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TIME WARNER CABLE
ANNUAL REPORT
2014

Table of contents

  • Page 1
    2014 TIME WARNER CABLE ANNUAL REPORT

  • Page 2
    ... on 23rd Street in New York City, welcome guests to a modern, interactive, and full-service environment. Visitors learn more about our suite of TV, Internet and phone products and services, as well as our home security and energy management system, Time Warner Cable IntelligentHome-all designed to...

  • Page 3
    ...to report, the company today is far stronger than at the beginning of 2014. We have great operating momentum and are extremely well positioned for the future. Reflecting on 2014 We began 2014 with our historic agreement to merge with Comcast Corporation. The transaction recognized Time Warner Cable...

  • Page 4
    ... service, make investments to improve the reliability of our network, enhance training and tools for our customer service, sales and retention agents, make our products better, deploy new and more capable equipment in our customers' homes, and roll out TWC Maxx...which, beyond increasing speeds...

  • Page 5
    ..., Kansas City, Raleigh, San Antonio and San Diego in 2015. • Deployed more than 8 million new set-top boxes, digital adapters and advanced modems in customers' homes. • Expanded our VOD offering to nearly 20,000 choices. • Made our TWC TV® streaming video app available on a variety of devices...

  • Page 6
    In 2014, Time Warner Cable reached a major milestone. We helped to connect more than one million young people to science, technology, engineering and math (STEM). TWC remains committed to its Connect a Million Minds® initiative and is continuing to connect young people to hands-on STEM learning ...

  • Page 7
    ... 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...

  • Page 8

  • Page 9
    ... include security and home management services, and TWC's business services also include networking and transport services (including cell tower backhaul services) and enterprise-class, cloud-enabled hosting, managed applications and services. TWC also sells video and online advertising inventory to...

  • Page 10
    ... the address to be an active link or to incorporate the contents of the website into this report. Services TWC has three reportable segments: Residential Services, Business Services and Other Operations. Residential Services TWC offers video, high-speed data and voice services, as well as security...

  • Page 11
    ... addition, during 2014, TWC launched the Phone 2 Go app, which allows voice customers to access their home phone service on a mobile device for no additional charge over a WiFi or cellular data connection. Through the Phone 2 Go app, voice customers are able to receive and place calls and send text...

  • Page 12
    ... to connect customers that their own networks do not reach. As of December 31, 2014, TWC served 578,000 business high-speed data subscribers. Video Services TWC offers business customers a wide spectrum of video services, including a full range of video programming tiers and music services targeting...

  • Page 13
    ..., managed application and messaging solutions along with other related information technology ("IT") solutions and professional services for medium-sized and enterprise customers across a variety of industries. Other Operations TWC's Other Operations segment principally consists of Time Warner Cable...

  • Page 14
    ... products to improve reliability and customer satisfaction. TWC increased internet speeds to up to 300 Mbps in New York, New York, Los Angeles, California and Austin, Texas during 2014. It also ceased delivering analog signals (going "all digital") in New York City and Los Angeles during 2014 and is...

  • Page 15
    ... Competitors Incumbent local telephone companies. TWC's residential video, high-speed data and voice services face competition throughout its operating areas from the video, digital subscriber line ("DSL"), fiber to the home ("FTTH"), wireless broadband and wireline and wireless phone offerings of...

  • Page 16
    ...2014, AT&T announced its agreement with DIRECTV to acquire DIRECTV. Overbuilders. In some of TWC's operating areas, other operators have built systems and offer video, high-speed data and voice services in competition with TWC. For example, in Kansas City, TWC's residential video and high-speed data...

  • Page 17
    ...to increase as new formats for advertising seek to attract the same advertisers. TWC competes for advertising revenue against, among others, local broadcast stations, national cable and broadcast networks, radio stations, print media and online advertising companies and content providers. Employees...

  • Page 18
    ...a few specialty networks and public access, educational and government channels. This regulation also applies to the installation, sale and lease of equipment used by subscribers to receive basic service, such as set-top boxes and remote control units. As of December 31, 2014, the FCC has determined...

  • Page 19
    ... and sale of settop boxes and other equipment that can be used to receive digital video services. With the exception of certain one-way devices such as digital transport adapters ("DTAs"), these regulations prohibit cable operators from placing into service set-top boxes that perform both channel...

  • Page 20
    ...addition, the Communications Act and FCC rules had limited the ability of cable-affiliated cable networks to offer exclusive programming contracts to a cable operator. In October 2012, the FCC allowed a preemptive restriction on exclusive contracts to expire, while at the same time making clear that...

