Time Warner Cable 2006 Annual Report Download - page 64

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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
INTRODUCTION
Management’s discussion and analysis of results of operations and financial condition (“MD&A”) is provided
as a supplement to the accompanying consolidated financial statements and notes to help provide an understanding
of Time Warner Cable Inc.’s (together with its subsidiaries, “TWC” or the “Company”) financial condition, changes
in financial condition and results of operations. MD&A is organized as follows:
•Overview. This section provides a general description of TWC’s business, as well as recent developments
the Company believes are important in understanding the results of operations and financial condition or in
understanding anticipated future trends.
•Financial statement presentation. This section provides a summary of how the Company’s operations are
presented in the accompanying consolidated financial statements.
•Results of operations. This section provides an analysis of the Company’s results of operations for the
three years ended December 31, 2006.
•Financial condition and liquidity. This section provides an analysis of the Company’s cash flows for the
three years ended December 31, 2006, as well as a discussion of the Company’s outstanding debt and
commitments that existed as of December 31, 2006. Included in the analysis of outstanding debt is a
discussion of the amount of financial capacity available to fund the Company’s future commitments, as well
as a discussion of other financing arrangements.
•Market risk management. This section discusses how the Company manages exposure to potential loss
arising from adverse changes in interest rates and changes in the market value of financial instruments.
•Critical accounting policies. This section discusses accounting policies that are considered important to
the Company’s results of operations and financial condition, require significant judgment and require
estimates on the part of management in application. The Company’s significant accounting policies,
including those considered to be critical accounting policies, are summarized in Note 2 to the accompanying
consolidated financial statements.
•Caution concerning forward-looking statements. This section provides a description of the use of forward-
looking information appearing in this report, including in MD&A and the consolidated financial statements.
Such information is based on management’s current expectations about future events, which are inherently
susceptible to uncertainty and changes in circumstances. Refer to Item 1A, “Risk Factors” in Part I of this
report, for a discussion of the risk factors applicable to the Company.
As discussed more fully in Note 1 to the accompanying consolidated financial statements, the 2005 and 2004
financial information was recast so that the basis of presentation would be consistent with that of 2006. Specifically,
the amounts were recast to reflect (i) the retrospective application of Financial Accounting Standards Board
(“FASB”) Statement No. 123 (revised 2004), Share-Based Payment (“FAS 123R”), which was adopted by the
Company in 2006, (ii) the retrospective presentation of certain cable systems transferred in 2006 as discontinued
operations and (iii) the effect of a stock dividend that occurred immediately prior to the consummation of the
acquisition of assets of Adelphia Communications Corporation (“Adelphia”).
OVERVIEW
TWC is the second-largest cable operator in the U.S. and is an industry leader in developing and launching
innovative video, data and voice services. As part of the strategy to expand TWC’s cable footprint and improve the
clustering of its cable systems, on July 31, 2006, a subsidiary of TWC, Time Warner NY Cable LLC (“TW NY”),
and Comcast Corporation (together with its subsidiaries, “Comcast”) completed their respective acquisitions of
assets comprising in the aggregate substantially all of the cable systems of Adelphia. Immediately prior to the
Adelphia acquisition, TWC and Time Warner Entertainment Company, L.P. (“TWE”) redeemed Comcast’s
interests in TWC and TWE, respectively. In addition, TW NY exchanged certain cable systems with Comcast.
In connection with these transactions, TWC acquired approximately 3.2 million net basic video subscribers,
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