internet Gig service to nearly all of our footprint. With our integration nearly complete, we are focused on operating as one company, with a unified product, marketing and service infrastructure, which will allow us to acceleratedriving customer relationship growth and innovate faster. With significantly less customer-facing change expected in 2019, we are focused onby deploying superior products and serviceservices packaged with minimal service disruptions. We expect our growing levels of productivity will result in lower customer churn, longer customer lifetimes and improved productivity with fewer customer calls and truck rolls per customer relationship. With nearly 85% of our residential customer base now in SPP packages, we expect additional benefits from lower legacy package migration activity, combined with SPP customers rolling off introductory pricing and modest price increases.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 Internet,and wireline voice and mobile packaged services. Additionally, 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 mostly complete, we have experienced a meaningful reduction in capital expenditures in dollars and as a percent of revenue in 2019 and expect these reductions to continue for the remainder of 2019.customers.

At the end of the second quarter of 2018, we launched our mobile product, Spectrum Mobile, under our mobile virtual network operator ("MVNO") reseller agreement with Verizon. Our Spectrum Mobile service is offered to our customers subscribing to our Internet service and runs on Verizon's mobile network combined with Spectrum WiFi. We began mass market advertisingIn March 2020, we launched 5G service offerings and we expect that, along with broader availability of Spectrum Mobile in September 2018. In the second quarter of 2019, we expanded our Spectrum Mobile bring-your-own-device ("BYOD") program, across all sales channels to include a broader set of devices. We believe our BYOD program will lower the cost for consumers of switching mobile carriers, and will reduce the short-term working capital impact of selling new mobile devices on installment plans. We expect these developments to contribute to the growth of our mobile business. We also continue to explore ways to manage our own network and drive even more mobile traffic to our network through our continued deployment of in-home and outdoor WiFi hotspots. In addition, wenetwork. We plan to use our WiFi network in conjunction with additional unlicensed, orand potentially licensed, spectrum to improve network performance and expand capacity to offer consumers a superior mobile service at a lower total cost to us.​​ In October 2020, we purchased approximately $464 million of Citizens Broadband Radio Service ("CBRS") licenses from the Federal Communications Commission ("FCC") in our effort to support our wireless network. Further, we have experimental wireless licenses from the Federal Communications CommissionFCC 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 increase profitability and cash flow over time. As a result of growth costs associated with our new mobile product line, we cannot be certain that we will be able to grow revenues or maintain our margins at recent historical rates. During the three and nine months ended September 30, 2020, our mobile product line increased revenues by $368 million and $936 million, respectively, reduced Adjusted EBITDA by approximately $88 million and $307 million, respectively, and reduced free cash flow by approximately $265 million and $758 million, respectively. During the three and nine months ended September 30, 2019, our mobile product line increased revenues by $192 million and $490 million, respectively, reduced Adjusted EBITDA by approximately $145 million and $384 million, respectively, and reduced free cash flow by approximately


29


$256 $256 million and $844 million, respectively. During the three and nine months ended September 30, 2018, our mobile product line increased revenues by $17 million during both time periods, reduced Adjusted EBITDA by approximately $77 million and $118 million, respectively, and reduced free cash flow by $149 million and $290 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 September 30,Nine Months Ended September 30,
20202019% Change20202019% Change
Revenues$12,037 $11,449 5.1 %$35,467 $33,997 4.3 %
Adjusted EBITDA$4,611 $4,070 13.3 %$13,447 $12,285 9.5 %
Income from operations$2,145 $1,570 36.6 %$5,872 $4,517 30.0 %
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 % Change 2019 2018 % Change
Revenues$11,449
 $10,887
 5.2% $33,997
 $32,390
 5.0%
Adjusted EBITDA$4,070
 $3,940
 3.3% $12,285
 $11,861
 3.6%
Income from operations$1,570
 $1,372
 14.5% $4,517
 $3,760
 20.2%

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

Growth in total revenue for the three and nine months ended September 30, 20192020 compared to the corresponding prior periods was primarily due to growth in our residential Internet mobile and commercial businessmobile customers. Adjusted EBITDA and income from operations growth was impacted by growth in revenue and increases in operating costs and expenses, primarily mobile, other and programming.for the nine months ended September 30, 2020, increases in costs to service customers offset by lower regulatory, connectivity and produced content costs. Income from operations was also affected by a decrease in depreciation and amortization expense.expense and other operating expenses, net.


22

The following table summarizes our customer statistics for Internet, video, Internetmobile and voice as of September 30, 20192020 and 20182019 (in thousands except per customer data and footnotes).

Approximate as of
September 30,
2020 (a)
2019 (a)
Customer Relationships (b)
Residential28,912 27,037 
SMB2,021 1,930 
Total Customer Relationships30,933 28,967 
Monthly Residential Revenue per Residential Customer (c)
$109.03 $112.00 
Monthly SMB Revenue per SMB Customer (d)
$164.77 $169.44 
Internet
Residential26,807 24,595 
SMB1,826 1,730 
Total Internet Customers28,633 26,325 
Video
Residential15,705 15,725 
SMB530 520 
Total Video Customers16,235 16,245 
Voice
Residential9,335 9,595 
SMB1,207 1,120 
Total Voice Customers10,542 10,715 
Mobile Lines
Residential2,020 793 
SMB40 1 
Total Mobile Lines2,060 794 
Enterprise Primary Service Units ("PSUs") (e)
272264 

(a)We calculate the aging of customer accounts based on the monthly billing cycle for each account. On that basis, as of September 30, 2020 and 2019, customers include approximately 181,700 and 148,000 customers, respectively, whose accounts were over 60 days past due, approximately 52,300 and 16,400 customers, respectively, whose accounts were over 90 days past due and approximately 26,000 and 14,100 customers, respectively, whose accounts were over 120 days past due. Included in the September 30, 2020 aging statistics are approximately 60,200 customers that would have been disconnected under our normal collection policies, but were not due to certain state mandates in place.
(b)Customer relationships include the number of customers that receive one or more levels of service, encompassing Internet, video and voice services, without regard to which service(s) such customers receive. Customers who reside in residential multiple dwelling units (“MDUs”) and that are billed under bulk contracts are counted based on the number of billed units within each bulk MDU. Total customer relationships exclude enterprise and mobile-only customer relationships.
(c)Monthly residential revenue per residential customer is calculated as total residential quarterly revenue divided by three divided by average residential customer relationships during the respective quarter and excludes mobile revenue and customers.
(d)Monthly SMB revenue per SMB customer is calculated as total SMB quarterly revenue divided by three divided by average SMB customer relationships during the respective quarter and 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,
 
2019 (a)
 
2018 (a)
Customer Relationships (b)
   
Residential27,037
 26,063
Small and Medium Business1,930
 1,792
Total Customer Relationships28,967
 27,855
    
