Charter Communications : 3Q20 Financial Addendum

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA (dollars in millions, except per share data)

		Three Months Ended September 30,			Nine Months Ended September 30,
		2020			2019		% Change			2020			2019		% Change
REVENUES:
Internet	$	4,722	$	4,195	12.5 %	$	13,659	$	12,322	10.8 %
Video		4,221			4,359	(3.2)%			13,014			13,134	(0.9)%
Voice		449			477	(5.8)%			1,357			1,470	(7.7)%
Residential revenue		9,392			9,031	4.0 %			28,030			26,926	4.1 %
Small and medium business		988			974	1.5 %			2,967			2,882	2.9 %
Enterprise		617			644	(4.3)%			1,845			1,939	(4.9)%
Commercial revenue		1,605			1,618	(0.8)%			4,812			4,821	(0.2)%
Advertising sales		460			394	16.8 %			1,074			1,134	(5.3)%
Mobile		368			192	91.8 %			936			490	91.3 %
Other		214			215	(0.7)%			621			632	(1.8)%
Total Revenue		12,039			11,450	5.1 %			35,473			34,003	4.3 %
COSTS AND EXPENSES:
Programming		2,727			2,790	(2.3)%			8,492			8,482	0.1 %
Regulatory, connectivity and produced content		612			612	(0.1)%			1,651			1,770	(6.7)%
Costs to service customers		1,902			1,894	0.4 %			5,598			5,483	2.1 %
Marketing		788			793	(0.7)%			2,273			2,296	(1.0)%
Mobile		456			337	35.2 %			1,243			874	42.2 %
Other expense		915			938	(2.5)%			2,692			2,772	(2.9)%
Total operating costs and expenses (exclusive		7,400			7,364	0.5 %			21,949			21,677	1.3 %
of items shown separately below)
Adjusted EBITDA		4,639			4,086	13.6 %			13,524			12,326	9.7 %
Adjusted EBITDA margin		38.5 %			35.7 %					38.1 %			36.2 %
Depreciation and amortization		2,370			2,415					7,295			7,465
Stock compensation expense		83			71					263			238
Other operating expenses, net		14			14					23			71
Income from operations		2,172			1,586					5,943			4,552
OTHER INCOME (EXPENSES):
Interest expense, net		(946)			(963)					(2,883)			(2,833)
Loss on extinguishment of debt		(58)			-					(121)			-
Gain (loss) on financial instruments, net		69			(34)					(185)			(116)
Other pension benefits (costs), net		(115)			9					(94)			27
Other expense, net		(13)			(5)					(13)			(131)
		(1,063)			(993)					(3,296)			(3,053)
Income before income taxes		1,109			593					2,647			1,499
Income tax expense		(177)			(126)					(372)			(329)
Consolidated net income		932			467					2,275			1,170
Less: Net income attributable to noncontrolling		(118)			(80)					(299)			(216)
interests
Net income attributable to Charter shareholders	$	814	$	387			$	1,976	$	954
EARNINGS PER COMMON SHARE
ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
Basic	$	4.01	$	1.77			$	9.62	$	4.30
Diluted	$	3.90		$	1.74				$	9.35		$	4.23
Weighted average common shares outstanding,	202,826,502	218,499,213			205,468,736	221,818,079
basic
Weighted average common shares outstanding,
208,722,129	222,355,867			211,399,781	225,337,984
diluted

Adjusted EBITDA is a non-GAAP term. See page 6 of this addendum for the reconciliation of Adjusted EBITDA to net income attributable to Charter shareholders as defined by GAAP.

All percentages are calculated using whole numbers. Minor differences may exist due to rounding.

Addendum to Charter Communications, Inc. Third Quarter 2020 Earnings Release

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in millions)

		September 30,			December 31,
		2020			2019
ASSETS		(unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	1,283	$	3,483
Accounts receivable, net		2,068			2,227
Prepaid expenses and other current assets		709			761
Total current assets		4,060			6,471
RESTRICTED CASH		3			66
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net		34,196			34,591
Customer relationships, net		6,050			7,453
Franchises		67,322			67,322
Goodwill		29,554			29,554
Total investment in cable properties, net		137,122			138,920
OTHER NONCURRENT ASSETS		3,008			2,731
Total assets	$	144,193	$	148,188
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	8,541	$	8,885
Current portion of long-term debt		1,715			3,500
Total current liabilities		10,256			12,385
LONG-TERM DEBT		77,947			75,578
DEFERRED INCOME TAXES		17,929			17,711
OTHER LONG-TERM LIABILITIES		4,349			3,703
SHAREHOLDERS' EQUITY:
Controlling interest		26,906			31,445
Noncontrolling interests		6,806			7,366
Total shareholders' equity		33,712			38,811
Total liabilities and shareholders' equity	$	144,193	$	148,188

