Time Warner Cable 2008 Annual Report Download - page 116

Diluted net loss per common share for 2008 excludes 719,000 common shares issuable under the Company’s
stock compensation plans because they do not have a dilutive effect due to the Company’s loss from continuing
operations.
Segments
FASB Statement No. 131, Disclosure about Segments of an Enterprise and Related Information, requires
public companies to disclose certain information about their reportable operating segments. Operating segments are
defined as components of an enterprise for which separate financial information is available and is evaluated on a
regular basis by the chief operating decision makers in deciding how to allocate resources to an individual segment
and in assessing performance of the segment. Since the Company’s continuing operations provide its services over
the same delivery system, the Company has only one reportable segment.
4. SEPARATION FROM TIME WARNER, RECAPITALIZATION AND REVERSE STOCK SPLIT OF
TWC COMMON STOCK
On May 20, 2008, TWC and its subsidiaries, TWE and TW NY, entered into the Separation Agreement with
Time Warner and its subsidiaries, WCI, Historic TW and ATC. TWC’s separation from Time Warner will take place
through a series of related transactions, the occurrence of each of which is a condition to the next. First, Time
Warner will complete certain internal restructuring transactions not affecting TWC. Next, following the satisfaction
or waiver of certain conditions, including those mentioned below, Historic TW will transfer its 12.43% non-voting
common stock interest in TW NY to TWC in exchange for 80 million newly issued shares of TWC’s Class A
common stock (the “TW NY Exchange”). Following the TW NY Exchange, Time Warner will complete certain
additional restructuring steps that will make Time Warner the direct owner of all shares of TWC’s Class A common
stock and Class B common stock previously held by its subsidiaries (all of Time Warner’s restructuring transaction
steps being referred to collectively as the “TW Internal Restructuring”). Upon completion of the TW Internal
Restructuring, TWC’s board of directors or a committee thereof will declare a special cash dividend to holders of
TWC’s outstanding Class A common stock and Class B common stock, including Time Warner, in an amount equal
to $10.27 per share (aggregating $10.855 billion) (the “Special Dividend”). The Special Dividend will be paid prior
to the completion of TWC’s separation from Time Warner. Following the receipt by Time Warner of its share of the
Special Dividend, TWC will file with the Secretary of State of the State of Delaware an amended and restated
certificate of incorporation, pursuant to which, among other things, each outstanding share of TWC Class A
common stock (including any shares of Class A common stock issued in the TW NY Exchange) and TWC Class B
common stock will automatically be converted into one share of common stock, par value $0.01 per share (the
“TWC Common Stock”) (the “Recapitalization”). Once the TW NY Exchange, the TW Internal Restructuring, the
payment of the Special Dividend and the Recapitalization have been completed, TWC’s separation from Time
Warner (the “Separation”) will proceed in the form of a pro rata dividend of all shares of TWC Common Stock held
by Time Warner to holders of Time Warner’s common stock (the “Distribution”).
The Special Dividend generally will constitute a dividend for United States federal income tax purposes to the
extent paid from TWC’s current or accumulated earnings and profits (“e&p”), as determined under United States
federal income tax principles. Distributions in excess of e&p generally will constitute a return of capital that will be
applied against and reduce (but not below zero) a stockholder’s adjusted tax basis in TWC Class A and Class B
common stock. Any remaining excess will be treated as a gain as if realized on the sale or other disposition of the
stock. The Company currently expects that between 30% and 35% of the Special Dividend paid to the public
stockholders would be taxed as a dividend. The remainder of the distribution would be characterized as a return of
capital (to the extent of the stockholder’s adjusted tax basis) and thereafter as a gain realized on the sale or other
disposition of the stock. The foregoing estimate is based on the Company’s results through December 31, 2008 and
may change depending upon a number of factors, including completion of an ongoing e&p study, actual financial/
tax results and the timing of the Special Dividend. The Company can make no assurances as to the tax treatment of
the Special Dividend and stockholders should consult their own tax advisors on such tax treatment. The Separation,
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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)