Charter Communications : 4Q20 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 December 31,			Year Ended December 31,
		2020			2019		% Change			2020			2019		% Change
REVENUES:
Internet	$	4,862	$	4,345	11.9 %	$	18,521	$	16,667	11.1 %
Video		4,418			4,473	(1.2)%			17,432			17,607	(1.0)%
Voice		449			450	(0.2)%			1,806			1,920	(5.9)%
Residential revenue		9,729			9,268	5.0 %			37,759			36,194	4.3 %
Small and medium business		997			986	1.1 %			3,964			3,868	2.5 %
Enterprise		623			617	0.9 %			2,468			2,556	(3.5)%
Commercial revenue		1,620			1,603	1.0 %			6,432			6,424	0.1 %
Advertising sales		625			434	43.9 %			1,699			1,568	8.3 %
Mobile		428			236	80.9 %			1,364			726	87.9 %
Other		222			220	1.5 %			843			852	(0.9)%
Total Revenue		12,624			11,761	7.3 %			48,097			45,764	5.1 %
COSTS AND EXPENSES:
Programming		2,909			2,808	3.6 %			11,401			11,290	1.0 %
Regulatory, connectivity and produced content		532			596	(10.7)%			2,183			2,366	(7.7)%
Costs to service customers		1,874			1,794	4.4 %			7,472			7,277	2.7 %
Marketing		758			748	1.4 %			3,031			3,044	(0.4)%
Mobile		522			372	40.5 %			1,765			1,246	41.7 %
Other expense		1,035			914	13.3 %			3,727			3,686	1.1 %
Total operating costs and expenses (exclusive		7,630			7,232	5.5 %			29,579			28,909	2.3 %
of items shown separately below)
Adjusted EBITDA		4,994			4,529	10.2 %			18,518			16,855	9.9 %
Adjusted EBITDA margin		39.6 %			38.5 %					38.5 %			36.8 %
Depreciation and amortization		2,409			2,461					9,704			9,926
Stock compensation expense		88			77					351			315
Other operating expenses, net		35			32					58			103
Income from operations		2,462			1,959					8,405			6,511
OTHER INCOME (EXPENSES):
Interest expense, net		(965)			(964)					(3,848)			(3,797)
Loss on extinguishment of debt		(22)			(25)					(143)			(25)
Gain (loss) on financial instruments, net		170			62					(15)			(54)
Other pension benefits (costs), net		28			(96)					(66)			(69)
Other expense, net		(18)			(4)					(31)			(135)
		(807)			(1,027)					(4,103)			(4,080)
Income before income taxes		1,655			932					4,302			2,431
Income tax expense		(254)			(110)					(626)			(439)
Consolidated net income		1,401			822					3,676			1,992
Less: Net income attributable to noncontrolling		(155)			(108)					(454)			(324)
interests
Net income attributable to Charter shareholders	$	1,246	$	714			$	3,222	$	1,668
EARNINGS PER COMMON SHARE
ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
Basic	$	6.33	$	3.36			$	15.85	$	7.60
Diluted	$	6.05		$	3.28				$	15.40		$	7.45
Weighted average common shares outstanding,	196,906,511	212,648,072			203,316,483	219,506,735
basic
Weighted average common shares outstanding,
212,077,917	217,778,099			209,273,247	223,786,380
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. Fourth Quarter 2020 Earnings Release

Page 1 of 7

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in millions)

		December 31,			December 31,
		2020			2019
ASSETS		(unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	998	$	3,483
Accounts receivable, net		2,201			2,227
Prepaid expenses and other current assets		707			761
Total current assets		3,906			6,471
RESTRICTED CASH		3			66
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net		34,357			34,591
Customer relationships, net		5,615			7,453
Franchises		67,322			67,322
Goodwill		29,554			29,554
Total investment in cable properties, net		136,848			138,920
OTHER NONCURRENT ASSETS		3,449			2,731
Total assets	$	144,206	$	148,188
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	8,867	$	8,885
Current portion of long-term debt		1,008			3,500
Total current liabilities		9,875			12,385
LONG-TERM DEBT		81,744			75,578
DEFERRED INCOME TAXES		18,108			17,711
OTHER LONG-TERM LIABILITIES		4,198			3,703
SHAREHOLDERS' EQUITY:
Controlling interest		23,805			31,445
Noncontrolling interests		6,476			7,366
Total shareholders' equity		30,281			38,811
Total liabilities and shareholders' equity	$	144,206	$	148,188

