Time Warner Cable 2008 Annual Report Download - page 71

Selling, general and administrative expenses. The major components of selling, general and administrative
expenses were as follows (in millions):
2008 2007 % Change
Year Ended December 31,
Employee .................................................. $ 1,146 $ 1,059 8%
Marketing ................................................. 569 499 14%
Other . .................................................... 1,139 1,090 4%
Total . .................................................... $ 2,854 $ 2,648 8%
Selling, general and administrative expenses increased primarily due to higher employee and marketing costs.
Employee costs increased primarily due to headcount and salary increases and marketing costs increased primarily
due to intensified marketing efforts. Other costs in 2008 included a benefit of approximately $16 million due to
changes in estimates of previously established casualty insurance accruals. Excluding this benefit, other costs
increased primarily due to higher miscellaneous administrative costs.
Merger-related and restructuring costs. The results for 2008 and 2007 included restructuring costs of
$15 million and $13 million, respectively. In addition, during 2007, the Company expensed non-capitalizable
merger-related costs associated with the 2006 transactions with Adelphia Communications Corporation (“Adel-
phia”) and Comcast (the “Adelphia/Comcast Transactions”) of $10 million. Beginning in the first quarter of 2009,
TWC is undertaking a significant restructuring, primarily consisting of headcount reductions, and expects to incur
restructuring charges ranging from approximately $50 million to $100 million during 2009.
Impairment of cable franchise rights. During the fourth quarter of 2008, the Company recorded a noncash
impairment of $14.822 billion to reduce the carrying value of its cable franchise rights as a result of its annual
impairment testing of goodwill and indefinite-lived intangible assets. See “Critical Accounting Policies—Asset
Impairments—Goodwill and Indefinite-lived Intangible Assets” for further details.
Loss on sale of cable systems. During 2008, the Company recorded a loss of $58 million as a result of the sale
of certain non-core cable systems, which closed in December 2008. See “Overview—Recent Developments—Sale
of Certain Cable Systems” for further details.
Reconciliation of Operating Income (Loss) to Operating Income (Loss) before Depreciation and Amortization. The
following table reconciles Operating Income (Loss) to Operating Income (Loss) before Depreciation and Amortization.
In addition, the table provides the components from Operating Income (Loss) to net income (loss) for purposes of the
discussions that follow (in millions):
2008 2007 % Change
Year Ended December 31,
Net income (loss) ........................................... $ (7,344) $ 1,123 NM
Income tax provision (benefit) .............................. (4,706) 740 NM
Income (loss) before income taxes ............................. (12,050) 1,863 NM
Interest expense, net ...................................... 923 894 3%
Minority interest expense (income), net........................ (1,022) 165 NM
Other expense (income), net ................................ 367 (156) NM
Operating Income (Loss) ...................................... (11,782) 2,766 NM
Depreciation ............................................. 2,826 2,704 5%
Amortization ............................................. 262 272 (4%)
Operating Income (Loss) before Depreciation and Amortization ......... $ (8,694) $ 5,742 NM
NM—Not meaningful.
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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)