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Time Warner Cable
2010 Annual Report

Table of contents

  • Page 1
    Time Warner Cable 2010 Annual Report

  • Page 2
    Our Mission Connect people and businesses with information, entertainment and each other. Give customers control in ways that are simple and easy. Our Values • Excellence • Teamwork • Initiative • Innovation • Integrity • Inclusion • Community We have 47,500 employees We serve...

  • Page 3
    ... is a comprehensive, premium triple-play offering that connects in-home entertainment, information and technology with the convenience of personalized service. • BegantrialsofTimeWarnerCableTV Essentials, a video-only package, launched first in New York City and northeast Ohio, targeting...

  • Page 4
    ...andintroducednewHD videoservicesgearedtolargehotels. • ProvidedonlineaccesstoESPN programmingtoourauthenticated videocustomers,oneofourfirst "TVEverywhere"offerings. Community Support Servicetothecommunitieswherewe dobusinessisoneofourcorevalues, andwe...

  • Page 5
    ... to give our customers a better experience. Starting in 2011, we plan to begin delivering video directly to consumers in their homes on multiple IP-connected devices, such as smart TVs and tablets. We will also pursue additional growth opportunities in providing services to business customers. To...

  • Page 6
    ...Our video, data and voice services meet all these needs. Hundreds of channels, including on average more than 110 in high-definition, thousands of movies and entertainment programming on demand, high-speed Internet access and state-of-the-art digital phone service meet our customers' information and...

  • Page 7
    ...cable networks' primetime lineups, so our customers can make any time their own prime time. All these features and more are presented through easy-to-use interfaces, supported by a large palette of customer care tools and services. Representatives are now available by phone and online through email...

  • Page 8
    ... enables any device with Wi-Fi connectivity to connect customers to our 4G/3G mobile high-speed data service. These mobile solutions also benefit our commercial customers. Time Warner Cable Business Classâ„¢ provides high-speed data and digital phone services to businesses. We provide cost-effective...

  • Page 9
    ... and more control when they use our services. Already, we have begun to demonstrate how we can deliver video directly to IP-connected devices in the home. We are developing new capabilities, new user interfaces and new ways to meet customer demands, while offering a more compelling and robust...

  • Page 10
    ... science, technology, engineering and math behind cable television and related careers. We partnered with such organizations as the Girl Scouts, 4-H and the Boys & Girls Clubs of America. With the help of more than 1,700 employee volunteers, 5,700 students visited Time Warner Cable facilities around...

  • Page 11
    ...Circle New York, New York 10023 (Address of principal executive offices) (Zip Code) (212) 364-8200 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value...

  • Page 12

  • Page 13
    ..." or the "Company") is the second-largest cable operator in the U.S., with technologically advanced, well-clustered systems located mainly in five geographic areas - New York State (including New York City), the Carolinas, Ohio, Southern California (including Los Angeles) and Texas. As of December...

  • Page 14
    ...-hour local news channels and sports channels in a number of cities. DBT enables subscribers who receive digital video signals ("digital video subscribers") to receive additional cable networks. Generally, CPST and DBT subscribers can purchase genre-based programming tiers, such as Time Warner Cable...

  • Page 15
    ...'s cable systems provide their high-speed data subscribers with the ability to subscribe to the services of certain other on-line providers, including Earthlink. Mobile Internet. In the fourth quarter of 2009, TWC began offering a wireless mobile broadband Internet access service in several cities...

  • Page 16
    ... and personal and managed data security. In addition, TWC began offering its wireless mobile broadband Internet service, Time Warner Cable Business Class Mobile, to commercial customers in certain of its service areas during 2010. High-speed data services are provided to commercial subscribers at...

  • Page 17
    ...on behalf of Verizon FiOS TV in New York, New York, Dallas, Texas and Los Angeles, California in exchange for a percentage of the advertising revenue. In addition, TWC, together with Comcast Corporation ("Comcast") and Cox Communications, Inc., owns National Cable Communications LLC ("National Cable...

  • Page 18
    ... at all times within a given group of households, SDV technology frees up capacity that can then be made available for other uses, including additional HD channels, expanded VOD offerings, faster high-speed data connections, reliable Digital Phone quality and interactive services. TWC received...

  • Page 19
    ...technology. During 2011, TWC plans to begin delivering video offerings, including both live linear and On-Demand programming, directly to subscriber broadband-connected consumer electronic devices, including "Smart TVs," game consoles and tablet personal computers, without the need for a set-top box...

  • Page 20
    ...'s video, high-speed data and Digital Phone services face competition from the video, digital subscriber line ("DSL"), wireless broadband and wireline and wireless phone offerings of AT&T and Verizon. In a significant number of TWC's operating areas, AT&T and Verizon have upgraded their networks to...