Residential Primary Service Units (“PSU”)   
Video15,725
 16,140
Internet24,595
 23,336
Voice9,595
 10,218
    
Monthly Residential Revenue per Residential Customer (c)
$112.00
 $111.13
    
Small and Medium Business PSUs   
Video520
 488
Internet1,730
 1,594
Voice1,120
 1,024
    
Monthly Small and Medium Business Revenue per Customer (d)
$169.44
 $173.52
    
Enterprise PSUs (e)
264
 243
23



30


(a)
Customer statistics do not include mobile. We calculate the aging of customer accounts based on the monthly billing cycle for each account. On that basis, as of September 30, 2019 and 2018, customers include approximately 148,000 and 231,400 customers, respectively, whose accounts were over 60 days past due, approximately 16,400 and 23,100 customers, respectively, whose accounts were over 90 days past due and approximately 14,100 and 18,500 customers, respectively, whose accounts were over 120 days past due.
(b)
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 exclude enterprise customer relationships.
(c)
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.
(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.
(e)
Enterprise PSUs represent the aggregate number of fiber service offerings counting each separate service offering as an individual PSU.

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 20182019 Annual Report on Form 10-K. There have been no material changes from the critical accounting policies described in our Form 10-K.

Results of Operations

The following table sets forth the consolidated statements of operations for the periods presented (dollars in millions):

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues$12,037 $11,449 $35,467 $33,997 
Costs and Expenses:
Operating costs and expenses (exclusive of items shown separately below)7,509 7,450 22,283 21,950 
Depreciation and amortization2,366 2,411 7,283 7,453 
Other operating expenses, net17 18 29 77 
9,892 9,879 29,595 29,480 
Income from operations2,145 1,570 5,872 4,517 
Other Income (Expenses):
Interest expense, net(947)(973)(2,904)(2,865)
Loss on extinguishment of debt(58)— (121)— 
Gain (loss) on financial instruments, net69 (34)(185)(116)
Other pension benefits (costs), net(115)9 (94)27 
Other expense, net(11)(3)(6)(129)
(1,062)(1,001)(3,310)(3,083)
Income before income taxes1,083 569 2,562 1,434 
Income tax expense(10)(10)(23)(86)
Consolidated net income1,073 559 2,539 1,348 
Less: Net income attributable to noncontrolling interests— — (1)(1)
Net income attributable to CCO Holdings member$1,073 $559 $2,538 $1,347 
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Revenues$11,449
 $10,887
 $33,997
 $32,390
        
Costs and Expenses:       
Operating costs and expenses (exclusive of items shown separately below)7,450
 7,018
 21,950
 20,742
Depreciation and amortization2,411
 2,479
 7,453
 7,776
Other operating expenses, net18
 18
 77
 112
 9,879
 9,515
 29,480
 28,630
Income from operations1,570
 1,372
 4,517
 3,760
        
Other Income (Expenses):       
Interest expense, net(973) (912) (2,865) (2,658)
Gain (loss) on financial instruments, net(34) 12
 (116) —
Other pension benefits, net9
 207
 27
 247
Other expense, net(3) (4) (129) (49)
 (1,001) (697) (3,083) (2,460)
        
Income before income taxes569
 675
 1,434
 1,300
Income tax expense(10) (8) (86) (13)
Consolidated net income559
 667
 1,348
 1,287
Less: Net income attributable to noncontrolling interests—
 —
 (1) (1)
        
Net income attributable to CCO Holdings member$559
 $667
 $1,347
 $1,286

Revenues. Total revenues grew $562$588 million and $1.6$1.5 billion for the three and nine months ended September 30, 2019,2020, respectively, compared to the corresponding periods in 20182019 primarily due to increases in the number of residential Internet and commercial


31


businessmobile customers, price adjustments as well asand during the launch of our mobile service in the second half of 2018three months ended September 30, 2020, advertising sales offset by a decrease in video customers.customers and $218 million of estimated customer credits to be issued to our video customers due to canceled sporting events. For the nine months ended September 30, 2020, total revenues also decreased as compared to the corresponding prior period due to $85 million of waived receivables related to the KAC program.

24

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 September 30,Nine Months Ended September 30,
20202019% Change20202019% Change
Internet$4,722 $4,195 12.5 %$13,659 $12,322 10.8 %
Video4,221 4,359 (3.2)%13,014 13,134 (0.9)%
Voice449 477 (5.8)%1,357 1,470 (7.7)%
Residential revenue9,392 9,031 4.0 %28,030 26,926 4.1 %
Small and medium business988 974 1.5 %2,967 2,882 2.9 %
Enterprise617 644 (4.3)%1,845 1,939 (4.9)%
Commercial revenue1,605 1,618 (0.8)%4,812 4,821 (0.2)%
Advertising sales460 394 16.8 %1,074 1,134 (5.3)%
Mobile368 192 91.8 %936 490 91.3 %
Other212 214 (0.8)%615 626 (1.7)%
$12,037 $11,449 5.1 %$35,467 $33,997 4.3 %
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 % Change 2019 2018 % Change
Video$4,359
 $4,332
 0.6 % $13,134
 $12,987
 1.1 %
Internet4,195
 3,809
 10.1 % 12,322
 11,286
 9.2 %
Voice477
 512
 (6.8)% 1,470
 1,599
 (8.0)%
Residential revenue9,031
 8,653
 4.4 % 26,926
 25,872
 4.1 %
            
Small and medium business974
 922
 5.7 % 2,882
 2,737
 5.3 %
Enterprise644
 632
 1.8 % 1,939
 1,881
 3.0 %
Commercial revenue1,618
 1,554
 4.1 % 4,821
 4,618
 4.4 %
            
Advertising sales394
 440
 (10.6)% 1,134
 1,223
 (7.3)%
Mobile192
 17
 NM
 490
 17
 NM
Other214
 223
 (4.3)% 626
 660
 (5.1)%
 $11,449
 $10,887
 5.2 % $33,997
 $32,390
 5.0 %

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

Three months ended
September 30, 2020
compared to
three months ended
September 30, 2019
Increase / (Decrease)		Nine months ended
September 30, 2020
compared to
nine months ended
September 30, 2019
Increase / (Decrease)
Increase in average residential Internet customers$373 $895 
Increase related to rate, product mix and allocation changes154 442 
$527 $1,337 

Residential Internet customers grew by 2,212,000 customers from September 30, 2019 to September 30, 2020 due to higher demand for our services. The increase related to rate, product mix and allocation changes was primarily due to price adjustments including promotional roll-off. The increase during the nine months ended September 30, 2020 as compared to the corresponding prior period was also impacted by a $29 million reduction related to the KAC program credits.