  • Page 21
    ... or legislation could limit TWC's ability to operate its business profitably and to manage its broadband facilities efficiently and could result in increased taxes and fees imposed on TWC." Other regulatory requirements. TWC's high-speed Internet access services are also subject to a number of other...

  • Page 22
    ... information relating to consumers. Certain of these requirements are industry specific and regulate TWC because it is a cable operator, a telecommunications provider and the operator of websites and mobile applications. Other requirements apply generally to all companies that hold consumer data...

  • Page 23
    ... Emergency Alert System requirements for analog and digital services; commercial restrictions on children's programming; recordkeeping and public file access requirements; and technical rules relating to operation of the cable network. In addition, TWC's video, Internet access and voice services are...

  • Page 24
    ...% owned subsidiaries of Advance Publications and Newhouse Broadcasting Corporation. In connection with a TWC internal reorganization in September 2012, Time Warner Cable Enterprises LLC ("TWCE") acquired TWE's and Time Warner NY Cable LLC's ("TW NY Cable") general and preferred partnership interests...

  • Page 25
    ... and information delivery. Technological advancements, such as new video formats and Internet streaming and downloading of programming that can be viewed on televisions, computers and mobile devices, many of which have been beneficial to TWC's business, have nonetheless increased the number of...

  • Page 26
    ... similar events, may disrupt TWC's business. Network and information systems and other technologies are critical to TWC's operating activities, both to its internal uses and in supplying services to customers. Network or information system shutdowns or other service disruptions caused by events such...

  • Page 27
    ... in the credit markets could increase TWC's borrowing costs and reduce the availability of financing. As of December 31, 2014, TWC had net debt of $23.011 billion. Adverse changes in the public credit markets, including increases in interest rates, could increase TWC's cost of borrowing and make it...

  • Page 28
    ... unfavorable terms. TWC has entered into long-term contracts for certain sports programming rights, including a media rights agreement with the Los Angeles Lakers and a services agreement with American Media Productions, which owns SportsNet LA, a regional sports network that carries the Los Angeles...

  • Page 29
    ...government has extended regulation to high-speed data services. TWC is subject to regulation of its video services relating to rates, equipment, technologies, programming, levels and types of services, taxes and other charges. Modification to existing regulations or the imposition of new regulations...

  • Page 30
    ...in increased taxes and fees imposed on TWC. The increasing popularity of bandwidth-intensive Internet-based services has increased the demand for and usage of TWC's high-speed data service. In order to continue to provide quality high-speed data service at attractive prices and to offer new services...

  • Page 31
    ... tax counsel confirming that the transactions undertaken in connection with the Separation, including the transfer by a subsidiary of Time Warner of its 12.43% non-voting 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...

  • Page 32
    ... equipment. TWC distributes video signals via the Company's video-specific infrastructure and increasingly over the Company's high-speed data infrastructure. TWC's cable plant and related equipment generally are either attached to utility poles under pole rental agreements with local public...

  • Page 33
    ... housing national operations centers and data centers used in its high-speed data services business in Herndon, Virginia; Charlotte, North Carolina; Raleigh, North Carolina; Syracuse, New York; Austin, Texas; Kansas City, Missouri; Los Angeles, California; San Diego, California; New York, New York...

  • Page 34
    ... of Insight Communications Company, Inc. ("Insight"), a cable company serving subscribers in Kentucky, Indiana and Ohio, from February 2006 until Insight's acquisition by the Company in February 2012. Prior to that, Mr. Jain served as Executive Vice President and Chief Operating Officer of Insight...

  • Page 35
    ... served as the Company's President and Chief Operating Officer from December 2010, the Company's Senior Executive Vice President and Chief Financial Officer from January 2008 and the Company's Senior Executive Vice President from August 2005. Mr. Marcus joined the Company from Time Warner Inc. where...

  • Page 36
    ...'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 and dividend information for TWC Common Stock for the...

  • Page 37
    ... to TWC's management to allow timely decisions regarding the required disclosure. Management's Report on Internal Control Over Financial Reporting Management's report on internal control over financial reporting and the report of the independent registered public accounting firm thereon set forth...

  • Page 38
    ... 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 the Company's website at www.twc.com/investors. Amendments to the Code...

  • Page 39
    ... Index is incorporated herein by reference. Exhibits 10.14 through 10.47 listed on the accompanying Exhibit Index identify management contracts or compensatory plans or arrangements required to be filed as exhibits to this Annual Report, and such listing is incorporated herein by reference. 31

  • Page 40
    ... thereunto duly authorized. TIME WARNER CABLE INC. By: /S/ ROBERT D. MARCUS Name: Robert D. Marcus Title: Chairman and Chief Executive Officer Dated: February 13, 2015 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 41
    ... Statement of Equity ...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 ... 34 67 68 69 70 71 72 126...