  • Page 21
    ... sets and mobile devices. TWC also competes with online order services with mail delivery and video stores. "Online" competition. TWC's high-speed data service faces competition from a variety of companies that offer other forms of online services, including low cost dial-up services over telephone...

  • Page 22
    ... television signals and cable programming, as well as the way TWC sells its program packages to subscribers; the use of cable systems by franchising authorities and other third parties; cable system ownership; the offering of voice, high-speed data and transport services; and its use of utility...

  • Page 23
    ... by cable operators and telecommunications companies that are used to provide high-speed Internet services. The proposed rate could be higher than the current rate paid by cable service providers. In May 2010, in furtherance of the recommendations made in the National Broadband Plan, the FCC issued...

  • Page 24
    ...an Order to address CableCARD issues. The new rules included requirements that cable operators provide reasonable access to switched digital programming for retail one-way devices through a technology of the operator's choice, provide credits to customers who use their own retail settop boxes rather...

  • Page 25
    ..., content from local and distant television broadcast stations. TWC generally does not obtain a license to use the copyrighted performances contained in these stations' programming directly from program owners. Instead, in exchange for filing reports with the U.S. Copyright Office and contributing...

  • Page 26
    ... most of these rules to incumbent cable operators which, although immediately effective, in some cases may not alter existing franchises prior to renewal. At the state level, several states, including California, Kansas, Missouri, North Carolina, Ohio, South Carolina, Texas and Wisconsin, have...

  • Page 27
    ..., see the discussion in "Risk Factors-Risks Related to Government Regulation-'Net neutrality' legislation or regulation could limit TWC's ability to operate its high-speed data business profitably and to manage its broadband facilities efficiently." National Broadband Plan. As part of the American...

  • Page 28
    ..., the Wisconsin public utility commission ruled that TWC's Digital Phone service is subject to traditional, circuit-switched telephone regulation, and in October 2010, the Maine Public Utilities Commission ruled that TWC's voice services should be regulated in Maine as a telephone service and that...

  • Page 29
    ... System requirements for analog and digital services; closed captioning requirements for the hearing impaired; commercial restrictions on children's programming; recordkeeping and public file access requirements; and technical rules relating to operation of the cable network. Operating Partnerships...

  • Page 30
    ... of the respective wireless broadband businesses of Sprint and Clearwire Communications. During 2010, Clearwire deployed its 4G wireless network in several cities, providing mobile broadband services to wholesale and retail customers. Clearwire's Class A Common Stock is listed for trading on the...

  • Page 31
    ...See "Risk Factors-Risk Related to Competition-TWC's competitive position and business and financial results could suffer if consumers replace TWC's traditional high-speed data or voice services with wireless data or voice services or if TWC does not develop compelling wireless offerings." SpectrumCo...

  • Page 32
    ... provide features and functions comparable to the video, highspeed data and/or voice services that TWC offers, and they offer them in bundles similar to TWC's. In a significant number of TWC's operating areas, AT&T and Verizon have upgraded their networks to carry two-way video, high-speed data with...

  • Page 33
    ... suffer. In order to provide its customers with high-speed data services both inside and outside the home, during the fourth quarter of 2009, TWC launched a wireless mobile broadband Internet access service in several cities utilizing Clearwire's mobile broadband network with service pursuant to...

  • Page 34
    ... so-called "net neutrality" requirements on cable operators. See "-Risks Related to Government Regulation-'Net neutrality' legislation or regulation could limit TWC's ability to operate its high-speed data business profitably and to manage its broadband facilities efficiently." TWC relies on network...

  • Page 35
    ... preferred equity. This level of indebtedness may limit TWC's ability to respond to market conditions, provide for capital investment needs or take advantage of business opportunities. Risks Related to Dependence on Third Parties Increases in programming and retransmission costs or the inability to...

  • Page 36
    ...to TWC in providing Digital Phone service to customers by routing voice traffic to and from destinations outside of TWC's network via the public switched telephone network, delivering E911, operator and directory assistance service and assisting in order processing, local number portability and long...

  • Page 37
    ... costs. Under federal law, TWC has the right to attach cables carrying video and other services to telephone and similar poles of investor-owned utilities at regulated rates. However, because these cables may carry services other than video services, such as high-speed data services or new forms...

  • Page 38
    ... of Time Warner of its 12.43% nonvoting common stock interest in TW NY to TWC in exchange for 80 million newly issued shares of TWC's Class A common stock, TWC's payment of a special cash dividend to holders TWC's outstanding Class A and Class B common stock, the conversion of each share of...

