Time Warner Cable 2009 Annual Report Download - page 92

10. GOODWILL AND INTANGIBLES
TWC has a significant number of intangible assets, including customer relationships and cable franchise rights. As of December 31,
2009 and 2008, the Company’s intangible assets and related accumulated amortization consisted of the following (in millions):
Gross
Accumulated
Amortization Net Gross
Accumulated
Amortization Net
December 31, 2009 December 31, 2008
Intangible assets subject to amortization:
Customer relationships ........................... $ 952 $ (803) $ 149 $ 953 $ (566) $ 387
Cable franchise renewals and access rights ............ 290 (171) 119 276 (175) 101
Other ........................................ 42 (36) 6 38 (33) 5
Total ........................................ $ 1,284 $ (1,010) $ 274 $ 1,267 $ (774) $ 493
Intangible assets not subject to amortization:
Cable franchise rights ............................ $ 25,014 $ (922) $ 24,092 $25,476 $ (1,385) $ 24,091
Other ........................................ — — — 3 — 3
Total ........................................ $ 25,014 $ (922) $ 24,092 $25,479 $ (1,385) $ 24,094
The Company recorded amortization expense of $249 million in 2009, $262 million in 2008 and $272 million in 2007. Based on the
current amount of intangible assets subject to amortization, the estimated amortization expense is expected to be $170 million in 2010,
$22 million in 2011, $19 million in 2012, $14 million in 2013 and $11 million in 2014. These amounts may vary as acquisitions and
dispositions occur in the future.
A summary of the changes in the carrying value of the Company’s goodwill for the years ended December 31, 2009 and 2008 is as
follows (in millions):
Gross
Accumulated
Impairment
Charges
Carrying
Value Gross
Accumulated
Impairment
Charges
Carrying
Value
December 31, 2009 December 31, 2008
Balance at beginning of year ...................... $ 2,101 $ — $ 2,101 $ 2,117 $ — $ 2,117
Adjustments and other changes .................... 10 — 10 (16) — (16)
Balance at end of year ........................... $ 2,111 $ — $ 2,111 $ 2,101 $ — $ 2,101
Annual Impairment Analysis
Goodwill and indefinite-lived intangible assets, primarily the Company’s cable franchise rights, are tested annually for impairment
during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. The impairment test for
goodwill involves a comparison of the estimated fair value of each of the Company’s eight geographic reporting units to its carrying
amount, including goodwill. The Company determines the fair value of a reporting unit using a combination of a discounted cash flow
(“DCF”) analysis and a market-based approach, which utilize significant unobservable inputs (Level 3) within the fair value hierarchy.
The impairment test for intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible
asset with its carrying value. The Company determines the fair value of the intangible asset using a DCF analysis, which utilizes
significant unobservable inputs (Level 3) within the fair value hierarchy. Determining fair value requires the exercise of significant
judgment, including judgment about appropriate discount rates, perpetual growth rates, the amount and timing of expected future cash
flows, as well as relevant comparable company earnings multiples for the market-based approach.
The Company determined that goodwill and cable franchise rights were not impaired during its annual impairment analyses as of
December 31, 2009 or 2007, respectively. The Company’s 2008 impairment analysis, which was performed as of December 31, 2008, did
not result in any goodwill impairments, but did result in a noncash pretax impairment charge on cable franchise rights of $14.822 billion.
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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)