  • Page 42
    ...providers of video, high-speed data and voice services in the U.S., with technologically advanced, well-clustered cable systems located mainly in five geographic areas - New York State (including New York City), the Carolinas, the Midwest (including Ohio, Kentucky and Wisconsin), Southern California...

  • Page 43
    ...), price and consumption (unlimited, 30 gigabyte ("GB") and 5 GB) levels and, for most high-speed data customers, includes access to a nationwide network of more than 300,000 Cable WiFi hotspots along with communications and Internet security features. TWC's voice service provides unlimited calling...

  • Page 44
    ... environment. Business Services Segment TWC offers a wide range of business high-speed data, networking, voice, video, hosting and cloud computing services. As of December 31, 2014, TWC served 687,000 business customers, including small and medium businesses; large enterprises; government, education...

  • Page 45
    ...broadcast satellite services. TWC's residential voice service faces competition from wireless voice providers, "over-the-top" phone services and other alternatives. Business Services Segment TWC faces significant competition as to each of its business services offerings. Its business high-speed data...

  • Page 46
    ... television, online, print and radio advertising). Employee-related costs primarily include costs associated with retail centers and activities related to direct sales and retention sales. Technical operations. Technical operations costs consist of the costs incurred at the Residential Services...

  • Page 47
    ... sale of premium networks, transactional video-on-demand (e.g., events and movies) and digital video recorder ("DVR") service. High-speed data. High-speed data revenue primarily includes subscriber fees for the Company's high-speed data services and related equipment rental and installation charges...

  • Page 48
    ...Company's high-speed data service and (b) TWC's management of certain functions, including, among others, the acquisition of programming rights, as well as the provision of certain functions, including engineering; (iii) home shopping network-related revenue (including commissions earned on the sale...

  • Page 49
    ...consist of costs associated with broad "corporate" functions (e.g., accounting and finance, information technology, executive management, legal and human resources) or functions supporting more than one reportable segment that are centrally managed (e.g., facilities, network operations, vehicles and...

  • Page 50
    .... 2013 2013 vs. 2012 2014 Revenue: Residential services ...Business services ...Other ...Total revenue ...Costs and expenses: Programming and content ...Sales and marketing(a) ...Technical operations(a) ...Customer care(a) ...Other operating(a) ...Depreciation ...Amortization ...Merger-related and...

  • Page 51
    ... Operations segment; sales and marketing costs at the Residential Services and Business Services segments; customer care costs at the Residential Services segment; and costs associated with advertising inventory sold on behalf of other video distributors ("ad rep agreements") at the Other Operations...

  • Page 52
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) connection with the DukeNet acquisition. During 2013, the Company incurred merger-related costs of $13 million in connection with the Insight and DukeNet acquisitions. During 2012...

  • Page 53
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) The income tax provision and effective tax rate for 2012 include (i) a benefit of $63 million related to a change in the tax rate applied to calculate the Company's net deferred ...

  • Page 54
    ... Year Ended December 31, 2013 2012 % Change 2014 vs. 2013 2013 vs. 2012 2014 Revenue: Video ...High-speed data ...Voice ...Other ...Total revenue ...Operating costs and expenses: Programming ...Sales and marketing(a) ...Technical operations(a) ...Customer care(a) ...Video franchise and other fees...

  • Page 55
    ... The Company's subscriber numbers as of December 31, 2014 reflect adjustments related to the treatment of employee accounts recorded during the second quarter of 2014 that decreased residential high-speed data subscribers by 10,000, residential voice subscribers by 17,000, residential single play...

  • Page 56
    ... CONDITION-(Continued) Average monthly revenue per unit for the Residential Services segment for 2014, 2013 and 2012 was as follows: Year Ended December 31, 2014 2013 2012 % Change 2014 vs. 2013 2013 vs. 2012 Video(a) ...High-speed data(b) ...Voice(c) ...Customer relationship(d) ...(a) $ 75...

  • Page 57
    ...2013 primarily related to increases in programming costs, sales and marketing costs and technical operations costs, partially offset by a decline in other operating costs. Operating costs and expenses in 2013 were also impacted by two additional months of Insight costs. Selected Residential Services...

  • Page 58
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Technical operations. Technical operations costs increased in 2014 primarily due to increased maintenance costs, higher compensation costs per employee and headcount growth, each ...

