Time Warner Cable 2006 Annual Report Download - page 79

Reconciliation of Operating Income to OIBDA. The following table reconciles Operating Income to OIBDA.
In addition, the table provides the components from Operating Income to Net income for purposes of the
discussions that follow (in millions):
2006 2005 % Change
Year Ended December 31,
Net income .......................................... $1,976 $1,253 58%
Discontinued operations, net of tax ..................... (1,038) (104) NM
Cumulative effect of accounting change, net of tax .......... (2) — NM
Income before discontinued operations and cumulative effect of
accounting change .................................. 936 1,149 (19)%
Income tax provision ................................ 620 153 305%
Income before income taxes, discontinued operations and
cumulative effect of accounting change .................. 1,556 1,302 20%
Interest expense, net ................................ 646 464 39%
Income from equity investments, net .................... (129) (43) 200%
Minority interest expense, net ......................... 108 64 69%
Other income ..................................... (2) (1) 100%
Operating Income ...................................... 2,179 1,786 22%
Depreciation ...................................... 1,883 1,465 29%
Amortization ...................................... 167 72 132%
OIBDA . . . .......................................... $4,229 $3,323 27%
NM — Not meaningful.
OIBDA. OIBDA increased to $4.229 billion in 2006 from $3.323 billion in 2005. This increase was
attributable to the impact of the Acquired Systems and revenue growth (particularly growth in high margin high-
speed data revenues), partially offset by higher costs of revenues and selling, general and administrative expenses,
as discussed above.
Depreciation expense. Depreciation expense increased to $1.883 billion in 2006 from $1.465 billion in 2005
primarily due to the impact of the Acquired Systems and demand-driven increases in recent years of purchases of
customer premise equipment, which generally has a significantly shorter useful life compared to the mix of assets
previously purchased.
Amortization expense. Amortization expense increased to $167 million in 2006 from $72 million in 2005 as a
result of the amortization of intangible assets associated with customer relationships acquired as part of the
Transactions.
Operating Income. Operating Income increased to $2.179 billion in 2006 from $1.786 billion in 2005
primarily due to the increase in OIBDA, partially offset by the increase in depreciation and amortization expense, as
discussed above.
As a result of the impact of the Adelphia Acquisition and the consolidation of TKCCP, beginning January 1,
2007, the Company anticipates that OIBDA and Operating Income will increase during 2007. Refer to Note 5 of the
accompanying consolidated financial statements for certain pro forma information presenting the Company’s
financial results as if the Transactions had occurred on January 1, 2005 and refer to “Overview — Recent
74
TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION — (Continued)