8-K – 2026-07-23 – 0001104659-26-086302-xbrl.zip

Exhibit 99.4

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL

STATEMENTS

 

The accompanying unaudited pro forma condensed

combined financial statements as of and for the three months ended March 31, 2026 and for the year ended December 31, 2025

are intended to reflect the impact of the Cox Transactions on the consolidated financial statements of Charter Communications, Inc.

(“Charter”), as if the Cox Transactions had occurred as of March 31, 2026 for the unaudited pro forma condensed combined

balance sheet and as of January 1, 2025 for the unaudited pro forma condensed combined statements of operations. The accompanying

unaudited pro forma financial statements present the pro forma financial position and results of operations of Charter based on the historical

financial statements and accounting records of Charter and Cox Communications, Inc (“Cox Communications”) and the related

pro forma transaction accounting adjustments as described in the accompanying notes. The transaction accounting adjustments are intended

to reflect U.S. generally accepted accounting principles (“GAAP”) to illustrate the effects of the transactions on Charter’s

historical financial statements.

 

The Transactions

 

On May 16, 2025, Charter, Charter Communications

Holdings, LLC (“Charter Holdings”), and Cox Enterprises, Inc. (“Cox Enterprises”) entered into a Transaction

Agreement (the “Transaction Agreement”) pursuant to which (i) Cox Enterprises will sell and transfer to Charter 100%

of the equity interests of certain subsidiaries of Cox Communications that conduct Cox Communications’ commercial fiber and managed

IT and cloud services businesses (the “Equity Sale”), (ii) Cox Enterprises will contribute the equity interests of Cox

Communications and certain other assets (other than certain excluded assets) primarily related to Cox Communications’ residential

cable business to Charter Holdings (the “Contribution”), and (iii) Cox Enterprises will pay $1.00 to Charter (collectively,

the “Cox Transactions”). Under the Transaction Agreement, Charter and Cox Enterprises may designate one or more wholly owned

subsidiaries to take actions with respect to Charter and Cox Enterprises, respectively.

 

Pursuant to the Transaction Agreement, at the

closing of the Cox Transactions:

 

· in consideration of the Equity Sale, Charter

will pay $3.5 billion in cash to Cox Enterprises;

 

· in consideration of the Contribution,

Charter Holdings will (i) pay to Cox Enterprises $650 million in cash and (ii) issue

to Cox Enterprises convertible preferred units of Charter Holdings with an aggregate liquidation

preference of $6.0 billion, which will pay a 6.875% dividend per annum, and approximately

33.6 million Charter Holdings common units. The Charter Holdings convertible preferred units

will be convertible into Charter Holdings common units, with an initial conversion price

of $477.41, subject to certain adjustments. The Charter Holdings common units will be exchangeable

by the holder, in certain circumstances, for cash or, at the election of Charter, Charter

Class A common stock on a one-for-one basis, subject to certain adjustments; and

 

· in consideration of the $1.00 payment

from Cox Enterprises to Charter, Charter will issue to Cox Enterprises one share of the newly

created Charter Class C common stock. The Charter Class C common stock will be

equivalent, economically, to the outstanding Charter Class A common stock and the Charter

Class B common stock but will have a number of votes per share that reflect the voting

power of the Charter Holdings common units and the Charter Holdings convertible preferred

units held by Cox Enterprises on an as-converted, as-exchanged basis.

 

The combined entity will assume Cox Communications’

approximately $12.4 billion in outstanding net debt and finance leases.

 

Basis of Presentation

 

The unaudited pro forma financial statements

are based on (i) the unaudited consolidated financial statements of Charter as of and for the three months ended March 31,

2026 contained in Charter’s Quarterly Report on Form 10-Q filed with the SEC on April 24, 2026, (ii) the unaudited

consolidated financial statements of Cox Communications as of and for the three months ended March 31, 2026 contained in this Current

Report on Form 8-K, (iii) the audited consolidated financial statements of Charter as of and for the year ended December 31,

2025 contained in Charter’s Annual Report on Form 10-K filed with the SEC on January 30, 2026, and (iv) the audited

consolidated financial statements of Cox Communications as of and for the year ended December 31, 2025 contained in this Current

Report on Form 8-K.