  • Page 39
    ...'s high-speed data network. As of December 31, 2010, TWC leased and owned real property housing national operations centers and regional data centers used in its high-speed data services business in Herndon, Virginia; Raleigh, North Carolina; Syracuse, New York; Austin, Texas; Kansas City, Missouri...

  • Page 40
    ..., et al. v. Time Warner Cable LLC, filed a purported class action in the Los Angeles County Superior Court alleging that the Company recorded phone calls with plaintiffs without notice in violation of provisions of the California Penal Code and the California Unfair Business Practices Act. The...

  • Page 41
    ... the Eastern District of Texas alleging that the Company and a number of other cable operators infringed several patents purportedly related to a variety of technologies, including high-speed data and IP-based telephony services. In addition, on September 13, 2006, Rembrandt filed a complaint in the...

  • Page 42
    ...predecessor Time Inc. Ellen East has served as the Company's Executive Vice President and Chief Communications Officer since October 2007. Prior to that, she served as Vice President of Communications and Public Affairs at Cox Communications Inc., a provider of video, internet and telephone services...

  • Page 43
    ... to that, beginning in 1994, Ms. MacKinnon worked at Turner Broadcasting System, Inc., a cable programming company, as Director of Government Relations. Mr. Marcus ...Robert D. Marcus has served as the Company's President and Chief Operating Officer since December 14, 2010 and continues to serve...

  • Page 44
    ... II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The principal market for the Company's common stock, par value $0.01 per share (the "TWC Common Stock"), is the New York Stock Exchange. For quarterly price information for the...

  • Page 45
    ...this Annual Report and (ii) the information regarding certain Company equity compensation plans called for by Item 201(d) of Regulation S-K is set forth below. The Company has adopted a Code of Ethics for its Senior Executive and Senior Financial Officers. A copy of the Code is publicly available on...

  • Page 46
    ...the 2006 Stock Plan listed in column (iii), as of December 31, 2010, a maximum of 4,820,958.80 shares may be issued in connection with Full Value Awards. Stock options granted under the 2006 Plan have exercise prices equal to the fair market value of TWC Common Stock at the date of grant. Generally...

  • Page 47
    ... 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TIME WARNER CABLE INC. By: /s/ GLENN A. BRITT Name: Glenn A. Britt Title: Chairman and Chief Executive Officer Dated: February 18, 2011...

  • Page 48
    ... of Comprehensive Income ...Notes to Consolidated Financial Statements ...Management's Report on Internal Control Over Financial Reporting ...Reports of Independent Registered Public Accounting Firm ...Selected Financial Information...Quarterly Financial Information ... 37 68 69 70 71 72 73 123...

  • Page 49
    ... to the Company. OVERVIEW TWC is the second-largest cable operator in the U.S., with technologically advanced, well-clustered systems located mainly in five geographic areas - New York State (including New York City), the Carolinas, Ohio, Southern California (including Los Angeles) and Texas. As of...

  • Page 50
    ... on subscriber and penetration levels, regulation, pricing and the rate of wireless substitution of wireline high-speed data and Digital Phone services, as well as the state of the economy and competition. TWC's business is affected by the economic environment and, in particular, trends in new home...

  • Page 51
    ... subsidiaries, Time Warner Entertainment Company, L.P. ("TWE") and TW NY Cable Holding Inc. ("TW NY"). The Company used a portion of the net proceeds from the 2010 Bond Offering for general corporate purposes, including the repurchase of its common stock under the Stock Repurchase Program. See Note...

  • Page 52
    ...from residential and commercial Digital Phone subscribers, along with related installation charges. Advertising revenues include the fees charged to local, regional and national advertising customers for advertising placed on the Company's video and high-speed data services, as well as revenues from...

  • Page 53
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) network costs; wireless mobile broadband service costs; other service-related expenses, including non-administrative labor; franchise fees; and other related costs. Selling, ...

  • Page 54
    ... voting interest) and a 12.43% non-voting common stock interest in TW NY. As a result of the Separation, Time Warner no longer has an ownership interest in TWC or TW NY. Refer to Note 5 for additional information regarding the Separation. Reclassifications Certain reclassifications have been made to...

  • Page 55
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Selected subscriber-related statistics were as follows (in thousands): December 31, 2010 2009 % Change ...Residential video Commercial video(b) ...Residential high-speed data...

  • Page 56
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) The increase in video revenues was primarily due to increases in average revenues per subscriber (due to price increases, improved subscriber mix and increased DVR service ...

  • Page 57
    ... of revenues ...Average monthly video programming costs per video subscriber ...$ (a) (b) $ 25.60 8.2% Employee and other direct operating costs include costs directly associated with the delivery of the Company's video, high-speed data and voice services to subscribers and the maintenance...