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

Three months ended
September 30, 2020
compared to
three months ended
September 30, 2019
Increase / (Decrease)		Nine months ended
September 30, 2020
compared to
nine months ended
September 30, 2019
Increase / (Decrease)
Estimated customer credits due to COVID-19$(218)$(262)
Decrease in average residential video customers(20)(224)
Decrease in video on demand and pay-per-view(18)(26)
Increase related to rate, product mix and allocation changes118 392 
$(138)$(120)


25

 Three months ended
September 30, 2019
compared to
three months ended
September 30, 2018
Increase / (Decrease)		 Nine months ended
September 30, 2019
compared to
nine months ended
September 30, 2018
Increase / (Decrease)
Increase related to rate changes$167
 $497
Decrease in average residential video customers(110) (291)
Decrease in video on demand and pay-per-view(30) (59)
 $27
 $147

We recorded $218 million of estimated customer credits related to canceled sporting events during the three and nine months ended September 30, 2020 and $44 million of customer credits related to KAC program during the nine months ended September 30, 2020. The increasesincrease related to rate, product mix and allocation changes werewas primarily due to price adjustments including annual increases and promotional roll-off.roll-off, partly offset by a higher mix of lower cost video packages within our video customer base. Residential video customers decreased by 415,00020,000 from September 30, 20182019 to September 30, 2019.2020.

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

 Three months ended
September 30, 2019
compared to
three months ended
September 30, 2018
Increase / (Decrease)		 Nine months ended
September 30, 2019
compared to
nine months ended
September 30, 2018
Increase / (Decrease)
Increase in average residential Internet customers$199
 $577
Increase related to rate changes187
 459
 $386
 $1,036

Residential Internet customers grew by 1,259,000 customers from September 30, 2018 to September 30, 2019. The increases related to rate changes were primarily due to price adjustments including promotional roll-off.



32


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

Three months ended
September 30, 2020
compared to
three months ended
September 30, 2019
Increase / (Decrease)		Nine months ended
September 30, 2020
compared to
nine months ended
September 30, 2019
Increase / (Decrease)
Decrease in average residential voice customers$(16)$(77)
Decrease related to rate, product mix and allocation changes(12)(36)
$(28)$(113)
 Three months ended
September 30, 2019
compared to
three months ended
September 30, 2018
Increase / (Decrease)		 Nine months ended
September 30, 2019
compared to
nine months ended
September 30, 2018
Increase / (Decrease)
Decrease in average residential voice customers$(29) $(68)
Decrease related to rate changes(6) (61)
 $(35) $(129)


The decreases related to rate changes were primarily due to value-based pricing. Residential wireline voice customers decreased by 623,000260,000 customers from September 30, 20182019 to September 30, 2019.2020. The decrease related to rate, product mix and allocation changes was primarily due to value-based pricing. The decrease during the nine months ended September 30, 2020 as compared to the corresponding prior period was also impacted by a $3 million reduction related to the KAC program credits.

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

Three months ended
September 30, 2020
compared to
three months ended
September 30, 2019
Increase / (Decrease)		Nine months ended
September 30, 2020
compared to
nine months ended
September 30, 2019
Increase / (Decrease)
Increase in small and medium business customers$42 $150 
Decrease related to rate and product mix changes(28)(65)
$14 $85 
 Three months ended
September 30, 2019
compared to
three months ended
September 30, 2018
Increase / (Decrease)		 Nine months ended
September 30, 2019
compared to
nine months ended
September 30, 2018
Increase / (Decrease)
Increase in small and medium business customers$76
 $251
Decrease related to rate changes(24) (106)
 $52
 $145

Small and medium business customers grew by 138,00091,000 from September 30, 20182019 to September 30, 2019.2020. The decreasesdecrease related to rate and product mix changes were primarily dueduring the three and nine months ended September 30, 2020 as compared to value-based pricingthe corresponding prior periods included reductions of $11 million and $28 million, respectively, related to SPP, net of promotional roll-off and price adjustments.COVID-19 programs.

Enterprise revenues increased $12decreased $27 million and $58$94 million during the three and nine months ended September 30, 2019,2020, respectively, compared to the corresponding periods in 20182019 primarily due to growth in customers offset by the sale of non-strategic assets.assets in the third quarter of 2019. The decrease during the nine months ended September 30, 2020 as compared to the corresponding prior period was also impacted by a revenue reduction of $18 million related to the COVID-19 Enterprise hospitality seasonal program. Enterprise PSUs increased 21,0008,000 from September 30, 20182019 to September 30, 2019.2020.

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 $46 million and $89increased $66 million during the three months ended September 30, 2020 as compared to the corresponding period in 2019 primarily due to an increase in political revenue, partially offset by a decrease in local ad revenues due to COVID-19. Advertising sales revenues decreased $60 million during the nine months ended September 30, 2020 as compared to the corresponding period in 2019 due to lower local and national ad revenues due to COVID-19, partially offset by an increase in political revenue.

During the three and nine months ended September 30, 2019,2020, mobile revenues represented approximately $172 million and $461 million of device revenues, respectively, compared to the corresponding periods in 2018 primarily due to a decrease in political revenue.

and approximately $196 million and $475 million of service revenues, respectively. During the three and nine months ended September 30, 2019, mobile revenues represented approximately $123 million and $348 million of device revenues, respectively, and approximately $69 million and $142 million of service revenues, respectively, related

26

respectively. The revenue increases are attributable to ouran increase in mobile service. During both the three and nine months ended September 30, 2018, mobile revenues represented approximately $16 million of device revenues and approximately $1 million of service revenues related to our mobile service. Aslines from 794,000 as of September 30, 2019 we had 794,000to 2,060,000 mobile lines.lines as of September 30, 2020.

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 decreased $9$2 million and $34$11 million during the three and nine months ended September 30, 2019, respectively,2020 compared to the corresponding periods in 20182019 primarily due to a decrease in late payment fees and home shoppingsecurity revenue offset by an increase in the sale of video devices.devices and regional sports and news revenue.



33


Operating costs and expenses. The increasesincrease 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
September 30, 2020
compared to
three months ended
September 30, 2019
Increase / (Decrease)		Nine months ended
September 30, 2020
compared to
nine months ended
September 30, 2019
Increase / (Decrease)
Programming$(63)$10 
Regulatory, connectivity and produced content— (119)
Costs to service customers8 115 
Marketing(5)(23)
Mobile119 369 
Other— (19)
$59 $333 
 Three months ended
September 30, 2019
compared to
three months ended
September 30, 2018
Increase / (Decrease)		 Nine months ended
September 30, 2019
compared to
nine months ended
September 30, 2018
Increase / (Decrease)
Programming$12
 $149
Regulatory, connectivity and produced content66
 131
Costs to service customers40
 (9)
Marketing3
 (14)
Mobile243
 739
Other68
 212
 $432
 $1,208

Programming costs were approximately $2.7 billion and $8.5 billion for the three and nine months ended September 30, 2020, respectively, representing 36% and 38% of total operating costs and expenses, respectively, and $2.8 billion and $8.5 billion for the three and nine months ended September 30, 2019, respectively, representing 37% and 39% of total operating costs and expenses, respectively, and $2.8 billion and $8.3 billion for the three and nine months ended September 30, 2018, respectively, representing 40% of total operating costs and expenses for both time periods.respectively. Programming costs consist primarily of costs paid to programmers for basic, digital, premium, VOD,video on demand, and pay-per-view programming. The increase inProgramming costs during the three and nine months ended September 30, 2020 were reduced by $163 million of estimated rebates from sports programming costs is primarilynetworks as a result of canceled sporting events due to COVID-19 and further benefited from a higher mix of lower cost video packages within our video customer base and lower video customers. The decrease was offset by contractual rate adjustments, including renewals and increases in amounts paid for retransmission consents partly offset by lower video customers and pay-per-view.consent.  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 and do not expect to be able to do so in the future without a potential loss of customers.