 

1

 

 

The Cox Transactions will be accounted for using

the acquisition method of accounting with Charter as the accounting acquirer. As of the date of this current report, Charter has not

completed the detailed valuation studies necessary to arrive at final estimates of the fair market value of the assets to be acquired

and the liabilities to be assumed and the related allocations of purchase price, nor has it identified all adjustments necessary to conform

Cox Communications to Charter’s accounting policies. As indicated in Note 1 to the unaudited pro forma financial statements, based

on information currently available, Charter has made certain adjustments to the historical book values of the assets and liabilities

of Cox Communications to reflect preliminary estimates of fair values necessary to prepare the unaudited pro forma financial statements.

Actual results may differ from these unaudited pro forma financial statements once the Cox Transactions are completed which includes

determining the final purchase price for Cox Communications, completing the valuation studies necessary to finalize the required purchase

price allocations, and identifying any additional conforming accounting policy changes for Cox Communications. There can be no assurance

that such finalization will not result in material changes.

 

The unaudited pro forma financial statements

are provided for illustrative purposes only and are based on available information and assumptions that Charter believes are reasonable

and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of Charter

would have been had the Cox Transactions occurred on the dates indicated, nor are they necessarily indicative of future consolidated

results of operations or consolidated financial position. The actual financial position and results of operations will differ, perhaps

significantly, from the pro forma amounts reflected herein due to a variety of factors, including access to additional information, changes

in value not currently identified and changes in operating results following the date of the pro forma financial statements. The assumptions

underlying the pro forma adjustments are described in greater detail in the accompanying notes to the unaudited pro forma condensed combined

financial statements.

 

Items Not Adjusted in the Unaudited Pro

Forma Financial Information

 

The unaudited pro forma financial statements

do not reflect all reclassifications or adjustments to conform the Cox Communications financial statement presentation or accounting

policies to those adopted by Charter. At this time, Charter is not aware of any intercompany transactions that would have a material

impact on the unaudited pro forma financial statements that are not reflected in the pro forma adjustments. Further review may identify

additional intercompany transactions, reclassifications or differences between the accounting policies of the companies that, when conformed,

could have a material impact on the unaudited pro forma financial statements of the combined company.

 

The unaudited pro forma financial statements

do not include any adjustment for liabilities or related costs that may result from integration activities, since management has not

completed the process of making these assessments. Significant liabilities and related costs may ultimately be recorded for employee

severance or relocation, costs of vacating some facilities and costs associated with other exit and integration activities. The unaudited

pro forma statements of operations also do not include any revenue or expense synergies or dis-synergies resulting from the Cox Transactions.

 

In connection with the Cox Transactions, at the

closing, Charter, Cox Enterprises and Advance/Newhouse Partnership (“A/N”) will enter into the amended tax receivables agreement,

which will set forth the terms pursuant to which Charter will pay Cox Enterprises and A/N, as applicable, for tax benefits arising from

Cox Enterprises’ or A/N’s potential future exchanges of their respective Charter Holdings common units and Charter Holdings

convertible preferred units, as applicable, into cash or Charter Class A common stock pursuant to the amended exchange agreement.

The amended tax receivables agreement will provide for a payment by Charter of 50% of the tax benefits when realized by Charter from

the step-up in tax basis resulting from any such future exchanges. A/N is currently party to the existing tax receivables agreement with

Charter, and such agreement will be amended and restated by the amended tax receivables agreement at the closing. Charter has not recorded

a pro forma adjustment for the tax receivables agreement with Cox Enterprises as a contingent consideration obligation in the preliminary

purchase price allocation as it is impractical to estimate its fair value since the tax benefit is dependent on uncertain future events

that are outside Charter’s control. A future exchange is not based on a fixed and determinable date and the exchange is not certain

to occur.

