Time Warner Cable 2007 Annual Report Download - page 113

A rollforward of the Company’s uncertain income tax positions, excluding the related accrual for interest and
penalties, for the year ended December 31, 2007 is presented below (in millions):
Balance as of January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16
Reductions based on tax positions related to prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)
Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Balance as of December 31, 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18
The Company does not currently anticipate that its existing reserves related to uncertain income tax positions
as of December 31, 2007 will significantly increase or decrease during the twelve-month period ending
December 31, 2008; however, various events could cause the Company’s current expectations to change in the
future. These uncertain tax positions, if ever recognized in the financial statements, would be recorded in the
statement of operations as part of the income tax provision.
With few exceptions, periods ending after March 31, 2003 are subject to U.S., state and local income tax
examinations by tax authorities.
10. EQUITY-BASED COMPENSATION
Time Warner Equity Plans
Prior to 2007, Time Warner granted options to purchase Time Warner common stock and shares of Time
Warner common stock (“restricted stock”) or restricted stock units (“RSUs”) under its equity plans (collectively, the
“Time Warner Equity Awards”) to employees of TWC. Time Warner has not made any equity awards under its
equity plans to employees of TWC since TWC Class A common stock began to trade publicly in March 2007. In
addition, employees of Time Warner who become employed by TWC retain their Time Warner Equity Awards
pursuant to their terms and TWC records equity-based compensation expense from the date of transfer through the
end of the applicable vesting period. The stock options granted by Time Warner to employees of TWC were granted
with exercise prices equal to, or in excess of, the fair market value of a share of Time Warner common stock at the
date of grant. Generally, the stock options vest ratably over a four-year vesting period and expire ten years from the
date of grant. The awards of restricted stock or RSUs generally vest between three to five years from the date of
grant. Holders of Time Warner restricted stock and RSU awards are generally entitled to receive cash dividends or
dividend equivalents, respectively, paid by Time Warner during the period of time that the restricted stock or RSU
awards are unvested. Certain Time Warner stock options and RSU awards provide for accelerated vesting upon an
election to retire pursuant to TWC’s defined benefit retirement plans or after reaching a specified age and years of
service.
Upon the exercise of a stock option, the vesting of a RSU award or the grant of restricted stock, shares of Time
Warner common stock are issued from authorized but unissued shares or from treasury stock.
Other information pertaining to each category of Time Warner equity-based compensation appears below.
Time Warner Stock Options
The assumptions presented in the table below represent the weighted-average value of the applicable
assumption used to value Time Warner stock options at their grant date for the years ended December 31,
2006 and 2005.
2006 2005
Years Ended December 31,
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.3% 24.5%
Expected term to exercise from grant date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.07 years 4.79 years
Risk-free rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6% 3.9%
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1% 0.1%
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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)