Regulatory, connectivity and produced content increased $66 millionremained constant and $131decreased $119 million during the three and nine months ended September 30, 2019,2020, respectively, compared to the corresponding periods in 20182019 primarily due to higher regulatory pass-through fees, original programmingdeferred sports rights costs and costs of video devices sold to customers.associated with the shortened baseball season resulting from COVID-19.
Costs to service customers increased $40$8 million and decreased $9$115 million during the three and nine months ended September 30, 2019,2020, respectively, compared to the corresponding periods in 2018. The increase2019 primarily due to higher labor costs resulting from COVID-19 related wage increases and flex time benefits along with 6.8% customer growth offset by a decrease in bad debt expense given the revenue write-off associated with the KAC program and better collections enhanced by government stimulus benefits.

Marketing costs decreased $5 million and $23 million during the three and nine months ended September 30, 20192020, respectively, compared to the corresponding periodperiods in 2018 was2019 primarily due to an increase in bad debt expense. Bad debt expense increased despite lower non-pay churn due to billing simplification changes we made which pushed out collectionstiming of media spend and, resulted in higher balances at disconnect.during the nine months ended September 30, 2020, a payroll tax credit.

Mobile costs of $456 million and $1.2 billion for the three and nine months ended September 30, 2020, respectively, and $337 million and $874 million for the three and nine months ended September 30, 2019, respectively, and $94 million and $135 million for the three and nine months ended September 30, 2018, respectively, were comprised of mobile device costs mobile launch costs and mobile service, customer acquisition and operating costs.


 The increases are attributable to increases in the number of mobile lines.

3427


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

Three months ended
September 30, 2020
compared to
three months ended
September 30, 2019
Increase / (Decrease)		Nine months ended
September 30, 2020
compared to
nine months ended
September 30, 2019
Increase / (Decrease)
Enterprise$(16)$(66)
Property tax and insurance(12)(32)
Advertising sales expense9 (26)
Corporate costs(5)27 
Stock compensation expense12 25 
Other12 53 
$— $(19)
 Three months ended
September 30, 2019
compared to
three months ended
September 30, 2018
Increase / (Decrease)		 Nine months ended
September 30, 2019
compared to
nine months ended
September 30, 2018
Increase / (Decrease)
Corporate costs$33
 $69
Property tax and insurance9
 49
Stock compensation expense—
 25
Enterprise—
 14
Advertising sales expense2
 7
Other24
 48
 $68
 $212

Enterprise costs decreased primarily due to the sale of non-strategic assets in the third quarter of 2019. Advertising sales expense decreased during the nine months ended September 30, 2020 compared to the corresponding prior period due to lower cost of sales fees driven by lower revenue.

Depreciation and amortization. Depreciation and amortization expense decreased by $68$45 million and $323$170 million during the three and nine months ended September 30, 2019,2020, respectively, compared to the corresponding periods in 2018. The decrease was2019 primarily due to a decrease in depreciation and amortization as certain assets acquired from TWC and Bright Housein acquisitions become fully depreciated offset by an increase in depreciation as a result of more recent capital expenditures.

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

Three months ended
September 30, 2020
compared to
three months ended
September 30, 2019
Increase / (Decrease)		Nine months ended
September 30, 2020
compared to
nine months ended
September 30, 2019
Increase / (Decrease)
Special charges, net$8 $12 
(Gain) loss on sale of assets, net(9)(60)
$(1)$(48)
 Three months ended
September 30, 2019
compared to
three months ended
September 30, 2018
Increase / (Decrease)		 Nine months ended
September 30, 2019
compared to
nine months ended
September 30, 2018
Increase / (Decrease)
Special charges, net$9
 $(77)
(Gain) loss on sale of assets, net(9) 42
 $—
 $(35)


Special charges, net decreased during the nine months ended September 30, 2019 compared to the corresponding period in 2018 primarily due to a decrease in merger and restructuring costs. The nine months ended September 30, 2018 also included a $22 million charge related to a withdrawal liability from a multiemployer pension plan. Loss on sale of assets, net increased during the nine months ended September 30, 2019 compared to the corresponding period in 2018 primarily due to a $41 million impairment of non-strategic assets recognized during the nine months ended September 30, 2019. See Note 12 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”Statements” for more information.

Interest expense, net. Net interest expense decreased by $26 million and increased by $61 million and $207$39 million for the three and nine months ended September 30, 2019,2020, respectively, compared to the corresponding periods in 2018 primarily as a2019. Changes in net interest expense is the result of an increasereductions in weighted average interest rates as well as increases in weighted average debt outstanding ofwhich was approximately $2.4$5.6 billion and $5.7 billion during both timethe three and nine months ended September 30, 2020, respectively, compared to the corresponding periods in 2019. The increases in weighted average debt outstanding is primarily due to the issuance of notes throughout 20182019 and 20192020 for general corporate purposes including distributions to parent companies for stock buybacks and debt repayments.

Loss on extinguishment of debt. Loss on extinguishment of debt of $58 million and $121 million for the three and nine months ended September 30, 2020, respectively, represents losses recognized as a result of the redemption of CCO Holdings notes. For more information, see Note 6 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Gain (loss) on financial instruments, net. We recorded gains on financial instruments of $69 million and losses on financial instruments of $185 million during the three and nine months ended September 30, 2020, respectively, and losses on financial

28

instruments of $34 million and $116 million during the three and nine months ended September 30, 2019, respectively, and a gain of $12 million during the three months ended September 30, 2018.respectively. Gains and losses on financial instruments are primarily recognized due to changes in the fair value of our cross-currency derivative instruments and the foreign currency remeasurement of the fixed-rate British pound sterling denominated notes (the “Sterling Notes”) into U.S. dollars. For more information, see Note 8 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Other pension benefits (costs), net. Net other pension benefits decreased(costs) increased by $198$124 million and $220$121 million during the three and nine months ended September 30, 2019,2020, respectively, compared to the corresponding periods in 20182019. The increase during the three and nine months ended September 30, 2020 compared to the corresponding prior periods was primarily due to a $125 million remeasurement gainloss in the third quarter of 20182020 as a result of significant lump sum settlement payments to participants. For more information, see Note 18 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”


35



Other expense, net. Other expense, net primarily represents equity losses on our equity investments. Other expense, net also includes impairmentsan impairment on equity investments of approximately $121 million and $58 million during the nine months ended September 30, 2019 and 2018, respectively.2019.