  • Page 59
    ...) Selected business subscriber-related statistics as of December 31, 2014, 2013 and 2012 were as follows (in thousands): December 31, 2013 % Change 2014 vs. 2013 2013 vs. 2012 2014 2012 Video(a) ...High-speed data(b) ...Voice(c) ...Single play(d) ...Double play(e) ...Triple play(f) ...Customer...

  • Page 60
    ... well as the Residential Services segment. Operating costs and expenses. Operating costs and expenses increased in 2014 primarily related to SportsNet LA content costs and growth in costs associated with ad rep agreements. Operating costs and expenses increased in 2013 primarily related to growth in...

  • Page 61
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Shared Functions. Costs and expenses associated with the Company's shared functions, which consist of operating costs associated with broad "corporate" functions (e.g., accounting...

  • Page 62
    ... by operating activities ...Capital expenditures ...Dividends paid ...Repurchases of common stock ...Proceeds from exercise of stock options ...Excess tax benefit from equity-based compensation ...Impact of the change in exchange rates on foreign currency denominated debt(a) ...All other, net...

  • Page 63
    ... in 2015 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 $5.525 billion in 2012 to $5.753 billion in 2013. This increase was primarily related to...

  • Page 64
    ...31, 2014 2013 2012 Capital expenditures ...$ Business acquisitions, net of cash acquired: DukeNet acquisition ...Insight acquisition ...All other ...Purchases of investments: Short-term investments in U.S. Treasury securities ...Loan to Sterling Entertainment Enterprises, LLC ...All other ...Return...

  • Page 65
    ... set-top boxes, remote controls, high-speed data modems (including wireless), telephone modems and the costs of installing such new equipment. Customer premise equipment also includes materials and labor costs incurred to install the "drop" cable that connects a customer's dwelling or business...

  • Page 66
    ...Time Warner Cable Enterprises LLC's ("TWCE") 8.875% senior notes due October 2012 ($350 million in aggregate principal amount), the repayment of Insight's senior credit facility and senior notes, repurchases of TWC common stock and the payment of quarterly cash dividends, partially offset by the net...

  • Page 67
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Outstanding Debt and Available Financial Capacity Debt as of December 31, 2014 and 2013 was as follows: Outstanding Balance as of December 31, 2014 2013 (in millions) Maturity ...

  • Page 68
    ..., high-speed data connectivity, fiber-related and TWC Media obligations. Amounts do not include the Company's reserve for uncertain tax positions and related accrued interest and penalties, which as of December 31, 2014 totaled $132 million, as the specific timing of any cash payments relating to...

  • Page 69
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) MARKET RISK MANAGEMENT Market risk is the potential gain/loss arising from changes in market rates and prices, such as interest rates. Interest Rate Risk Fixed-rate Debt As of ...

  • Page 70
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Foreign Currency Exchange Risk TWC is exposed to the market risks associated with fluctuations in the British pound sterling exchange rate as it relates to its £1.275 billion ...

  • Page 71
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Indefinite-lived Intangible Assets and Goodwill At least annually, separate tests are performed to determine if the Company's indefinite-lived intangible assets (primarily cable ...

  • Page 72
    ... million in 2014, 2013 and 2012, respectively. Pension expense is determined using certain assumptions, including the expected long-term rate of return on plan assets, discount rate and expected rate of compensation increases. TWC uses a December 31 measurement date for its pension plans. See Notes...

  • Page 73
    ... the 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, installation costs are capitalized only upon...

  • Page 74
    TIME WARNER CABLE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) • changes in the regulatory and tax environments in which the Company operates, including, among others, regulation of broadband Internet services, "net neutrality" legislation ...

  • Page 75
    TIME WARNER CABLE INC. CONSOLIDATED BALANCE SHEET December 31, 2014 2013 (in millions) ASSETS Current assets: Cash and equivalents ...Receivables, less allowances of $109 million and $77 million as of December 31, 2014 and 2013, respectively ...Deferred income tax assets ...Other current assets ......

  • Page 76
    TIME WARNER CABLE INC. CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31, 2014 2013 2012 (in millions, except per share data) Revenue ...$ Costs and expenses: Programming and content ...Sales and marketing ...Technical operations ...Customer care ...Other operating ...Depreciation ......

  • Page 77
    TIME WARNER CABLE INC. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year Ended December 31, 2013 2012 (in millions) 2014 Net income ...$ Change in accumulated unrealized losses on pension benefit obligation, net of income tax benefit (provision) of $230 million in 2014, $(377) million in 2013 ...