  • Page 58
    ...-related 'make-up' equity award costs"). Selling, general and administrative expenses increased primarily as a result of increases in employee costs (primarily due to higher headcount and compensation, as well as $12 million of executive severance costs in the fourth quarter of 2010), marketing...

  • Page 59
    ... December 31, 2010, approximately $70 million of customer relationships that the Company acquired as a result of the 2007 dissolution of Texas and Kansas City Cable Partners, L.P. ("TKCCP") were fully amortized. Based on the remaining carrying value of intangible assets subject to amortization as of...

  • Page 60
    ..., 2009, TWC employees who held stock options under Time Warner equity plans were treated as if their employment with Time Warner had been terminated without cause at the time of the Separation. In most cases, this treatment resulted in shortened exercise periods, generally one year from the date of...

  • Page 61
    ...the BST video programming tier. High-speed data subscriber numbers reflect billable subscribers who receive TWC's Road Runner high-speed data service or any of the other high-speed data services offered by TWC. The determination of whether a high-speed data or Digital Phone subscriber is categorized...

  • Page 62
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Total Subscription revenues increased 5.3% as a result of increases in residential and commercial video, high-speed data and voice revenues. Residential and commercial ...

  • Page 63
    ... 2008 % Change Video programming ...Employee(a) ...High-speed data ...Voice ...Video franchise and other fees(b) ...Other direct operating costs(a) ...Total ...Costs of revenues as a percentage of revenues...Average monthly video programming costs per video subscriber ...(a) (b) $ $ 3,998 2,594...

  • Page 64
    ... 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...

  • Page 65
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Interest expense, net. Interest expense, net, increased primarily due to higher average debt outstanding during 2009. Additionally, interest expense, net, for 2009 included $13 ...

  • Page 66
    ... quarterly dividend payments and common stock repurchases. TWC's sources of cash include cash provided by operating activities, cash and equivalents on hand, borrowing capacity under its committed credit facility and commercial paper program, as well as access to capital markets. The Company...

  • Page 67
    ... consolidated financial statements for a discussion of the Company's accounting for its interest rate swap contracts. In 2008, TWC filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (the "SEC") that allows TWC to offer and sell from time to time senior and...

  • Page 68
    ... rights ...Noncash loss on sale of cable systems...Noncash equity-based compensation ...Net interest payments(a) ...Pension plan contributions ...Net income tax payments(b) ...Net restructuring accruals (payments) ...All other, net, including working capital changes ...Cash provided by operating...

  • Page 69
    .... Canoe Ventures LLC is a joint venture formed by TWC and certain other cable operators and is focused on developing a common technology platform among cable operators for the delivery of advanced advertising products and services to be offered to programmers and advertisers. Cash used by investing...

  • Page 70
    ...customer's home or business for the purpose of receiving/sending video, high-speed data and/or voice signals. Such equipment includes digital (including high-definition) set-top boxes, remote controls, high-speed data modems (including wireless), telephone modems and the costs of installing such new...

  • Page 71
    ... net repayments under the Company's commercial paper program, the payment of quarterly cash dividends and repurchases of TWC common stock, partially offset by the net proceeds of the 2010 Bond Offering and the net proceeds from the exercise of stock options. Cash used by financing activities in...

  • Page 72
    ... assets and services to be used in the normal course of the Company's operations. For example, the Company is contractually committed to make certain minimum lease payments for the use of property under operating lease agreements. In accordance with applicable accounting rules, the future rights and...

  • Page 73
    ...-2013 2014-2015 Thereafter Total Programming purchases ...$ Outstanding debt obligations and TW NY Cable Preferred Membership Units(b) ...Interest and dividends(c) ...Facility leases(d) ...Digital Phone connectivity(e) ...Data processing services ...High-speed data connectivity(f) ...Other ...Total...

  • Page 74
    ...Company's interest rate risk management program and resulted in a decrease in interest expense, net, of $117 million in 2010. Equity Risk TWC is also exposed to market risk as it relates to changes in the market value of its investments. TWC invests in equity instruments of companies for operational...

  • Page 75
    ... OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Accounting Policies and Estimates-Asset Impairments-Investments" for additional information about Clearwire Communications LLC. Prior to 2007, some of TWC's employees were granted options to purchase shares of Time Warner common stock in connection...

  • Page 76
    ... used to value cable franchise rights entails identifying the projected discrete cash flows related to such cable franchise rights and discounting them back to the valuation date. Significant judgments inherent in this analysis include the selection of appropriate discount rates, estimating...