 

2

 

 

UNAUDITED PRO FORMA CONDENSED

COMBINED BALANCE SHEET

AS OF MARCH 31,

2026

(dollars in millions)

 

   
Charter


(Historical)    
Cox


Communications


(Historical)    
Pro Forma


Adjustments  
     
Pro Forma
Combined  

ASSETS  
       
       
     
     
     

CURRENT ASSETS:  
       
       
     
     
     

Cash and cash equivalents  
$ 517    
$ 84    
$ (154 )
1a    
$ 447  

Accounts receivable, net  
  3,510    
  650    
  —  
     
  4,160  

Amounts due from Cox Enterprises, Inc.  
  —    
  4,154    
  (4,154 )
1b    
  —  

Prepaid expenses and other current assets  
  933    
  355    
  —  
     
  1,288  

Total current assets  
  4,960    
  5,243    
  (4,308 )
     
  5,895  

   
       
       
     
     
     

INVESTMENT IN CABLE PROPERTIES:  
       
       
     
     
     

Property, plant and equipment, net  
  47,198    
  12,534    
  3,966  
1c    
  63,698  

Customer relationships, net  
  324    
  485    
  3,115  
1c    
  3,924  

Franchises  
  67,471    
  10,275    
  (3,800 )
1c    
  73,946  

Goodwill  
  29,710    
  1,260    
  (1,260 )
1c    
  29,710  

Total investment in cable properties, net  
  144,703    
  24,554    
  2,021  
     
  171,278  

   
       
       
     
     
     

OTHER NONCURRENT ASSETS  
  4,981    
  991    
  (351 )
1d    
  5,621  

   
       
       
     
     
     

Total assets  
$ 154,644    
$ 30,788    
$ (2,638 )
     
$ 182,794  

   
       
       
     
     
     

LIABILITIES AND SHAREHOLDERS’ EQUITY  
       
       
     
     
     

CURRENT LIABILITIES:  
       
       
     
     
     

Accounts payable, accrued and other current liabilities  
$ 12,375    
$ 1,804    
$ —  
     
$ 14,179  

Current portion of long-term debt  
  —    
  1,042    
  —  
     
  1,042  

Total current liabilities  
  12,375    
  2,846    
  —  
     
  15,221  

   
       
       
     
     
     

LONG-TERM DEBT  
  94,414    
  11,464    
  2,780  
1e    
  108,658  

EQUIPMENT INSTALLMENT PLAN FINANCING FACILITY  
  1,596    
  —    
  —  
     
  1,596  

DEFERRED INCOME TAXES  
  20,049    
  4,545    
  (4,896 )
1f    
  19,698  

OTHER LONG-TERM LIABILITIES  
  5,140    
  454    
  —  
     
  5,594  

   
       
       
     
     
     

SHAREHOLDERS’ EQUITY:  
       
       
     
     
     

Controlling interests  
  16,385    
  11,479    
  (14,456 )
1g    
  13,408  

Noncontrolling interests  
  4,685    
  —    
  13,934  
1g    
  18,619  

Total shareholders’ equity  
  21,070    
  11,479    
  (522 )
     
  32,027  

   
       
       
     
     
     

Total liabilities and shareholders’ equity  
$ 154,644    
$ 30,788    
$ (2,638 )
     
$ 182,794  

 

 

See accompanying “Notes to Unaudited Pro

Forma Condensed Combined Financial Statements”

 

3

 

 

UNAUDITED PRO FORMA CONDENSED

COMBINED STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2026

(dollars and weighted average shares outstanding

in millions, except per share amounts)

 

   
Charter


(Historical)    
Cox


Communications


(Historical)    
Pro Forma


Adjustments  
     
Pro Forma
Combined  

REVENUES  
$ 13,597    
$ 3,059    
$ 13  
2a    
$ 16,669  

   
       
       
     
     
     

COSTS AND EXPENSES:  
       
       
     
     
     

Operating costs and expenses (exclusive of items shown separately below)  
  8,163    
  1,740    
  (52 )
2b    
  9,851  

Depreciation and amortization  
  2,211    
  538    
  114  
2c    
  2,863  

Other operating expenses, net  
  15    
  46    
  2  
2d    
  63  

   
  10,389    
  2,324    
  64  
     
  12,777  

Income from operations  
  3,208    
  735    
  (51 )
     