  • Page 78
    ... tax benefit from equity-based compensation ...Changes in operating assets and liabilities, net of acquisitions and dispositions: Receivables ...Accounts payable and other liabilities ...Other changes ...Cash provided by operating activities ...INVESTING ACTIVITIES Capital expenditures ...Business...

  • Page 79
    ... compensation ...Shares issued upon exercise of stock options ...Taxes paid in lieu of shares issued for equity-based compensation ...Acquisition of noncontrolling interest . . Other changes ...Balance as of December 31, 2012 ...Net income ...Other comprehensive income ...Cash dividends declared...

  • Page 80
    ... California (including Los Angeles) and Texas. TWC's mission is to connect its customers to the world-simply, reliably and with superior service. TWC offers video, high-speed data and voice services to residential and business services customers. TWC's residential services also include security...

  • Page 81
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 2. RECENT ACCOUNTING STANDARDS Accounting Standards Not Yet Adopted Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board issued authoritative guidance that outlines a single ...

  • Page 82
    ... boxes and high-speed data and telephone modems, installation costs are capitalized only upon the initial deployment of these assets. All costs incurred in subsequent disconnects and reconnects of previously installed customer premise equipment are expensed as incurred. Standard capitalization rates...

  • Page 83
    ... using a DCF analysis based on the terms of the contracts. This valuation requires estimates of future interest rates, forward exchange rates and judgments about the future credit worthiness of the Company and each counterparty over the terms of the contracts. Refer to Note 11 for further details...

  • Page 84
    ... aspect of accounting for investments involves determining whether an other-than-temporary decline in value of an investment has been sustained. In making this determination, all available information (e.g., budgets, business plans, financial statements, etc.) in addition to quoted market prices, if...

  • Page 85
    ...time of grant for the expected term of the option. The expected dividend yield percentage is determined by dividing the expected annual dividend by the market price of TWC common stock at the date of grant. Segments Public companies are required to disclose certain information about their reportable...

  • Page 86
    ... the sale of premium networks, transactional video-on-demand (e.g., events and movies) and digital video recorder service; (ii) high-speed data revenue, including subscriber fees received from residential customers for high-speed data services and related equipment rental and installation charges...

  • Page 87
    ... customers are recorded as revenue. The amount of such fees recorded on a gross basis related to video, high-speed data and voice services was $666 million in 2014, $685 million in 2013 and $695 million in 2012. Operating Costs and Expenses Programming, high-speed data connectivity and voice network...

  • Page 88
    ... or Services If sales contracts are entered into for the sale of multiple products or services, the standalone selling price for each deliverable in the transaction is evaluated. For example, video, high-speed data and voice services are sold to subscribers in a bundled package at a rate lower...

  • Page 89
    ..."Comcast merger"). Upon completion of the Comcast merger, all of the outstanding shares of the Company will be cancelled and each issued and outstanding share will be converted into the right to receive 2.875 shares of Class A common stock of Comcast. At their special meetings on October 8, 2014 and...

  • Page 90
    ... DukeNet Acquisition On December 31, 2013, TWC completed its acquisition of DukeNet Communications, LLC ("DukeNet"), a regional fiber optic network company that provides data and high-capacity bandwidth services to wireless carrier, data center, government and enterprise customers in North Carolina...

  • Page 91
    ... in MLB Network, LLC (5.3% owned), iN Demand L.L.C. (28.9% owned) and National Cable Communications LLC (16.7% owned). In addition, the Company has an equity-method investment in Sterling Entertainment Enterprises, LLC (doing business as SportsNet New York, 26.8% owned). The Company has received...

  • Page 92
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Clearwire On September 13, 2012, the Company exchanged all of its beneficially owned shares of Class B common stock of Clearwire Corporation ("Clearwire") together with all of its beneficially owned Class B common units of...

  • Page 93
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Annual Impairment Analysis In the first quarter of 2014, in connection with the Company's determination that it has three reportable segments, the Company performed an evaluation of its reporting units and concluded that ...

  • Page 94
    ... 2015, which were repaid on February 2, 2015, and (b) the Company's commercial paper program. Senior Notes and Debentures TWC Notes and Debentures Notes and debentures issued by TWC as of December 31, 2014 and 2013 consisted of the following (in millions): Date of Issuance Maturity Interest Payment...

  • Page 95
    ...") publicly in a number of offerings pursuant to an indenture, dated as of April 9, 2007, as it has been and may be amended from time to time (the "TWC Indenture"), by and among the Company, Time Warner Cable Enterprises LLC ("TWCE"), a 100% owned subsidiary of the Company, and The Bank of New York...

  • Page 96
    ... specifically relating to a material adverse change in TWC's financial condition or results of operations. Borrowings under the Revolving Credit Facility may be used for general corporate purposes, and unused credit is available to support borrowings under the Commercial Paper Program (as...

