Time Warner Cable 2007 Annual Report Download - page 102

On February 13, 2007, Adelphia’s Chapter 11 reorganization plan became effective and, under applicable
securities law regulations and provisions of the U.S. bankruptcy code, TWC became a public company subject to
the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Under the terms of the
reorganization plan, during 2007, substantially all of the 155,913,430 shares of TWC’s Class A common stock that
Adelphia received in the Adelphia Acquisition (representing approximately 16% of TWC’s outstanding common
stock) were distributed to Adelphia’s creditors. The remaining shares are expected to be distributed as the remaining
disputes are resolved by the bankruptcy court. As of December 31, 2007, Time Warner owned approximately 84.0%
of TWC’s outstanding common stock (including 82.7% of the outstanding shares of TWC’s Class A common stock
and all outstanding shares of TWC’s Class B common stock, representing a 90.6% voting interest), as well as a
12.43% non-voting common stock interest in TW NY Holding. On March 1, 2007, TWC’s Class A common stock
began trading on the New York Stock Exchange under the symbol “TWC.”
TKCCP Joint Venture
TKCCP was a 50-50 joint venture between TWE-A/N, which is a consolidated subsidiary of TWC, and
Comcast. In accordance with the terms of the TKCCP partnership agreement, on July 3, 2006, Comcast notified
TWC of its election to trigger the dissolution of the partnership and its decision to allocate all of TKCCP’s debt,
which totaled approximately $2 billion, to the pool of assets consisting of the Houston cable systems (the “Houston
Pool”). On August 1, 2006, TWC notified Comcast of its election to receive the Kansas City Pool. On October 2,
2006, TWC received approximately $630 million from Comcast due to the repayment of debt owed by TKCCP to
TWE-A/N that had been allocated to the Houston Pool. From July 1, 2006 through December 31, 2006, TWC was
entitled to 100% of the economic interest in the Kansas City Pool (and recognized such interest pursuant to the
equity method of accounting), and it was not entitled to any economic benefits of ownership from the Houston Pool.
On January 1, 2007, TKCCP distributed its assets to TWC and Comcast. TWC received the Kansas City Pool,
which served 788,000 basic video subscribers as of December 31, 2006, and Comcast received the Houston Pool,
which served 795,000 basic video subscribers as of December 31, 2006. TWC began consolidating the results of the
Kansas City Pool on January 1, 2007. TKCCP was formally dissolved on May 15, 2007.
For accounting purposes, the Company has treated the distribution of TKCCP’s assets as a sale of the
Company’s 50% equity interest in the Houston Pool and as an acquisition of Comcast’s 50% equity interest in the
Kansas City Pool. As a result of the sale of the Company’s 50% equity interest in the Houston Pool, the Company
recorded a pretax gain of $146 million in the first quarter of 2007, which is included as a component of other
income, net, in the consolidated statement of operations for the year ended December 31, 2007.
The acquisition of Comcast’s 50% equity interest in the Kansas City Pool on January 1, 2007 was treated as a
step-acquisition and accounted for as a purchase business combination. The consideration paid to acquire the 50%
equity interest in the Kansas City Pool was the fair value of the 50% equity interest in the Houston Pool transferred
to Comcast. The estimated fair value of TWC’s 50% interest in the Houston Pool of $880 million was determined
using a DCF analysis and was reduced by debt assumed by Comcast. The purchase price allocation is as follows as
of December 31, 2007 (in millions):
Depreciation/
Amortization
Periods
Intangible assets not subject to amortization (cable franchise rights) . . . . . . . . . . . . $ 612 non-amortizable
Intangible assets subject to amortization (primarily customer relationships) . . . . . . . 66 4 years
Property, plant and equipment (primarily cable television equipment) . . . . . . . . . . . 183 1-20 years
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 not applicable
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48) not applicable
Total purchase price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 880
97
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)