  3,892  

   
       
       
     
     
     

OTHER INCOME (EXPENSES):  
       
       
     
     
     

Interest expense, net  
  (1,256 )  
  (111 )  
  (137 )
2e    
  (1,504 )

Other expenses, net  
  (124 )  
  16    
  (17 )
2f    
  (125 )

   
  (1,380 )  
  (95 )  
  (154 )
     
  (1,629 )

   
       
       
     
     
     

Income before income taxes  
  1,828    
  640    
  (205 )
     
  2,263  

Income tax expense  
  (465 )  
  (138 )  
  159  
2g    
  (444 )

Consolidated net income  
  1,363    
  502    
  (46 )
     
  1,819  

Less: Net income attributable to noncontrolling interests  
  (200 )  
  —    
  (520 )
2h    
  (720 )

Net income attributable to Charter shareholders  
$ 1,163    
$ 502    
$ (566 )
     
$ 1,099  

   
       
       
     
     
     

EARNINGS PER COMMON SHARE:  
       
       
     
     
     

Basic  
$ 9.27    
       
     
2i    
$ 8.79  

Diluted  
$ 9.17    
       
     
2i    
$ 8.70  

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:  
       
       
     
     
     

Basic  
  125    
       
     
2i    
  125  

Diluted  
  127    
       
     
2i    
  127  

 

See accompanying “Notes to Unaudited Pro

Forma Condensed Combined Financial Statements”

 

4

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT

OF OPERATIONS  

YEAR ENDED DECEMBER 31, 2025

(dollars and weighted average shares outstanding

in millions, except per share amounts)

 

   
Charter


(Historical)    
Cox


Communications


(Historical)    
Pro Forma


Adjustments  
     
Pro Forma
Combined  

REVENUES  
$ 54,774    
$ 12,531    
$ 54  
2a    
$ 67,359  

   
       
       
     
     
     

COSTS AND EXPENSES:  
       
       
     
     
     

Operating costs and expenses (exclusive of items shown separately below)  
  32,739    
  7,543    
  (222 )
2b    
  40,060  

Depreciation and amortization  
  8,711    
  2,158    
  505  
2c    
  11,374  

Impairment of intangible assets  
  —    
  5,604    
  —  
     
  5,604  

Other operating expenses, net  
  416    
  192    
  153  
2d    
  761  

   
  41,866    
  15,497    
  436  
     
  57,799  

Income (loss) from operations  
  12,908    
  (2,966 )  
  (382 )
     
  9,560  

   
       
       
     
     
     

OTHER INCOME (EXPENSES):  
       
       
     
     
     

Interest expense, net  
  (5,042 )  
  (424 )  
  (568 )
2e    
  (6,034 )

Other expenses, net  
  (408 )  
  (30 )  
  (30 )
2f    
  (468 )

   
  (5,450 )  
  (454 )  
  (598 )
     
  (6,502 )

   
       
       
     
     
     

Income (loss) before income taxes  
  7,458    
  (3,420 )  
  (980 )
     
  3,058  

Income tax expense  
  (1,692 )  
  772    
  425  
2g    
  (495 )

Consolidated net income (loss)  
  5,766    
  (2,648 )  
  (555 )
     
  2,563  

Less: Net income attributable to noncontrolling interests  
  (779 )  
  —    
  (388 )
2h    
  (1,167 )

Net income (loss) attributable to Charter shareholders  
$ 4,987    
$ (2,648 )  
$ (943 )
     
$ 1,396  

   
       
       
     
     
     

EARNINGS PER COMMON SHARE:  
       
       
     
     
     

Basic  
$ 36.90    
       
     
2i    
$ 10.34  

Diluted  
$ 36.21    
       
     
2i    
$ 10.15  

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:  
       
       
     
     
     

Basic  
  135    
       
     
2i    
  135  

Diluted  
  138    
       
     
2i    
  138  

 

See accompanying “Notes to Unaudited Pro

Forma Condensed Combined Financial Statements”

 

5

 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL STATEMENTS

 

Note 1. Cox Transactions Pro Forma Balance

Sheet Adjustments

 