Addendum to Charter Communications, Inc. Third Quarter 2020 Earnings Release

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in millions)

		Three Months Ended			Nine Months Ended
		September 30,			September 30,
		2020			2019			2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income	$	932	$	467	$	2,275	$	1,170
Adjustments to reconcile consolidated net income to net cash flows from
operating activities:
Depreciation and amortization		2,370			2,415			7,295			7,465
Stock compensation expense		83			71			263			238
Noncash interest income, net		(10)			(17)			(31)			(89)
Other pension (benefits) costs, net		115			(9)			94			(27)
Loss on extinguishment of debt		58			-			121			-
(Gain) loss on financial instruments, net		(69)			34			185			116
Deferred income taxes		151			96			252			233
Other, net		(4)			(3)			(21)			148
Changes in operating assets and liabilities, net of effects from acquisitions
and dispositions:
Accounts receivable		(74)			(227)			159			(564)
Prepaid expenses and other assets		(76)			(49)			(240)			(225)
Accounts payable, accrued liabilities and other		188			165			61			(75)
Net cash flows from operating activities		3,664			2,943			10,413			8,390
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(2,014)			(1,651)			(5,352)			(4,913)
Change in accrued expenses related to capital expenditures		104			(21)			(70)			(449)
Real estate investments through variable interest entities		(41)			(61)			(122)			(125)
Other, net		(35)			2			(43)			10
Net cash flows from investing activities		(1,986)			(1,731)			(5,587)			(5,477)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt		3,030			2,443			10,352			13,157
Repayments of long-term debt		(1,819)			(763)			(9,711)			(10,886)
Payments for debt issuance costs		(29)			(16)			(91)			(48)
Issuance of equity		-			-			23			-
Purchase of treasury stock		(3,361)			(2,767)			(6,868)			(4,568)
Proceeds from exercise of stock options		50			25			171			106
Purchase of noncontrolling interest		(366)			(339)			(884)			(593)
Distributions to noncontrolling interest		(37)			(38)			(114)			(116)
Borrowings for real estate investments through variable interest entities, net		39			-			63			-
Other, net		(1)			(6)			(30)			(133)
Net cash flows from financing activities		(2,494)			(1,461)			(7,089)			(3,081)
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(816)			(249)			(2,263)			(168)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period		2,102			846			3,549			765
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period	$	1,286		$	597		$	1,286		$	597
CASH PAID FOR INTEREST	$	1,038		$	1,048		$	3,023		$	3,065
CASH PAID FOR TAXES
$	34	$	12	$	84	$	55

Addendum to Charter Communications, Inc. Third Quarter 2020 Earnings Release

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES UNAUDITED SUMMARY OF OPERATING STATISTICS (in thousands, except per customer and penetration data)

						Approximate as of
		September 30,			June 30,		December 31,		September 30,
			2020 (a)			2020 (a)			2019 (a)			2019 (a)
Footprint (b)
Estimated Passings		53,022			52,714			52,154			51,940
Customer Relationships (c)
Residential		28,912			28,496			27,277			27,037
SMB		2,021			1,980			1,958			1,930
Total Customer Relationships		30,933			30,476			29,235			28,967
Residential		416			751			240			282
SMB		41			4			28			28
Total Customer Relationships Net Additions		457			755			268			310
Total Customer Relationship Penetration of Estimated Passings (d)		58.3 %			57.8 %			56.1 %			55.8 %
Monthly Residential Revenue per Residential Customer (e)	$	109.03	$	110.82	$	113.79	$	112.00
Monthly SMB Revenue per SMB Customer (f)	$	164.77	$	166.06	$	169.06	$	169.44
Residential Customer Relationships Penetration
Single Play Penetration (g)		44.2 %			44.0 %			43.0 %			42.7 %
Double Play Penetration (g)		32.3 %			31.7 %			30.7 %			29.9 %
Triple Play Penetration (g)		23.5 %			24.3 %			26.2 %			27.3 %
% Residential Non-Video Customer Relationships		45.7 %			45.1 %			42.7 %			41.8 %
Internet
Residential		26,807			26,313			24,908			24,595
SMB		1,826			1,783			1,756			1,730
Total Internet Customers		28,633			28,096			26,664			26,325
Residential		494			842			313			351
SMB		43			8			26			29
Total Internet Net Additions		537			850			339			380
Video
Residential		15,705			15,652			15,620			15,725
SMB		530			516			524			520
Total Video Customers		16,235			16,168			16,144			16,245
Residential		53			102			(105)			(77)
SMB		14			(8)			4			2
Total Video Net Additions		67			94			(101)			(75)
Voice
Residential		9,335			9,398			9,443			9,595
SMB		1,207			1,169			1,144			1,120
Total Voice Customers		10,542			10,567			10,587			10,715
Residential		(63)			38			(152)			(213)
SMB		38			7			24			23
Total Voice Net Additions		(25)			45			(128)			(190)
Mobile Lines
Residential			2,020			1,672			1,078			793
SMB		40			25			4			1
Total Mobile Lines		2,060			1,697			1,082			794
Residential		348			313			285			275
SMB		15			12			3			1
Total Mobile Lines Net Additions		363			325			288			276
Enterprise (h)
Enterprise Primary Service Unites ("PSUs")		272			270			267			264
Enterprise Net Additions		2			1			3			6

