Time Warner Cable 2007 Annual Report Download - page 55

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Adelphia Acquisition and Related Transactions
As discussed further in Note 4 to the accompanying consolidated financial statements, on July 31, 2006,
TW NY and Comcast completed their respective acquisitions of assets comprising in the aggregate substantially all
of the cable assets of Adelphia (the “Adelphia Acquisition”). Additionally, on July 31, 2006, immediately before the
closing of the Adelphia Acquisition, Comcast’s interests in TWC and Time Warner Entertainment Company, L.P.
(“TWE”), a subsidiary of TWC, were redeemed (the “TWC Redemption” and the “TWE Redemption,”
respectively, and, collectively, the “Redemptions”). Following the Redemptions and the Adelphia Acquisition,
on July 31, 2006, TW NYand Comcast swapped certain cable systems, most of which were acquired from Adelphia,
in order to enhance TWC’s and Comcast’s respective geographic clusters of subscribers (the “Exchange” and,
together with the Adelphia Acquisition and the Redemptions, the “Transactions”). As a result of the closing of the
Transactions, on July 31, 2006, TWC acquired systems with approximately 4.0 million basic video subscribers and
disposed of the Transferred Systems (as defined below), with approximately 0.8 million basic video subscribers, for
a net gain of approximately 3.2 million basic video subscribers. In addition, on July 28, 2006, American Television
and Communications Corporation (“ATC”), a subsidiary of Time Warner, contributed its 1% common equity
interest and $2.4 billion preferred equity interest in TWE to TW NY Cable Holding Inc. (“TW NY Holding”), a
subsidiary of TWC and the parent of TW NY, in exchange for a 12.43% non-voting common stock interest in
TW NY Holding (the “ATC Contribution”).
The results of the systems acquired in connection with the Transactions have been included in the
accompanying consolidated statement of operations since the closing of the Transactions. The systems
previously owned by TWC that were transferred to Comcast in connection with the Redemptions and the
Exchange (the “Transferred Systems”) have been reflected as discontinued operations in the accompanying
consolidated financial statements for all periods presented (Note 4).
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” (Note 4).
FINANCIAL STATEMENT PRESENTATION
Revenues
The Company’s revenues consist of Subscription and Advertising revenues. Subscription revenues consist of
revenues from video, high-speed data and voice services.
Video revenues include monthly fees for basic, standard and digital services from both residential and
commercial subscribers. Video revenues from digital services, or digital video revenues, include revenues from
digital tiers, digital pay channels, pay-per-view, video-on-demand, subscription-video-on-demand and digital video
recorders. Video revenues also include related equipment rental charges, installation charges and franchise fees
collected on behalf of local franchising authorities. Several ancillary items are also included within video revenues,
such as commissions earned on the sale of merchandise by home shopping services and rental income earned on the
leasing of antenna attachments on the Company’s transmission towers. In each period presented, these ancillary
items constitute less than 2% of video revenues.
50
TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)