For purposes of the unaudited pro forma financial

statements, the preliminary purchase price is assumed to be approximately $14.3 billion based on preliminary fair value estimates for

each component of consideration transferred to Cox Enterprises. The Charter Holdings common units which are exchangeable into Charter

Class A common stock are fair valued based on a $142.21 closing price of Charter Class A common stock on June 30, 2026,

representing the last business day of the most recently completed month. The Charter Holdings convertible preferred units fair value

estimate is based on an initial preferred instrument multiple above the $6.0 billion aggregate liquidation preference contemplating a

6.875% preferred cash dividend and estimated fair value of Charter Class A common stock upon conversion. The final purchase price

will be different from the preliminary purchase price presented as the fair value of the equity portion of the Cox Transactions consideration

will be based on the fair value of Charter Class A common stock at closing.

 

(in millions, except price per share

data)  
   

Charter Holdings common units issued to Cox Enterprises  
  33.6  

Closing price as of June 30, 2026  
$ 142.21  

Estimated fair value of Charter Holdings common units issued

to Cox Enterprises  
$ 4,776  

Estimated fair value of Charter Holdings convertible preferred

units issued to Cox Enterprises  
  5,378  

Cash paid to Cox Enterprises  
  4,150  

Total preliminary

purchase price  
$ 14,304  

 

The table below presents the allocation of the

preliminary purchase price to the identifiable assets acquired and liabilities assumed at their respective estimated fair values as if

the Cox Transactions had closed on March 31, 2026.

 

(in millions)  
   

Current assets  
$ 1,105  

Property, plant and equipment  
  16,500  

Customer relationships  
  3,600  

Franchises  
  6,475  

Other noncurrent assets  
  640  

Current liabilities (includes current portion of long-term

debt of $1.0 billion)  
  (2,846 )

Long-term debt  
  (10,122 )

Deferred income taxes  
  (594 )

Other long-term liabilities  
  (454 )

   
$ 14,304  

 

The preliminary estimates are based upon currently

available information. As such, additional assets and liabilities may be identified and reflected in the final purchase price allocation.

 

Upon finalization of the fair value assessment,

Charter anticipates the finalized fair values of the net assets acquired will differ from the preliminary assessment outlined above.

Generally, changes to the initial estimates of the fair value of the assets acquired and liabilities assumed will be recorded as adjustments

to those assets and liabilities and residual amounts will be allocated to goodwill. If upon completion of the valuations, the fair values

are greater or less than the amounts included in the preliminary purchase price allocation above, such a change would not likely have

a material impact on the financial position or results of operations of Charter.

 

6

 

 

The following summarizes the pro forma balance

sheet adjustments relating to the Cox Transactions:

 

(a) Pro forma adjustment of $154 million to cash

and cash equivalents represents the use of cash to pay approximately $142 million of remaining

transaction costs not already reflected in the historical financial statements including

advisor fees and other expenses directly related to the Cox Transactions, as well as $28

million use of cash to pay debt issuance costs, offset by $16 million source of cash from

Cox Enterprises to reflect minimum operating cash of $100 million to be assumed at closing

per the Transaction Agreement. Refer to (e) below for sources and uses of cash.

 

(b) Represents the elimination of the intercompany

note receivable from Cox Enterprises not assumed in the Cox Transactions.

 

(c) For pro forma purposes, preliminary estimates

are used for allocations of the purchase price to Cox Communications' property, plant and

equipment; customer relationships; and franchises. As of the filing date, Charter has not

completed the detailed valuation studies necessary to determine the fair value of Cox Communications'

assets to be acquired and liabilities to be assumed, or the related allocations of purchase

price. Accordingly, the allocation of purchase price to acquired tangible and intangible

assets is based on preliminary fair value estimates and is subject to revision following

management's final analysis, with assistance from third-party valuation advisors, upon completion

of the Cox transactions. The estimated tangible and intangible asset values and their remaining

useful lives may materially change based on information obtained during the acquisition process

and circumstances occurring prior to closing.

