Time Warner Cable 2008 Annual Report Download - page 73

Income tax provision (benefit). TWC’s income tax provision (benefit) has been prepared as if the Company
operated as a stand-alone taxpayer for all periods presented. In 2008, the Company recorded an income tax benefit
of $4.706 billion and in 2007, the Company recorded an income tax provision of $740 million. The effective tax rate
was 39% in 2008, which included the impacts of the impairment of cable franchise rights and the loss on the sale of
cable systems, as compared to 40% in 2007. Absent these items, the effective tax rate for 2008 would have been
45%. The increase in the Company’s effective tax rate for 2008 (excluding the impairment of cable franchise rights
and the loss on the sale of cable systems) was primarily due to the tax impact of the 2008 impairment on the
Company’s investment in Clearwire LLC, as discussed above.
On February 19, 2009, California’s legislature approved the state’s budget, which is expected to be signed into
law during the first quarter of 2009, that, in part, changes the methodology of income tax apportionment in
California. This tax law change is likely to result in an increase in state deferred tax liabilities and a corresponding
noncash tax provision, which would be recorded in the first quarter of 2009.
Net income (loss) and net income (loss) per common share. Net loss was $7.344 billion in 2008 compared to
net income of $1.123 billion in 2007. Basic and diluted net loss per common share were $7.52 in 2008 compared to
basic and diluted net income per common share of $1.15 in 2007. Net loss in 2008 included the impairment of cable
franchise rights and the loss on the sale of cable systems, as discussed above. Excluding these items, net income
decreased primarily due to the change in other expense (income), net, (which included the 2008 impairment on the
Company’s investment in Clearwire LLC and the 2007 TKCCP Gain) and increases in minority interest expense,
net, and interest expense, net, partially offset by an increase in Operating Income and a decrease in income tax
provision.
2007 vs. 2006
As further discussed in Notes 5 and 10 to the accompanying consolidated financial statements, the Company
completed the Adelphia/Comcast Transactions and began consolidating the results of the systems acquired in and
retained after the Adelphia/Comcast Transactions (the “Acquired Systems”) on July 31, 2006. Additionally, on
January 1, 2007, the Company began consolidating the results of certain cable systems located in Kansas City, south
and west Texas and New Mexico (the “Kansas City Pool”) upon the distribution of the assets of TKCCP to TWC and
Comcast. Accordingly, the operating results for 2007 include the results for the systems TWC owned before and
retained after the Adelphia/Comcast Transactions (the “Legacy Systems”), the Acquired Systems and the Kansas
City Pool for the full twelve-month period, and the operating results for 2006 include the results of the Legacy
Systems for the full twelve-month period and the Acquired Systems for only the five months following the closing
of the Adelphia/Comcast Transactions and do not include the consolidation of the results of the Kansas City Pool.
The impact of the incremental seven months of revenues and expenses of the Acquired Systems on the results for
2007 is referred to as the “impact of the Acquired Systems” in this report. Additionally, the Company has reflected
the financial position, results of operations and cash flows of the systems transferred to Comcast in connection with
the Adelphia/Comcast Transactions as discontinued operations for all periods presented.
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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)