Time Warner Cable 2011 Annual Report Download - page 62

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
Selling, general and administrative expenses. The components of selling, general and administrative expenses were as
follows (in millions):
Year Ended December 31,
2010 2009 % Change
Employee ...................................................... $ 1,330 $ 1,250 6.4%
Marketing ...................................................... 629 563 11.7%
Bad debt(a) ...................................................... 114 143 (20.3%)
Separation-related “make-up” equity award costs(b) ...................... 5 9 (44.4%)
Other .......................................................... 1,047 965 8.5%
Total ........................................................... $ 3,125 $ 2,930 6.7%
(a) Bad debt expense includes amounts charged to expense associated with the Company’s allowance for doubtful accounts and collection expenses, net of
late fees billed to subscribers. Late fees billed to subscribers were $140 million and $118 million in 2010 and 2009, respectively.
(b) As a result of the Separation from Time Warner on March 12, 2009, pursuant to their terms, Time Warner equity awards held by TWC employees were
forfeited and/or experienced a reduction in value as of the date of the Separation. Amounts represent the costs associated with TWC stock options and
RSUs granted to TWC employees during the second quarter of 2009 to offset these forfeitures and/or reduced values.
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 expense and consulting and professional fees, partially offset by a decrease in bad debt expense primarily due to
improvements in collection efforts during 2010. Bad debt expense for the fourth quarter of 2010 increased compared to 2009
as the fourth quarter of 2009 included a benefit from the reduction in the allowance for doubtful accounts to reflect the
quality of residential receivables as of the end of 2009, which benefited both the fourth quarter and full year 2009.
Additionally, casualty insurance expense in 2009 included a benefit of approximately $11 million due to changes in estimates
of previously established casualty insurance accruals.
Restructuring costs. The results for 2010 and 2009 include restructuring costs of $52 million and $81 million,
respectively, primarily related to headcount reductions of approximately 900 and 1,300 in 2010 and 2009, respectively, and
other exit costs, including the termination of a facility lease during the second quarter of 2010.
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,
2010 2009 % Change
OIBDA ........................................................ $ 6,818 $ 6,402 6.5%
Depreciation .................................................. (2,961) (2,836) 4.4%
Amortization .................................................. (168) (249) (32.5%)
Operating Income ................................................ 3,689 3,317 11.2%
Interest expense, net .......................................... (1,394) (1,319) 5.7%
Other expense, net ............................................ (99) (86) 15.1%
Income before income taxes ...................................... 2,196 1,912 14.9%
Income tax provision .......................................... (883) (820) 7.7%
Net income ...................................................... 1,313 1,092 20.2%
Less: Net income attributable to noncontrolling interests ................ (5) (22) (77.3%)
Net income attributable to TWC shareholders .......................... $ 1,308 $ 1,070 22.2%
OIBDA. OIBDA increased principally as a result of revenue growth, partially offset by higher costs of revenues and
selling, general and administrative expenses, as discussed above. The results for 2010 included net expenses of
approximately $50 million related to mobile high-speed data service.
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