  • Page 77
    ... tax free, issues related to consideration paid or received, and certain financing transactions. Significant judgment is required in assessing and estimating the tax consequences of these transactions. The Company prepares and files tax returns based on interpretation of tax laws and regulations. In...

  • Page 78
    ... video programming costs based on the Company's contractual agreements with its programming vendors, which are generally multi-year agreements that provide for the Company to make payments to the programming vendors at agreed upon market rates based on the number of subscribers to which the Company...

  • Page 79
    ...Risk Factors," in Part I of this report, as well as: • increased competition from video, high-speed data and voice providers, particularly direct broadcast satellite operators, incumbent local telephone companies, companies that deliver programming over broadband Internet connections, and wireless...

  • Page 80
    ... equity: Common stock, $0.01 par value, 348.3 million and 352.5 million shares issued and outstanding as of December 31, 2010 and 2009, respectively ...Additional paid-in capital ...Retained earnings (accumulated deficit) ...Accumulated other comprehensive loss, net ...Total TWC shareholders' equity...

  • Page 81
    TIME WARNER CABLE INC. CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31, 2010 2009 2008 (in millions, except per share data) Revenues: Subscription: Video ...High-speed data ...Voice ...Total Subscription ...Advertising ...Total revenues ...Costs and expenses: Costs of revenues(a) ......

  • Page 82
    ... ...Debt issuance costs ...Proceeds from exercise of stock options ...Dividends paid ...Repurchases of common stock ...Payment of special cash dividend ...Other financing activities...Cash provided (used) by financing activities ...Increase (decrease) in cash and equivalents ...Cash and equivalents...

  • Page 83
    ... ...Other comprehensive income ...Comprehensive income ...Equity-based compensation ...Redemption of Historic TW's interest in TW NY ...Special cash dividend ($30.81 per common share) ...Retained distribution related to unvested restricted stock units ...Other changes(b) ...Balance as of December...

  • Page 84
    TIME WARNER CABLE INC. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 2010 Year Ended December 31, 2009 (in millions) 2008 Net income (loss) ...Change in pension benefit obligation, net of income tax (benefit) provision of $25 million in 2010, $95 million in 2009 and $(192) million in 2008 ......

  • Page 85
    ...State (including New York City), the Carolinas, Ohio, Southern California (including Los Angeles) and Texas. TWC offers video, high-speed data and voice services over its broadband cable systems to residential and commercial customers. TWC markets its services separately and in "bundled" packages of...

  • Page 86
    ... guidance provides for new disclosures requiring the Company to (i) disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers and (ii) present separately information about purchases, sales, issuances...

  • Page 87
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Business Combinations and Disclosures In December 2010, the FASB issued authoritative guidance that updates existing disclosure requirements related to supplementary pro forma information for business combinations. Under ...

  • Page 88
    ... construction of its cable systems. Costs associated with the construction of transmission and distribution facilities are capitalized. With respect to customer premise equipment, which includes set-top boxes and high-speed data and telephone modems, TWC capitalizes installation costs only upon the...

  • Page 89
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) As of December 31, 2010 and 2009, the Company's property, plant and equipment and related accumulated depreciation included the following (in millions): December 31, 2010 (in millions) 2009 Estimated Useful Lives (in years...

  • Page 90
    ...when the connections are completed, as installation revenues recognized are less than the related direct selling costs. Advertising revenues are recognized in the period during which the advertisements are exhibited. Video programming, high-speed data and voice costs are recorded as the services are...

  • Page 91
    ... is used here, multiple-element arrangements can involve Contemporaneous purchases and sales (e.g., the Company sells advertising services to a customer and at the same time purchases programming services); Sales of multiple products and/or services (e.g., the Company sells video, high-speed data...

  • Page 92
    ... products or services, then the Company evaluates whether it has fair value evidence for each deliverable in the transaction. For example, the Company sells video, highspeed data and voice services to subscribers in a bundled package at a rate lower than if the subscriber purchases each product...

  • Page 93
    ... reflect the employees' years of service and compensation during their employment period. The pension expense recognized by the Company is determined using certain assumptions, including the expected long-term rate of return on plan assets, the interest factor implied by the discount rate and the...

  • Page 94
    ... employees. The risk-free rate assumed in valuing the stock options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the market price...

  • Page 95
    ...results of operations or cash flow for any one period. Segments Public companies are required to disclose certain information about their reportable operating segments. Operating segments are defined as significant components of an enterprise for which separate financial information is available and...

  • Page 96
    ... TW transferred its 12.43% non-voting common stock interest in TW NY to TWC in exchange for 26.7 million newly issued shares (after giving effect to the TWC Reverse Stock Split discussed below) of TWC's Class A common stock (the "TW NY Exchange"). On March 12, 2009, TWC paid a special cash dividend...