Income tax expense. We recognized income tax expense of $10 million and $23 million for the three and nine months ended September 30, 2020, respectively, and $10 million and $86 million for the three and nine months ended September 30, 2019, respectively, and $8 million and $13 million for the three and nine months ended September 30, 2018, respectively. Income tax expense increaseddecreased during the nine months ended September 30, 20192020 compared to the corresponding period in 20182019 primarily as a result of an internal entity simplification and higher pretax income. that increased expense in 2019. For more information, see Note 14 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

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.

Net income attributable to CCO Holdings member. Net income attributable to CCO Holdings member decreasedincreased from $667$559 million and $1.3 billion for the three months ended September 30, 2018 to $559 million for the three months ended September 30, 2019 and remained constant at $1.3 billion for both the nine months ended September 30, 2019, respectively, to $1.1 billion and 2018$2.5 billion for the three and nine months ended September 30, 2020, respectively, primarily as a result of the factors described above.

Use of Adjusted EBITDA and Free Cash Flow

We use certain measures that are not defined by 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, net income attributable to CCO Holdings member and net cash flows from operating activities reported in accordance with GAAP. These terms, as defined by us, may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA and free cash flow are reconciled to net income attributable to Charter shareholdersCCO Holdings member and net cash flows from operating activities, respectively, below.

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

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

Management and Charter’s board of directors use Adjusted EBITDA and free cash flow to assess our performance and our ability to service our debt, fund operations and make additional investments with internally generated funds. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under our credit facilities or outstanding notes to determine compliance with the covenants contained in the facilities and notes (all such documents have been previously filed with the Securities and Exchange Commission (the “SEC”)). For the purpose of calculating compliance with leverage covenants, we use Adjusted EBITDA, as presented, excluding certain expenses paid by our operating subsidiaries to other Charter entities. Our debt covenants refer to these expenses as management fees, which were $308 million and $927 million for the three and nine months ended September 30, 2020, respectively, and $317 million and $916 million for the three and nine months ended September 30, 2019, respectively, and $278 million and $816 million for the three and nine months ended September 30, 2018, respectively.



3629


Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net income attributable to CCO Holdings member$1,073 $559 $2,538 $1,347 
Plus: Net income attributable to noncontrolling interest— — 1 1 
Interest expense, net947 973 2,904 2,865 
Income tax expense10 10 23 86 
Depreciation and amortization2,366 2,411 7,283 7,453 
Stock compensation expense83 71 263 238 
Loss on extinguishment of debt58 — 121 — 
(Gain) loss on financial instruments, net(69)34 185 116 
Other pension (benefits) costs, net115 (9)94 (27)
Other, net28 21 35 206 
Adjusted EBITDA$4,611 $4,070 $13,447 $12,285 
Net cash flows from operating activities$3,621 $2,937 $10,316 $8,347 
Less: Purchases of property, plant and equipment(2,014)(1,651)(5,352)(4,913)
Change in accrued expenses related to capital expenditures104 (21)(70)(449)
Free cash flow$1,711 $1,265 $4,894 $2,985 

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Net income attributable to CCO Holdings member$559
 $667
 $1,347
 $1,286
Plus: Net income attributable to noncontrolling interest—
 —
 1
 1
Interest expense, net973
 912
 2,865
 2,658
Income tax expense10
 8
 86
 13
Depreciation and amortization2,411
 2,479
 7,453
 7,776
Stock compensation expense71
 71
 238
 213
(Gain) loss on financial instruments, net34
 (12) 116
 —
Other pension benefits, net(9) (207) (27) (247)
Other, net21
 22
 206
 161
Adjusted EBITDA$4,070
 $3,940
 $12,285
 $11,861
        
Net cash flows from operating activities$2,937
 $2,788
 $8,347
 $8,504
Less: Purchases of property, plant and equipment(1,651) (2,118) (4,913) (6,692)
Change in accrued expenses related to capital expenditures(21) (154) (449) (620)
Free cash flow$1,265
 $516
 $2,985
 $1,192

Liquidity and Capital Resources

Introduction

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

Recent Events

In May 2019,February 2020, CCO Holdings LLC and CCO Holdings Capital Corp. jointly issued $750 million$1.65 billion aggregate principal amount of 5.375%4.500% senior unsecured notes due 20292030 at par and in July 2019,March 2020, an additional $750 million$1.1 billion of the same series of notes were issued at a price of 102.000%102.5% of the aggregate principal amount. Also in March 2020, CCO Holdings and CCO Holdings Capital Corp. issued $1.4 billion aggregate principal amount of 4.500% senior unsecured notes due 2032 at par. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.250% senior notes due September 30, 2022, 5.125% senior notes due February 15, 2023, 5.125% senior notes due May 1, 2023, 5.750% senior notes due September 1, 2023 and 5.750% senior notes due January 15, 2024, as well as distributions to our parent companies to fund buybacks of Charter Class A common stock and Charter Holdings common units.

In April 2020, Charter Communications Operating, LLC ("Charter Operating") and Charter Communications Operating Capital Corp. jointly issued $1.6 billion aggregate principal amount of 2.800% senior secured notes due April 2031 at a price of 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 were used to pay related fees and expenses and for general corporate purposes.

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

In July 2020, CCO Holdings and CCO Holdings Capital Corp. jointly issued $1.5 billion aggregate principal amount of 4.250% senior unsecured notes due 2031 at par and later in July 2020, an additional $1.5 billion of the same series of notes were issued at a price of 102%. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including

30

repaying certain indebtedness, including repayment of all of CCO Holdings' 5.875% senior notes due April 1, 2024, as well as distributions to our parent companies to fund buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness.units.

In July 2019, Charter OperatingOctober 2020, CCO Holdings and Charter Communications OperatingCCO Holdings Capital Corp. jointly issued $1.25an additional $1.5 billion aggregate principal amount of 5.125%its 4.500% senior unsecured notes due 20492032 at a price of 99.880%103.75% of the aggregate principal amount. The net proceeds will be used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.375% senior notes due May 1, 2025, as well as distributions to our parent companies to fund potential buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness, which may include Time Warner Cable, LLC's 5.000% senior notes due 2020.units.