 

(d) Represents the write-down of the Cox Communications

trade name intangible under the market participant assumption that it will not continue as

a market-based intangible. The Spectrum trade name will be used to market or promote the

products and services of the combined company across the Cox footprint whereas the Cox Communications

trade name will become the name of the combined company within one year of closing the Cox

Transactions.

 

(e) Cox Communications’ debt assumed was

adjusted to the most recent available estimated fair value using quoted market values as

of June 30, 2026 representing the last business day of the most recently completed month.

This adjustment resulted in a decrease in long-term debt of approximately $1.3 billion. The

fair value adjustment to long-term debt is a result of quoted market values of Cox Communications’

debt being lower than the face amount of the related debt as a result of market interest

rates being higher than the stated interest rate of the debt. In acquisition accounting,

this results in the recognition of a debt discount that is amortized as an increase to interest

expense over the remaining life of the debt. In addition, long-term debt was also adjusted

to reflect $4.15 billion new debt raised, less debt issuance costs, to fund the preliminary

purchase price of the Cox Transactions. This includes an additional $150 million for Cox

Communications’ repayment of bond at maturity in June 2025 that they no longer

intend to refinance before closing of the Cox Transactions.

 

The following table presents pro forma

cash sources and uses as a result of the Cox Transactions.

 

(in millions)  
   

Sources:  
     

Proceeds from issuance of long-term debt  
$ 4,150  

Cox Communications cash and cash equivalents assumed  
  84  

Cox Enterprises cash contributed to reflect minimum operating

cash  
  16  

Charter cash and cash equivalents on-hand  
  70  

   
$ 4,320  

Uses:  
     

Cash portion of purchase price paid to Cox Enterprises  
$ 4,150  

Remaining transaction costs including advisor fees and

other expenses  
  142  

Debt issuance costs  
  28  

   
$ 4,320  

 

7

 

 

(f) For pro forma purposes, deferred taxes are

presented dependent on the anticipated tax treatment for the Contribution and the Equity

Sale components of the Cox Transactions. The Contribution is treated as a nontaxable partnership

contribution and no Charter deferred taxes are assumed to be recorded in purchase accounting

as the excess book basis of net assets contributed is associated with the noncontrolling

interest partner, Cox Enterprises, and not the controlling interest partner, Charter. The

Equity Sale is treated as a taxable stock acquisition and the tax attributes of the Cox Communications

subsidiaries acquired are assumed to carry over to Charter and net deferred tax liabilities

of $594 million are estimated to be recorded in purchase accounting reflecting historical

temporary difference of these subsidiaries contemplating additional book step-up and applying

an estimated tax rate of 25%. Lastly, on the relative ownership adjustment of Charter Holdings,

a $945 million reduction in deferred tax liabilities is estimated for the carrying value

adjustment to Charter’s common units held in Charter Holdings applying an estimated

tax rate of 25%. Refer to (h) below on relative ownership adjustment to shareholders’

equity.

 

(g) Pro forma adjustments to controlling interests

and noncontrolling interests in shareholders’ equity are reflected as follows.

 

(in millions)  
   

Controlling Interests:  
     

Elimination of Cox Communications’ historical

equity  
$ (11,479 )

Payment of remaining transaction costs including advisor

fees  
  (142 )

Relative ownership adjustment of Charter

Holdings’ common unit equity balances, net of tax  
  (2,835 )

   
$ (14,456 )

   
     

Noncontrolling Interests:  
     

Fair value of the Charter Holdings common units issued to

Cox Enterprises  
$ 4,776  

Fair value of the Charter Holdings convertible preferred

units issued to Cox Enterprises  
  5,378  

Relative ownership adjustment of Charter

Holdings’ common unit equity balances  
  3,780  

   
$ 13,934  

 

The Charter Holdings common units issued to Cox

Enterprises as a portion of the consideration for the Contribution initially are measured at their fair value of $4.8 billion in accordance

with acquisition accounting. However, upon new partner entry to Charter Holdings, the carrying amounts of the common units of the controlling

interest (Charter) and noncontrolling interests (Cox Enterprises and A/N) are adjusted to reflect their relative effective common ownership

interest in Charter Holdings. Relative ownership adjustment results in an increase to noncontrolling interests of approximately $3.8 billion

and a corresponding decrease to additional paid-in capital of $3.8 billion, net of a $945 million reduction in deferred income

taxes, for Charter’s decrease in book basis in Charter Holdings.