  • Page 97
    ... Communications Corporation in 2006, Time Warner NY Cable LLC ("TW NY Cable"), a former 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. On August 1, 2013, all of the TW NY Cable...

  • Page 98
    ... related to the Company's cash flow hedges has been and is expected to be immaterial. Equity Award Reimbursement Obligation Prior to 2007, some of TWC's employees were granted options to purchase shares of Time Warner Inc. ("Time Warner") common stock in connection with their past employment...

  • Page 99
    ...of change. On March 12, 2014, all remaining outstanding Time Warner stock options held by TWC employees expired and the Company was obligated to reimburse Time Warner $6 million, which consisted of the intrinsic value of awards exercised through March 12, 2014 for which payment had not yet been made...

  • Page 100
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Changes in Common Stock Changes in common stock from January 1 through December 31 are presented below (in millions): 2014 2013 2012 Balance at beginning of year ...Shares issued under the equity-based compensation plan ...

  • Page 101
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table summarizes the changes in the components of accumulated other comprehensive income (loss), net, included in TWC shareholders' equity from January 1 through December 31 (in millions): 2014 2013 2012 ...

  • Page 102
    ...-related and restructuring costs in the consolidated statement of operations. Restricted Stock Units The following table summarizes information about unvested RSUs for the year ended December 31, 2014: WeightedAverage Grant Date Value Number of Units (in millions) Unvested as of December 31, 2013...

  • Page 103
    ... summarizes information about stock options that were outstanding as of December 31, 2014: WeightedAverage Exercise Price WeightedAverage Remaining Contractual Term (in years) Number of Options (in millions) Aggregate Intrinsic Value (in millions) Outstanding as of December 31, 2013 ...Exercised...

  • Page 104
    ..., 2013 2012 Expected volatility ...Expected term to exercise from grant date (in years) ...Risk-free rate ...Expected dividend yield ...14. EMPLOYEE BENEFIT PLANS Pension Plans 26.14% 5.94 1.19% 2.97% 30.03% 6.43 1.35% 2.91% TWC sponsors the Time Warner Cable Pension Plan (the "TWC Pension Plan...

  • Page 105
    ... received benefit payments of $210 million during 2014. On September 4, 2013, the TWC Pension Plan was amended to provide certain eligible participants and deferred beneficiaries with a voluntary election opportunity during a limited-time period to receive, or to commence receiving, their plan...

  • Page 106
    ... periodic benefit costs in 2015 include actuarial losses net of prior service credits of $39 million. Weighted-average assumptions used to determine benefit obligations as of December 31, 2014, 2013 and 2012 consisted of the following: 2014 2013 2012 Discount rate ...Rate of compensation increase...

  • Page 107
    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, 2014, 2013 and 2012 consisted of the following: 2014 2013 2012 Expected long-term rate of return on plan assets ......

  • Page 108
    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 other receivables and accrued liabilities, by level within the fair value hierarchy as of ...

  • Page 109
    ... those in limited partnerships that invest in operating companies that are not publicly traded on a stock exchange, and hedge funds. Private equity investments are valued using inputs such as trading multiples of comparable public securities, merger and acquisition activity and pricing data from the...

  • Page 110
    ...TWC contributes to a number of multiemployer plans under the terms of collective-bargaining agreements that cover its union-represented employees. Such multiemployer plans provide medical, pension and retirement savings benefits to active employees and retirees. For the years ended December 31, 2014...

  • Page 111
    ... costs of $13 million in connection with the Insight and DukeNet acquisitions. For the year ended December 31, 2012, the Company incurred merger-related costs of $54 million, primarily associated with the Insight acquisition. The Company expects to incur additional merger-related costs in 2015...

  • Page 112
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Restructuring Costs The Company incurred restructuring costs of $27 million, $106 million and $61 million for the years ended December 31, 2014, 2013 and 2012, respectively, primarily related to employee terminations and ...

  • Page 113
    ... quarter of 2014 that, in part, lowers the New York State business tax rate beginning in 2016. The income tax provision and effective tax rate for the year ended December 31, 2013 include (i) a benefit of $77 million primarily related to changes in the tax rate applied to calculate the Company's net...

  • Page 114
    ...): 2014 2013 2012 Balance at beginning of year ...Deferred income tax provision ...Business acquisitions(a) ...Recorded directly to TWC shareholders' equity as a component of accumulated other comprehensive income (loss), net: Change in accumulated unrealized losses on pension benefit obligation...