On October 1, 2019, CCO Holdings and CCO Holdings Capital Corp. jointly issued $1.35 billion aggregate principal amount of 4.750% senior unsecured notes due 2030 at par and on October 24, 2019, an additional $500 million of the same series of notes were issued at a price of 101.250% of the aggregate principal amount. The net proceeds from the October 1, 2019 issuance were used to finance a tender offer and call redemption of $500 million aggregate principal amount of CCO Holdings' 5.250% senior unsecured notes due 2021 and $850 million aggregate principal amount of CCO Holdings' 5.750% senior unsecured notes due 2024, as well as to pay related fees and expenses and for general corporate purposes. The net proceeds from the October 24, 2019 issuance will be used to pay related fees and expenses and for general corporate purposes, including distributions to our parent companies to fund potential buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness.

In October 2019, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.5 billion aggregate principal amount of 4.800% senior unsecured notes due 2050 at a price of 99.436% of the aggregate principal amount. The net proceeds will be used to pay related fees and expenses and for general corporate purposes, including distributions to our parent


37


companies to fund potential buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness.

In October 2019, Charter Operating entered into an amendment to its Credit Agreement repricing $4.5 billion of its revolving loan and $4.0 billion of term loan A to LIBOR plus 1.25% and its existing term loan B to LIBOR plus 1.75%. In addition, $4.5 billion of the revolving loan and $4.0 billion of term loan A maturities were extended to 2025 and $3.8 billion of term loan B maturities were extended to 2027.

Overview of Our Contractual Obligations and Liquidity

We have significant amounts of debt. The principal amount of our debt as of September 30, 20192020 was $74.2$79.1 billion, consisting of $10.8$10.2 billion of credit facility debt, $43.0$45.3 billion of investment grade senior secured notes and $20.4$23.5 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 launchcontinue to grow our new 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 providesell the handset or tablet to customers pursuant to equipment installment plans. Free cash flow was $1.7 billion and $4.9 billion for the three and nine months ended September 30, 2020, respectively, and $1.3 billion and $3.0 billion for the three and nine months ended September 30, 2019, respectively, and $516 million and $1.2 billion for the three and nine months ended September 30, 2018, respectively. See table below for factors impacting free cash flow during the three and nine months ended September 30, 20192020 compared to the corresponding prior periods. As of September 30, 2019,2020, the amount available under our credit facilities was approximately $4.3$4.7 billion and cash on hand was approximately $290 million.$1.0 billion. We expect to utilize free cash flow, cash on hand and availability under our credit facilities as well as future refinancing transactions to further extend the maturities of our obligations. The timing and terms of any refinancing transactions will be subject to market conditions among other considerations. Additionally, we may, from time to time, and depending on market conditions and other factors, use cash on hand and the proceeds from securities offerings or other borrowings to retire our debt through open market purchases, privately negotiated purchases, tender offers or redemption provisions. We believe we have sufficient liquidity from cash on hand, free cash flow and Charter Operating’s revolving credit facility as well as access to the capital markets to fund our projected cash needs.

We continue to evaluate the deployment of our cash on hand and anticipated future free cash flow including to invest in our business growth and other strategic opportunities, including mergers and acquisitions as well as distributions to our parent companies 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. Our leverage ratio was 4.54.3 times Adjusted EBITDA as of September 30, 2019.2020. 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, 2020, Charter purchased approximately 5.5 million and 11.9 million of Charter Class A common stock for approximately $3.3 billion and $6.5 billion, respectively, and during the three and nine months ended September 30, 2019, Charter purchased approximately 6.9 million and 11.8 million shares, respectively, of Charter Class A common stock for approximately $2.7 billion and $4.5 billion, respectively, and during the three and nine months ended September 30, 2018, Charter purchased 3.0 million and 10.3 million shares, respectively, of Charter Class A common stock for approximately $929 million and $3.1 billion, respectively.

In December 2017, Charter and A/N entered into an amendment to the letter agreement (the "Letter Agreement") that requires A/N to sell to Charter or to Charter Holdings, on a monthly basis, a number of shares of Charter Class A common stock or Charter Holdings common units that represents a pro rata participation by A/N and its affiliates in any repurchases of shares of Charter Class A common stock from persons other than A/N effected by Charter during the immediately preceding calendar month, at a purchase price equal to the average price paid by Charter for the shares repurchased from persons other than A/N during such immediately preceding calendar month. A/N and Charter both have the right to terminate or suspend the pro rata repurchase arrangement on a prospective basis. Charter Holdings purchased from A/N 0.6 million and 1.7 million Charter Holdings common units at an average price per unit of $568.19 and $514.10, or $366 million and $884 million, during the three and nine months ended September 30, 2020, respectively, and 0.9 million and 1.6 million Charter Holdings common units at an average price per unit of $391.62 and $366.76, or $339 million and $593 million, during the three and nine months ended September 30, 2019, respectively, and 0.5 million and 1.5 million Charter Holdings common units at an average price per unit of $292.81 and $306.11, or $145 million and $473 million, during the three and nine months ended September 30, 2018, respectively.

As of September 30, 2019,2020, Charter had remaining board authority to purchase an additional $1.4$1.6 billion of Charter’s Class A common stock and/or Charter Holdings common units. Although Charter expects to continue to buy back its common stock consistent with its leverage target range, Charter is not obligated to acquire any particular amount of common stock, and the timing of any purchases that may occur cannot be predicted and will largely depend on market conditions and other potential

31

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.



38


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.

Free Cash Flow

Free cash flow increased $749$446 million and $1.8$1.9 billion during the three and nine months ended September 30, 20192020 compared to the corresponding prior periods in 20182019 due to the following (dollars in millions).

Three months ended
September 30, 2020
compared to
three months ended
September 30, 2019
Increase / (Decrease)		Nine months ended
September 30, 2020
compared to
nine months ended
September 30, 2019
Increase / (Decrease)
Changes in working capital, excluding change in accrued interest$267 $1,184 
Increase in Adjusted EBITDA541 1,162 
Decrease in cash paid for interest, net10 39 
Increase in capital expenditures(363)(439)
Other, net(9)(37)
$446 $1,909 
 Three months ended
September 30, 2019
compared to
three months ended
September 30, 2018
Increase / (Decrease)		 Nine months ended
September 30, 2019
compared to
nine months ended
September 30, 2018
Increase / (Decrease)
Decrease in capital expenditures$467
 $1,779
Increase in Adjusted EBITDA130
 424
Changes in working capital, excluding change in accrued interest180
 (338)
Increase in cash paid for interest, net(13) (129)
Other, net(15) 57
 $749
 $1,793

Free cash flow was reduced by $265 million and $758 million during the three and nine months ended September 30, 2020, respectively, and $256 million and $844 million during the three and nine months ended September 30, 2019, respectively, and $149 million and $290 million during the three and nine months ended September 30, 2018, respectively, due to mobile with impacts negatively affecting working capital, capital expenditures and Adjusted EBITDA.

