Time Warner Cable 2009 Annual Report Download - page 53

Other expense, net. Other expense, net, detail is shown in the table below (in millions):
2009 2008
Year Ended December 31,
Direct transaction costs related to the Separation Transactions
(a)
................................ $ (28) $ (17)
Income (loss) from equity investments, net
(b)
.............................................. (49) 16
Impairment of investment in The Reserve Fund’s Primary Fund ................................ (5) —
Other investment gains (losses)
(c)
....................................................... 15 (366)
Equity award reimbursement obligation to Time Warner
(d)
.................................... (21) —
Other ........................................................................... 2 —
Other expense, net .................................................................. $ (86) $ (367)
(a)
Amounts primarily consist of legal and professional fees.
(b)
The change in income (loss) from equity investments, net, for 2009 was primarily due to the impact of losses incurred during 2009 by Clearwire Communications LLC.
(c)
2008 amount consists of a $367 million impairment charge on the Company’s investment in Clearwire Communications LLC (an investment accounted for under the
equity method of accounting) and an $8 million impairment charge on an investment, partially offset by a $9 million gain recorded on the sale of a cost-method
investment. In 2009, the Company recovered a portion of the investment on which it recorded the $8 million impairment charge in 2008, resulting in a $3 million gain.
Additionally, 2009 amount includes a $12 million gain due to a post-closing adjustment associated with the 2007 dissolution of Texas and Kansas City Cable Partners,
L.P. (“TKCCP”).
(d)
See Note 8 to the accompanying consolidated financial statements for a discussion of the Company’s accounting for its equity award reimbursement obligation to Time
Warner.
Income tax benefit (provision). TWC’s income tax benefit (provision) has been prepared as if the Company operated as a
stand-alone taxpayer for all periods presented. In 2009, the Company recorded an income tax provision of $820 million and, in 2008, the
Company recorded an income tax benefit of $5.109 billion. The effective tax rate for 2009 was 42.9%, which included the impact of the
passage of the California state budget during the first quarter of 2009 that, in part, changed the methodology of income tax apportionment
in California. This tax law change resulted in an increase in state deferred tax liabilities and a corresponding noncash tax provision of
$38 million. Absent this tax law change, the effective tax rate for 2009 would have been 40.9%. The effective tax rate for 2008 was
39.1%, which included the impacts of the impairment of cable franchise rights and the loss on sale of cable systems. Absent these items,
the effective tax rate for 2008 would have been 44.2%. The decrease in the Company’s effective tax rate for 2009 (excluding the
California state tax law change in 2009 and the impairment of cable franchise rights and the loss on sale of cable systems in 2008) was
primarily due to the tax impact of the 2008 impairment charge on the Company’s investment in Clearwire Communications LLC, as
discussed above.
Net (income) loss attributable to noncontrolling interests. Net loss attributable to noncontrolling interests in 2008 included the
impacts of the impairment of cable franchise rights and the loss on sale of cable systems, as discussed above. Excluding these items, net
income attributable to noncontrolling interests decreased principally due to the changes in the ownership structure of the Company as a
result of the TW NY Exchange, which occurred in February 2009.
Net income (loss) attributable to TWC and net income (loss) attributable to TWC per common share. Net income (loss) attributable
to TWC and net income (loss) attributable to TWC per common share were as follows for 2009 and 2008 (in millions, except per share
data):
2009 2008 % Change
Year Ended December 31,
Net income (loss) attributable to TWC .......................................... $ 1,070 $ (7,344) NM
Net income (loss) attributable to TWC per common share:
Basic ................................................................. $ 3.07 $ (22.55) NM
Diluted................................................................ $ 3.05 $ (22.55) NM
NM—Not meaningful.
As discussed above, in 2009, net income attributable to TWC and net income attributable to TWC per common share were impacted
by restructuring costs and Separation-related “make-up” equity award costs. In 2008, net loss attributable to TWC and net loss
attributable to TWC per common share were impacted by the impairment of cable franchise rights, the loss on sale of cable systems and
restructuring costs. Excluding these items, net income attributable to TWC and net income attributable to TWC per common share
increased primarily due to an increase in Operating Income and decreases in other expense, net, and net income attributable to
noncontrolling interests, partially offset by increases in interest expense, net, and income tax provision, each as discussed above.
41
TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)