Addendum to Charter Communications, Inc. Third Quarter 2020 Earnings Release

Page 4 of 7

1. We calculate the aging of customer accounts based on the monthly billing cycle for each account. On that basis, at September 30, 2020, June 30, 2020, December 31, 2019 and September 30, 2019, customers included approximately 181,700, 124,500, 154,200 and 148,000 customers, respectively, whose accounts were over 60 days past due, approximately 52,300, 18,400, 13,500 and 16,400 customers, respectively, whose accounts were over 90 days past due and approximately 26,000, 10,400, 10,000 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.
2. Passings represent our estimate of the number of units, such as single family homes, apartment and condominium units and SMB and enterprise sites passed by our cable distribution network in the areas where we offer the service indicated. These estimates are based upon the information available at this time and are updated for all periods presented when new information becomes available.
3. 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.
4. Penetration represents residential and SMB customers as a percentage of estimated passings. Penetration excludes mobile-only customers.
5. 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.
6. 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.
7. Single play, double play and triple play penetration represents the number of residential single play, double play and triple play cable customers, respectively, as a percentage of residential customer relationships, excluding mobile.
8. Enterprise PSUs represents the aggregate number of fiber service offerings counting each separate service offering at each customer location as an individual PSU.

Addendum to Charter Communications, Inc. Third Quarter 2020 Earnings Release

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES

(dollars in millions)

		Three Months Ended			Nine Months Ended
		September 30,			September 30,
		2020			2019			2020			2019
Net income attributable to Charter shareholders	$	814	$	387	$	1,976	$	954
Plus: Net income attributable to noncontrolling interest		118			80			299			216
Interest expense, net		946			963			2,883			2,833
Income tax expense		177			126			372			329
Depreciation and amortization		2,370			2,415			7,295			7,465
Stock compensation expense		83			71			263			238
Loss on extinguishment of debt		58			-			121			-
(Gain) loss on financial instruments, net		(69)			34			185			116
Other pension (benefits) costs, net		115			(9)			94			(27)
Other, net		27			19			36			202
Adjusted EBITDA (a)		4,639			4,086			13,524			12,326
Less: Mobile revenue		(368)			(192)			(936)			(490)
Plus: Mobile costs and expenses		456			337			1,243			874
Cable Adjusted EBITDA	$	4,727		$	4,231		$	13,831		$	12,710
Net cash flows from operating activities	$	3,664	$	2,943	$	10,413	$	8,390
Less: Purchases of property, plant and equipment		(2,014)			(1,651)			(5,352)			(4,913)
Change in accrued expenses related to capital expenditures		104			(21)			(70)			(449)
Free cash flow		1,754			1,271			4,991			3,028
Plus: Mobile net cash outflows from operating activities		126			156			407			563
Purchases of mobile property, plant and equipment		139			100			351			281
Cable free cash flow	$	2,019	$	1,527	$	5,749	$	3,872

1. See page 1 of this addendum for detail of the components included within Adjusted EBITDA.

The above schedule is presented in order to reconcile Adjusted EBITDA, cable Adjusted EBITDA, free cash flow and cable free cash flow, non-GAAP measures, to the most directly comparable GAAP measures in accordance with Section 401(b) of the Sarbanes-Oxley Act.

Addendum to Charter Communications, Inc. Third Quarter 2020 Earnings Release

Page 6 of 7

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED CAPITAL EXPENDITURES (dollars in millions)

		Three Months Ended			Nine Months Ended
		September 30,			September 30,
		2020			2019			2020			2019
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
Less: Mobile capital expenditures		(139)			(100)			(351)			(281)
Cable capital expenditures	$	1,875	$	1,551	$	5,001	$	4,632
Capital expenditures included in total related to:
Commercial services	$	358	$	327	$	942	$	956

1. 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).
2. 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).
3. Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).
4. Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.
5. 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).

Addendum to Charter Communications, Inc. Third Quarter 2020 Earnings Release

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