Time Warner Cable 2011 Annual Report Download - page 56

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
Merger-related and restructuring costs. During 2011, the Company incurred merger-related costs of $10 million in
connection with the NaviSite and NewWave cable system acquisitions and the pending Insight acquisition. No such costs
were incurred during 2010. The Company expects to incur additional merger-related costs during 2012 related to the Insight
acquisition.
The Company incurred restructuring costs of $60 million and $52 million during 2011 and 2010, respectively. These
restructuring costs were primarily related to employee terminations of approximately 775 and 900 in 2011 and 2010,
respectively, and other exit costs, including the termination of a facility lease during the second quarter of 2010. The
Company expects to incur restructuring costs during 2012 in connection with various initiatives intended to improve
operating efficiency, primarily related to employee terminations.
Reconciliation of OIBDA to Operating Income. The following table reconciles OIBDA to Operating Income. In
addition, the table provides the components from Operating Income to net income attributable to TWC shareholders for
purposes of the discussions that follow (in millions):
Year Ended December 31,
2011 2010 % Change
OIBDA ........................................................ $ 7,096 $ 6,818 4.1%
Depreciation .................................................. (2,994) (2,961) 1.1%
Amortization .................................................. (33) (168) (80.4%)
Operating Income ................................................ 4,069 3,689 10.3%
Interest expense, net .......................................... (1,518) (1,394) 8.9%
Other expense, net ............................................ (89) (99) (10.1%)
Income before income taxes ...................................... 2,462 2,196 12.1%
Income tax provision .......................................... (795) (883) (10.0%)
Net income ...................................................... 1,667 1,313 27.0%
Less: Net income attributable to noncontrolling interests ................ (2) (5) (60.0%)
Net income attributable to TWC shareholders .......................... $ 1,665 $ 1,308 27.3%
OIBDA. OIBDA increased principally as a result of revenue growth, partially offset by higher costs of revenues and
selling, general and administrative expenses and the wireless-related asset impairments recorded in the fourth quarter of
2011, as discussed above. Included within OIBDA for 2011 are NaviSite and NewWave cable system revenues of $94
million and $13 million, respectively, and operating expenses of $72 million and $8 million, respectively.
The results for 2011 included net expenses from new initiatives of approximately $70 million related to the Company’s
mobile high-speed data service and other new services, such as advanced home monitoring and security services. The results
for 2010 included net expenses of approximately $50 million related to mobile high-speed data service. The Company
expects to incur net expenses of approximately $100 million to $150 million in 2012 related to new initiatives, including
advanced home monitoring and security services, the deployment of WiFi access points and the expected fall 2012 launch of
regional sports networks (“RSNs”). The RSNs will carry Los Angeles Lakers’ basketball games and other regional sports
programming. Due to the timing of the RSN launches, a significant portion of the 2012 net expenses from new initiatives is
expected to be incurred in the fourth quarter of 2012.
Depreciation. As discussed above, depreciation expense for the fourth quarter of 2010 benefited from a reclassification
of approximately $15 million.
Amortization. The decrease in amortization expense was primarily due to (a) approximately $880 million of customer
relationships acquired in the July 31, 2006 transactions with Adelphia Communications Corporation and Comcast (the
“Adelphia/Comcast Transactions”) that were fully amortized as of July 31, 2010 and (b) 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”) that were fully amortized as of December 31, 2010.
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