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SEC Filings

10-Q
CCO HOLDINGS LLC filed this Form 10-Q on 10/27/2017
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Loss on extinguishment of debt. Loss on extinguishment of debt of $35 million and $110 million for the nine months ended September 30, 2017 and 2016, respectively, primarily represents losses recognized as a result of repurchases of CCO Holdings, LLC ("CCO Holdings") notes. For more information, see Note 5 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Gain (loss) on financial instruments, net. We recorded a gain of $17 million and a loss of $15 million during the three and nine months ended September 30, 2017, respectively and gains of $71 million and $16 million during the three and nine months ended September 30, 2016, respectively. Gains and losses on financial instruments are recognized due to changes in the fair value of our interest rate and 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 7 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Other pension benefits (costs). Other pension benefits decreased by $30 million and $524 million during the three and nine months ended September 30, 2017, respectively, compared to the corresponding periods in 2016. The decrease during the three months ended September 30, 2017 compared to the corresponding period in 2016 was primarily due to a third quarter 2017 remeasurement as a result of significant lump sum settlement payments to participants. The decrease during the nine months ended September 30, 2017 compared to the corresponding period in 2016 was also affected by a $675 million pension curtailment gain offset by an $157 million net remeasurement loss recognized in 2016 that resulted from an amendment to the plans made subsequent to the TWC Transaction. For more information, see Note 15 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Other expense, net. Other expense, net primarily represents equity losses on our equity-method investments.

Income tax benefit (expense). We recognized income tax expense of $6 million and $35 million for the three and nine months ended September 30, 2017, respectively, and income tax benefit of $7 million for the three months ended September 30, 2016. Income tax benefit for the nine months ended September 30, 2016 was insignificant. Income tax expense is recognized primarily through increases in deferred tax liabilities, as well as through current federal and state income tax expense. For more information, see Note 11 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 assumed in the Transactions.

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

Use of Adjusted EBITDA and Free Cash Flow

We use certain measures that are not defined by GAAP to evaluate various aspects of our business. Adjusted EBITDA and free cash flow are non-GAAP financial measures and should be considered in addition to, not as a substitute for, consolidated net income and net cash flows from operating activities reported in accordance with GAAP. These terms, as defined by us, may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA and free cash flow are reconciled to consolidated net income and net cash flows from operating activities, respectively, below.

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

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

Management and Charter’s board of directors use Adjusted EBITDA and free cash flow to assess our performance and our ability to service our debt, fund operations and make additional investments with internally generated funds. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under our credit facilities or outstanding notes to determine compliance with


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