  • Page 115
    ... of data, video and voice services provided to business customers as well as other business services, including enterprise-class, cloud-enabled hosting, managed applications and services. Other Operations, which principally consists of (i) Time Warner Cable Media ("TWC Media"), the advertising sales...

  • Page 116
    ..., 2013 and 2012 is as follows (in millions): Year Ended December 31, 2014 Other Operations Shared Intersegment Segment Functions Eliminations Residential Services Segment Business Services Segment Total Consolidated Revenue(a) ...$ 18,446 $ Operating costs and expenses ...(9,823) Merger-related...

  • Page 117
    ... RSNs and local sports, news and lifestyle channels. These services are reflected as programming expense for the Residential Services and Business Services segments and as revenue for the Other Operations segment. Intersegment revenue for the years ended December 31, 2014, 2013 and 2012 consisted of...

  • Page 118
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Revenue for the years ended December 31, 2014, 2013 and 2012 was derived from the following sources (in millions): Year Ended December 31, 2013 2012 2014 Residential Services revenue: Video ...High-speed data ...Voice ...

  • Page 119
    ... of December 31, 2014 under certain programming and content purchase agreements and various other contractual obligations (including amounts associated with data processing services, high-speed data connectivity, fiber-related and TWC Media obligations) and the estimated timing and effect that such...

  • Page 120
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) the future programming costs for these contract requirements and commitments based on subscriber numbers and tier placement as of December 31, 2014 applied to the per-subscriber rates contained in these contracts. Actual ...

  • Page 121
    ... The Company settled this lawsuit on terms that are not material to the Company. On December 19, 2011, Sprint Communications Company L.P. filed a complaint in the U.S. District Court for the District of Kansas alleging that the Company infringes 12 patents purportedly relating to Voice over Internet...

  • Page 122
    ... relating to intellectual property rights and intellectual property licenses, could have a material adverse effect on the Company's business, financial condition and operating results. 19. ADDITIONAL FINANCIAL INFORMATION Other Current Assets Other current assets as of December 31, 2014 and 2013...

  • Page 123
    ...the years ended December 31, 2014, 2013 and 2012 consisted of the following (in millions): Year Ended December 31, 2013 2012 2014 Income from equity-method investments, net(a) ...Gain (loss) on equity award reimbursement obligation to Time Warner ...Gain on sale of investment in Clearwire ...Other...

  • Page 124
    ...payment was made in January 2014 and 2013, respectively. 20. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Set forth below are condensed consolidating financial statements presenting the financial position, results of operations (including comprehensive income) and cash flows of (i) Time Warner Cable...

  • Page 125
    ...arrive at the information for Time Warner Cable Inc. on a consolidated basis. The Guarantor Subsidiary has fully and unconditionally guaranteed the debt securities issued by the Parent Company in its 2007 registered exchange offer and subsequent public offerings. The Parent Company directly owns all...

  • Page 126
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Condensed consolidating financial information is as follows (in millions): Condensed Consolidating Balance Sheet as of December 31, 2014 Parent Company Guarantor Subsidiary NonGuarantor Subsidiaries TWC Consolidated ...

  • Page 127
    TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Condensed Consolidating Balance Sheet as of December 31, 2013 Parent Company Guarantor Subsidiary NonGuarantor Subsidiaries TWC Consolidated Eliminations ASSETS Current assets: Cash and equivalents ...Receivables, net ...

  • Page 128
    ... 31, 2014 Parent Company Guarantor Subsidiary NonGuarantor Subsidiaries TWC Consolidated Eliminations Revenue ...Costs and expenses: Programming and content ...Sales and marketing ...Technical operations ...Customer care ...Other operating ...Depreciation ...Amortization ...Merger-related and...

  • Page 129
    ... 31, 2013 Parent Company Guarantor Subsidiary NonGuarantor Subsidiaries TWC Consolidated Eliminations Revenue ...Costs and expenses: Programming and content ...Sales and marketing ...Technical operations ...Customer care ...Other operating ...Depreciation ...Amortization ...Merger-related and...

  • Page 130
    ... 31, 2012 Parent Company Guarantor Subsidiary NonGuarantor Subsidiaries TWC Consolidated Eliminations Revenue ...Costs and expenses: Programming and content ...Sales and marketing ...Technical operations ...Customer care ...Other operating ...Depreciation ...Amortization ...Merger-related and...

  • Page 131
    ... ACTIVITIES Short-term borrowings, net ...Repayments of long-term debt ...Dividends paid ...Repurchases of common stock ...Proceeds from exercise of stock options ...Excess tax benefit from equity-based compensation ...Taxes paid in cash in lieu of shares issued for equity-based compensation ...Net...