Financial Information about Guarantors, Issuers of Guaranteed Securities and Consolidated Subsidiaries

Each of CCO Holdings, Charter Operating, Time Warner Cable, LLC and Time Warner Cable Enterprises LLC (collectively, the “Issuers”) and certain Charter Operating direct and indirect subsidiaries (collectively, the “Obligor Group”) jointly, severally, fully and unconditionally guarantee the outstanding debt securities of the respective Issuers (other than the CCO Holdings unsecured notes) and Charter Operating’s credit facilities on a senior basis (collectively, the “Guaranteed Debt”). Such guarantees are pari passu in right of payment with all senior indebtedness of the guarantors and senior in right of payment to subordinated obligations of the guarantors. Each guarantee will be limited to the maximum amount that can be guaranteed by the relevant guarantor without rendering the relevant guarantee, as it relates to that guarantor, voidable or otherwise ineffective or limited under applicable law, and enforcement of each guarantee would be subject to certain generally available defenses. Certain Charter Operating subsidiaries that are regulated entities are only designated as guarantor subsidiaries upon approval by regulators. The guaranteed obligations of a guarantor may be released under certain circumstances permitted under the documentation governing the Guaranteed Debt, including if a subsidiary guarantor no longer qualifies as a “Subsidiary” of Charter Operating under transactions not prohibited by the Charter Operating credit agreement.

The Guaranteed Debt and the subsidiary guarantees thereof are also secured by (i) a lien on substantially all of the assets of Charter Operating and its subsidiaries, to the extent such lien can be perfected under the Uniform Commercial Code by the filing of a financing statement, and (ii) a pledge by CCO Holdings of the equity interests owned by it in any of Charter Operating’s subsidiaries, as well as intercompany obligations owing to it by any of such entities. Such subsidiary guarantees are effectively senior to all unsecured debt or debt secured by a junior liens of the subsidiary guarantors, in each case to the extent of the value of the collateral securing the guarantee obligations of the subsidiary guarantors.

See Note 9 to the consolidated financial statements contained in “Part II. Item 8. Financial Statements and Supplementary Data” in CCO Holdings' 2019 Annual Report on Form 10-K for further details about the terms, conditions and other factors that may

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affect payments to holders of Guaranteed Debt. There have been no material changes from such disclosure described in our Form 10-K.

In March 2020, the SEC adopted amendments to the financial disclosure requirements of Regulation S-X for guarantors and issuers of guaranteed securities. CCO Holdings is voluntarily complying with the new disclosure requirements beginning with its Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. Because the assets, liabilities and results of operations of the combined Obligor Group are not materially different than corresponding amounts presented in the consolidated financial statements of CCO Holdings, summarized financial information of the Obligor Group has been omitted pursuant to SEC Regulation S-X Rule 13-01, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. The information below is being presented to comply with the terms of the Charter Operating credit agreement. This information is not intended to present the financial position, results of operations and cash flow of the individual companies or groups of companies in accordance with generally accepted accounting principles.

CCO HoldingsCharter Operating and Consolidated SubsidiariesCCO HoldingsCharter Operating and Consolidated Subsidiaries
September 30, 2020December 31, 2019
Balance Sheet Data:
Current assets$— $3,694 $500 $5,655 
Receivables from related party$42 $— $59 $— 
Noncurrent assets$— $138,966 $— $140,588 
Loans receivables to related party$567 $— $545 $— 
Current liabilities$299 $9,297 $296 $11,346 
Payable to related party$— $136 $— $357 
Noncurrent liabilities$23,383 $58,115 $21,951 $56,604 
Loans payable to related party$— $1,573 $— $1,504 
Noncontrolling interests$— $23 $— $23 
Nine Months Ended September 30,
20202019
Statement of Operations Data:
Revenue$— $35,467 $— $33,997 
Income from operations$— $5,872 $— $4,517 
Net income$2,538 $3,544 $1,347 $2,132 
Statement of Cash Flows Data:
Net cash flows from operating activities$(873)$11,189 $(762)$9,109 
Net cash flows from investing activities$6,701 $(5,455)$4,429 $(5,277)
Net cash flows from financing activities$(6,328)$(7,468)$(3,667)$(3,842)

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, 2019,2020, 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, 20192020 financial results. There can be no assurance that they will satisfy these tests at the time of the contemplated distribution. Distributions by Charter Operating for payment of principal on parent company 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

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interests of the borrower in an amount sufficient to make permitted tax payments.

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

Historical Operating, Investing, and Financing Activities

Cash, Cash Equivalents and Restricted Cash. We held $290 million$1.0 billion and $300 million$3.2 billion in cash and cash equivalents as of September 30, 20192020 and December 31, 2018,2019, respectively.

Operating Activities. Net cash provided by operating activities decreased $157 millionincreased $2.0 billion during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, primarily due to an increase in Adjusted EBITDA of $1.2 billion and changes in working capital, excluding the change in accrued interest and accrued expenses related to capital expenditures, that used $509$805 million more cash and an increase in cash paid for interest, net of $129 million offset by an increase in Adjusted EBITDA of $424 million.less cash.



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Investing Activities. Net cash used in investing activities was $5.3$5.5 billion and $7.4$5.3 billion for the nine months ended September 30, 20192020 and 2018,2019, respectively. The decreaseincrease in cash used was primarily due to a decreasean increase in capital expenditures.

Financing Activities. Net cash used in financing activities was $3.1$7.1 billion and $1.1$3.1 billion for the nine months ended September 30, 20192020 and 2018,2019, respectively. The increase in cash used was primarily due to an increase in distributions to parent companies offset byand a decrease in the amount by which borrowings of long-term debt exceeded repayments.

Capital Expenditures

We have significant ongoing capital expenditure requirements.  Capital expenditures were $2.0 billion and $5.4 billion for the three and nine months ended September 30, 2020, respectively, and $1.7 billion and $4.9 billion for the three and nine months ended September 30, 2019, respectively, and $2.1 billion and $6.7 billion for the three and nine months ended September 30, 2018, respectively.  The decreaseincrease was primarily due to lower customer premise equipment expenditureshigher support capital as a result of the completion of our all-digital conversionfacility improvements and fewer SPP migrations, lowerinvestments in back office systems and mobile store build-outs, higher line extensions driven by continued network expansion, including to rural areas and higher scalable infrastructure as a result of core network enhancements and node splits given growing customers and traffic and during the completion of the roll-out of DOCSIS 3.1 technology across our footprint in 2018 and lower support spending with the substantial completion of the integration of TWC and Bright House.three months ended September 30, 2020, higher Internet customer premise equipment. See the table below for more details.
 
We currently expect 2020 cable capital expenditures excluding capital expenditures related to mobile, to be slightly below $7 billionconsistent and possibly lower as a percentage of cable revenue versus 2019, despite the significant acceleration in 2019, versus $8.9 billion in 2018. customer growth and network utilization during COVID-19.The actual amount of our capital expenditures in 20192020 will depend on a number of factors including further spend related to product development and growth rates of both our residential and commercial businesses.