  • Page 97
    ... consolidated statement of operations. The primary input in estimating the fair value of TWC's investment in Clearwire Communications was the quoted market value of Clearwire's publicly traded shares of Class A common stock at December 31, 2008, which declined significantly from May 2008, the date...

  • Page 98
    ... fair value requires the exercise of significant judgment, including judgment about appropriate discount rates, perpetual growth rates and the amount and timing of future cash flows. The Company determined that cable franchise rights and goodwill were not impaired during its annual impairment...

  • Page 99
    ... ...New York City ...Texas ...Midwest ...Carolinas ...Northeast ...National ...Kansas City ...$ 3,558 2,156 3,270 2,835 1,659 962 382 - 14,822 Total ... $ As a result of the cable franchise rights impairment charge taken in 2008, the carrying values of the Company's impaired cable franchise rights...

  • Page 100
    ... adverse changes in the Company's business or market disruption. Borrowings under the $4.0 billion Revolving Credit Facility may be used for general corporate purposes, and unused credit is available to support borrowings under the CP Program (as defined below). In connection with the entry into...

  • Page 101
    ... principal amount of the TWC Debt Securities being redeemed and (ii) the sum of the present values of the remaining scheduled payments on such TWC Debt Securities discounted to the redemption date on a semi-annual basis at a government treasury rate plus a designated number of basis points for each...

  • Page 102
    ... to file reports with the SEC under the Exchange Act. The TWE Debt Securities were issued pursuant to an indenture, dated as of April 30, 1992, as it has been and may be amended from time to time (the "TWE Indenture") by and among TWE, the TWE Debt Guarantors and The Bank of New York Mellon...

  • Page 103
    ... in 2006, TW NY Cable LLC ("TW NY Cable"), a subsidiary of TWC, issued $300 million of its Series A Preferred Membership Units (the "TW NY Cable Preferred Membership Units") to a limited number of third parties. The TW NY Cable Preferred Membership Units pay cash dividends at an annual rate equal to...

  • Page 104
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) described above, (ii) if TW NY Cable is not the surviving entity or is no longer a limited liability company, the then holders of the TW NY Cable Preferred Membership Units have the right to receive from the surviving ...

  • Page 105
    ... each reporting period to reflect changes in the market price of Time Warner common stock and the number of Time Warner stock options held by TWC employees with an offsetting adjustment to TWC shareholders' equity. Beginning on March 12, 2009, the date of the Separation, TWC began accounting for...

  • Page 106
    .... The size and timing of the Company's purchases under the Stock Repurchase Program are based on a number of factors, including price and business and market conditions. From the program's inception through December 31, 2010, the Company repurchased 8.0 million shares of TWC Common Stock for $515...

  • Page 107
    ... compensation plans ...Repurchase and retirement of common stock ...Balance as of December 31, 2010 ...(a) Refer to Note 5 for further details regarding the TW NY Exchange and the Recapitalization. Common Stock Dividends The Company's Board of Directors declared quarterly cash dividends per share...

  • Page 108
    ...to be paid in cash, taking into account estimated forfeitures. In addition, in connection with the TWC Reverse Stock Split, pursuant to the 2006 Plan and related award agreements, adjustments were made to reduce the number of outstanding TWC RSUs. Neither the payment of the Special Dividend retained...

  • Page 109
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) TWC Stock Options The table below presents the assumptions used to value TWC stock options at their grant date for the years ended December 31, 2010, 2009 and 2008 and reflects the weighted average of all awards granted ...

  • Page 110
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) TWC Restricted Stock Units The following table summarizes information about unvested TWC RSUs for the year ended December 31, 2010: Number of Units (in thousands) WeightedAverage Grant Date Fair Value Unvested as of ...

  • Page 111
    ...are based on formulas that reflect the employees' years of service and compensation during their employment period. TWC uses a December 31 measurement date for its pension plans. Changes in the Company's projected benefit obligation, fair value of plan assets and funded status from January 1 through...

  • Page 112
    ... ...Rate of compensation increase ... 5.90% 4.25% 6.16% 4.25% 6.17% 4.00% In 2010, the discount rate used to determine benefit obligations was determined by the matching of plan liability cash flows to a portfolio of bonds individually selected from a large population of high-quality corporate...

  • Page 113
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2010, 2009 and 2008 were as follows: 2010 2009 2008 Discount rate ...Expected long-term return on plan assets ......

  • Page 114
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following tables set forth the investment assets of the qualified pension plans, which exclude accrued investment income and accrued liabilities, by level within the fair value hierarchy as of December 31, 2010 and ...