 

Note 2. Cox Transactions Pro Forma Statement

of Operations Adjustments

 

The following summarizes the pro forma statement

of operations adjustments relating to the Cox Transactions.

 

(a) Proforma adjustments to revenues of $13 million

and $54 million for the three months ended March 31, 2026 and year ended December 31,

2025, respectively, represent reclassifications of customer revenues treated as contra-expense

in Cox Communications historical financials in order to conform to Charter’s financial

statement presentation including i) cash collected from customers to recover collection costs

reclassed from operating costs and expenses, ii) cash collected from customers for unreturned

equipment fees reclassed from other operating expenses, net, and iii) real estate sublease

income reclassed from other expenses, net.

 

(b) Pro forma adjustments to operating costs

and expenses of $52 million and $222 million for the three months ended March 31, 2026

and year ended December 31, 2025, respectively, represents costs related to excluded

parent company obligations and intercompany cost allocations from Cox Enterprises that are

to be terminated by Cox Communications at the closing in connection with the Transaction

Agreement. Following the closing, these costs will not be incurred by Charter. Pro forma

adjustments to operating costs and expenses also includes the reclassification of customer

revenues treated as contra-expense in Cox Communications historical financials in order to

conform to Charter’s financial statement presentation. See Note 2(a).

 

8

 

 

(c) Depreciation and amortization increased by

$114 million and $505 million for the three months ended March 31, 2026 and year ended

December 31, 2025, respectively, as follows.

 

   
Three

Months Ended March 31, 2026    
Year Ended

December 31, 2025  

(in millions)  
Depreciation    
Amortization    
Total    
Depreciation    
Amortization  
Total  

Cox Communications pro forma expense based on

fair value  
$ 516    
$ 136    
$ 652    
$ 2,063    
$ 600  
$ 2,663  

Cox Communications historical expense  
       
       
  (538 )  
       
     
  (2,158 )

   
       
       
$ 114    
       
     
$ 505  

 

The increase was estimated using a

preliminary average remaining useful life of 8 years for property, plant and equipment and 11 years for customer relationships. Property,

plant and equipment are depreciated using a straight-line depreciation method. Customer relationships are amortized using an accelerated

method (sum of the years’ digits) to reflect the period over which the relationships are expected to generate cash flows. Following

the acquisition, Cox Communications’ pro forma customer relationships of $3.6 billion would result in amortization expense under

the accelerated method of $600 million for year 1, $545 million for year 2, $491 million for year 3, $436 million for year 4, $382 million

for year 5 and $1.1 billion thereafter. The effect of a one-year decrease in the weighted average useful lives of property, plant and

equipment and customer relationships would be an increase to depreciation and amortization expense of approximately $85 million and $349

million for the three months ended March 31, 2026 and year ended December 31, 2025, respectively, while the effect of a one-year

increase would result in a decrease of approximately $67 million and $275 million for the three months ended March 31, 2026 and

year ended December 31, 2025, respectively. The pro forma adjustments are based on current estimates and may not reflect actual

depreciation and amortization once the purchase price allocation is finalized and final determination of remaining useful lives are made.

 

(d) Pro forma adjustment to increase other operating

expenses, net by $153 million for the year ended December 31, 2025 primarily represents

the payment of remaining transaction costs not already reflected in the historical financial

statements including advisor fees and other expenses directly related to the Cox Transactions.

Transaction costs of $15 million and $128 million are included in the historical income statement

of Charter within other operating expenses, net for the three months ended March 31,

2026 and year ended December 31, 2025, respectively. Pro forma adjustments to other

operating expenses, net for the three months ended March 31, 2026 and year ended December 31,

2025 also includes the reclassification of customer revenues treated as contra-expense in

Cox Communications historical financials in order to conform to Charter’s financial

statement presentation. See Note 2(a).