Our capital expenditures are funded primarily from cash flows from operating activities and borrowings on our credit facility. In addition, our accrued liabilities related to capital expenditures decreased by $449$70 million and $620$449 million for the nine months ended September 30, 2020 and 2019, and 2018, respectively.


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The following tables present our major capital expenditures categories in accordance with National Cable and Telecommunications Association (“NCTA”) disclosure guidelines for the three and nine months ended September 30, 20192020 and 2018.2019. 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 September 30,Nine Months Ended September 30,
2020201920202019
Customer premise equipment (a)$520 $470 $1,501 $1,527 
Scalable infrastructure (b)424 320 979 840 
Line extensions (c)439 370 1,204 1,054 
Upgrade/rebuild (d)175 165 459 451 
Support capital (e)456 326 1,209 1,041 
Total capital expenditures$2,014 $1,651 $5,352 $4,913 
Capital expenditures included in total related to:
Mobile$139 $100 $351 $281 
Commercial services$358 $327 $942 $956 
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Customer premise equipment (a)$470
 $675
 $1,527
 $2,437
Scalable infrastructure (b)320
 505
 840
 1,578
Line extensions (c)370
 348
 1,054
 992
Upgrade/rebuild (d)165
 190
 451
 522
Support capital (e)326
 400
 1,041
 1,163
Total capital expenditures$1,651
 $2,118
 $4,913
 $6,692
        
Capital expenditures included in total related to:       
Mobile$100
 $66
 $281
 $136
Commercial services$327
 $342
 $956
 $934
All-digital transition$—
 $42
 $—
 $316


(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).
(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).

(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).

(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).
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(c)Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).

(d)Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.
(e)Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles).

Recently Issued Accounting Standards

See Note 19 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements” for a discussion of recently issued accounting standards.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk.

We use derivative instruments to manage foreign exchange risk on the Sterling Notes, and do not hold or issue derivative instruments for speculative trading purposes.

Cross-currency derivative instruments are used to effectively convert £1.275 billion aggregate principal amount of fixed-rate British pound sterling denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt. The cross-currency derivative instruments have maturities of June 2031 and July 2042. We are required to post collateral on the cross-currency derivative instruments when such instruments are in a liability position. In April 2019, we entered into a collateral holiday agreement for 60% of both the 2031 and 2042 cross-currency swaps, which eliminates the requirement to post collateral for three years, as well as a ten year collateral cap on the remaining 40% of the cross-currency swaps which limits the required collateral posting on that 40% of the cross-currency swaps to $150 million. For more information, see Note 8 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

As of September 30, 20192020 and December 31, 2018,2019, the weighted average interest rate on credit facility debt was approximately 3.8%1.7% and 4.3%3.3%, respectively, and the weighted average interest rate on the senior notes was approximately 5.4%5.2% and 5.6%5.4%, respectively, resulting in a blended weighted average interest rate of 5.2%4.7% and 5.4%5.1%, respectively. The interest rate on approximately 84% and 85%86% of the total principal amount of our debt was effectively fixed as of September 30, 20192020 and December 31, 2018, respectively.2019.


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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, 20192020 (dollars in millions).

 2019 2020 2021 2022 2023 Thereafter Total Fair Value
Debt:               
Fixed-Rate$—
 $3,500
 $2,200
 $4,250
 $4,150
 $48,368
 $62,468
 $68,395
Average Interest Rate—% 4.19% 4.32% 4.70% 5.85% 5.61% 5.44%  
                
Variable Rate$71
 $286
 $286
 $286
 $584
 $10,221
 $11,734
 $11,762
Average Interest Rate3.49% 3.01% 2.79% 2.79% 2.78% 3.20% 3.11%  

20202021202220232024ThereafterTotalFair Value
Debt:
Fixed-Rate$— $1,700 $3,000 $1,500 $1,100 $60,645 $67,945 $77,872 
Average Interest Rate— %4.05 %4.46 %6.92 %4.50 %5.28 %5.24 %
Variable Rate$69 $277 $277 $436 $1,165 $8,895 $11,119 $10,904 
Average Interest Rate1.52 %1.50 %1.51 %1.61 %1.93 %2.25 %2.15 %

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, 20192020 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 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.



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During the quarter ended September 30, 2019,2020, 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.


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PART II. OTHER INFORMATION

Item 1.     Legal Proceedings.

Our Annual Report on Form 10-K for the year ended December 31, 2018 includes “Legal Proceedings” under Item 3 of Part I. Other than as described inSee Note 17 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, 20182019 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. The current pandemic and continued spread of COVID-19 has caused a significant economic recession. At this time, we cannot predict the duration of any business disruption and the ultimate impact of COVID-19 on our business, including the depth and duration of the economic impact to household formation and growth and our residential and business customers’ ability to pay for our products and services including the impact of extended unemployment benefits and other stimulus packages. We expect that some of the COVID-19 programs may result in incremental churn and bad debt during the remainder of the year and into 2021. 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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SIGNATURES

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

CCO HOLDINGS, LLC
Registrant
By:By:/s/ Kevin D. Howard
Kevin D. Howard
Date: October 29, 2019November 2, 2020Executive Vice President, Chief Accounting Officer and Controller
CCO HOLDINGS CAPITAL CORP.
Registrant
By:By:/s/ Kevin D. Howard
Kevin D. Howard
Date: October 29, 2019November 2, 2020Executive Vice President, Chief Accounting Officer and Controller




S- 1
S-1




Exhibit Index
ExhibitDescription
10.1
EmploymentExchange and Registration Rights Agreement, between Charter Communications, Inc. and Kevin D. Howard, dated August 2, 2019 (incorporated by reference to Exhibit 10.1October 12, 2020, relating to the Current Report on Form 8-K filed by Charter Communications, Inc. on August 7, 2019).
10.2
Second Supplemental Indenture, dated as of October 1, 2019,4.500% Senior Notes due 2032, among CCO Holdings, LLC, CCO Holdings Capital Corp. and TheDeutsche Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by Charter Communications, Inc. on October 7, 2019).
10.3
Form of 4.750% Senior Notes due 2030 (included in Exhibit 10.2).
10.4
Exchange and Registration Rights Agreement, dated October 1, 2019, relating to the 4.750% Senior Notes due 2030, among CCO Holdings, LLC, CCO Holdings Capital Corp. and BofA 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 October 7, 2019)16, 2020).
31.122.1
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
Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of 1934.
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
101
The following financial information from CCO Holdings, LLC's Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2019,2020, filed with the Securities and Exchange Commission on October 29, 2019,November 2, 2020, formatted in iXBRL (inline eXtensible Business Reporting Language) includes: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Changes in Member's Equity; (iv) the Consolidated Statements of Cash Flows; and (vi) the Notes to the Consolidated Financial Statements.
104Cover Page, formatted in iXBRL and contained in Exhibit 101.




E- 1
E-1