  • Page 115
    ... and market research reports), spreads, bids and offers. U.S. government asset-backed debt securities consist of pass-through mortgage-backed securities issued by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association valued using available trade information, dealer...

  • Page 116
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 16. RESTRUCTURING COSTS Beginning in the first quarter of 2009, the Company began a restructuring to improve operating efficiency, primarily related to headcount reductions of approximately 900 and 1,300 in 2010 and 2009,...

  • Page 117
    ..., 2009, TWC employees who held stock options under Time Warner equity plans were treated as if their employment with Time Warner had been terminated without cause at the time of the Separation. In most cases, this treatment resulted in shortened exercise periods, generally one year from the date of...

  • Page 118
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Significant components of TWC's deferred income tax liabilities, net, as of December 31, 2010 and 2009 are as follows (in millions): December 31, 2010 2009 Equity-based compensation ...Investments ...Other(a) ...Valuation...

  • Page 119
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Uncertain Income Tax Positions The Company recognizes income tax benefits for those income tax positions determined more likely than not to be sustained upon examination, based on the technical merits of the positions. The...

  • Page 120
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 18. RELATED PARTY TRANSACTIONS In the normal course of conducting its business, the Company has various transactions with equity-method investments, Time Warner and affiliates and subsidiaries of Time Warner. Effective ...

  • Page 121
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table summarizes the Company's aggregate contractual obligations as of December 31, 2010 under certain programming, Digital Phone and high-speed data connectivity and other agreements and the estimated timing...

  • Page 122
    ...") filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that the Company and a number of other cable operators infringed several patents purportedly related to a variety of technologies, including high-speed data and IP-based telephony services. In addition...

  • Page 123
    ...TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) on September 13, 2006, Rembrandt filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that the Company infringes several patents purportedly related to "high-speed cable modem internet products and services." On June...

  • Page 124
    ... 31, 2009 included the TW NY Exchange, in which Historic TW transferred its 12.43% non-voting common stock interest in TW NY to TWC in exchange for 26.7 million newly issued shares (after giving effect to the TWC Reverse Stock Split) of TWC's Class A common stock. Interest Expense, Net Interest...

  • Page 125
    ... of Time Warner Cable Inc. (the "Parent Company"). The Guarantor Subsidiaries have fully and unconditionally, jointly and severally, directly or indirectly, guaranteed the debt issued by the Parent Company in its 2007 registered exchange offer and its 2008, 2009 and 2010 public offerings. The Parent...

  • Page 126
    ... costs incurred by the Parent Company, the Guarantor Subsidiaries or the Non-Guarantor Subsidiaries are allocated to the various entities based on the relative number of video subscribers at each entity. Effective January 1, 2010, the Company prospectively modified its intercompany transfer pricing...

  • Page 127
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Consolidating Balance Sheet December 31, 2010 Parent Company Guarantor Subsidiaries NonGuarantor Subsidiaries (in millions) TWC Consolidated Eliminations ASSETS Current assets: Cash and equivalents ...$ Receivables, net ...

  • Page 128
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Consolidating Balance Sheet December 31, 2009 Parent Company Guarantor Subsidiaries NonGuarantor Subsidiaries (in millions) TWC Consolidated Eliminations ASSETS Current assets: Cash and equivalents ...$ Receivables, net ...

  • Page 129
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Consolidating Statement of Operations Year Ended December 31, 2010 Parent Company Guarantor Subsidiaries NonGuarantor Subsidiaries (in millions) TWC Consolidated Eliminations Revenues ...Costs of revenues ...Selling, ...

  • Page 130
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Consolidating Statement of Operations Year Ended December 31, 2009 Parent Company Guarantor Subsidiaries NonGuarantor Subsidiaries (in millions) TWC Consolidated Eliminations Revenues ...Costs of revenues ...Selling, ...

  • Page 131
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Consolidating Statement of Operations Year Ended December 31, 2008 Parent Company Guarantor Subsidiaries NonGuarantor Subsidiaries (in millions) TWC Consolidated Eliminations Revenues ...$ Costs of revenues ...Selling, ...

  • Page 132
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Consolidating Statement of Cash Flows Year Ended December 31, 2010 Parent Company Guarantor Subsidiaries NonGuarantor Subsidiaries (in millions) TWC Consolidated Eliminations Cash provided (used) by operating activities ...

  • Page 133
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Consolidating Statement of Cash Flows Year Ended December 31, 2009 Parent Company Guarantor Subsidiaries NonGuarantor Subsidiaries (in millions) TWC Consolidated Eliminations Cash provided by operating activities ...$ ...