 

(e) Interest expense, net increased by $137 million

and $568 million for the three months ended March 31, 2026 and year ended December 31,

2025, respectively, as follows.

 

(in millions)  
Three

Months Ended


March 31, 2026    
Year

Ended


December 31, 2025  

Additional interest expense on new debt issued  
$ (68 )  
$ (270 )

Elimination of intercompany note interest income  
  (41 )  
  (188 )

Amortization of discount as a result of adjusting assumed

Cox Communications’ long-term debt to fair value  
  (29 )  
  (118 )

Amortization of new debt issuance costs  
  (1 )  
  (2 )

Elimination of amortization related to

Cox Communications’ debt discounts and debt issuance costs  
  2    
  10  

   
$ (137 )  
$ (568 )

 

9

 

 

(f) Pro forma adjustment to increase other expenses,

net by $17 million and $30 million for the three months ended March 31, 2026 and year

ended December 31, 2025, respectively, primarily represents the elimination of the Cox

Enterprises allocated non-service component of pension benefit. Following the closing, these

pension benefits will not be incurred by Charter. Pro forma adjustments to other expenses,

net also includes the reclassification of customer revenues treated as contra-expense in

Cox Communications historical financials in order to conform to Charter’s financial

statement presentation. See Note 2(a).

 

(g) The pro forma adjustment to income tax expense

of $159 million and $425 million for the three months ended March 31, 2026 and year

ended December 31, 2025, respectively, was determined by removing Cox Communications’

income tax expense and applying an estimated Charter tax rate of 25% to pro forma income

before taxes allocated to Charter after the allocation of profits to the noncontrolling interest

holders.

 

(h) Net income attributable to noncontrolling

interest increased by $520 million and $388 million for the three months ended March 31,

2026 and year ended December 31, 2025, respectively, as shown in the following table.

All ownership amounts are calculated using whole numbers; minor differences may exist due

to rounding.

 

(in millions)  
Three

Months Ended


March 31, 2026    
Year

Ended


December 31, 2025  

Charter Holdings pro forma income before income

taxes  
$ 2,263    
$ 3,058  

Charter Holdings 6.875% cash dividend

to Cox Enterprises preferred unit holders  
  (103 )  
  (413 )

Charter Holdings pro forma income before income taxes available

for allocation to common unit holders  
$ 2,160    
$ 2,645  

Noncontrolling interest in Charter Holdings

excluding preferred units based on pro forma common unit ownership of Charter Holdings (19.5% Cox Enterprises and 9.0% A/N)  
  28.5 %  
  28.5 %

Noncontrolling interest expense - Charter Holdings common

units  
$ 617    
$ 754  

Noncontrolling interest expense - Charter Holdings convertible

preferred units  
  103    
  413  

Eliminate historical noncontrolling interest

expense recorded based on historical A/N common unit ownership of Charter Holdings  
  (200 )  
  (779 )

   
$ 520    
$ 388  

 

10

 

 

(i) The following table sets forth the computation

of pro forma basic and diluted earnings per share for the three months ended March 31,

2026 and year ended December 31, 2025. Not included in the computation of pro forma

diluted earnings per share because the effect would be anti-dilutive are the 33.6 million

Charter Holdings common units and the 12.6 billion equivalent common units for the Charter

Holdings convertible preferred units ($6.0 billion par value divided by $477.41 initial conversion

price) issued to Cox Enterprises on an if-converted, if-exchanged basis.

 

(in millions,

except per share data)  
Three

Months Ended


March 31, 2026    
Year

Ended


December 31, 2025  

Numerator:  
       
     

Pro forma net income attributable

to common stock  
$ 1,099    
$ 1,396  

   
       
     

Denominator:  
       
     

Pro forma Charter weighted average shares outstanding

(basic)  
  125    
  135  

Effect of dilutive securities:  
       
     

Assumed exercise

or issuance of shares relating to stock plans  
  2    
  3  

Pro forma weighted average common shares outstanding,

diluted  
  127    
  138  

   
       
     

Pro forma net income per share attributable to common stock:  
       
     

Basic  
$ 8.79    
$ 10.34  

Diluted  
$ 8.70    
$ 10.15  

 

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