Time Warner Cable 2012 Annual Report Download - page 68

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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
On September 27, 2010, the Small Business Jobs Act was enacted, which provided for a bonus depreciation deduction
of 50% of the cost of the Company’s qualified capital expenditures retroactive to the beginning of 2010. Additionally, on
December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was enacted,
which provided for a bonus depreciation deduction of 100% of the cost of the Company’s qualified capital expenditures from
September 8, 2010 through December 31, 2011, which was reduced to 50% for 2012. As a result of these Acts, the Company
received an income tax refund of $270 million in the first quarter of 2011. Due to the decline in the bonus depreciation
deduction and the continued reversal of bonus depreciation benefits recorded in prior years, as well as the fourth-quarter
2012 income tax payments on the gain on the sale of SpectrumCo’s licenses, net income tax payments increased significantly
in 2012. This increase was partially offset by the usage of Insight’s net operating loss carryforwards, other Insight-related
items, a taxable loss on the sale of the Clearwire investment and a tax deduction related to reserves from the formation of an
insurance subsidiary in connection with the internal reorganization discussed in Note 20 to the accompanying consolidated
financial statements.
On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted, which provides for the extension of bonus
depreciation deductions of 50% of the cost of the Company’s qualified capital expenditures for 2013. This extension largely
offsets the Company’s expected increase in net income tax payments in 2013 from the reversal of bonus depreciation benefits
recorded in prior years. As discussed above, net income tax payments in 2012 benefited from a number of deductions that will
not recur in 2013 and, as a result, the Company expects that net income tax payments in 2013 will increase compared to 2012.
Net interest payments for 2012 increased primarily as a result of interest payments related to the 2011 Bond Offerings.
The Company contributed $285 million to its qualified defined benefit pension plans (the “qualified pension plans”) and
$4 million to its nonqualified defined benefit pension plan (the “nonqualified pension plan” and, together with the qualified
pension plans, the “pension plans”) during 2012. As of December 31, 2012, the pension plans were underfunded by $209
million, primarily due to the decline in interest rates to historically low levels. The Company may make discretionary cash
contributions to the qualified pension plans in 2013. Such contributions will be dependent on a variety of factors, including
current and expected interest rates, asset performance, the funded status of the qualified pension plans and management’s
judgment. For the nonqualified pension plan, the Company will continue to make contributions in 2013 to the extent benefits
are paid. See Note 14 to the accompanying consolidated financial statements for additional discussion of the pension plans.
Cash provided by operating activities increased from $5.218 billion in 2010 to $5.688 billion in 2011. This increase was
primarily related to changes in income tax refunds and payments and an increase in OIBDA, partially offset by increases in
pension plan contributions and net interest payments.
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