Time Warner Cable 2006 Annual Report Download - page 137

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quarter, including certain adjustments to reflect the impact of significant transactions as if they had occurred at the
beginning of the period.
The following table sets forth the calculation of the TW Leverage Ratio for the year ended December 31, 2006
(in millions, except ratio):
Indebtedness .......................................................... $14,432
Preferred Membership Units ............................................... 300
Six times annual rental expense ............................................ 1,099
Total .............................................................. $15,831
EBITDAR ............................................................ $ 5,344
TW Leverage Ratio ..................................................... 2.96x
As indicated in the table above, as of December 31, 2006, the TW Leverage Ratio did not exceed 3:1.
Deferred Financing Costs
As of December 31, 2006, the Company has capitalized $17 million of deferred financing costs associated with
entering into the Cable Facilities and the establishment of its commercial paper program and the issuance by TW
NYof the TW NY Series A Preferred Membership Units. These capitalized costs are amortized over the term of the
related debt facility and preferred equity and are included as a component of interest expense.
Maturities
Annual repayments of long-term debt and preferred equity are expected to occur as follows (in millions):
Year Repayments
2008 .............................................................. $ 600
2009 .............................................................. 4,000
2010 .............................................................. —
2011 .............................................................. 7,094
2012 .............................................................. 609
Thereafter ........................................................... 2,302
$14,605
Fair Value of Debt
Based on the level of interest rates prevailing at December 31, 2006 and 2005, the fair value of TWC’s fixed-
rate debt (including the mandatorily redeemable preferred equity) exceeded its carrying value by approximately
$363 million and $325 million at December 31, 2006 and 2005, respectively. Unrealized gains or losses on debt do
not result in the realization or expenditure of cash and are not recognized for financial reporting purposes unless the
debt is retired prior to its maturity.
10. INCOME TAXES
TWC is not a separate taxable entity for U.S. federal and various state income tax purposes and its results are
included in the consolidated U.S. federal and certain state income tax returns of Time Warner. The following
income tax information has been prepared assuming TWC was a stand-alone taxpayer for all periods presented.
132
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)