Time Warner Cable 2011 Annual Report Download - page 123

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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
21. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
TWE and TW NY (the “Guarantor Subsidiaries”) are subsidiaries 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 subsequent public offerings. The Parent Company
owns all of the voting interests, directly or indirectly, of both TWE and TW NY.
The SEC’s rules require that condensed consolidating financial information be provided for subsidiaries that have
guaranteed debt of a registrant issued in a public offering, where each such guarantee is full and unconditional and where the
voting interests of the subsidiaries are wholly owned by the registrant. Set forth below are condensed consolidating financial
statements presenting the financial position, results of operations, and cash flows of (i) the Parent Company, (ii) the
Guarantor Subsidiaries on a combined basis (as such guarantees are joint and several), (iii) the direct and indirect
non-guarantor subsidiaries of the Parent Company (the “Non-Guarantor Subsidiaries”) on a combined basis and (iv) the
eliminations necessary to arrive at the information for Time Warner Cable Inc. on a consolidated basis.
There are no legal or regulatory restrictions on the Parent Company’s ability to obtain funds from any of its subsidiaries
through dividends, loans or advances.
These condensed consolidating financial statements should be read in conjunction with the consolidated financial
statements of Time Warner Cable Inc.
Basis of Presentation
In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to
(i) the Parent Company’s interests in the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries, (ii) the Guarantor
Subsidiaries’ interests in the Non-Guarantor Subsidiaries and (iii) the Non-Guarantor Subsidiaries interests in the Guarantor
Subsidiaries, where applicable, even though all such subsidiaries meet the requirements to be consolidated under U.S.
generally accepted accounting principles. All intercompany balances and transactions between the Parent Company, the
Guarantor Subsidiaries and the Non-Guarantor Subsidiaries have been eliminated, as shown in the column “Eliminations.”
The accounting bases in all subsidiaries, including goodwill and identified intangible assets, have been allocated to the
applicable subsidiaries.
Certain administrative 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 agreement for certain
services. While this modification did not materially impact net income of either the Guarantor Subsidiaries or the
Non-Guarantor Subsidiaries, it did increase revenues and associated expenses (including expenses reported as intercompany
royalties) for the Non-Guarantor Subsidiaries and reduced revenues and associated expenses for the Guarantor Subsidiaries.
Prior to October 1, 2009, interest income (expense), net, was determined based on third-party debt and the relevant
intercompany amounts within the respective legal entity. Beginning October 1, 2009, the Parent Company began to allocate
interest expense to certain subsidiaries based on each subsidiary’s contribution to revenues. This allocation serves to reduce
the Parent Company’s interest expense and increase the interest expense of both the Guarantor Subsidiaries and
Non-Guarantor Subsidiaries.
Prior to March 12, 2009, Time Warner Cable Inc. was not a separate taxable entity for U.S. federal and various state
income tax purposes and its results were included in the consolidated U.S. federal and certain state income tax returns of
Time Warner Inc. In the condensed consolidating financial statements, income tax provision has been presented based on
each subsidiary’s legal entity basis. Deferred taxes of the Parent Company, the Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries have been presented based upon the temporary differences between the carrying amounts of the
respective assets and liabilities of the applicable entities.
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