Addendum to Charter Communications, Inc. Fourth 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			Year Ended December 31,
		December 31,
		2020			2019			2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income	$	1,401	$	822	$	3,676	$	1,992
Adjustments to reconcile consolidated net income to net cash flows from
operating activities:
Depreciation and amortization		2,409			2,461			9,704			9,926
Stock compensation expense		88			77			351			315
Noncash interest income, net		(10)			(17)			(41)			(106)
Other pension (benefits) costs, net		(28)			96			66			69
Loss on extinguishment of debt		22			25			143			25
(Gain) loss on financial instruments, net		(170)			(62)			15			54
Deferred income taxes		213			87			465			320
Other, net		11			10			(10)			158
Changes in operating assets and liabilities, net of effects from acquisitions
and dispositions:
Accounts receivable		(133)			59			26			(505)
Prepaid expenses and other assets		116			(172)			(124)			(397)
Accounts payable, accrued liabilities and other		230			(28)			291			(103)
Net cash flows from operating activities		4,149			3,358			14,562			11,748
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(2,063)			(2,282)			(7,415)			(7,195)
Change in accrued expenses related to capital expenditures		(7)			504			(77)			55
Purchases of wireless spectrum licenses		(371)			-			(464)			-
Real estate investments through variable interest entities		(61)			(23)			(183)			(148)
Other, net		(68)			(53)			(18)			(43)
Net cash flows from investing activities		(2,570)			(1,854)			(8,157)			(7,331)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt		5,402			6,528			15,754			19,685
Repayments of long-term debt		(2,383)			(2,423)			(12,094)			(13,309)
Payments for debt issuance costs		(34)			(55)			(125)			(103)
Issuance of equity		-			-			23			-
Purchase of treasury stock		(4,349)			(2,305)			(11,217)			(6,873)
Proceeds from exercise of stock options		13			12			184			118
Purchase of noncontrolling interest		(578)			(292)			(1,462)			(885)
Distributions to noncontrolling interest		(40)			(38)			(154)			(154)
Borrowings for real estate investments through variable interest entities, net		59			-			122			-
Other, net		46			21			16			(112)
Net cash flows from financing activities		(1,864)			1,448			(8,953)			(1,633)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND		(285)			2,952			(2,548)			2,784
RESTRICTED CASH
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period		1,286			597			3,549			765
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period	$	1,001		$	3,549		$	1,001		$	3,549
CASH PAID FOR INTEREST	$	843		$	898		$	3,866		$	3,963
CASH PAID FOR TAXES
$	39	$	16	$	123	$	71

