Time Warner Cable 2007 Annual Report Download - page 54

technical performance of these systems to levels that allow the delivery of these advanced services and features.
TWC substantially completed these integration-related efforts, as well as the launch of Digital Phone service to
residential customers in the Acquired Systems, by the end of 2007. As of December 31, 2007, penetration rates for
TWC’s services continued to be lower in the Acquired Systems than in the Legacy Systems; however, penetration
rates for advanced services improved in the Acquired Systems during 2007 and TWC believes there is opportunity
over time to further increase service penetration rates and improve Subscription revenues and Operating Income
before Depreciation and Amortization in the Acquired Systems, including the acquired systems in Dallas, TX and
Los Angeles, CA. See Item 1A, “Risk Factors—Additional Risks of TWC’s Operations—TWC may continue to
face challenges in its systems in Dallas, Texas and Los Angeles, California” in Part I of this report for additional
information.
Recent Developments
Sale of Certain North Carolina Cable Systems
The closing of the transactions with Adelphia (discussed below), which included the Company’s acquisition
from Adelphia of certain cable systems in Mooresville, Cornelius, Davidson and unincorporated Mecklenburg
County, North Carolina, triggered a right of first refusal under the franchise agreements covering these systems.
These municipalities (“the Consortium”) exercised their right to acquire these systems. As a result, on December 19,
2007, these cable systems, serving approximately 14,000 basic video subscribers and approximately 30,000
revenue generating units as of the closing date, were sold for $52 million. The sale of these systems did not have a
material impact on the Company’s results of operations or cash flows.
2007 Bond Offering
On April 9, 2007, TWC issued $5.0 billion in aggregate principal amount of senior unsecured notes and
debentures (the “2007 Bond Offering”) consisting of $1.5 billion principal amount of 5.40% Notes due 2012,
$2.0 billion principal amount of 5.85% Notes due 2017 and $1.5 billion principal amount of 6.55% Debentures due
2037 pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”).
The Company used the net proceeds from this issuance to repay all of the outstanding indebtedness under its
$4.0 billion three-year term loan facility and a portion of the outstanding indebtedness under its $4.0 billion five-
year term loan facility. On November 5, 2007, the Company and the two subsidiaries of the Company that guarantee
the Company’s obligations under the securities exchanged substantially all of the securities issued in the 2007 Bond
Offering for a like aggregate principal amount of registered securities with the same terms pursuant to a registered
exchange offer. See Note 8 to the accompanying consolidated financial statements for further details.
TKCCP Joint Venture
As discussed further in Note 4 to the accompanying consolidated financial statements, TKCCP was a 50-50
joint venture between a consolidated subsidiary of TWC (Time Warner Entertainment-Advance/Newhouse
Partnership (“TWE-A/N”)) and Comcast. 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 pool of assets consisting of the Houston cable systems (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 accompanying consolidated statement of operations for the year ended December 31, 2007.
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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)