Time Warner Cable 2009 Annual Report Download - page 52

the components from Operating Income (Loss) to net income (loss) attributable to TWC for purposes of the discussions that follow (in
millions):
2009 2008 % Change
Year Ended December 31,
Operating Income (Loss) before Depreciation and Amortization ....................... $ 6,402 $ (8,694) NM
Depreciation ........................................................... (2,836) (2,826) 0.4%
Amortization .......................................................... (249) (262) (5.0%)
Operating Income (Loss) ................................................... 3,317 (11,782) NM
Interest expense, net ................................................... (1,319) (923) 42.9%
Other expense, net .................................................... (86) (367) (76.6%)
Income (loss) before income taxes........................................... 1,912 (13,072) NM
Income tax benefit (provision) ............................................ (820) 5,109 NM
Net income (loss) ......................................................... 1,092 (7,963) NM
Less: Net (income) loss attributable to noncontrolling interests ...................... (22) 619 NM
Net income (loss) attributable to TWC ......................................... $ 1,070 $ (7,344) NM
NM—Not meaningful.
Operating Income (Loss) before Depreciation and Amortization. As discussed above, in 2009, Operating Income before
Depreciation and Amortization was impacted by restructuring costs and Separation-related “make-up” equity award costs. In 2008,
Operating Loss before Depreciation and Amortization was impacted by the impairment of cable franchise rights, the loss on sale of cable
systems and restructuring costs. Excluding these items, Operating Income before Depreciation and Amortization increased principally as
a result of revenue growth, partially offset by higher costs of revenues, as discussed above. Additionally, Operating Income before
Depreciation and Amortization in 2008 was negatively impacted by $14 million of costs resulting from the impact of Hurricane Ike on
certain of the Company’s cable systems in southeast Texas and Ohio.
Depreciation expense. The slight increase in depreciation expense was primarily associated with continued purchases of customer
premise equipment, scalable infrastructure and line extensions occurring during or subsequent to 2008, partially offset primarily by
certain property, plant and equipment acquired in the 2006 transactions with Adelphia Communications Corporation (“Adelphia”) and
Comcast Corporation (“Comcast”) (the “Adelphia/Comcast Transactions”) that was fully depreciated as of July 31, 2008. The Company
expects depreciation expense to increase in 2010 as compared to 2009 primarily as a result of continued purchases of customer premise
equipment, scalable infrastructure and line extensions occurring during or subsequent to 2009.
Amortization expense. Amortization expense in 2009 benefited from an approximate $13 million adjustment to reduce excess
amortization recorded in prior years. The Company expects amortization expense to decrease in 2010 as compared to 2009 as a result of
customer relationships acquired in the Adelphia/Comcast Transactions becoming fully amortized during the third quarter of 2010.
Operating Income (Loss). As discussed above, in 2009, Operating Income was impacted by restructuring costs and
Separation-related “make-up” equity award costs. In 2008, Operating Loss was impacted by the impairment of cable franchise
rights, the loss on sale of cable systems and restructuring costs. Excluding these items, Operating Income increased primarily due to the
increase in Operating Income before Depreciation and Amortization, as discussed above.
Interest expense, net. Interest expense, net, increased primarily due to higher average debt outstanding during 2009. Additionally,
interest expense, net, for 2009 included $13 million of debt issuance costs primarily related to the portion of the upfront loan fees for the
2008 Bridge Facility that was recognized as expense due to the repayment of all borrowings outstanding under, and the resulting
termination of, such facility with a portion of the net proceeds of the March 2009 Bond Offering. Interest expense, net, for 2008 included
$45 million of debt issuance costs primarily related to the portion of the upfront loan fees for the 2008 Bridge Facility that was recognized
as expense due to the reduction of commitments under such facility as a result of the public debt issuances in June 2008 and November
2008 (the “2008 Bond Offerings”). The Company expects that interest expense, net, will increase in 2010 primarily due to higher average
interest rates on outstanding debt.
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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)