Addendum to Charter Communications, Inc. Fourth 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
		December 31,		September 30,	December 31,
			2020 (a)			2020 (a)		2019 (a)
Footprint (b)
Estimated Passings		53,300			53,022				52,154
Customer Relationships (c)
Residential		29,079			28,912				27,277
SMB		2,051			2,021				1,958
Total Customer Relationships		31,130			30,933				29,235
Residential		167			416				240
SMB		30			41				28
Total Customer Relationships Quarterly Net Additions		197			457				268
Total Customer Relationship Penetration of Estimated Passings (d)		58.4 %			58.3 %				56.1 %
Monthly Residential Revenue per Residential Customer (e)	$	111.85	$	109.03			$	113.79
Monthly SMB Revenue per SMB Customer (f)	$	163.02	$	164.77			$	169.06
Residential Customer Relationships Penetration
Single Play Penetration (g)		44.5 %			44.2 %				43.0 %
Double Play Penetration (g)		32.7 %			32.3 %				30.7 %
Triple Play Penetration (g)		22.9 %			23.5 %				26.2 %
% Residential Non-Video Customer Relationships		46.2 %			45.7 %				42.7 %
Internet
Residential		27,023			26,807				24,908
SMB		1,856			1,826				1,756
Total Internet Customers		28,879			28,633				26,664
Residential		216			494				313
SMB		30			43				26
Total Internet Quarterly Net Additions		246			537				339
Video
Residential		15,639			15,705				15,620
SMB		561			530				524
Total Video Customers		16,200			16,235				16,144
Residential		(66)			53				(105)
SMB		31			14				4
Total Video Quarterly Net Additions		(35)			67				(101)
Voice
Residential		9,215			9,335				9,443
SMB		1,224			1,207				1,144
Total Voice Customers		10,439			10,542				10,587
Residential		(120)			(63)				(152)
SMB		17			38				24
Total Voice Quarterly Net Additions		(103)			(25)				(128)
Mobile Lines
Residential			2,320			2,020				1,078
SMB		55			40				4
Total Mobile Lines		2,375			2,060				1,082
Residential		300			348				285
SMB		15			15				3
Total Mobile Lines Quarterly Net Additions		315			363				288
Enterprise (h)
Enterprise Primary Service Unites ("PSUs")		274			272				267
Enterprise Quarterly Net Additions		2			2				3

Addendum to Charter Communications, Inc. Fourth 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 December 31, 2020, September 30, 2020 and December 31, 2019, customers included approximately 168,400, 181,700 and 154,200 customers, respectively, whose accounts were over 60 days past due, approximately 17,800, 52,300 and 13,500 customers, respectively, whose accounts were over 90 days past due and approximately 11,100, 26,000 and 10,000 customers, respectively, whose accounts were over 120 days past due.
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. Fourth Quarter 2020 Earnings Release

Page 5 of 7

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES

(dollars in millions)

		Three Months Ended			Year Ended December 31,
		December 31,
		2020			2019			2020			2019
Net income attributable to Charter shareholders	$	1,246	$	714	$	3,222	$	1,668
Plus: Net income attributable to noncontrolling interest		155			108			454			324
Interest expense, net		965			964			3,848			3,797
Income tax expense		254			110			626			439
Depreciation and amortization		2,409			2,461			9,704			9,926
Stock compensation expense		88			77			351			315
Loss on extinguishment of debt		22			25			143			25
(Gain) loss on financial instruments, net		(170)			(62)			15			54
Other pension (benefits) costs, net		(28)			96			66			69
Other, net		53			36			89			238
Adjusted EBITDA (a)	$	4,994		$	4,529		$	18,518		$	16,855
Net cash flows from operating activities	$	4,149	$	3,358	$	14,562	$	11,748
Less: Purchases of property, plant and equipment		(2,063)			(2,282)			(7,415)			(7,195)
Change in accrued expenses related to capital expenditures		(7)			504			(77)			55
Free cash flow	$	2,079	$	1,580	$	7,070	$	4,608

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 and 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. Fourth Quarter 2020 Earnings Release

Page 6 of 7

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED CAPITAL EXPENDITURES (dollars in millions)

		Three Months Ended			Year Ended December 31,
		December 31,
		2020			2019			2020			2019
Customer premise equipment (a)	$	501	$	543	$	2,002	$	2,070
Scalable infrastructure (b)		499			599			1,478			1,439
Line extensions (c)		437			390			1,641			1,444
Upgrade/rebuild (d)		156			183			615			634
Support capital (e)		470			567			1,679			1,608
Total capital expenditures	$	2,063	$	2,282	$	7,415	$	7,195
Capital expenditures included in total related to:
Commercial services	$	383	$	358	$	1,325	$	1,314
Mobile	$	157	$	151	$	508	$	432

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., digital receivers 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. Fourth Quarter 2020 Earnings Release

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