  • Page 132
    ... NonGuarantor Subsidiaries TWC Consolidated Eliminations Cash provided (used) by operating activities . . INVESTING ACTIVITIES Capital expenditures ...Business acquisitions, net of cash acquired ...Purchases of investments ...Return of capital from investees ...Proceeds from sale, maturity and...

  • Page 133
    ... NonGuarantor Subsidiaries TWC Consolidated Eliminations Cash provided (used) by operating activities . . INVESTING ACTIVITIES Capital expenditures ...Business acquisitions, net of cash acquired ...Purchases of investments ...Return of capital from investees ...Proceeds from sale, maturity and...

  • Page 134
    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 135
    ... 31, 2014, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Time Warner Cable Inc.'s internal control over financial reporting as of December 31, 2014, based...

  • Page 136
    ...2014 and 2013, and the related consolidated statement of operations, comprehensive income, cash flows and equity for each of the three years in the period ended December 31, 2014 of Time Warner Cable Inc. and our report dated February 13, 2015 expressed an unqualified opinion thereon. New York, New...

  • Page 137
    ... the fourth quarter of 2011. Additionally, income tax provision in 2011 includes net income tax expense of $14 million as a result of the impact of the reversal of deferred income tax assets associated with Time Warner stock option awards held by TWC employees, net of excess tax benefits realized...

  • Page 138
    TIME WARNER CABLE INC. SELECTED FINANCIAL INFORMATION-(Continued) December 31, 2012 (in millions) 2014 2013 2011 2010 Selected Balance Sheet Information: Cash and equivalents ...Total assets ...Total debt(a) ...Mandatorily redeemable preferred equity ...(a) $ 707 48,501 23,718 - $ 525 48,...

  • Page 139
    TIME WARNER CABLE INC. QUARTERLY FINANCIAL INFORMATION (Unaudited) Quarter Ended June 30, September 30, December 31, (in millions, except per share data) March 31, 2014(a) Revenue ...Operating Income ...Net income ...Net income attributable to TWC shareholders ...Net income per common share ...

  • Page 140
    ...Plan of Merger, dated as of February 12, 2014, among Time Warner Cable Inc. ("TWC" or the "Company"), Comcast Corporation and Tango Acquisition Sub, Inc. (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated February 12, 2014 and filed with the Securities...

  • Page 141
    ...Form 8-K dated and filed November 2, 2006 (File No. 1-15062)). Twelfth Supplemental Indenture, dated as of September 30, 2012, among Time Warner Cable Enterprises LLC ("TWCE"), the Company, TW NY, Time Warner Cable Internet Holdings II LLC ("TWC Internet Holdings II") and The Bank of New York Mellon...

  • Page 142
    ... the Company, TW NY, TWE and The Bank of New York, as trustee (incorporated herein by reference to Exhibit 4.2 to the TWC April 4, 2007 Form 8-K). Second Supplemental Indenture, dated as of September 30, 2012, among the Company, TW NY, TWCE, TWC Internet Holdings II and The Bank of New York Mellon...

  • Page 143
    ... (File No. 1-15062) (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...

  • Page 144
    ... (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated July 25, 2013 and filed with the SEC on July 29, 2013). Employment Agreement, effective as of February 16, 2012, between Time Warner Cable Inc. and Marc Lawrence-Apfelbaum (incorporated herein by...

  • Page 145
    ...ended December 31, 2008). Amendment Number 1 to Restricted Stock Unit Agreements and Stock Option Agreements under the Time Warner Cable Inc. 2006 Stock Incentive Plan and 2011 Stock Incentive Plan (no Addendum) (incorporated herein by reference to Exhibit 10.54 to the TWC 2013 Form 10-K). Amendment...

  • Page 146
    ...31, 2014. The following financial information from the Company's Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on February 13, 2015, formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheet as of December 31, 2014 and December 31, 2013...

  • Page 147

  • Page 148
    ... of New York University Chairman & Chief Executive Officer, The Global Maximum Educational Opportunities, Inc. Former Chief Executive Officer, Deloitte & Touche USA LLP & Deloitte Touche Tohmatsu Limited Legal & Business Consultant & Private Investor Former Executive Vice President, General Counsel...

  • Page 149
    ..., Quarterly Reports on Form 10 Q, and Proxy Statement, may be viewed or downloaded on the company's website: www.twc.com/investors. Alternatively, copies may be requested 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...

  • Page 150
    Time Warner Cable Inc. 60 Columbus Circle New York, NY 10023 212.364.8200 www.twc.com NYSE: TWC