  • Page 134
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Consolidating Statement of Cash Flows Year Ended December 31, 2008 Parent Company Guarantor Subsidiaries NonGuarantor Subsidiaries (in millions) TWC Consolidated Eliminations Cash provided (used) by operating activities ...

  • Page 135
    TIME WARNER CABLE INC. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act). The Company's ...

  • Page 136
    ... PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Time Warner Cable Inc. We have audited the accompanying consolidated balance sheet of Time Warner Cable Inc. (the "Company") as of December 31, 2010 and 2009, and the related consolidated statements of operations, cash flows...

  • Page 137
    ...and the related consolidated statements of operations, cash flows, equity and comprehensive income for each of the three years in the period ended December 31, 2010 of Time Warner Cable Inc. and our report dated February 18, 2011 expressed an unqualified opinion thereon. New York, New York February...

  • Page 138
    ... 31, 2009 2008 2007 (in millions, except per share data) 2006 Selected Operating Statement Information:(a) Revenues: Video ...High-speed data...Voice ...Advertising ...Total revenues...Total costs and expenses(b) ...Operating Income (Loss)(b) ...Interest expense, net ...Other income (expense...

  • Page 139
    ... all of the cable assets of Adelphia Communications Corporation ("Adelphia") and related transactions. In addition, effective January 1, 2007, TWC 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...

  • Page 140
    ... ...Advertising ...Total revenues ...Operating Income ...Net income...Net income attributable to TWC shareholders ...Net income per common share attributable to TWC common shareholders: ...Basic(a) ...Diluted(a) ...Common stock-high(b)(c) ...Common stock-low(b) ...Special cash dividend declared and...

  • Page 141
    ... and Communications Corporation ("ATC"), the Company and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.10 to Time Warner Inc.'s ("Time Warner") Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-15062)). Ninth Supplemental Indenture dated as...

  • Page 142
    ... and Mizuho Corporate Bank, Ltd., as Co-Documentation Agents, with associated Guarantees (incorporated herein by reference to Exhibit 10.52 to the Time Warner 2005 Form 10-K) (terminated on December 21, 2009). Amended and Restated Limited Liability Company Agreement of TW NY Cable, dated as of July...

  • Page 143
    ...) (the "Time Warner March 28, 2003 Form 8-K")). First Amendment, dated as of December 31, 2009, to the TWE Limited Partnership Agreement, between Time Warner Cable LLC, TW NY Cable, and TWE GP Holdings LLC (incorporated herein by reference to Exhibit 10.2 to the Company's Annual Report on Form 10...

  • Page 144
    ... Declaration of Trust, dated as of December 18, 2003, by and between Kansas City Cable Partners and Wilmington Trust Company (incorporated herein by reference to Exhibit 10.6 to the TWC February 13, 2007 Form 8-K). Separation Agreement, dated May 20, 2008, among Time Warner, the Company, TWE, TW NY...

  • Page 145
    ... Cable Inc. 2006 Stock Incentive Plan, as amended, effective March 12, 2009 (incorporated herein by reference to Exhibit 10.1 to the TWC March 31, 2009 Form 10-Q). Time Warner Cable Inc. 2007 Annual Bonus Plan (incorporated herein by reference to Exhibit 10.45 to the Company's Annual Report on Form...

  • Page 146
    ...Kansas City Cable Partners General Partner LLC, TCI Texas Cable Holdings LLC, TCI Texas Cable, LLC, Comcast TCP Holdings, Inc., Comcast TCP Holdings, LLC, KCCP Trust, Time Warner Cable Information Services (Kansas), LLC, Time Warner Cable Information Services (Missouri), LLC, Time Warner Information...

  • Page 147
    ... the Company's Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on February 18, 2011, formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheet as of December 31, 2010 and December 31, 2009, (ii) Consolidated Statement of Operations for...

  • Page 148
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  • Page 150
    ... Services Peter R. Haje Lead Director Legal and Business Consultant Former Executive Vice President, General Counsel & Secretary Time Warner Inc. N.J. Nicholas, Jr. Investor Former Co-Chief Executive Officer Time Warner Inc. Glenn A. Britt Chairman & Chief Executive Officer Time Warner Cable...

  • Page 151
    ...Form 10-Q, and Proxy Statement, may be ordered, viewed or downloaded on the company's website: www.timewarnercable.com/investors. Alternatively, copies may be ordered free of charge by calling toll free: 877-4 INFO-TWC. Common Stock Time Warner Cable Inc. common stock is listed on the New York Stock...

  • Page 152
    Time Warner Cable Inc. 60 Columbus Circle New York, NY 10023 212.364.8200 www.timewarnercable.com NYSE: TWC